<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 14, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INVISION TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3844 94-3123544
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
3420 E. THIRD AVENUE
FOSTER CITY, CALIFORNIA 94404
(415) 578-1930
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
CURTIS P. DISIBIO
CHIEF FINANCIAL OFFICER
INVISION TECHNOLOGIES, INC.
3420 E. THIRD AVENUE
FOSTER CITY, CALIFORNIA 94404
(415) 578-1930
(Name, address and telephone number of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT L. JONES, ESQ. THOMAS A. BEVILACQUA, ESQ.
BRETT D. WHITE, ESQ. TOMAS C. TOVAR, ESQ.
Cooley Godward LLP Brobeck, Phleger & Harrison LLP
Five Palo Alto Square Two Embarcadero Place
3000 El Camino Real 2200 Geng Road
Palo Alto, California 94306 Palo Alto, California 94303
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1993, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
AMOUNT TO BE PRICE PER OFFERING REGISTRATION
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) FEE
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value......... 3,593,750 $16.00 $57,500,000 $17,424
</TABLE>
(1) Includes 468,750 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated in accordance with Rule 457 for the purpose of computing the
amount of the registration fee based on the average of the high and low
sales prices of the Company's Common Stock as reported on the Nasdaq
SmallCap Market on March 13, 1997.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 14, 1997
[BROADVISION LOGO]
3,125,000 SHARES
COMMON STOCK
Of the 3,125,000 shares of Common Stock offered hereby, 1,875,000 shares are
being issued and sold by InVision Technologies, Inc. ("InVision" or the
"Company") and 1,250,000 shares are being sold by the Selling Stockholders. See
"Principal and Selling Stockholders." The Company will not receive any of the
proceeds from the sale of shares by the Selling Stockholders. On March 12, 1997,
the last sale price of the Common Stock as reported on the Nasdaq SmallCap
Market was $16.50 per share. See "Price Range of Common Stock." The Common Stock
is traded on the Nasdaq SmallCap Market under the symbol "INVN." The Company has
made application for inclusion of the Common Stock on the Nasdaq National Market
under the symbol "INVN."
------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
- --------------------------------------------------------------------------
Total (3)..................... $ $ $ $
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting estimated offering expenses of $600,000 payable by the
Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 468,750 shares of Common Stock solely to cover
over-allotments, if any. If such over-allotment option is exercised in full,
the total Price to Public, Underwriting Discounts and Commissions, and
Proceeds to Company will be $ , $ , and $ ,
respectively. See "Underwriting."
------------------
The Common Stock is offered by the Underwriters as stated herein, subject to
receipt and acceptance by them and subject to their right to reject any order in
whole or in part. It is expected that delivery of such shares will be made
through the offices of Robertson, Stephens & Company LLC ("Robertson, Stephens &
Company"), in San Francisco, California, on or about , 1997.
ROBERTSON, STEPHENS & COMPANY
PRUDENTIAL SECURITIES INCORPORATED
SCHRODER WERTHEIM & CO.
DONALD & CO. SECURITIES INC.
The date of this Prospectus is , 1997
<PAGE>
[ARTWORK]
<PAGE>
[Image of three sticks of dynamite and x-ray image thereof]
An enhanced x-ray device produces an image where the contents of a bag are
superimposed. This reduces the system's ability to detect explosive devices. It
also impairs the operator's ability to resolve alarms.
[Images of the three sticks of dynamite in the CT plane and resulting CT Image]
In contrast, the CTX 5000 produces both x-ray and thin cross-sectional images.
These computed tomography ("CT" or "CAT SCAN") images do not suffer from the
superimposition of bag contents. This unique view of luggage allows an operator
to quickly and confidently resolve alarms.
[Images of the three sticks of dynamite in two CT planes and resulting CT Image]
THE CTX 5000 automatically acquires multiple CT images and rapidly analyzes
items in the bag. Data about a threat's mass, location and destiny are acquired.
If a threat is detected, the operator is presented with the x-ray and CT images,
clearly indicating suspicious items.
THREAT RESOLUTION
[Image of suitcase on the CTX 5000 x-ray image monitor next to an image of the
same suitcase on the CTX 5000 CT image monitor]
<PAGE>
<TABLE>
<CAPTION>
CTX 5000 X-Ray Image Monitor CTX 5000 CT Image Monitor
<S> <C>
Once a threat is detected, the CTX 5000 presents images on two monitors.
- - Threats are outlined in red for clear - Threats are automatically outlined by a red
identification box and highlighted in red
- - CT slice positions are shown using vertical - Metals, including electronics, are colored
lines on the x-ray image blue
- - Threat position vertical lines are colored - Detonators are colored green
red
</TABLE>
[Picture of an open radio in an open suitcase with a sign next to it stating
"450 grams semtex in cassette radio," and next to it the CT monitor image of the
same suitcase]
The CTX 5000 detects the radio bomb's explosive and highlights its detonator and
electronics. The CTX 5000 automatically alarms and identifies the threat
concealed behind a circuit board.
MILITARY EXPLOSIVE: SEMTEX CONCEALED IN RADIO CT IMAGE
[Picture of a sheet explosive in the lining of an open suitcase with a sign next
to it stating "6 mm detasheet in suitcase lining," and next to it the CT monitor
image of the same suitcase]
The CTX 5000 reveals the sheet explosive hidden in the suitcase's lining. The
CTX 5000 automatically alarms and highlights this explosive.
<PAGE>
SHEET EXPLOSIVE: 6MM DETASHEET IN SUITCASE LINING CT IMAGE
[Picture of three sticks of dynamite next to an open bag containing various
items with a sign next to it stating "3 sticks of dynamite," and next to it the
CT monitor image of the 3 sticks of dynamite on top of the bag]
The CTX 5000 automatically detects and highlights the dynamite. The uncluttered
CT image clearly shows the dynamite's location regardless of its proximity to
other bag contents. There is no interference from the champagne bottle.
COMMERCIAL EXPLOSIVE: POWERPRIMER DYNAMITE
Automatic detection means CTX 5000 clears most luggage without operator
intervention and fatigue. The threat is highlighted in red, and boxed to
precisely focus the operator's attention. Multiple cross-sectional CT images
completely reveal the threat and its configuration.
<PAGE>
INTEGRATED CONFIGURATION
CTX 5000 FULLY OPERATIONAL
AND INTEGRATED INTO THE
BAGGAGE HANDLING SYSTEM
STAND ALONE CONFIGURATION
CTX 5000 FULLY OPERATIONAL
AND ADJOINING THE BAGGAGE
HANDLING SYSTEM
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES
OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................................................................. 4
Forward Looking Statements..................................................................... 6
Risk Factors................................................................................... 6
Use of Proceeds................................................................................ 16
Price Range of Common Stock.................................................................... 16
Dividend Policy................................................................................ 16
Capitalization................................................................................. 17
Dilution....................................................................................... 18
Selected Consolidated Financial Data........................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of Operation........... 20
Business....................................................................................... 26
Management..................................................................................... 37
Certain Transactions........................................................................... 43
Principal and Selling Stockholders............................................................. 45
Description of Capital Stock................................................................... 47
Shares Eligible for Future Sale................................................................ 50
Underwriting................................................................................... 51
Legal Matters.................................................................................. 52
Experts........................................................................................ 52
Additional Information......................................................................... 52
Index to Consolidated Financial Statements..................................................... F-1
</TABLE>
------------------------
The "InVision" and "CTX 5000" logos are trademarks of the Company. Certain
other trademarks of the Company and other companies are used in this Prospectus.
The Company was founded in September 1990. The Company's headquarters are
located at 3420 E. Third Avenue, Foster City, California, 94404 and its
telephone number is (415) 578-1930.
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements examined by its independent
public accountants and quarterly reports containing unaudited consolidated
financial information for the first three quarters of each fiscal year.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING SYNDICATE COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ STOCK MARKET IN ACCORDANCE
WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS, INCLUDING THE INFORMATION UNDER "RISK
FACTORS."
THE COMPANY
InVision Technologies, Inc. ("InVision" or the "Company") is the worldwide
leader in explosive detection technology. The Company develops, manufactures,
markets and supports an explosive detection system ("EDS") for civil aviation
security based on advanced computed tomography ("CT" or "CAT Scan") technology.
To date, the Company's CTX 5000 is the only EDS to be certified by the Federal
Aviation Administration ("FAA") for use in the inspection of checked luggage on
commercial flights. Historically, the FAA has been the leader in establishing
standards for aviation security worldwide, and the Company believes that
airports around the world will migrate over time towards security policies
consistent with those of the FAA. As a result, the Company believes that the CTX
5000 is well positioned to become the industry standard. In December 1996, the
Company received an order from the FAA for 54 CTX 5000 systems to be installed
at the busiest U.S. airports. For the fiscal year ended December 31, 1996, the
Company had revenues of $15.8 million, and at March 1, 1997 had orders in
backlog in the amount of $55.0 million. As of March 1, 1997, 30 CTX 5000 systems
had been shipped to twelve airports in seven countries around the world.
The Company believes that the CTX 5000 is the only EDS capable of reliably
detecting all types of explosives designated by the FAA to be a threat to
commercial aviation, and that the CTX 5000 is superior to competing systems by
virtue of its advanced detection technology. The CTX 5000 is capable of
capturing and processing substantially more data than other explosive detection
systems, and of rendering three-dimensional images of suspicious objects. By
combining heightened levels of data capture and diagnosis capabilities with
simple user interfaces, the Company's CTX 5000 is capable of providing high
detection and low false alarm rates, as well as advanced threat resolution
capability and increased operator efficiency.
There are over 600 airports worldwide providing scheduled service for an
aggregate of over 2.5 billion passengers per year. Of these airports, over 400
are located in the United States, 150 are in Europe, and 50 are in the
Asia/Pacific region. According to a 1996 report issued by the Aviation Security
Advisory Committee, it would cost approximately $2.2 billion to equip the 76
largest airports in the United States with certified explosive detection
systems.
In recent years, increased incidents of bombings and airline terrorism have
contributed to an enhanced perception of the threat of terrorism among the
general public. According to a report of the President's Commission on Aviation
Security and Terrorism dated August 4, 1989, there were over 42 bombings against
civilian aviation targets worldwide between 1975 and 1989. According to Time
Magazine, there were 10,222 bombings in the United States between 1983 and 1993.
According to a CBS poll conducted in July 1996, the public perception of the
threat of commercial aircraft bombings has increased dramatically, and airline
passengers have expressed a willingness to pay more for airline travel and
endure delays if such actions will decrease the threat of successful airline
bombings. Following the December 1988 bombing of Pan American Flight 103, the
United States enacted the Aviation Security Improvement Act of 1990, in response
to which the FAA sponsored the development of advanced explosive detection
technology, established protocols for the certification of such technology, and
began to set forth the guidelines for its worldwide implementation. To date, the
FAA has spent approximately $150 million on development related to high
detection technology and, subsequent to a report of the White House Commission
on Aviation Safety and Security, the Congress has recently appropriated $144.2
million for the purchase of EDS to be deployed at major airports in the United
States.
The Company's objective is to become the leading provider of explosive
detection systems worldwide and to extend its technology expertise to address
broader applications for detection. Specific elements of the Company's growth
strategy are to enhance its technological leadership, expand its sales and
marketing organization, leverage its detection technology expertise to enter new
markets for detection, and selectively pursue strategic relationships and
acquisitions.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company... 1,875,000 shares
Common Stock Offered by the Selling
Stockholders........................ 1,250,000 shares
Common Stock to be Outstanding after
the Offering........................ 11,050,000 shares(1)
Use of Proceeds....................... To purchase capital equipment and
undertake facility improvements, to fund
research and development, for working
capital and other general corporate
purposes, and to pursue possible
acquisitions. See "Use of Proceeds."
Proposed Nasdaq National Market
Symbol.............................. INVN
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues.................................................. $ -- $ -- $ -- $ 9,066 $ 15,841
Gross profits............................................. -- -- -- 2,289 6,105
Loss from operations...................................... (2,044) (3,025) (3,324) (2,988)(2) (2,233)(2)
Net loss.................................................. (2,196) (3,307) (3,727) (3,292) (3,572)(3)
Net loss per share(4)..................................... $ (0.50) $ (0.44)
Weighted average shares outstanding(4).................... 6,642 8,142
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
AS
ACTUAL ADJUSTED(5)
--------- -------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash.................................................................................... $ 2,363 $ 30,930
Working capital......................................................................... 7,380 35,947
Total assets............................................................................ 15,256 43,823
Long-term liabilities................................................................... 110 110
Total stockholders' equity.............................................................. 9,074 37,641
</TABLE>
- ------------
(1) Based on the number of shares outstanding on December 31, 1996. Excludes,
as of such date, (i) approximately 1,126,000 shares of Common Stock
issuable upon exercise of options outstanding, of which options to purchase
approximately 628,000 shares were exercisable at a weighted average
exercise price of $0.80 per share, (ii) 180,000 shares of Common Stock
issuable upon exercise of warrants outstanding at an exercise price of
$6.60 per share, (iii) approximately 835,000 shares reserved for future
grants under the Company's Equity Incentive Plan, and (iv) 300,000 shares
reserved for issuance pursuant to the Company's 1996 Employee Stock
Purchase Plan. Common Stock outstanding after the Offering includes 15,474
shares to be issued upon the exercise of options by the Selling
Stockholders, all of which shares are being sold in this Offering. See
"Management--Equity Incentive Plans," "Principal and Selling Stockholders,"
"Description of Capital Stock" and Note 8 of Notes to Consolidated
Financial Statements.
(2) The Company recorded non-cash charges related to grants of stock options
having exercise prices below the fair market value on the date of grant to
employees and directors in the amounts of $369,000 and $489,000,
respectively, in 1995 and 1996. See Note 8 of Notes to Consolidated
Financial Statements.
(3) The Company recorded a non-cash charge resulting from amortization of a
bridge loan warrant discount in the amount of $1.3 million in 1996. See
Note 6 of Notes to Consolidated Financial Statements.
(4) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the method used to determine the number of shares used to compute per
share amounts.
(5) As adjusted to give effect to (i) the exercise of options to purchase
15,474 shares of Common Stock to be sold in this Offering by the Selling
Stockholders at a weighted average exercise price of $0.55 per share, (ii)
the sale of the 1,875,000 shares of Common Stock offered by the Company
hereby at an assumed public offering price of $16.50 per share, and (iii)
the application of the net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES (I)
NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, (II) THE EXERCISE OF
OPTIONS TO PURCHASE 15,474 SHARES OF COMMON STOCK TO BE SOLD IN THIS OFFERING BY
THE SELLING STOCKHOLDERS AND THE APPLICATION OF PROCEEDS THEREFROM, AND (III) NO
EXERCISE OF WARRANTS OUTSTANDING OR THE REMAINING OPTIONS OUTSTANDING ON
DECEMBER 31, 1996 TO PURCHASE AN AGGREGATE OF APPROXIMATELY 1,306,000 SHARES OF
COMMON STOCK. ALL REFERENCES TO THE COMPANY'S FISCAL YEARS REFER TO THE PERIODS
ENDING DECEMBER 31.
5
<PAGE>
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS MAY CONTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS
AND UNCERTAINTIES. WHEN USED IN THIS PROSPECTUS, THE WORDS "ANTICIPATE,"
"BELIEVE," "ESTIMATE," AND "EXPECT" AND SIMILAR EXPRESSIONS AS THEY RELATE TO
THE COMPANY OR ITS MANAGEMENT ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING
STATEMENTS. THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD
DIFFER MATERIALLY FROM THE RESULTS EXPRESSED IN, OR IMPLIED BY, THESE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE RISKS RELATED TO MARKET ACCEPTANCE OF THE COMPANY'S SINGLE
PRODUCT, FLUCTUATIONS IN THE COMPANY'S QUARTERLY AND ANNUAL OPERATING RESULTS,
THE LOSS OF ORDERS OF THE COMPANY'S PRODUCT, INCLUDING THE LOSS OF THE COMPANY'S
MOST RECENT ORDER FROM THE FAA, LOSS OF ANY OF THE COMPANY'S SOLE SOURCE
SUPPLIERS, INTENSE COMPETITION, RELIANCE ON LARGE ORDERS, CONCENTRATION OF THE
COMPANY'S CUSTOMERS, RISKS RELATED TO THE LENGTHY SALES CYCLES FOR THE CTX 5000,
BUDGETING LIMITATIONS OF THE COMPANY'S CUSTOMERS AND PROSPECTIVE CUSTOMERS, AND
THE RISKS RELATED TO THE COMPANY'S LIMITED MANUFACTURING EXPERIENCE, AS WELL AS
THOSE DISCUSSED IN "RISK FACTORS," IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," AND ELSEWHERE IN THIS
PROSPECTUS.
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. In addition
to the other information in this Prospectus, the following risk factors should
be considered carefully in evaluating the Company and its business before
purchasing the Common Stock offered hereby.
HISTORY OF LOSSES; NO ASSURANCE OF PROFITABILITY
The Company commenced operations in September 1990, remained in the
development stage through 1994 and received its first revenues from product
sales in the first quarter of 1995. The Company has experienced net losses for
each quarter and year since inception and, as of December 31, 1996, had an
accumulated deficit of approximately $19.5 million. There can be no assurance
that the Company will achieve profitability on a quarterly or annual basis or,
if it is achieved, that profitability can be maintained. The Company expects to
expand its manufacturing, research and development, sales and marketing, and
administrative capabilities. The anticipated increase in the Company's operating
expenses caused by this expansion could have a material adverse effect on the
Company's business, financial condition and results of operations if revenues do
not increase at an equal or greater rate. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
SINGLE PRODUCT; UNCERTAINTY OF MARKET ACCEPTANCE
The CTX 5000 currently is the only product offered by the Company and the
Company derives substantially all of its revenues from the sale of CTX 5000
units. The Company's orders to date have been received from a limited number of
customers and the substantial majority of these have been from a single
customer, the FAA. The commercial success of the CTX 5000 will depend upon its
acceptance by domestic and international airports, government agencies and
airlines as a useful and cost-effective alternative to less expensive, higher
throughput (i.e. bags per hour) competing products employing different
technologies. The large capital commitment (approximately $1.0 million) required
to purchase the CTX 5000 may limit the marketability of the CTX 5000. In
addition, the Company's failure to compete successfully with respect to
throughput, the ability to scan all sizes of baggage, the ease of integration of
the CTX 5000 into existing baggage handling systems and other factors could
delay, limit or prevent market acceptance of the CTX 5000. Moreover, the market
for EDS technology is largely undeveloped, and the Company believes that the
overall demand for EDS technology will depend significantly upon public
perception of the risk of terrorist attacks. There can be no assurance that the
public will perceive the threat of terrorist bombings to be substantial or that
the airline industry and governmental agencies will actively pursue EDS
technology. As a result, there can be no assurance the Company will be able to
achieve market penetration, revenue growth or profitability. See
"Business--Competition" and "--Industry Background."
6
<PAGE>
FLUCTUATIONS IN OPERATING RESULTS
The Company's past operating results have been, and its future operating
results will be, subject to fluctuations resulting from a number of factors,
including: the timing and size of orders from, and shipments to, major
customers; budgeting and purchasing cycles of its customers; delays in product
shipments caused by custom requirements of customers or ability of the customer
to accept shipment; the timing of enhancements to the CTX 5000 by the Company or
new products by its competitors; changes in pricing policies by the Company, its
competitors or suppliers, including possible decreases in average selling prices
of the CTX 5000 in response to competitive pressures; the proportion of revenues
derived from competitive bid processes; the mix between sales to domestic and
international customers; market acceptance of enhanced versions of the CTX 5000;
the availability and cost of key components; the availability of manufacturing
capacity; and fluctuations in general economic conditions. The Company also may
choose to reduce prices or to increase spending in response to competition or to
pursue new market opportunities, all of which may have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company's systems revenues in any period are derived from sales of multiple CTX
5000 systems to a limited number of customers and are recognized upon shipment
which, in addition to the high cost of one CTX 5000 causes minor variations in
the number of orders, or the timing of shipments, to substantially affect the
Company's quarterly revenues. Because a significant portion of the Company's
quarterly operating expenses are, and will continue to be, relatively fixed in
nature, such revenue fluctuations will cause the Company's quarterly and annual
operating results to vary substantially. Accordingly, the Company believes that
period-to-period comparisons of its results of operations are not meaningful and
cannot be relied upon as indications of future performance. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations." Because of all of the foregoing
factors, the Company's operating results may be below the expectations of public
market analysts and investors in some future quarters, which would likely result
in a decline in the trading price of the Common Stock.
DEPENDENCE ON SUPPLIERS
Certain key components used in the Company's products have been designed by
the Company to its specifications and are currently available only from one or a
limited number of suppliers. The Company currently does not have long-term
agreements with these suppliers. Moreover, in view of the high cost of many of
these components, the Company does not maintain significant inventories of some
necessary components. If the Company's suppliers were to experience financial,
operational, production or quality assurance difficulties, the supply of
components to the Company would be reduced or interrupted. In the event that a
supplier were to cease operations, discontinue a product or withhold supply for
any reason, the Company may be unable to acquire such product from alternative
sources within a reasonable period of time. The Company also uses a variety of
independent third party manufacturers and subassemblers. The inability of the
Company to develop alternative sources for single or sole source components, to
find alternative third party manufacturers or subassemblers, or to obtain
sufficient quantities of these components could result in delays or
interruptions in product shipments, which could have a material adverse effect
on the Company's business, financial condition and results of operations.
COMPETITION
The market for explosive detection systems is intensely competitive and is
characterized by continuously developing technology and frequent introductions
of new products and features. The Company expects competition to increase as
other companies introduce additional and more competitive products in the EDS
market and as the Company develops additional capabilities and enhancements for
the CTX 5000 and new applications for its certified technology. Historically,
the principal competitors in the market for explosive detection systems have
been InVision, Vivid Technologies, Inc., EG&G Astrophysics, Thermedics Detection
Inc., and Barringer Technologies Inc. Each of these competitors provides EDS
solutions and products for use in the inspection of checked luggage, although to
date only the Company's CTX 5000, operating as two units in parallel to meet the
7
<PAGE>
throughput requirement, has been certified by the FAA. The Company is aware of
certain major corporations competing in other markets that intend to enter the
EDS market. In particular, in January 1996 Lockheed Martin Corporation received
a grant in the amount of approximately $8.7 million from the FAA for the design
and development of a CT-based EDS over a two-year period. Announcements of
currently planned or other new products may cause customers to delay their
purchasing decisions for EDS products, which could have a material adverse
effect on the Company's business, financial condition and results of operations.
Each of the Company's competitors may have substantially greater financial
resources than the Company. There can be no assurance that the Company will be
able to compete successfully with its competitors or with new entrants to the
EDS market.
The Company believes that its ability to compete in the EDS market is based
upon such factors as: product performance, functionality, quality and features;
quality of customer support services, documentation and training; and the
capability of the technology to appeal to broader applications beyond the
inspection of checked baggage. Although the Company believes that the CTX 5000
is superior to its competitors' products in its explosive detection capability
and accuracy, the CTX 5000 must also compete on the basis of price, throughput,
the ability to handle all sizes of baggage, and the ease of integration into
existing baggage handling systems. Certain of the Company's competitors may have
an advantage over the Company's existing technology with respect to these
factors. Currently, the CTX 5000 has an average selling price of approximately
$1.0 million, compared to substantially lower prices for systems offered by the
Company's competitors; has a throughput rate of approximately 300 bags per hour
("bph"), compared to rates claimed to exceed 1,000 bph by certain of the
Company's competitors; has a gantry size which limits the ability of the unit to
accept all sizes of baggage; and requires that the baggage remain still while
being scanned, making it difficult to integrate into the continuously moving
baggage handling systems found in most airports. There can be no assurance that
the Company will be successful in convincing potential customers that the CTX
5000 is superior to other systems given all of the necessary performance
criteria, that new systems with comparable or greater performance, lower price
and faster or equivalent throughput will not be introduced, or that, if such
products are introduced, customers will not delay or cancel existing or future
orders for the Company's system. Further, there can be no assurance that the
Company will be able to enhance the CTX 5000 to better compete on the basis of
cost, throughput, accommodation of baggage size and ease of integration, or that
the Company will otherwise be able to compete successfully with existing or new
competitors. The failure of the Company to develop such enhancements or
otherwise successfully compete in the EDS market for any of the above reasons
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Competition."
DEPENDENCE ON LARGE ORDERS; CUSTOMER CONCENTRATIONS; LENGTHY SALES CYCLE
In any given fiscal year, the Company's revenues have principally consisted,
and the Company believes will continue to consist, of orders of multiple units
from a limited number of customers. While the number of individual customers may
vary from period to period, the Company is nevertheless dependent upon these
multiple orders for a substantial portion of its revenues. There can be no
assurance that the Company will obtain such multiple orders on a consistent
basis. During the fiscal year ended December 31, 1996, revenues from the
Company's six largest customers were $14.0 million, or 88.4%, of the Company's
revenues. During the fiscal year ended December 31, 1995, revenues from the
Company's three largest customers were $6.8 million, or 75.0%, of the Company's
revenues. To date, all orders from United States customers have been entirely
funded by the FAA, and the Company's largest sales contract to date, for 54 CTX
5000 systems, is with the FAA. There can be no assurance that such funding or
sales will continue in the future. The Company's inability to obtain sufficient
multiple orders or the failure of the FAA to continue such purchases or funding
would have a material adverse effect on the Company's business, financial
condition and results of operations. Moreover, the timing and shipment of such
orders could cause the operating results in any quarter to differ from the
projections of securities analysts, which could adversely affect the trading
price of the Common Stock. Losses arising from customer disputes regarding
shipping schedules, product condition or performance, or the Company's inability
to collect accounts receivable from any major customer could also have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Recent Developments."
8
<PAGE>
The sales process of the CTX 5000 is often protracted due to the lengthy
approval processes that typically accompany large capital expenditures. The
Company's revenues depend in significant part upon the decision of a government
agency to upgrade and expand existing facilities, alter workflows and hire
additional technical expertise in addition to procuring the CTX 5000, all of
which involve a significant capital commitment as well as significant future
support costs. The sales cycle of the CTX 5000 is often lengthy due to the
protracted approval process that typically accompanies large capital
expenditures and the time required to manufacture the CTX 5000 and install and
assimilate the CTX 5000. Typically, six to twelve months may elapse between a
new customer's initial evaluation of the Company's system and the execution of a
contract. Another three months to a year may elapse prior to shipment of the CTX
5000 as the customer site is prepared and the CTX 5000 is manufactured. During
this period the Company expends substantial funds and management resources but
recognizes no associated revenue. See "--Fluctuations in Operating Results,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Introduction" and "--Quarterly Results of Operations."
PUBLIC AGENCY CONTRACT AND BUDGET CONSIDERATIONS
Substantially all of the Company's customers to date have been public
agencies or quasi-public agencies. In contracting with public agencies, the
Company is subject to public agency contract requirements which vary from
jurisdiction to jurisdiction and which are subject to budgetary processes and
expenditure constraints. Budgetary allocations for explosive detection systems
are dependent, in part, upon governmental policies which fluctuate from time to
time in response to political and other factors, including the public's
perception of the threat of commercial airline bombings. Many domestic and
foreign government agencies have experienced budget deficits that have led to
decreased capital expenditures in certain areas. The Company's results of
operations may be subject to substantial period-to-period fluctuations as a
result of these and other factors affecting capital spending. A reduction of
funding for explosive detection technology deployment could materially and
adversely affect the Company's business, financial condition and results of
operations. Future sales to public agencies will depend, in part, on the
Company's ability to meet public agency contract requirements, certain of which
may be onerous or even impossible for the Company to satisfy. In addition,
public agency contracts are frequently awarded only after formal competitive
bidding processes, which have been and may continue to be protracted, and
typically contain provisions that permit cancellation in the event that funds
are unavailable to the public agency. There can be no assurance that the Company
will be awarded any of the contracts for which its products are bid or, if
awarded, that substantial delays or cancellations of purchases will not result
from protests initiated by losing bidders. See "Business--Sales and Marketing."
LIMITED FIELD OPERATIONS; DEPENDENCE ON OPERATOR PERFORMANCE
As of March 1, 1997, 30 CTX 5000 systems had been shipped to twelve airports
in seven countries around the world. A majority of these units were installed
since January 1996, and the Company's customers have only limited experience
with the operation of the CTX 5000 in high-volume airport operations. Many of
the factors necessary to make the overall baggage scanning system a success,
such as the CTX 5000's integration with the baggage handling system, ongoing
system maintenance and the performance of operators, are beyond the control of
the Company. In particular, once the CTX 5000 identifies a threat, the operator
must make a determination whether the threat is actual or a false alarm and,
therefore, whether or not to allow the bag to continue onto the aircraft.
Unsatisfactory performance of operators can lead to reduced efficacy of the CTX
5000. The failure of the CTX 5000 to perform successfully in deployments,
whether due to the limited experience of the Company's customers with the CTX
5000, operator error or any other reason, may have an adverse effect on the
market's perception of the efficacy of the CTX 5000, which in turn could have a
material adverse effect on the Company's business, financial condition and
results of operations.
9
<PAGE>
LIMITED MANUFACTURING EXPERIENCE; MANAGEMENT OF GROWTH
As of March 1, 1997, the Company had produced a total of 36 CTX 5000 systems
and had not sustained then current production levels for any significant period
of time. As a result of the FAA's recent order of 54 CTX 5000 systems, the
Company is in the process of substantially increasing its rate of manufacture of
the CTX 5000, which has placed significant demands on the Company's management,
working capital and financial and management control systems. Failure to upgrade
the Company's operating, management and financial control systems when
necessary, or difficulties encountered during such upgrades, could have a
material adverse effect on the Company's business, financial condition and
results of operations. The success of the increase in production capability will
depend in part upon the Company's ability to continue to improve and expand its
engineering and technical resources and to attract, retain and motivate key
personnel. The failure of the Company to establish such production capability or
to increase its revenues sufficiently to compensate for the increase in
operating expenses resulting from current or any future expansion would have a
material adverse effect on the Company's business, financial condition and
results of operations.
To accommodate the recent increase in the manufacturing rate, the Company
has entered into a lease for a new, substantially larger, manufacturing
facility. The ability of the Company to successfully transition its
manufacturing operation to this new facility is subject to a variety of factors,
including the ability to install appropriate equipment, adapt to a new working
environment, and quickly and efficiently move to the new facility. The
operations of this new facility will also require the Company to incur
substantially larger fixed costs than it has experienced in the past. Unforeseen
delays and complications that may arise in the transition to the new facility
which could interrupt the Company's manufacturing rate, failure of the FAA to
perform under the December 1996 purchase contract, or failure to maintain an
order rate sufficient to fully utilize this new manufacturing facility each
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Recent Developments,"
"--Manufacturing" and "--Facilities."
NO ASSURANCE OF CONTINUED CERTIFICATION; RISK OF CERTIFICATION OF COMPETING
TECHNOLOGIES; RISK OF CHANGING STANDARDS
The FAA has the responsibility for setting and maintaining performance
standards for explosive detection systems for all U.S. airlines, both in the
United States and abroad. The FAA Final Criteria for Certification of EDS,
published in September 1993, requires, among other things, a throughput of 450
bph for an explosive detection system. The Company's CTX 5000 unit currently has
been tested by the FAA at less than 450 bph and therefore has not been certified
as a single unit. The CTX 5000, when combined in a system consisting of two
units, was certified by the FAA in 1994. To date no other EDS has been certified
by the FAA. There currently is no requirement that U.S. airlines or airports (or
international airlines or airports) deploy FAA-certified explosive detection
systems or that U.S. airlines or airports (or most international airlines or
airports) deploy explosive detection systems at all. Should the standards be
lowered, resulting in other lower priced or higher throughput explosive
detection systems becoming certified, or should other competitive systems
otherwise become certified, the Company would lose a significant competitive
advantage. Under such circumstances, there can be no assurance that the
Company's product would be able to compete successfully with these systems.
Accordingly, the certification by the FAA of any competing EDS could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, should the FAA increase its certification
standards, there can be no assurance that the CTX 5000 would meet such
standards. See "Business--Industry Background."
The Company intends to continue to modify the CTX 5000 in an effort to make
throughput enhancements, cost reductions and other modifications to the CTX 5000
based upon the availability of adequate funds. Any such modifications or updated
versions of the CTX 5000 may require FAA approval in order to retain
certification or may require re-certification. There can be no assurance that
any such modifications will be approved or, if required, certified by the FAA,
and the failure to gain approval or certification for such products could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company believes that its long-term success will
depend in part upon the ability to manufacture an EDS that meets or
10
<PAGE>
exceeds the throughput standards of the FAA Final Certification Criteria without
being combined with another unit. See "Business--Product Development."
COMPETITION FOR FAA GRANTS
The U.S. Government currently plays an important role in funding the
development of EDS technology and sponsoring its deployment in U.S. airports. To
date the Company has received $8.0 million from FAA grants and contracts, and
expects to receive an additional $2.7 million for further throughput enhancement
and cost reduction activities in 1997. The Company is also aware that Lockheed
Martin Corporation was awarded a grant of approximately $8.7 million in January,
1996 from the FAA for the design and development of a CT-based EDS over a
two-year period. There can be no assurance that additional research and
development funds from the FAA will become available in the future or that the
Company will receive any such additional funds. Failure by the FAA to continue
to sponsor the Company's technology could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the grant to Lockheed Martin Corporation and any future grants to the Company's
other competitors may improve such competitors' ability to develop and market
high detection EDS technology and cause the Company's customers to delay any
purchase decisions, which could have a material adverse effect on the Company's
ability to market the CTX 5000 and on the Company's business, financial
condition and results of operations. See "Business--Product Development."
DEPENDENCE ON KEY PERSONNEL
The Company's performance depends in part on the expertise of certain
technical personnel with skills in the disciplines of x-ray physics, image
reconstruction and expert systems design. In addition, much of the Company's
proprietary technology is known only by certain technical employees and might be
unavailable should such individuals leave the Company. The number of scientists
qualified to perform the development required by the Company is extremely
limited. The Company also depends on the skills of certain key management
personnel. While the Company maintains key-man life insurance for Dr. Sergio
Magistri, its President and Chief Executive Officer, in the amount of $3.0
million, the Company does not maintain key person life insurance for any of its
other employees and has employment agreements with only four of its executive
officers, which agreements the employees may terminate at will. There can be no
assurance that these individuals will continue employment with the Company. The
loss of certain key personnel or failure of the Company to attract and retain
new key personnel, particularly as the Company seeks to expand, could materially
adversely affect the Company's business, financial condition and results of
operations. See "Management."
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company's performance depends in part upon its proprietary technology.
In the United States, the Company relies upon patents, copyrights and trade
secrets for the protection of the proprietary elements of the CTX 5000 and the
Company's CT technology. There can be no assurance, however, that the Company
could enforce such patents, trade secrets or copyrights. The Company has a
United States patent for automatic concealed object detection having a pre-scan
stage which expires in 2010 (the "Patent") but does not rely on the Patent.
There can be no assurance that the Patent would be effective in preventing
CT-based competition. In accordance with certain Federal Acquisition Regulations
included in the Company's development contract, dated September 27, 1991 (the
"FAA R&D Contract"), with the FAA, the United States Government has rights to
use certain of the Company's proprietary technology developed after the award of
the FAA R&D Contract and funded by the FAA R&D Contract. The U.S. Government may
use such rights to produce or have produced for the U.S. Government competing
products using the Company's CT technology. In the event that the U.S.
Government were to exercise these rights, the Company's exclusivity in supplying
the U.S. Government with certified CT-based explosive detection systems could be
materially adversely affected. Moreover, pursuant to 28 U.S.C. 1941, the U.S.
Government has the right to allow any entity to infringe a patent, trade secret
or copyright otherwise protected by federal law, and the aggrieved party can sue
only for royalties, not for injunctive relief. In the event that the U.S.
Government permits another entity to infringe on the Patent or the Company's
trade
11
<PAGE>
secrets or copyrights, the Company would be unable to prevent such infringement,
which may have a material adverse effect on the Company's competitive position
in the EDS market and on the Company's business, financial condition and results
of operations.
The Company generally enters into confidentiality agreements with each of
its employees, distributors, customers, and potential customers and limits
access to distribution of its software, documentation and other proprietary
information. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known to or independently
developed by others. Outside the United States, the time period for filing a
foreign counterpart of the Patent has expired, and the Company has not sought or
obtained patent protection (except to the extent of licenses held under patents
owned by Imatron, Inc.) and has relied to date primarily on software copyrights
and trade secrets for the protection of its proprietary technology. The absence
of a foreign counterpart to the Patent could adversely affect the Company's
ability to prevent a competitor from using technology similar to technology used
in the CTX 5000. There can be no assurance that the steps taken by the Company
to protect its proprietary technology will be adequate or that its competitors
will not be able to develop similar, functionally equivalent or superior
technology.
The Company in the past has received, and may from time to time in the
future receive, communications from third parties alleging infringements by the
Company or one of its suppliers of patents or other intellectual proprietary
rights owned by such third parties. There can be no assurance that any
infringement claims (or claims for indemnification resulting from infringement
claims against third parties, such as customers) will not be asserted against
the Company. If the Company's product is found to infringe a patent, a court may
grant an injunction to prevent making, selling or using the product in the
applicable country. Protracted litigation may be necessary to defend the Company
against alleged infringement of others' rights. Irrespective of the validity or
success of such claims, defense of such claims could result in significant costs
to the Company and the diversion of time and effort by management, either of
which by itself could have a material adverse effect on the business, financial
condition and results of operations of the Company. Further, adverse
determinations in such litigation could result in the Company's loss of
proprietary rights, subject the Company to significant liabilities (including
treble damages in certain circumstances), or prevent the Company from selling
its products. If infringement claims are asserted against the Company, the
Company may seek to obtain a license of such third party's intellectual property
rights, which may not be available under reasonable terms or at all. In
addition, litigation may be necessary to enforce patents issued to or licensed
exclusively to the Company and protect trade secrets or know-how owned or
licensed by the Company and, whether or not the Company is successful in
defending such intellectual property, the Company could incur significant costs
and divert considerable management and key technician time and effort with
respect to the prosecution of such litigation, either of which by itself could
have a material adverse effect on the business, financial condition and results
of operations of the Company. See "Business--Intellectual Property and
Proprietary Rights."
INTERNATIONAL BUSINESS; FLUCTUATION IN EXCHANGE RATES; RISK OF CHANGE IN FOREIGN
REGULATIONS
The Company markets its products to customers outside of the United States
and, accordingly, is exposed to the risks of international business operations,
including unexpected changes in regulatory requirements, changes in foreign
control legislation, possible foreign currency controls, uncertain ability to
protect and utilize its intellectual property in foreign jurisdictions, currency
exchange rate fluctuations or devaluation, tariffs or other barriers,
difficulties in staffing and managing foreign operations, difficulties in
obtaining and managing vendors and distributors, and potentially negative tax
consequences. International sales are subject to certain inherent risks
including tariffs, embargoes and other trade barriers, staffing and operating
foreign sales and service operations and collecting accounts receivable. The
Company is also subject to risks associated with regulations relating to the
import and export of high technology products. The Company cannot predict
whether quotas, duties, taxes or other charges or restrictions upon the
importation or exportation of the Company's products in the future will be
implemented by the United States or any other country. Fluctuations in currency
exchange rates could cause the Company's products to become relatively more
expensive to customers in a
12
<PAGE>
particular country, leading to a reduction in sales or profitability in that
country. There can be no assurance that any of these factors will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
PRODUCT LIABILITY RISKS; RISK OF FAILURE TO DETECT EXPLOSIVES; AVAILABILITY OF
INSURANCE
The Company's business exposes it to potential product liability risks which
are inherent in the manufacturing and sale of explosive detection systems. There
are many factors beyond the control of the Company that could lead to liability
claims, such as the reliability of the customer's operators, the training of the
operators after the initial installation and training period, and the
maintenance of the units by the customers. For these and other reasons, there
can be no assurance that the units will detect all explosives hidden in the
luggage scanned. The Company does not believe that it would be liable for any
such claims, but the cost of defending any such claims would be significant and
any adverse determination may be in excess of the Company's insurance coverage.
Moreover, the failure of the CTX 5000 to detect an explosive would also result
in negative publicity which could have a material adverse effect on sales and
may cause customers to cancel orders already placed, either of which could have
a material adverse effect on the Company's business, financial condition and
results of operations. Many of the Company's customers require the Company to
maintain insurance at certain levels. The Company currently has product
liability insurance in the amount of $150 million. There can be no assurance
that additional insurance coverage, if required by customers or otherwise, could
be obtained on acceptable terms, if at all.
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS
An element of the Company's strategy is to review acquisition prospects that
would complement its existing product offerings, augment its market coverage,
enhance its technological capabilities or otherwise offer growth opportunities.
Although the Company has no present understandings, commitments or agreements
with respect to any material acquisition of any businesses, products or
technologies, the Company may make acquisitions of businesses, products or
technologies in the future. Future acquisitions by the Company could result in
potentially dilutive issuances of equity securities, the incurrence of debt and
contingent liabilities, and amortization expenses related to goodwill and other
intangible assets, any of which could materially adversely affect the Company's
business, financial condition and results of operations. Acquisitions entail
numerous risks, including difficulties in the assimilation of acquired
operations, technologies and products, diversion of management's attention from
other business concerns, risks of entering markets in which the Company has no
or limited prior experience and potential loss of key employees of acquired
organizations. The Company's management has limited experience in assimilating
acquired organizations. No assurance can be given as to the ability of the
Company to successfully integrate any businesses, products, technologies or
personnel that might be acquired in the future, and the failure of the Company
to do so could have a material adverse effect on the Company's business,
financial condition and results of operations.
CONCENTRATION OF OWNERSHIP; CONTROL BY MANAGEMENT
Upon completion of this offering, the Company's principal stockholder, HARAX
Holding, S.A. ("HARAX"), and its affiliates will hold approximately 22.2% of the
Company's Common Stock (21.3% if the Underwriters' over-allotment option is
exercised in full), and the present directors and executive officers of the
Company and their affiliates will, in the aggregate, beneficially own 12.8% of
the outstanding Common Stock (12.3% if the Underwriters' over-allotment option
is exercised in full), in each case including shares issuable pursuant to stock
options exercisable within 60 days of the date hereof. Consequently, HARAX
together with the Company's directors and executive officers, acting in concert,
will have the ability to significantly affect the election of the Company's
directors and have a significant effect on the outcome of corporate actions
requiring stockholder approval. In addition, HARAX, acting alone, will have the
power to significantly affect matters relating to the Company's affairs and
business. See "Principal and Selling Stockholders."
13
<PAGE>
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation authorizes the Company's Board of
Directors to issue up to five million shares of preferred stock in one or more
series, to fix the rights, preferences, privileges and restrictions granted to
or imposed upon any wholly unissued shares of preferred stock, to fix the number
of shares constituting any such series, and to fix the designation of any such
series, without further vote or action by its stockholders. The rights of the
holders of Common Stock will be subject to, and may be materially adversely
affected by, the rights of the holders of any preferred stock that may be issued
in the future. The issuance of preferred stock could have the effect of making
it more difficult for a third party to acquire a majority of the outstanding
voting stock of the Company. The Company has no present plans to issue shares of
preferred stock. In addition, in the event of certain transactions by which the
Company is acquired or becomes controlled by a single investor or group of
investors, the Board of Directors pursuant to the Company's Employee Stock
Purchase Plan, has discretion to provide that each right to purchase Common
Stock will be assumed or an equivalent right substituted by the successor
corporation, if any, or the Board may shorten the offering period and provide
for all sums collected by payroll deductions to be applied to purchase stock
immediately prior to such transaction. Furthermore, the Company's Certificate of
Incorporation provides for a staggered board and does not permit stockholder
action by written consent, both of which may have the effect of delaying or
preventing changes in control or management of the Company. The Company also is
subject to the provisions of Section 203 of the Delaware General Corporation
Law, which places restrictions on business combinations with certain interested
stockholders. The above factors, coupled with the concentration of ownership in
the directors and executive officers, could discourage certain types of
transactions involving an actual or potential change in control of the Company,
including transactions in which the holders of Common Stock might otherwise
receive a premium for their shares over then current prices, and may limit the
ability of such stockholders to cause or approve transactions which they may
deem to be in their best interests, all of which could have a material adverse
effect on the market price of the Common Stock offered hereby. See "Description
of Capital Stock-- Delaware Law and Certain Charter Provisions."
VOLATILITY OF STOCK PRICE; DILUTION
Since the Company's initial public offering in April 1996, the price of the
Company's Common Stock has fluctuated widely, with sales on the Nasdaq SmallCap
Market ranging from, on a post-split basis, $4.63 to $17.75. See "Price Range of
Common Stock." Although the Company has applied to have the Common Stock
approved for quotation on Nasdaq National Market, there can be no assurance that
a more orderly and active trading market will develop for the Common Stock or,
if one does develop, that it will be maintained. The market price of the shares
of Common Stock, like that of the common stock of many other high technology
companies, is highly volatile. The Company believes that factors such as the
crash of TWA Flight 800, the Gore Commission report and the entering into of the
FAA contract for 54 CTX 5000 systems have greatly affected the fluctuation in
the Company's Common Stock trading price. In the future such events, as well as
announcements of technological innovations or new products by the Company or its
competitors and general market conditions, may have a significant effect on the
market price of the Common Stock. In addition, in recent years the stock market
in general, and the market for small capitalization stocks in particular, has
experienced extreme price fluctuations which have often been unrelated to the
operating performance of affected companies. Such fluctuations could adversely
affect the market price of the Company's Common Stock. Purchasers of the Common
Stock offered hereby will experience immediate, substantial dilution in the net
tangible book value per share of the Common Stock from the public offering
price. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of Common Stock in the public market following
this Offering could have an adverse effect on the trading price of the Common
Stock. Upon completion of this Offering, based on shares outstanding as of March
1, 1997, the Company will have outstanding approximately 11,062,400 shares of
Common Stock assuming no exercise of options after December 31, 1996 other than
the options to purchase 15,474 shares that will be exercised by Selling
Stockholders and sold in this Offering. Of the shares outstanding,
14
<PAGE>
7,052,416 shares, including the 3,125,000 shares offered hereby, (7,521,166
shares if the Underwriters' overallotment option is exercised in full) will be
freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act. The remaining 4,009,984 shares of
Common Stock outstanding upon completion of this offering are "restricted
securities" as that term is defined in Rule 144. As a result of lock-up
agreements between certain security holders and representatives of the
Underwriters, approximately 4,656,263 shares of Common Stock will become
available for immediate sale in the public market beginning 120 days after the
date of this Prospectus, subject in certain cases to the volume, holding period
and other restrictions of Rule 144.
The Company has entered into an agreement with a stockholder pursuant to
which 420,454 shares are currently registered for resale under the Securities
Act, and has entered into agreements with certain of its stockholders and others
pursuant to which such persons following this Offering have the right to require
the Company to register up to an aggregate of 577,388 additional shares of
Common Stock for resale under the Securities Act. Of such shares, 397,388 are
currently outstanding and the remaining 180,000 shares are issuable upon the
exercise of currently outstanding warrants. See "Description of Capital
Stock--Registration Rights" and "Certain Transactions."
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of 1,875,000 shares of Common
Stock offered by the Company hereby (2,343,750 if the Underwriters'
over-allotment option is exercised in full) at an assumed public offering price
of $16.50 per share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company, together
with the proceeds from the exercise of options to purchase 15,474 shares of
Common Stock to be sold in this Offering by the Selling Stockholders are
estimated to be approximately $28,567,000 ($35,857,000 if the Underwriters'
over-allotment option is exercised in full). The Company will not receive any
proceeds from the sale of Common Stock by the Selling Stockholders. The Company
anticipates that the net proceeds will be used (i) to purchase approximately
$2.0 million of capital equipment and for facility improvements totaling
approximately $1.5 million in connection with a move of the Company's principle
executive offices and manufacturing facility, (ii) to fund research and
development, and (iii) for working capital and other general corporate purposes.
A portion of the proceeds also may be used to acquire or invest in
complementary businesses, products or technologies. From time to time, the
Company evaluates potential acquisitions of such businesses, products or
technologies in the ordinary course of business. The Company has no present
understandings, commitments or agreements with respect to any material
acquisition of any businesses, products or technologies. See "Risk
Factors--Risks Associated with Potential Acquisitions."
Pending the foregoing uses, the Company intends to invest the net proceeds
from this Offering in short-term, interest bearing, investment-grade securities.
PRICE RANGE OF COMMON STOCK
On April 23, 1996, the Common Stock commenced trading on the Nasdaq SmallCap
Market under the symbol "INVN". Prior to that date, there was no public market
for the Common Stock. The following table sets forth, for the periods indicated,
the high and low bid quotations of the Common Stock as reported on the Nasdaq
SmallCap Market giving effect to the Company's 2-for-1 stock split effected on
February 7, 1997 as if the stock split had occurred on April 23, 1996. These
over-the-counter quotations reflect inter-dealer prices, without retail markup,
markdown or commission, and may not necessarily represent the sales prices in
actual transactions.
<TABLE>
<CAPTION>
THE NASDAQ
SMALLCAP MARKET
------------------
HIGH LOW
------- -------
<S> <C> <C>
Fiscal 1996
Second quarter (from April 23, 1996).............................................. $ 6 5/8 $ 5 5/8
Third quarter..................................................................... 17 1/16 4 5/8
Fourth quarter.................................................................... 17 5/16 10 7/8
Fiscal 1997
First quarter (through March 12, 1997)............................................ $17 3/4 $13 5/8
</TABLE>
On March 12, 1997, the last sale price of the Common Stock on the Nasdaq
SmallCap Market was $16.50 per share. On March 1, 1997 there were approximately
150 stockholders of record of Common Stock, and the Company believes its shares
were held beneficially by approximately 4,000 owners on such date. The Company
has made application for inclusion of the Common Stock on the Nasdaq National
Market.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock
and it is currently the intention of the Board of Directors not to pay cash
dividends in the foreseeable future. The Company plans to retain future
earnings, if any, to finance its operations. In addition, the Company's bank
credit facility prohibits the payment of dividends without the lender's consent.
16
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1996 the actual
capitalization of the Company and the capitalization of the Company as adjusted
to give effect to (i) the sale of the 1,875,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $16.50 per share
after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by the Company, (ii) the exercise of options to
purchase 15,474 shares of Common Stock to be sold in the Offering by the Selling
Stockholders at a weighted average exercise price of $0.55 per share, and (iii)
the application by the Company of the estimated net proceeds therefrom.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(In thousands)
<S> <C> <C>
Long-term obligations, net of current portion............................................ $ 110 $ 110
Stockholders' equity:
Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized;
none issued and outstanding.......................................................... -- --
Common stock, $0.001 par value; 20,000,000 shares authorized;
9,160,000 shares issued and outstanding actual; and
11,050,000 shares issued and outstanding, as adjusted(1)............................. 9 11
Additional paid-in capital............................................................. 28,919 57,484
Deferred stock compensation expense.................................................... (355) (355)
Accumulated deficit.................................................................... (19,499) (19,499)
--------- -----------
Total stockholders' equity........................................................... 9,074 37,641
--------- -----------
Total capitalization............................................................... $ 9,184 $ 37,751
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) Based on the number of shares outstanding on December 31, 1996. Excludes, as
of such date, (i) approximately 1,126,000 shares of Common Stock issuable
upon exercise of options outstanding, of which options to purchase
approximately 628,000 shares were exercisable at a weighted average exercise
price of $0.80 per share, (ii) 180,000 shares of Common Stock issuable upon
exercise of warrants outstanding at an exercise price of $6.60 per share,
(iii) approximately 835,000 shares reserved for future grants under the
Company's Equity Incentive Plan, and (iv) 300,000 shares reserved for
issuance pursuant to the Company's 1996 Employee Stock Purchase Plan. See
"Management--Equity Incentive Plans," "Principal and Selling Stockholders,"
"Description of Capital Stock" and Note 8 of Notes to Consolidated Financial
Statements.
17
<PAGE>
DILUTION
The net tangible book value of the Company as of December 31, 1996 was
$9,074,000, or $0.99 per share of Common Stock. Net tangible book value per
share is determined by dividing the net tangible book value (tangible assets
less total liabilities) of the Company by the number of shares of Common Stock
outstanding at that date. After giving effect to the receipt of the estimated
net proceeds from the sale of the shares of Common Stock offered by the Company
at the assumed public offering price of $16.50 per share, the pro forma net
tangible book value of the Company as of December 31, 1996 would have been
$37,641,000, or $3.41 per share. This represents an immediate increase in net
tangible book value to existing stockholders of $2.42 per share and an immediate
dilution to new investors of $13.09 per share. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price........................................ $ 16.50
Net tangible book value as of December 31, 1996.................... $ 0.99
Increase in net tangible book value attributable to new
investors........................................................ 2.42
---------
Pro forma net tangible book value after the Offering................. 3.41
---------
Dilution to new investors............................................ $ 13.09
---------
---------
</TABLE>
The above computations assume the exercise of options to purchase 15,474
shares of Common Stock to be sold in this Offering by the Selling Stockholders
at a weighted average exercise price of $0.55 per share. In addition, the above
computations assume no exercise of options to purchase 1,126,000 shares of
Common Stock outstanding at December 31, 1996 at a weighted average exercise
price of $0.80 per share and no exercise of warrants to purchase 180,000 shares
of Common Stock at an exercise price of $6.60 per share outstanding on such
date. To the extent such options and warrants are exercised, there will be
further dilution to investors.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth for the periods and the dates indicated
certain financial data which should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and notes thereto included elsewhere
herein. The statement of operations data for each of the three fiscal years in
the period ended December 31, 1996, and the balance sheet data at December 31,
1995 and 1996, are derived from the consolidated financial statements of the
Company which have been audited by Price Waterhouse LLP, independent
accountants, and are included elsewhere in this Prospectus. The statement of
operations data for the years ended December 31, 1992 and 1993 and the balance
sheet data at December 31, 1992, 1993, and 1994 are derived from audited
financial statements not otherwise contained herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues................................................. $ -- $ -- $ -- $ 9,066 $ 15,841
Cost of revenues......................................... -- -- -- 6,777 9,736
--------- --------- --------- --------- ---------
Gross profit........................................... -- -- -- 2,289 6,105
--------- --------- --------- --------- ---------
Operating expenses:
Research and development(1)............................ 744 1,424 1,582 1,940 2,785
Sales and marketing.................................... 242 520 664 1,866 2,976
General and administrative............................. 1,058 1,081 1,078 1,471 2,577
--------- --------- --------- --------- ---------
Total operating expenses............................. 2,044 3,025 3,324 5,277 8,338
--------- --------- --------- --------- ---------
Loss from operations..................................... (2,044) (3,025) (3,324) (2,988 (2) (2,233)(2)
Interest expense......................................... (162) (288) (410) (338) (1,511)(3)
Other income, net........................................ 10 6 7 34 172
--------- --------- --------- --------- ---------
Net loss................................................. $ (2,196) $ (3,307) $ (3,727) $ (3,292) $ (3,572)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net loss per share(4).................................... $ (0.50) $ (0.44)
--------- ---------
--------- ---------
Weighted average shares outstanding(4)................... 6,642 8,142
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash..................................................... $ 562 $ 212 $ 2,241 $ 1,927 $ 2,363
Working capital (deficit)................................ (2,365) (4,759) (4,893) (3,477) 7,380
Total assets............................................. 1,804 1,950 4,646 7,316 15,256
Long-term liabilities.................................... -- -- -- 34 110
Total stockholders' equity (deficit)..................... (1,696) (3,983) (4,224) (2,522) 9,074
</TABLE>
- ------------------------------
(1) Net of amounts reimbursed by the FAA of $3,099,000, $1,518,000, $821,000,
$593,000, and $1,476,000, respectively, during 1992, 1993, 1994, 1995, and
1996. See Note 4 of Notes to Consolidated Financial Statements.
(2) The Company recorded non-cash charges related to grants of stock options
having exercise prices below the fair market value on the date of grant to
employees and directors in the amounts of $369,000 and $489,000,
respectively, in 1995 and 1996. See Note 8 of Notes to Consolidated
Financial Statements.
(3) The Company recorded a non-cash charge resulting from amortization of a
bridge loan warrant discount in the amount of $1.3 million in 1996. See Note
6 of Notes to Consolidated Financial Statements.
(4) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the method used to compute per share amounts.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION MAY CONTAIN FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. WHEN USED IN THIS DISCUSSION, THE WORDS
"ANTICIPATE," "BELIEVE," "ESTIMATE," AND "EXPECT" AND SIMILAR EXPRESSIONS AS
THEY RELATE TO THE COMPANY OR ITS MANAGEMENT ARE INTENDED TO IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THE RESULTS EXPRESSED IN, OR IMPLIED
BY, THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO
SUCH DIFFERENCES INCLUDE RISKS RELATED TO MARKET ACCEPTANCE OF THE COMPANY'S
SINGLE PRODUCT, FLUCTUATIONS IN THE COMPANY'S QUARTERLY AND ANNUAL OPERATING
RESULTS, THE LOSS OF ORDERS OF THE COMPANY'S PRODUCT, INCLUDING THE LOSS OF THE
COMPANY'S MOST RECENT ORDER FROM THE FAA, LOSS OF ANY OF THE COMPANY'S SOLE
SOURCE SUPPLIERS, INTENSE COMPETITION, RELIANCE ON LARGE ORDERS, CONCENTRATION
OF THE COMPANY'S CUSTOMERS, RISKS RELATED TO THE LENGTHY SALES CYCLES FOR THE
CTX 5000, BUDGETING LIMITATIONS OF THE COMPANY'S CUSTOMERS AND PROSPECTIVE
CUSTOMERS, AND THE RISKS RELATED TO THE COMPANY'S LIMITED MANUFACTURING
EXPERIENCE, AS WELL AS THOSE DISCUSSED IN "RISK FACTORS," IN "BUSINESS," AND
ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
InVision designs, manufactures and markets an explosive detection system
based on advanced CT technology. The Company was formed in September 1990 to
design and develop the CTX 5000 and remained in the development stage through
December 1994. In June 1994, the Company received its first commercial order for
a CTX 5000 system from the Brussels International Airport in Belgium, and since
such time has received orders for a total of 87 systems, of which a total of 30
had been shipped as of March 1, 1997. For the fiscal year ended December 31,
1996, the Company had revenues of $15.8 million, and at March 1, 1997 had orders
in backlog in the amount of $55.0 million. See "Business--Backlog."
The Company considers research and development to be a vital part of its
operating discipline and continues to dedicate substantial resources to research
to enhance the performance, functionality and reliability of its CTX 5000
hardware and software. At March 1, 1997, the Company had 35 full-time employees
engaged in research and development activities, and also was using the services
of 8 specialized contract employees and consultants in this area. Beginning in
1991, total research and development expenditures by the Company have been
partially offset by amounts reimbursed by the FAA under development contracts
and grants. The Company believes that investment in research and development in
absolute dollars will increase substantially to meet its future needs regardless
of the level of funding received from the FAA. During the year ended December
31, 1996, the Company spent $4.3 million on research and development activities,
of which $1.5 million was funded by the FAA under development contracts and
grants. To the extent that FAA contract and grant receipts decline in the
future, research and development expenses borne by the Company would increase,
and the Company expects that its results of operations would be adversely
impacted. See "Risk Factors--Competition for FAA Grants."
The Company markets its products both directly through internal sales
personnel and indirectly through authorized agents, distributors and systems
integrators. In the United States, the Company markets its CTX 5000 primarily
through direct sales personnel. Internationally, the Company utilizes both a
direct sales force and authorized agents to sell its products. During the years
ended December 31, 1996 and 1995, international sales represented 76.2% and
89.2%, respectively, of the Company's revenues. See "Risk Factors--International
Business; Fluctuation in Exchange Rates; Risk of Change in Foreign Regulations."
The sales cycle of the CTX 5000 is often lengthy due to the protracted
approval process that typically accompanies large capital expenditures and the
time required to manufacture the CTX 5000 and install and assimilate the CTX
5000. Typically, six to twelve months may elapse between a new customer's
initial evaluation of the Company's system and the execution of a contract.
Another three months to a year may elapse prior to shipment of the CTX 5000 as
the customer site is prepared and the CTX 5000 is manufactured. During this
period the Company expends substantial funds and management resources but
recognizes no associated
20
<PAGE>
revenue. See "Risk Factors--Dependence on Large Orders; Customer Concentrations;
Lengthy Sales Cycle" and "--Public Agency Contract and Budget Considerations."
The Company recognizes revenue on shipment unless extended acceptance
criteria exist, in which case revenue is recognized upon achievement of such
acceptance criteria. The Company typically requires significant customer
deposits and progress payments in advance of shipment on customer purchase
orders. Provision for estimated installation, training and warranty costs is
recorded at the time revenue is recognized. Systems typically carry a one-year
warranty.
RESULTS OF OPERATIONS
The following table sets forth certain income and expenditure items from the
Company's consolidated statement of operations expressed as a percentage of
revenues for the periods indicated. Information for 1994 has been omitted as the
Company did not recognize revenue in that year.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Revenues.................................................................. 100.0% 100.0%
Cost of revenues.......................................................... 74.8 61.5
--------- ---------
Gross profit............................................................ 25.3 38.5
--------- ---------
Operating expenses:
Research and development................................................ 21.4 17.6
Sales and marketing..................................................... 20.6 18.8
General and administrative.............................................. 16.2 16.3
--------- ---------
Total operating expenses.............................................. 58.2 52.6
--------- ---------
Loss from operations...................................................... (33.0) (14.1)
Interest expense.......................................................... (3.7) (9.5)
Other income, net......................................................... 0.4 1.1
--------- ---------
Net loss.................................................................. (36.3)% (22.6)%
--------- ---------
--------- ---------
</TABLE>
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
REVENUES. The Company's revenues are comprised of system revenues, which
include sales of the CTX 5000, accessories, installation and configuration, and
maintenance related to product support.
Revenues increased by 74.7% to $15.8 million in 1996 from $9.0 million in
1995. The increase in 1996 revenues is attributable to increased sales of the
CTX 5000, reflecting a 63.6% increase in unit shipments to 18 units in 1996 from
11 units in 1995 and, to a lesser extent, changes in product configuration
leading to an increase in the average selling price per unit and sales of add-on
products to current customers. There were no revenues recorded in 1994.
GROSS PROFIT. Cost of revenues primarily consists of purchased materials
procured for use in the assembly of the Company's products, as well as
manufacturing labor, overhead and warranty costs. In any given period the
Company's gross profit may be affected by several factors, including product
configuration, location of the installation, and complexity of integration into
various airport environments.
Gross profit increased by 167% to $6.1 million in 1996 from $2.3 million in
1995. Gross margins were 38.5% in 1996 and 25.3% in 1995. The increase in gross
margins was primarily caused by lower unit costs resulting from increased
manufacturing efficiency and reduced overhead cost per unit due to increased
volume, as well as changes in product configurations leading to an increase in
the average selling price. Increased operating
21
<PAGE>
efficiencies resulting from a larger installed base also reduced the average
cost of maintenance and warranty service. There was no gross profit in 1994.
RESEARCH AND DEVELOPMENT. Research and development expenditures consist
primarily of compensation paid to personnel engaged in research and development
activities, amounts paid for outside services, and costs of materials utilized
in the development of hardware products, including prototype units. All software
and hardware development costs are expensed as incurred. Beginning in 1991,
total research and development expenditures by the Company have been partially
offset by amounts reimbursed by the FAA under development contracts and grants.
The Company believes that investment in research and development in absolute
dollars will increase substantially to meet its future needs regardless of the
level of funding received from the FAA.
During 1996, 1995 and 1994, the Company was entitled to reimbursements of
$1.5 million, $0.6 million and $0.8 million, respectively, under research and
development contracts and grants from the FAA to develop and enhance the CTX
5000. Such reimbursements have been reflected as a reduction to research and
development expense in each period presented. Billings are rendered to the FAA
monthly on the basis of actual costs incurred.
Total research and development expenditures increased by 68.2% to $4.3
million in 1996 from $2.5 million in 1995 and by 5.4% in 1995 from $2.4 million
in 1994. Of these amounts, $1.5 million and $0.6 million, respectively, were
funded by research and development contracts and grants from the FAA in 1996 and
1995. As a percentage of revenues, total research and development expenditures
remained at approximately 27.3% for both 1996 and 1995. In 1996, the increase in
total expenditures reflects the effects of personnel additions, costs of
prototype development, efforts to increase throughput and develop systems for
more effective airport integration, and conceptual design.
SALES AND MARKETING. Sales and marketing expenditures consist primarily of
compensation paid to direct and indirect sales and marketing personnel, payments
to consultants, travel related to the sales process, and other selling and
distribution costs.
Sales and marketing expenditures increased by 59.5% to $3.0 million in 1996
from $1.9 million in 1995 and by 181% in 1995 from $0.7 million in 1994. As a
percentage of revenues, sales and marketing expenses declined to 18.8% in 1996
from 20.6% in 1995. The increased levels of expenditures in absolute dollars for
1996 and 1995 reflect increased selling costs associated with the higher unit
sales, including foreign travel, trade shows, public relations and commissions.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of compensation paid to administrative personnel, including directors,
payments to consultants, professional service fees, and travel and other general
expenses.
General and administrative expenses increased by 75.2% to $2.6 million in
1996 from $1.5 million in 1995 and by 36.5% in 1995 from $1.1 million in 1994.
As a percentage of revenues, general and administrative expenses were 16.3% for
1996 and 16.2% for 1995. The increase in absolute dollars in 1996 reflects
increased costs of operating as a public company. In addition, the increases for
1996 and 1995 reflect additions to support capabilities required by the growth
in revenues and corporate headcount.
INTEREST EXPENSE. Interest expense increased to $1.5 million in 1996 from
$0.3 million in 1995 and decreased in 1995 from $0.4 million in 1994. Interest
expense in 1996 reflects the effect of $1.3 million of amortization of the fair
market value of warrants issued in connection with a bridge loan obtained in
December 1995. Interest expense during 1995 and 1994 resulted directly from
short-term debt outstanding during each period.
INCOME TAXES. At December 31, 1996 the Company had federal net operating
loss carryforwards of approximately $11.0 million available to reduce future
federal taxable income. The Company's net operating loss carryforwards expire
from 2005 to 2011. As a result of changes in ownership that occurred in the 1995
22
<PAGE>
financings, future utilization of certain of the Company's carryforwards are
limited to not more than approximately $0.5 million per year.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain consolidated statements of operations
data for the four fiscal quarters in each of the years ended December 31, 1995
and 1996. This data is unaudited but, in the opinion of the Company's
management, reflects all of the adjustments (consisting only of normal recurring
adjustments) necessary for fair presentation of this information in accordance
with generally accepted accounting principles. The operating results for any
quarter are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................... $ 892 $ 2,520 $ 3,057 $ 2,597 $ 3,932 $ 3,555 $ 3,959 $ 4,395
Cost of revenues........... 658 1,685 2,088 2,346 2,453 2,188 2,232 2,863
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Gross profit............. 234 835 969 251 1,479 1,367 1,727 1,532
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Operating expenses:
Research and
development............ 351 412 521 656 595 481 615 1,094
Sales and marketing...... 222 464 571 609 597 638 758 983
General and
administrative......... 294 257 419 501 472 674 730 701
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Total operating
expenses............. 867 1,133 1,511 1,766 1,664 1,793 2,103 2,778
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Loss from operations....... (633) (298) (542) (1,515) (185) (426) (376) (1,246)
Interest expense........... (125) (95) (65) (53) (1,040)(1) (455)(1) (7) (9)
Other income, net.......... 12 7 11 4 10 51 61 50
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Net loss................... $ (746) $ (386) $ (596) $ (1,564) $ (1,215) $ (830) $ (322) $ (1,205)
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Net loss per share......... $ (0.12) $ (0.06) $ (0.09) $ (0.23) $ (0.17) $ (0.11) $ (0.04) $ (0.13)
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Weighted average shares
outstanding............... 6,323 6,438 6,929 6,876 7,081 7,816 8,650 9,023
</TABLE>
- ------------------------
(1) The Company recorded noncash charges of $0.9 million and $0.4 million in the
quarters ended March 31, 1996 and June 30, 1996, respectively, resulting
from amortization of a bridge loan warrant discount.
23
<PAGE>
The following table sets forth, as a percentage of revenues, certain
consolidated statements of operations data for the four fiscal quarters in each
of the years ended December 31, 1995 and 1996.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31, JUNE 30, SEP. 30,
1995 1995 1995 1995 1996 1996 1996
----------- ----------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues.................. 73.8 66.9 68.3 90.3 62.4 61.5 56.4
----- ----- --------- ----- ----- ----- -----
Gross profit.................... 26.2 33.1 31.7 9.7 37.6 38.5 43.6
Operating expenses:
Research and development........ 39.3 16.3 17.0 25.3 15.1 13.5 15.5
Sales and marketing............. 24.9 18.4 18.7 23.5 15.2 17.9 19.1
General and administrative...... 33.0 10.2 13.7 19.3 12.0 19.0 18.4
----- ----- --------- ----- ----- ----- -----
Total operating expenses...... 97.2 45.0 49.4 68.0 42.3 50.4 53.1
----- ----- --------- ----- ----- ----- -----
Loss from operations.............. (71.0) (11.8) (17.7) (58.3) (4.7) (12.0) (9.5)
Interest expense.................. (14.0) (3.8) (2.1) (2.0) (26.4) (12.8) (0.2)
Other income, net................. 1.3 0.3 0.4 0.2 0.3 1.4 1.5
----- ----- --------- ----- ----- ----- -----
Net loss.......................... (83.6)% (15.3)% (19.5)% (60.2)% (30.9)% (23.3)% (8.1)%
----- ----- --------- ----- ----- ----- -----
----- ----- --------- ----- ----- ----- -----
<CAPTION>
DEC. 31,
1996
-----------
<S> <C>
Revenues.......................... 100.0%
Cost of revenues.................. 65.1
-----
Gross profit.................... 34.9
Operating expenses:
Research and development........ 24.9
Sales and marketing............. 22.4
General and administrative...... 15.9
-----
Total operating expenses...... 63.2
-----
Loss from operations.............. (28.4)
Interest expense.................. (0.2)
Other income, net................. 1.1
-----
Net loss.......................... (27.4)%
-----
-----
</TABLE>
The Company's quarterly revenues have fluctuated significantly in the past
and are expected to fluctuate significantly in the future. These fluctuations
are the result of a variety of factors, including the Company's delivery cycle,
variations in product configuration, timing of orders, and suitability of client
sites. The Company's cost of revenues fluctuates from quarter to quarter
consistent with fluctuations in such revenues. In addition, the Company's gross
margins may be affected by, among other factors, the configuration of systems
sold, the mix between system and add-on sales, and the breakdown between
domestic and international sales. During 1996, as the number of orders shipped
and associated revenues increased, the overall variability of the Company's
gross profits decreased.
The Company has experienced operating and net losses in each of the eight
fiscal quarters in the years 1995 and 1996. There can be no assurance that the
Company will become profitable on either a quarterly or annual basis. The
Company's past operating results have been, and its future operating results
will be, subject to fluctuations resulting from a number of factors, including
the timing and announcement of orders, delays in shipments caused by customer
readiness or integration issues, the timing of new or enhanced product offerings
by the Company or it's competitors, the mix between sales to domestic and
international customers, market acceptance of any new or enhanced version of the
Company's products, availability of key components, the availability of
manufacturing capacity, the Company's ability to rapidly increase production,
and fluctuations in demand driven by general conditions impacting the aviation
industry beyond the control of the Company. The Company's revenues in any period
are generally derived from a limited number of customers. The Company may also
choose to reduce prices or increase spending in response to competition or to
pursue new market opportunities, all of which may adversely affect the Company's
business, financial condition and results of operations. See "Risk
Factors--History of Losses; No Assurance of Profitability" and "--Fluctuations
in Operating Results."
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
private sales of $16.5 million of Preferred and Common Stock (of which $5.6
million represents indebtedness converted to equity), the sale of $9.5 million
of Common Stock in the Company's Initial Public Offering in April 1996, and $3.2
million of short-term borrowings. At December 31, 1996, the Company had $2.4
million in cash and no outstanding borrowings.
24
<PAGE>
In February 1997, the Company entered into two one-year revolving line of
credit agreements with Silicon Valley Bank. The first agreement provides for
maximum borrowings generally in an amount up to the lower of 80% of domestic
eligible accounts receivable or $4.5 million. Borrowings under this agreement
generally bear interest at the bank's prime rate plus 1.00% per annum (9.25% at
December 31, 1996). The second agreement is partially guaranteed by the
Export-Import Bank of the United States and provides for maximum borrowings
generally in an amount up to the lower of the sum of 90% of eligible export
accounts receivable plus 70% of eligible raw materials and work-in-process
inventory designated for export customers or $4.5 million. Borrowings under this
agreement generally bear interest at the bank's prime rate plus 0.75% per annum
(9.00% at December 31, 1996). Borrowings under both agreements are secured by
all of the Company's assets. The agreements require that the Company maintain
certain financial ratios and levels of tangible net worth and profitability and
also prohibit the Company from paying cash dividends. Proceeds of loans under
both lines of credit may be used for general corporate purposes.
Cash used in operations was $9.4 million in 1996 and $2.0 million in 1995.
Net cash used in operations for 1996 was primarily due to the net loss of $3.6
million, a $5.3 million increase in accounts receivable and a $1.4 million
increase in inventories which were partially offset by a non-cash charge for the
amortization of the warrant discount of $1.3 million. For 1995, net cash used in
operations was due primarily to the net loss of $3.3 million and increases in
accounts receivable and inventories associated with increased manufacturing and
sales activities, which were partially offset by an increase in accounts payable
and accrued liabilities.
Net cash used in investing activities was $1.1 million in 1996 and $0.6
million in 1995, in each case due primarily to the purchase of property and
equipment. The Company anticipates spending approximately $2.0 million for
purchases of capital equipment and approximately $1.5 million for facility
improvements in connection with a move of the Company's principal executive
offices and manufacturing facility. The Company has no other significant capital
spending or purchase commitments other than normal purchase commitments and
commitments under leases.
Net cash provided by financing activities was $10.9 million in 1996 and $2.3
million in 1995. The increase in 1996 was due to $14.0 million in net proceeds
from issuances of Common Stock primarily associated with the Company's initial
public offering in 1996 which were partially offset by $3.2 million in net
repayments of short-term debt financing. Net cash provided by financing
activities in 1995 was due primarily to $1.2 million in proceeds from the
issuance of Preferred Stock and $1.0 million in proceeds from short-term debt
financing.
The Company believes that existing cash of $2.4 million as of December 31,
1996 and available borrowings under the Company's line of credit agreements,
together with the anticipated net proceeds from this Offering, will be
sufficient to finance its working capital and capital expenditure requirements
for at least the next 12 months.
25
<PAGE>
BUSINESS
THE FOLLOWING DISCUSSION MAY CONTAIN FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. WHEN USED IN THIS DISCUSSION, THE WORDS
"ANTICIPATE," "BELIEVE," "ESTIMATE," AND "EXPECT" AND SIMILAR EXPRESSIONS AS
THEY RELATE TO THE COMPANY OR ITS MANAGEMENT ARE INTENDED TO IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THE RESULTS EXPRESSED IN, OR IMPLIED
BY, THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO
SUCH DIFFERENCES INCLUDE RISKS RELATED TO MARKET ACCEPTANCE OF THE COMPANY'S
SINGLE PRODUCT, FLUCTUATIONS IN THE COMPANY'S QUARTERLY AND ANNUAL OPERATING
RESULTS, THE LOSS OF ORDERS OF THE COMPANY'S PRODUCT, INCLUDING THE LOSS OF THE
COMPANY'S MOST RECENT ORDER FROM THE FAA, LOSS OF ANY OF THE COMPANY'S SOLE
SOURCE SUPPLIERS, INTENSE COMPETITION, RELIANCE ON LARGE ORDERS, CONCENTRATION
OF THE COMPANY'S CUSTOMERS, RISKS RELATED TO THE LENGTHY SALES CYCLES FOR THE
CTX 5000, BUDGETING LIMITATIONS OF THE COMPANY'S CUSTOMERS AND PROSPECTIVE
CUSTOMERS, AND THE RISKS RELATED TO THE COMPANY'S LIMITED MANUFACTURING
EXPERIENCE, AS WELL AS THOSE DISCUSSED IN "RISK FACTORS," IN "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND
ELSEWHERE IN THIS PROSPECTUS.
GENERAL
InVision is the worldwide leader in explosive detection technology. The
Company develops, manufactures, markets and supports an explosive detection
system for civil aviation security based on advanced CT technology. To date, the
Company's CTX 5000 is the only EDS to be certified by the FAA for use in the
inspection of checked luggage on commercial flights. Historically, the FAA has
been the leader in establishing standards for aviation security worldwide, and
the Company believes that airports around the world will migrate over time
towards security policies consistent with those of the FAA. As a result, the
Company believes that the CTX 5000 is well positioned to become the industry
standard. In December 1996, the Company received an order from the FAA for 54
CTX 5000 systems to be installed at the busiest U.S. airports. For the fiscal
year ended December 31, 1996, the Company had revenues of $15.8 million, and at
March 1, 1997 had orders in backlog in the amount of $55.0 million. As of March
1, 1997, 30 CTX 5000 systems had been shipped to twelve airports in seven
countries around the world.
The Company believes that the CTX 5000 is the only EDS capable of detecting
all types of explosives designated by the FAA to be a threat to commercial
aviation and that the CTX 5000 is superior to competing systems by virtue of its
advanced detection technology. The CTX 5000 is capable of capturing and
processing substantially more data than other explosive detection systems. The
Company believes that there are important technological advantages that lead to
the superiority of the CTX 5000 over systems of the Company's primary
competitors. By combining heightened levels of data capture and diagnosis
capabilities with simple user interfaces, the Company's CTX 5000 is capable of
providing high detection and low false alarm rates, as well as advanced threat
resolution capability and increased operator efficiency.
The Company's objective is to become the dominant provider of explosive
detection systems worldwide and to extend its expertise in EDS technology to
address broader applications. Specific elements of the Company's growth strategy
are to enhance its technological leadership, expand its sales and marketing
organization, leverage its detection technology expertise to enter new markets
for detection, and selectively pursue strategic relationships and acquisitions.
INDUSTRY BACKGROUND
MARKET SIZE. There are over 600 airports worldwide providing scheduled
service for an aggregate of over 2.5 billion passengers per year. Of these
airports, over 400 are located in the United States, 150 are in Europe, and 50
are in the Asia/Pacific region. According to a 1996 report issued by the
Aviation Security Advisory Committee, it will cost approximately $2.2 billion to
equip the 76 largest airports in the United States with certified explosive
detection systems.
THE TERRORIST THREAT. In recent years, increased incidents of bombings and
airline terrorism have contributed to an enhanced perception of the threat of
terrorism among the general public. According to a report of the
26
<PAGE>
President's Commission on Aviation Security and Terrorism dated August 4, 1989,
there were over 42 bombings against civilian aviation targets worldwide between
1975 and 1989. According to Time Magazine, there were 10,222 bombings in the
United States between 1983 and 1993. According to a CBS poll conducted in July
1996, the public perception of the threat of commercial aircraft bombings has
increased dramatically, and airline passengers have expressed a willingness to
pay more for airline travel and endure delays if such actions will decrease the
threat of successful airline bombings.
THE EVOLUTION OF EXPLOSIVE DETECTION TECHNOLOGIES. In the 1970's, in
response to hijackings, airports worldwide began to install x-ray systems to
screen carry-on baggage for weapons such as guns and knives. In response to the
implementation of this technology, terrorists in some cases adopted the tactic
of airline bombings. The effort to develop automated explosive detection
capabilities was first established in the late 1970's by the FAA and was
predicated on the application of conventional x-ray technology. However, until
the advent of certified explosive detection systems in 1994, the Company
believes that EDS technology remained largely inadequate. Following the bombing
of Pan American Flight 103 over Lockerbie, Scotland in December 1988, certain
European countries hastened to implement explosive detection capabilities based
upon then-existing technologies. In order to placate immediate public safety
concerns, these conventional systems were designed to process 100% of checked
baggage. However, these conventional systems were and continue to remain
deficient in that they are unable to reliably detect and identify all of the
types and amounts of explosives determined by the FAA to be a threat to civil
aviation.
Several advanced explosive detection technologies have been developed to
attempt to address the need for effective explosive detection. These systems
include CT, dual energy x-ray and trace detection. CT technology uses a source
of x-rays rotating around an object to create multiple two-dimensional images,
commonly know as "slices," of the density distribution of the object's cross
section and compares these density data to those of explosives. Dual energy
x-ray systems measure the x-ray absorption properties of a bag's contents at two
different x-ray energies to determine if any of the contents have the physical
characteristics of explosive materials. Trace detection equipment, known as
"sniffers," detect particulate and chemical traces of explosive materials
collected by an operator by wiping or vacuuming the bag under inspection. The
only explosive detection system to be certified by the FAA is the Company's CTX
5000, which is based on CT technology.
THE EMERGENCE OF WORLDWIDE STANDARDS AND FAA CERTIFICATION. Throughout the
history of civil aviation, the FAA has been a leader in setting the standards
for aviation security worldwide. In the 1970's, the FAA first established
standards for worldwide security by setting guidelines for screening of carry-on
baggage for guns and knives. These standards were subsequently mandated by the
United Nations for adoption by all of its member states, leading to the
installation of over 7,000 detection systems worldwide. Following the December
1988 bombing of Pan American Flight 103, the United States enacted the Aviation
Security Improvement Act of 1990 (the "Aviation Security Act"), in response to
which the FAA increased research and development funding for advanced explosives
detection technology. To date the FAA has spent approximately $150 million on
such activities.
In 1993, as required by the Aviation Security Act, the FAA adopted a
certification protocol regarding explosive detection systems for use on checked
baggage. The FAA certification process was developed to certify equipment that,
alone or as part of an integrated system, can detect under realistic air carrier
operating conditions the amounts, configurations and types of explosive material
which would be likely to be used to cause catastrophic damage to commercial
aircraft. To do so, the FAA contracted with the National Academy of Sciences to
establish a scientifically valid protocol for certification. The FAA also
consulted with a variety of public agencies, including the Federal Bureau of
Investigation and the Central Intelligence Agency. The result of this
collaboration was the establishment of a detection protocol which focuses on (i)
the categories of explosive substances to be detected, (ii) the probability of
detection by explosive category, (iii) the quantity of explosive that must be
detectable, (iv) the number of bags processed per hour, and (v) the maximum
acceptable false alarm rates by explosive. To date only one explosive detection
system, the Company's CTX 5000, has met the requirements of the protocol and has
been certified by the FAA. In order to meet the throughput criteria established
in the FAA protocol, the CTX 5000 was certified with two units operating in
parallel.
27
<PAGE>
IMPLEMENTATION OF MULTI-LEVEL SCREENING PROCESSES. As the capabilities of
EDS technology have evolved and worldwide detection standards have become more
pervasive, certain airports around the world have sought to augment their
detection capabilities by implementing various multi-level screening processes.
To date, two distinct processes have become most prevalent: a system first
implemented by the British Airport Authority (the "BAA Approach"); and a system
endorsed by the FAA (the "FAA Approach"). Prior to the development of certified
detection technology and in recognition of the deficiencies of existing x-ray
technology in providing comprehensive detection, certain European airports
adopted the BAA Approach, which consists of the use of several explosive
detection systems operating in series in order to attempt to increase detection
rates while maintaining throughput rates.
The FAA Approach was developed following the advent of certified detection
technology. Currently, the FAA Approach is comprised of a process of passenger
"profiling" combined with the use of certified EDS equipment for the detection
of explosives in baggage deemed to be high risk. Profiling involves an initial
determination of whether a particular passenger represents a high threat based
on certain decision criteria which are believed to be reasonable predictors of
risk. Based on this determination, a passenger's baggage may undergo a higher
level of investigation, which will in most cases involve the baggage being
screened with the use of certified EDS equipment. In contrast to the BAA
Approach, in which the effectiveness of the entire detection process is
dependent on technologies with greater emphasis on throughput than detection,
the FAA Approach is predicated on the use of high-detection technology and is
focused on the ability to accurately and effectively detect explosives and to
identify individuals believed to pose the greatest threat to civil aviation. The
Company believes that the FAA Approach, as it is currently being implemented at
major airports throughout the United States, will prove to be the more effective
process in reducing the dangers associated with the use of explosives against
civil aviation.
THE GORE COMMISSION. In response to the recent crash of TWA Flight 800 off
Long Island, New York in July 1996, President Clinton formed the White House
Commission on Aviation Safety and Security, chaired by Vice President Gore (the
"Gore Commission"), to review airline and airport security and oversee aviation
safety. The Gore Commission concluded that "the threat against civil aviation is
changing and growing, and that the federal government must lead the fight
against it" and recommended that "the federal government commit greater
resources to improving aviation security." The Gore Commission released its
initial report in September 1996, and in October 1996 the United States enacted
legislation which includes a $144.2 million appropriation for 1997 for the
deployment of explosives detection systems and other advanced security equipment
for use by air carriers and airport authorities. Of this amount, $52.2 million,
or 36.2%, was allocated to the purchase of certified CT technology.
THE INVISION TECHNOLOGY ADVANTAGE
The Company believes that the CTX 5000 is the only EDS presently capable of
reliably detecting all types of explosives designated by the FAA to be a threat
to commercial aviation and that the CTX 5000 is superior to competing systems by
virtue of its advanced detection technology.
The Company's CTX 5000 employs CT technology which was pioneered in the
medical field in the 1970's and enhanced for use in explosive detection by the
Company's engineers in the 1990's. As its principal detection vehicle, the CTX
5000 uses a source of x-rays rotating around an object to create two-dimensional
images of the density distribution of the object's cross section. These
cross-sectional images are commonly known as "slices." The CTX 5000 is capable
of rendering several contiguous slices of an object in order to optimize the
diagnostic sample-sets of an object. The data gathered from the slices is used
to measure the physical characteristics of objects by determining their linear
attenuation coefficients (density), morphology (shape), and granularity
(uniformity). Once measured, each characteristic is automatically compared,
using sophisticated composition algorithms, to a database of characteristics of
compounds used in explosive devices in order to render an initial diagnosis of
the object's threat. If an object is determined to contain the characteristics
of an explosive, additional slices of the object are collected in order to
determine the mass descriminates (quantity) of the threat. At this stage,
potential threats which cannot be cleared automatically by the CTX 5000 are
submitted to an
28
<PAGE>
operator for threat resolution. The operator is also presented with information
regarding the presence of detonators, power sources, proximity charges, metallic
objects and other characteristics of a potential bomb, and the suspicious
objects are highlighted in different colors.
The Company believes that there are three important technical
characteristics which lead to the superiority of the CTX 5000 over systems of
the Company's primary competitors, which are based on dual energy technology.
These characteristics are:
DATA QUALITY AND QUANTITY. Dual energy x-ray systems collect data from one
or two views of an object to determine the atomic number of materials
encountered during the scan. CT technology, with approximately 500 views per
slice, yields more data and is capable of measuring the density of an object.
While Explosives have well defined density ranges which are generally distinct
from those of the contents of checked baggage, certain classes of explosives
have atomic numbers which are similar to those of many materials found in
checked baggage. As a result, the CTX 5000 is better able to distinguish between
explosives and the benign contents of checked baggage, resulting in higher
detection and lower false alarm rates.
THREE DIMENSIONAL DATA. CT technology's ability to render three dimensional
data concerning an object also contributes to its superior detection compared to
dual energy x-ray technology. By utilizing these data, CT technology is able to
map characteristics of an object, such as mass and density, regardless of the
object's position in the bag and the superposition of other objects. Dual energy
x-ray systems render only two dimensional data. As a result, if multiple objects
are superimposed over the potential explosive, the system's ability to calculate
the atomic number of the potential explosive is diminished. Given the inherent
limitations of the use of atomic numbers as a parameter for explosive detection,
this diminished capacity with regard to stacked objects is particularly
problematic.
ADVANCED THREAT RESOLUTION. Threat resolution refers to the process
following an alarm of determining whether checked baggage is safe or contains a
threat. Once an alarm occurs, the CTX 5000 presents its operators with images
and threat analysis tools that are unavailable in dual energy systems. For
example, the CTX 5000 simultaneously provides operators with both x-ray images
and CT images on separate screens. These data are cross-referenced with each
other to give the operator an overall image of a suitcase and detailed CT
information relating to the contents, and in particular relating to the
potential threat. In addition to the images, the CTX 5000 provides an abundance
of tools and data, designed to allow operators to determine whether a bag is a
threat requiring further action or is safe to clear to the plane. One of these
tools is the ability to take additional slices to provide more data and focus in
on the threat. In contrast, dual energy x-ray systems display a single x-ray
image of a potential threat and are not capable of providing additional
information to an operator who suspects that an explosive is present.
The Company believes that the strengths of the CTX 5000 with respect to
these three important technical characteristics were central to the CTX 5000
meeting the stringent FAA standards for certification and to gaining operational
acceptance by the commercial aviation industry. In addition, the Company
believes that the limitations of competing technologies with respect to these
important characteristics will limit these technologies' ability to attain the
high detection and low false alarm rates necessary to obtain FAA certification;
however, there can be no assurance that technological innovations will not
enable these technologies to overcome these limitations. As the only EDS to be
certified by the FAA, the Company believes its CTX 5000 system is well
positioned to be the cornerstone of the advanced explosive detection process
being promoted by the FAA for implementation at airports around the world.
GROWTH STRATEGY
The Company's objective is to be the leading provider of explosive detection
systems worldwide and to extend its technology expertise to address broader
applications for detection. Specific elements of the Company's growth strategy
are to:
29
<PAGE>
ENHANCE TECHNOLOGICAL LEADERSHIP. The Company believes that its
technological capabilities provide it with a significant competitive advantage.
Accordingly, the Company considers research and development to be a vital part
of its operating discipline, and continues to make substantial investments to
enhance the performance, functionality and reliability of its CTX 5000 hardware
and software. Among the Company's priorities in enhancing its technological
capabilities are to increase throughput rates while maintaining certified
detection capability and to increase threat resolution capabilities. In 1996,
the Company spent $4.3 million (or 26.9% of revenues) for research and
development to improve the Company's technology.
EXPAND SALES AND MARKETING CAPABILITIES. The Company believes that its
sales and marketing capability is vital to achieving high levels of market
penetration for its systems. The objectives of the Company's sales force include
promoting broader acceptance for EDS technology worldwide and emphasizing the
importance of high detection rate EDS technology. Because sales cycles for the
CTX 5000 can be lengthy, the Company's sales and marketing efforts are focused
on developing and maintaining close working relationships with key management
personnel at regulatory authorities, airports and airport authorities worldwide.
As the market for certified explosive detection technology expands, the Company
intends to supplement its sales and marketing capability by adding sales
personnel in the U.S. and in Asia, enhancing customer support capabilities in
Europe through the addition of systems integration expertise, and continuing to
educate governmental entities worldwide about the benefits of certified
detection and the advantages of the CTX 5000.
LEVERAGE TECHNOLOGY EXPERTISE TO ENTER NEW MARKETS FOR DETECTION. The
Company believes that installations of advanced automated explosive detection
systems at airports will accelerate the adoption of this technology for
additional aviation applications such as screening of carry-on baggage and
trailer-mounted mobile units for inspections at remote location, as well as for
other security applications, including the detection of drugs, the protection of
government and private facilities, and the screening of mail. Since the amount
of government money spent in drug interdiction efforts far surpasses the amount
spent for the development of EDS technology, the Company believes that drug
detection applications afford significant market opportunities for the
application of the Company's certified detection technology. The Company
believes that its leadership in high detection technology will be a competitive
advantage as these markets develop.
PURSUE STRATEGIC RELATIONSHIPS AND ACQUISITIONS. From time to time the
Company reviews strategic relationship opportunities, including potential
acquisitions, that would complement its existing product offerings, augment its
market coverage, enhance its technological capabilities or otherwise offer
growth opportunities. The Company believes that the CTX 5000 is suited to the
integration of applications which are direct extensions of its strength in
explosive detection technology. Pursuant to this strategy, the Company has
entered a strategic relationship with EG&G Astrophysics for the development of
an explosive detection system based upon a combination of the CTX 5000 as it
currently exists and a pre-scanner based upon EG&G's x-ray scanning technology.
See "--Recent Developments."
PRODUCT DEVELOPMENT
The Company considers research and development to be a vital part of its
operating discipline and continues to dedicate substantial resources to research
and development to enhance the performance, functionality and reliability of its
CTX 5000 hardware and software. In particular, the Company recognizes the need
to improve certain of its system capabilities, specifically related to
throughput and gantry size, in order to accommodate the breadth of market
potential for EDS technology. At March 1, 1997 the Company had 35 full-time
employees engaged in research and development activities, and also was using the
services of 8 specialized contract employees and consultants in this area.
During the year ended December 31, 1996, the Company spent $4.3 million on
research and development activities, of which $1.5 million was funded by the FAA
under development contracts and grants. In order to fulfill the objectives of
its growth strategy, the Company intends to continue to invest heavily in
product development.
The Company's development efforts under the current FAA research grant are
primarily focused on increasing the speed (throughput) and decreasing the
manufacturing cost of the CTX 5000. The Company is also
30
<PAGE>
developing, in conjunction with the FAA, improvements to the user-interface,
inspection algorithms, and operator on-line testing techniques. See "Risk
Factors--Competition" and "--No Assurance of Continued Certification; Risk of
Certification of Competing Technologies; Risk of Changing Standards."
CUSTOMERS
In order to capitalize on the global opportunity for deployment of explosive
detection technology for civil aviation, the Company focuses on three important
markets: (i) installations at key U.S. airports, (ii) installations at new
airports under construction worldwide and (iii) installations at international
airports.
The following is a list of the airports which are employing the Company's
CTX 5000 technology or have a CTX 5000 on order as of March 1, 1997:
<TABLE>
<CAPTION>
AIRPORT LOCATION OPERATED BY
- ------------------------------------------ ------------------------ -------------------------------
<S> <C> <C>
John F. Kennedy International (2 units) New York, New York El Al Israel and United
Airlines
Hartsfield International (2 units) Atlanta, Georgia Delta Airlines
San Francisco International (1 unit) San Francisco, United Airlines
California
O'Hare International (1 unit) Chicago, Illinois United Airlines
Heathrow International (3 units) (1 UNIT) London, England British Airport Authority
Manchester International (10 units) Manchester, England Manchester Airport
Brussels National (1 unit) Brussels, Belgium Brussels Airport
Charles de Gaulle International (2 units) Roissy, France Direction Generale de
(1 UNIT) L'Aviation Civi le
Orly International (2 UNITS) Paris, France Direction Generale de
L'Aviation Civi le
Narita International (1 unit) Tokyo, Japan A distributor
Ben Gurion International (4 units) Tel Aviv, Israel Israel Airports Authority
Nino Aquino International (2 units) Manila, Philippines Northwest Airlines
Riyadh International (1 UNIT) Riyadh, Saudi Arabia A distributor
</TABLE>
- ------------
ITALICIZED ITEMS DENOTE NUMBER OF UNITS ON ORDER BUT NOT YET SHIPPED.
In December 1996, as an extension of legislation enacted upon the
recommendation of the Gore Commission, the Company received an order for 54 CTX
5000 systems from the FAA. Under the terms of the FAA contract, these units are
to be installed during 1997 at America's busiest airports. As of March 1, 1997,
four of these systems have been installed. For reasons of security, the FAA will
not divulge the deployment schedule or locations of the remaining units at this
time. See "--Recent Developments."
The Company believes that customer service and support are critical to its
success and has committed significant resources to these functions. Accordingly,
the Company provides a high level of customer support to assist in the site
planning, installation and integration of the Company's products into its
customer's facilities in addition to field service for maintaining the
reliability of the Company's products once installed. The Company's service
organization includes customer service engineers, product application
specialists, operator training engineers and technical support engineers. As of
March 1, 1997 the Company had 14 individuals employed in customer service and
support roles. The Company typically hires and trains its own support staff
throughout the world rather than relying on third-party maintenance services. In
addition to providing a one year parts warranty, the Company offers fee-based
primary and back-up service contracts to its customers to provide system
maintenance, ongoing technical support, documentation, training and, under full
service contracts, periodic software releases.
The Company believes that operator qualification and training is as
important to the explosives detection process as the CTX 5000's automated
detection process. In this regard, the Company has developed and
31
<PAGE>
provides in depth operator training and testing as a critical component of each
sale and installation. See "Risk Factors--Limited Field Operations; Dependence
on Operator Performance."
SALES AND MARKETING
The Company markets its products both directly through internal sales
personnel and indirectly through authorized agents, distributors and systems
integrators. As of March 1, 1997, the Company employed a total of eight people
in sales and marketing. In North America, the Company markets its CTX 5000
primarily through direct sales personnel, which as of March 1, 1996 consisted of
three individuals. Internationally, the Company utilizes both a direct sales
force and authorized agents to sell its products. As of March 1, 1997, the
Company had four direct international sales personnel broadly covering Europe,
Asia, and the Middle East and approximately 12 authorized agents representing
the Company in specific countries. In addition, in order to explore
opportunities in Japan, the Company has entered into a distributor agreement
with InVision Japan, a Japanese corporation owned 10% by the Company. For sales
through its authorized agents and distributors, the Company generally is
directly involved in developing proposal documents and negotiating contract
terms. During the fiscal years ended December 31, 1996 and 1995, international
sales represented 76.2% and 89.2%, respectively, of the Company's revenues. See
"Risk Factors--International Business; Fluctuation in Exchange Rates; Risk in
Change in Foreign Regulations."
Support for the direct and indirect sales representatives is provided by
product application specialists who assist in pre- and post-sale support. Such
support includes assistance in designing customer configurations, educating
customers on the system and technology and supporting the implementation and
integration process. In addition, the Company provides its sales representatives
with training, promotional literature, a multi-media presentation, videos and
competitive analysis.
The selling process often involves a team comprised of individuals from
sales, marketing, engineering, customer service and support, and senior
management. The team frequently engages in a multi-level sales effort directed
toward a variety of constituents, including government regulators, the local
airport operator or authority, systems and or conveyor integrators, individual
airlines and airline operating committees. The combination of the high average
selling prices, the time needed for various agencies to secure funding for
systems and the negotiation and execution of actual contracts leads to a typical
sales cycle lasting from six to twelve months, or more, from initial contact
with a customer. Often, local government regulators become involved in the sales
decision process or provide funds for the purchase. For repeat orders from
existing customers, the Company can often expedite the sales cycle by utilizing
existing contracts and contract extensions and thereby avoiding lengthy
procurement processes. See "Risk Factors--Dependence on Large Orders; Customer
Concentrations; Lengthy Sales Cycle" and "--Public Agency Contract and Budget
Considerations."
BACKLOG
The Company measures its backlog of system revenues as orders for which
contracts or purchase orders have been signed, but which have not yet been
shipped and for which revenues have not yet been recognized. The Company
includes in its backlog only those customer orders which are scheduled for
delivery within the next 18 months. The Company typically ships its products
within three to twelve months after receiving an order. However, such shipments
may be impacted by delays which occur in the delivery of components to the
Company or customers' readiness to accept delivery for reasons of site
preparation or otherwise. At March 1, 1997, the Company's system revenues
backlog was approximately $55.0 million, and at March 1, 1996, the Company's
system revenues backlog was approximately $6.5 million.
Substantially all of the Company's backlog as of March 1, 1997 is expected
to be shipped during the current fiscal year. Any failure of the Company to meet
an agreed upon schedule could lead to the cancellation of the related order.
Variations in the size, complexity and delivery requirements of the customer
order may result in substantial fluctuations in backlog from period to period.
The Company believes that it is important for competitive reasons and to better
satisfy customer requirements to reduce order lead times and expects that the
32
<PAGE>
Company's backlog may decrease on a relative basis over time. In addition, all
orders are subject to cancellation or delay by the customer and, accordingly,
there can be no assurance that such backlog will eventually result in revenues.
For these reasons, the Company believes that backlog cannot be considered a
meaningful indicator of the Company's performance on an annual or quarterly
basis.
MANUFACTURING
The Company seeks to focus its manufacturing resources on activities which
emphasize the Company's core competencies and distinctive value. The Company's
manufacturing operations consist primarily of: materials management; assembly,
test and quality control of parts and components subassemblies; and final system
testing. Using the Company's designs and specifications, subcontractors assemble
mechanical and electrical sub-components. The Company performs final assembly
and test of systems, including configuration to customers orders and testing
with current release software, prior to shipment. The Company's manufacturing
organization has expertise in mechanical, electrical, electronic and software
assembly and testing. In addition, because quality and reliability over the life
of the Company's products are vital to customer satisfaction and repeat
purchases, the Company believes its quality assurance program to be a key
component of its business strategy.
The Company generally purchases major contracted assemblies from single
source suppliers in order to ensure high quality, prompt delivery and low cost.
The Company reviews its single source procurements on a case by case basis and
began to qualify second sources for certain contracted assemblies in 1996. The
Company purchases components, materials and electro-mechanical subsystems from
single source suppliers pursuant to purchase orders placed from time to time in
the ordinary course of business and has no guaranteed supply arrangements with
such suppliers. Although to date the Company has not experienced any significant
delays in obtaining any of its single source assemblies, there can be no
assurance that the Company will not face shortages of one or more of these
systems in the future. See "Risk Factors--Dependence on Suppliers."
The Company outsources certain manufacturing processes, including standard
and build-to-print fabricated parts such as mechanical sub-assemblies, sheet
metal fabrication, cables and assembled printed circuit boards. This strategy
enables the Company to leverage product development, manufacturing and
management resources while retaining greater control over product delivery,
final product configuration and timing of new product introductions, all of
which the Company believes are critical to exceeding customer expectations.
The Company is currently producing approximately four systems per month and
has the capacity to accommodate production of over six systems per month in its
current facility. In February 1997, the Company entered into a lease agreement
for a new headquarters and manufacturing facility. The new facility is expected
to be outfitted for occupancy in June 1997. The new facility is expected to have
an initial capacity in excess of 15 systems per month. The Company's plans call
for production levels which may be in excess of its current facility's capacity.
Any delays in the availability of the new facility for the production of CTX
5000 systems could cause delays in shipments of such systems to customers, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Risk Factors--Limited Manufacturing
Experience; Management of Growth" and "Business--Facilities."
RECENT DEVELOPMENTS
FAA PROCUREMENT CONTRACT. On December 24, 1996, the FAA awarded a $52.2
million contract to the Company for the purchase of 54 CTX 5000 systems to be
installed at major airports throughout the United States. This contract calls
for all 54 units to be delivered to airports by the end of 1997. In addition,
the government has the option to purchase up to 46 additional systems for 1998,
bringing the total value of the contract, if such option is fully exercised, to
$110.9 million. The FAA may cancel this contract for any reason, in which case
the FAA would only be obligated to pay for units delivered and to reimburse the
Company for costs incurred and commitments made by the Company in order to
fulfill the contract.
33
<PAGE>
EG&G ASTROPHYSICS. In November 1996, the Company entered into a Research
and Development Agreement with EG&G Astrophysics ("EG&G") whereby an EG&G
affiliate invested $2.0 million in the Company and the parties agreed to attempt
to jointly develop and introduce to the EDS marketplace a system combining the
two companies' products into an automatic, high throughput, high detection
system. The terms of the agreement provide for the parties to equally fund and
jointly own the technology developed in the development program. Either party
may terminate the agreement for cause, or may terminate the agreement without
cause (which in certain cases would result in a penalty) on 60 days' notice.
This alliance targets the furtherance of the Company's strategy to increase
throughput and provide a better solution than multi-level detection systems
currently in use in certain airports in the United Kingdom and Asia which, the
Company believes, represent a significant compromise in detection and increase
the cost and complexity of the baggage handling system. There can be no
assurance that the Company and EG&G will be able to develop such an EDS in a
cost-effective manner or at all.
COMPETITION
The market for explosive detection systems is intensely competitive and is
characterized by continuously developing technology and frequent introductions
of new products and features. The Company expects competition to increase as
other companies introduce additional and more competitive products in the EDS
market and as the Company develops additional capabilities and enhancements for
the CTX 5000 and new applications for its certified technology. Historically,
the principal competitors in the market for explosive detection systems have
been InVision, Vivid Technologies, Inc., EG&G Astrophysics, Thermedics Detection
Inc., and Barringer Technologies Inc. Each of these competitors provides EDS
solutions and products for use in the inspection of checked luggage, although to
date only the Company's CTX 5000 has been certified by the FAA. The Company is
aware of certain major corporations competing in other markets that intend to
enter the EDS market. In particular, in January 1996 Lockheed Martin Corporation
received a grant in the amount of approximately $8.7 million from the FAA for
the design and development of a CT-based EDS over a two-year period.
Announcements of currently planned or other new products may cause customers to
delay their purchasing decisions for EDS products, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. Each of the Company's competitors may have substantially greater
financial resources than the Company. There can be no assurance that the Company
will be able to compete successfully with its competitors or with new entrants
to the EDS market.
The Company believes that its ability to compete in the EDS market is based
upon such factors as: product performance, functionality, quality and features;
quality of customer support services, documentation and training; and the
capability of the technology to appeal to broader applications beyond the
inspection of checked baggage. Although the Company believes that the CTX 5000
is superior to its competitors' products in its explosive detection capability
and accuracy, the CTX 5000 must also compete on the basis of price, throughput,
the ability to handle all sizes of baggage, and the ease of integration into
existing baggage handling systems. Certain of the Company's competitors may have
an advantage over the Company's existing technology with respect to these
factors. Currently, the CTX 5000 has an average selling price of approximately
$1.0 million, compared to substantially lower prices for systems offered by the
Company's competitors; has a throughput rate of approximately 300 bags per hour
("bph"), compared to rates claimed to exceed 1,000 bph by certain of the
Company's competitors; has a gantry size which limits the ability of the unit to
accept all sizes of baggage; and requires that the baggage remain still while
being scanned, making it difficult to integrate into the continuously moving
baggage handling systems found in most airports. There can be no assurance that
the Company will be successful in convincing potential customers that the CTX
5000 is superior to other systems given all of the necessary performance
criteria, that new systems with comparable or greater performance, lower price
and faster or equivalent throughput will not be introduced, or that, if such
products are introduced, customers will not delay or cancel existing or future
orders for the Company's system. Further, there can be no assurance that the
Company will be able to enhance the CTX 5000 to better compete on the basis of
cost, throughput, accommodation of baggage size and ease of integration, or that
the Company will otherwise be able to compete successfully with existing or new
competitors. The failure of the Company to develop such enhancements or
34
<PAGE>
otherwise successfully compete in the EDS market for any of the above reasons
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Competition."
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company's performance depends in part upon its proprietary technology.
In the United States, the Company relies upon patents, copyrights and trade
secrets for the protection of the proprietary elements of the CTX 5000 and the
Company's CT technology. There can be no assurance, however, that the Company
could enforce such patents, trade secrets or copyrights. The Company has a
United States patent for automatic concealed object detection having a pre-scan
stage which expires in 2010 (the "Patent") but does not rely on the Patent.
There can be no assurance that the Patent would be effective in preventing
CT-based competition. In accordance with certain Federal Acquisition Regulations
included in the Company's development contract, dated September 27, 1991 (the
"FAA R&D Contract"), with the FAA, the United States Government has rights to
use certain of the Company's proprietary technology developed after the award of
the FAA R&D Contract and funded by the FAA R&D Contract. The U.S. Government may
use such rights to produce or have produced for the U.S. Government competing
products using the Company's CT technology. In the event that the U.S.
Government were to exercise these rights, the Company's exclusivity in supplying
the U.S. Government with certified CT-based explosive detection systems could be
materially adversely affected. Moreover, pursuant to 28 U.S.C. 1941, the U.S.
Government has the right to allow any entity to infringe a patent, trade secret
or copyright otherwise protected by federal law, and the aggrieved party can sue
only for royalties, not for injunctive relief. In the event that the U.S.
Government permits another entity to infringe on the Patent or the Company's
trade secrets or copyrights, the Company would be unable to prevent such
infringement, which may have a material adverse effect on the Company's
competitive position in the EDS market and on the Company's business, financial
condition and results of operations.
The Company generally enters into confidentiality agreements with each of
its employees, distributors, customers, and potential customers and limits
access to distribution of its software, documentation and other proprietary
information. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known to or independently
developed by others. Outside the United States, the time period for filing a
foreign counterpart of the Patent has expired, and the Company has not sought or
obtained patent protection (except to the extent of licenses held under patents
owned by Imatron, Inc.) and has relied to date primarily on software copyrights
and trade secrets for the protection of its proprietary technology. The absence
of a foreign counterpart to the Patent could adversely affect the Company's
ability to prevent a competitor from using technology similar to technology used
in the CTX 5000. There can be no assurance that the steps taken by the Company
to protect its proprietary technology will be adequate or that its competitors
will not be able to develop similar, functionally equivalent or superior
technology.
The Company in the past has received, and may from time to time in the
future receive, communications from third parties alleging infringements by the
Company or one of its suppliers of patents or other intellectual proprietary
rights owned by such third parties. There can be no assurance that any
infringement claims (or claims for indemnification resulting from infringement
claims against third parties, such as customers) will not be asserted against
the Company. If the Company's product is found to infringe a patent, a court may
grant an injunction to prevent making, selling or using the product in the
applicable country. Protracted litigation may be necessary to defend the Company
against alleged infringement of others' rights. Irrespective of the validity or
success of such claims, defense of such claims could result in significant costs
to the Company and the diversion of time and effort by management, either of
which by itself could have a material adverse effect on the business, financial
condition and results of operations of the Company. Further, adverse
determinations in such litigation could result in the Company's loss of
proprietary rights, subject the Company to significant liabilities (including
treble damages in certain circumstances), or prevent the Company from selling
its products. If infringement claims are asserted against the Company, the
Company may seek to obtain a license of such third party's intellectual property
rights, which may not be available under reasonable terms or at all. In
addition, litigation
35
<PAGE>
may be necessary to enforce patents issued to or licensed exclusively to the
Company and protect trade secrets or know-how owned or licensed by the Company
and, whether or not the Company is successful in defending such intellectual
property, the Company could incur significant costs and divert considerable
management and key technician time and effort with respect to the prosecution of
such litigation, either of which by itself could have a material adverse effect
on the business, financial condition and results of operations of the Company.
The Company also holds an exclusive, royalty-free, worldwide license from
Imatron (obtained in connection with the formation of the Company) under
Imatron's patents and know-how to develop, manufacture and sell (a) systems for
the inspection of mail, freight, parcels and baggage, and (b) compact medical
scanner products for military field applications. The Company, in exchange,
granted to Imatron an exclusive, royalty-free, worldwide license under the
Company's patent or future patents and know-how to permit Imatron to utilize
such technology in medical scanner products (other than compact medical scanner
products for military field applications). Imatron is a manufacturer of medical
scanning systems and holds a portfolio of CT patents.
While the Company believes that its intellectual property rights are
valuable, the Company also believes that because of the rapid pace of
technological change in the industry, factors such as innovative skills,
technical expertise, the ability to adapt quickly to new technologies and
evolving customer requirements, product support, and customer relations are of
greater competitive significance.
EMPLOYEES
As of March 1, 1997, the Company employed 127 people, of whom 35 were
primarily engaged in research and development activities, 22 in marketing and
sales, customer support and field service, 23 in manufacturing and 20 in
administration and finance. In addition, the Company utilized the services of 27
full-time consultants and temporary employees in 1996. Management believes that
the Company's relationship with its employees is good.
FACILITIES
The Company's principal administrative, marketing, development and
manufacturing facility is located in Foster City, California and consists of
approximately 27,000 square feet under a lease which expires in October 1998.
The Company has an option to extend the lease for one year. The base rent under
this lease is approximately $300,000 per year. In March, 1997 the Company
entered into a lease for new principal corporate offices and manufacturing
facilities in Newark, California, which consists of approximately 95,000 square
feet under a lease which expires in May 2007. The Company has an option to
extend the lease for five years. The initial base rent under this lease is
approximately $672,000 per year. The Company anticipates relocating to this new
facility upon completion of tenant improvements, currently scheduled for June
1997. Management believes that the new facilities will be sufficient to satisfy
the Company's administrative and manufacturing needs for the foreseeable future.
The Company's manufacturing facility is currently producing approximately
four systems per month and has the capacity to accommodate production of over
six systems per month. The new facility is expected to have a capacity in excess
of 15 systems per month before the implementation of activities for
manufacturing cycle time reduction and multiple shifts.
LEGAL PROCEEDINGS
From time to time, the Company may be involved in litigation, including
litigation relating to claims arising out of its operations in the normal course
of business. As of the date of this Prospectus, the Company is not a party to
any legal proceedings, the adverse outcome of which, in management's opinion,
individually or in aggregate would have a material adverse effect on the
Company's business, financial condition or results of operations.
36
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following sets forth certain information regarding the Company's
executive officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- -------------------------------------------------------
<S> <C> <C>
Dr. Sergio Magistri........... 44 President, Chief Executive Officer and Director
Sauveur Chemouni.............. 42 Vice President, Engineering
Curtis P. DiSibio............. 40 Vice President and Chief Financial Officer
David M. Pillor............... 42 Senior Vice President, Sales and Marketing
Dr. Fredrick L. Roder......... 49 Vice President, Federal Systems
Dr. Benno Stebler............. 44 Vice President, Manufacturing
Stephen Wolff................. 38 Vice President, Marketing & Product Development
Dr. Douglas P. Boyd(1)(2)..... 55 Director
Dr. Giovanni Lanzara(2)....... 57 Chairman of the Board
Dr. Bruno Trezza(1)........... 60 Director
</TABLE>
- ------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
DR. SERGIO MAGISTRI has served as President, Chief Executive Officer and
Director of the Company since December 1992. From June 1991 to November 1992, he
was a Project Manager with AGIE, Switzerland, a manufacturer of high precision
tooling equipment, responsible for all aspects of a family of new products for
high precision electro-erosion machining with sub-micron precision. From 1988 to
June 1991, Dr. Magistri was a consultant to high technology companies, including
FI.M.A.I. Holding, S.A. As a consultant to FI.M.A.I., Dr. Magistri was involved
in the formation of the Company and the development of its business plan and of
its technology. From 1983 to 1988, Dr. Magistri held various positions with
Imatron, Inc. ("Imatron"), a CT medical scanner company, including as an
Engineering Physicist and Manager of Advanced Reconstruction Systems, and
Director of Computer Engineering at Imatron. Dr. Magistri holds a degree in
Electrical Engineering and a doctorate in Biomedical Engineering from the Swiss
Institute of Technology, Zurich, Switzerland.
SAUVEUR CHEMOUNI joined the Company in 1990 as Manager and then Director of
Engineering and has served as Vice President of Engineering since September
1995. From 1988 to 1990, he was with Imatron, where he was instrumental in the
development of the Company's original EDS capability. From 1983 to 1988, he was
the owner of a computer graphics company. Mr. Chemouni holds a degree in physics
and a Masters degree in Computer Sciences from Supelec, Paris, France.
CURTIS P. DISIBIO has served as Vice President, Finance and Administration
of the Company since April 1991 and Chief Financial Officer since March 1993.
From 1980 to 1986, Mr. DiSibio worked in public accounting. In 1986 Mr. DiSibio
served as controller of Trilogy Systems Corporation ("Trilogy"), a development
stage mainframe computer company, and was involved in the sale of Trilogy's
operations to Digital Equipment Corporation. From 1987 to 1990, Mr. DiSibio held
various positions including Treasurer and Chief Financial Officer of ELXSI
Corporation, a publicly traded mini-super computer company which Trilogy had
acquired. Mr. DiSibio received a Masters degree in Business Administration
degree from Santa Clara University.
DAVID M. PILLOR joined the Company in July 1994 as Vice President, Sales and
Marketing, and has served as Senior Vice President, Sales and Marketing since
November 1995. From 1988 to July 1994, Mr. Pillor held various positions
including Area Sales Manager, National Sales Manager and Vice President of Sales
of Technomed International, a medical products company. Mr. Pillor holds a
Bachelor of Science degree in Chemistry from the University of Maryland.
DR. FREDRICK L. RODER has served as Vice President, Federal Systems, of the
Company since January 1997, following the acquisition of Imatron Federal
Systems, Inc. ("IFS") by the Company. From June 1991 to
37
<PAGE>
December 1996, he served as President of IFS and as Prime Contractor and
Principal Investigator on FAA research and development contracts. From 1986
until 1991, he served as Director, New Product Development, of Imatron. He holds
a Bachelor of Science degree in Physics from City College of New York, a Masters
degree in Physics from Yeshiva University and a doctorate in Nuclear Science and
Engineering from Catholic University of America.
DR. BENNO STEBLER joined the Company in May 1991 as Vice President,
Engineering, and has served as Vice President, Manufacturing, of the Company
since September 1995. From 1989 to 1991, Dr. Stebler served as Staff Engineer at
Toshiba America, a consumer electronics company. From 1986 to 1989, Dr. Stebler
served in various positions at Imatron including Software Manager of the Compact
Medical Scanner, a predecessor to the CTX 5000. Dr. Stebler holds a diploma of
Electrical Engineering and a doctorate in Biomedical Engineering from the Swiss
Institute of Technology, Zurich, Switzerland.
STEPHEN WOLFF joined the Company in 1990 first as Manager and then as
Director, Marketing & Product Development, and has served as Vice President,
Marketing & Product Development, of the Company since October 1995. From 1981 to
1990, Mr. Wolff held various positions at Science Applications International,
Corp., a government research contractor, including Project Coordinator for
development of a Prototype Thermal Neutron Analysis explosive detection system.
Mr. Wolff was also principal investigator for an FAA sponsored testing program
for weapons detection technology. Mr. Wolff holds a Bachelor of Science degree
in Chemical Engineering from Imperial College, London, England and a Masters
degree in Chemical Engineering from Stanford University.
DR. DOUGLAS P. BOYD served as a Director of the Company from September 1990
to December 1992, and since June 1993. Dr. Boyd was a founder of Imatron in 1981
and has held various positions at Imatron, and currently serves as its Chairman
of the Board and Chief Technology Officer. Dr. Boyd is an Adjunct Professor of
Radiology at the University of California, San Francisco.
DR. GIOVANNI LANZARA has served as a Director of the Company since September
1990 and as Chairman of the Board since March 1994. Since 1978, he has served as
a professor and President of the Transportation Engineering Department at the
University of Aquila, Rome, Italy. Dr. Lanzara has been President of the
International Center for Transportation Studies since 1987. Dr. Lanzara served
as director of Imatron from August 1993 to June 1996.
DR. BRUNO TREZZA has served as a Director of the Company since November
1993. Since 1974, he has served as a professor of economics at the University
"La Sapienza" in Rome, Italy. From 1980 to 1981, Dr. Trezza served as an
economic advisor to the Italian Prime Minister. From 1974 to 1983, he served as
a member of the Committee for Economic Planning of the Italian Ministry of
Planning. He has served as a director of several private companies and public
institutions in Italy.
The Board of Directors has set the size of the Board at five directors.
Since there are currently only four elected directors, a vacancy exists which
may be filled at the Board's discretion. Directors serve until the next annual
meeting of shareholders and until their successors are elected. Executive
officers serve at the discretion of the Board of Directors. See "--Employment
Agreements."
The Board of Directors has an Audit Committee and a Compensation Committee.
The functions of the Audit Committee include recommending to the Board the
retention of independent auditors, reviewing the scope of the annual audit
undertaken by the Company's independent auditors and the progress and results of
their work, and reviewing the financial statements of the Company and its
internal accounting and auditing procedures. The functions of the Compensation
Committee include reviewing and approving executive compensation policies and
practices, reviewing salaries and bonuses for certain officers of the Company,
administering the Company's employee stock option plans, and considering such
other matters as may, from time to time, be delegated to the Compensation
Committee by the Board of Directors.
38
<PAGE>
Non-employee directors currently receive $1,200 per day in cash compensation
for their services as members of the Board of Directors and are reimbursed for
expenses incurred in connection with the performance of services as directors.
In addition, non-employee directors of the Company currently receive $1,200 per
day for each day of consulting services rendered to the Company not in
connection with their services as directors.
Aggregate consulting fees earned by directors of the Company were $136,280
in 1994, $115,800 in 1995 and $263,600 in 1996. During these years Giovanni
Lanzara (who earned $100,000 in 1994, $71,400 in 1995 and $117,600 in 1996) and
Bruno Trezza (who earned $104,400 in 1996) were the only individual directors
who earned consulting fees in excess of $60,000 in any individual calendar year.
EXECUTIVE COMPENSATION
The following table sets forth certain compensation earned by the Company's
President and Chief Executive Officer, in addition to the Company's four other
most highly compensated executive officers who each earned compensation in
excess of more than $100,000 for fiscal 1996 and 1995 (collectively, the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
----------------------------------- UNDERLYING
NAME FISCAL YEAR SALARY BONUS OPTIONS
- ----------------------------------------------------------------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Dr. Sergio Magistri.............................................. 1996 $ 136,666 $ -- --
President and Chief Executive Officer 1995 141,982(1) -- 63,272
Curtis P. DiSibio................................................ 1996 111,250 34,750 --
Chief Financial Officer 1995 109,000 18,790 39,326
David M. Pillor.................................................. 1996 110,000 117,603(2) --
Senior Vice President, Sales & Marketing 1995 100,000 117,790(2) 154,186
Dr. Benno Stebler................................................ 1996 116,000 37,876 --
Vice President, Manufacturing 1995 114,000 19,206 43,798
Sauveur Chemouni................................................. 1996 104,478 33,000 --
Vice President, Engineering 1995 100,000 -- 51,848
</TABLE>
- ------------------------
(1) Includes approximately $10,000 of relocation expenses.
(2) Includes commission payments of $97,603 in 1996 and $70,790 in 1995; amount
in 1995 includes $47,000 related to orders received in 1994.
The Company has a policy of granting certain cash incentive awards to its
senior management based upon the achievement of certain performance goals. The
specific performance goals are determined by the Company's Board of Directors
and are designed to fairly reward senior management for significant positive
contributions to the Company.
RECENT OPTION GRANTS
The Company did not grant any stock options to its Named Executive Officers
during fiscal 1996.
OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
During the last fiscal year no options were exercised by the Named Executive
Officers. The following table sets forth information with respect to the number
of securities underlying unexercised options held by the
39
<PAGE>
Named Executive Officers as of December 31, 1996 and the value of unexercised
in-the-money options as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END(1)
-------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Dr. Sergio Magistri.................. 139,732 81,714 $ 2,221,726 $ 1,298,338
Curtis P. DiSibio.................... 50,788 14,895 $ 799,669 $ 230,146
David M. Pillor...................... 125,530 49,829 $ 1,969,076 $ 774,679
Dr. Benno Stebler.................... 58,004 15,054 $ 913,573 $ 231,831
Sauveur Chemouni..................... 45,590 20,092 $ 711,690 $ 309,416
</TABLE>
- ------------------------
(1) Based on a per share price of $16.50, the closing price of the Common Stock
as reported on the Nasdaq SmallCap Market, minus the exercise price of the
option, multiplied by the number of shares underlying the option.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Magistri,
DiSibio, Pillor and Stebler which provide for salaries and other employment
terms. The agreements with Messrs. Magistri, DiSibio, Pillor and Stebler each
provide that if the Company terminates the employee's employment without cause,
the employee is entitled to a severance payment equal to his annual base salary
for six months. All of the employment agreements are terminable at the will of
either the employee or the Company, with or without cause. In each case,
termination by the employee requires two months notice to the Company.
401(K) PLAN
In January 1992, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of the Company's employees.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by up to the annual limit prescribed by statute ($9,500 in 1996)
and contribute the amount of such reduction to the 401(k) Plan. The 401(k) Plan
does not provide for additional matching contributions to the 401(k) Plan by the
Company. The trustee under the 401(k) Plan, at the direction of each
participant, invests the assets of the 401(k) Plan in numerous investment
options. The 401(k) Plan is intended to qualify under Section 401 of the
Internal Revenue Code so that contributions by employees to the 401(k) Plan, and
income earned on plan contributions, are not taxable until withdrawn, and so
that the contributions by employees will be deductible by the Company when made.
STOCK OPTION PLANS
EQUITY INCENTIVE PLAN
The Company's 1991 Stock Option Plan was adopted by the Board of Directors
and approved by the shareholders in May 1991. In March 1996, the 1991 Stock
Option Plan was amended and restated as the Equity Incentive Plan (the "Equity
Plan"). In December 1996 the Board of Directors approved an amendment to the
Equity Plan, subject to stockholder approval, increasing the number of shares
available thereunder by 640,000 shares. A total of 2,221,818 shares of Common
Stock have been reserved for issuance under the Equity Plan. The Equity Plan
provides for grants of incentive stock options, nonstatutory stock options,
stock bonuses, rights to purchase restricted stock, and stock appreciation
rights (collectively "Stock Awards") to employees (including officers and
employee directors) and consultants of the Company and its affiliates. The
Equity Plan is presently being administered by the Board of Directors, which
determines optionees and the terms of options granted, including the exercise
price, number of shares subject to the option and the exercisability thereof.
The terms of options granted under the Equity Plan generally may not exceed
ten years from the date of grant. Options granted under the Equity Plan to date
have been at the discretion of the Board and have typically
40
<PAGE>
vested at the rate of 25% of the shares subject to option at the end of the
first anniversary of the date of grant and 1/16th of such shares at the end of
each quarter thereafter. No incentive stock option may be transferred by the
optionee other than by will or the laws of descent or distribution. Incentive
stock options shall be exercisable during the lifetime of the person to whom the
option is granted only by such person. An optionee whose relationship with the
Company or any related corporation ceases for any reason (other than by death or
permanent and total disability) may exercise options in the 30-day period
following such cessation (unless such options terminate or expire sooner by
their terms) or in such longer period determined by the Board of Directors.
Shares subject to Stock Awards (other than stock appreciation rights)
granted under the Equity Plan which have lapsed or terminated may again be
subject to Stock Awards granted under the Equity Plan. The Board of Directors
has the authority to effect, with the consent of affected holders, the
cancellation of outstanding Stock Awards under the Equity Plan in return for the
grant of new Stock Awards for the same or different number of Stock Awards with
an exercise price per share of 85%, 100% or, under certain circumstances, 110%
of fair market value of the Common Stock on the new grant date, with the shares
subject to the outstanding Stock Awards again becoming available for grant under
the Equity Plan. Upon any merger or consolidation in which the Company is not
the surviving corporation, all outstanding Stock Awards shall either be assumed
by the surviving entity or continue in full force and effect. If any surviving
entity refuses to assume or continue such Stock Awards or substitute similar
Stock Awards then such Stock Awards shall be terminated if not exercised prior
to such event.
As of December 31, 1996, approximately 246,000 shares of Common Stock had
been issued upon the exercise of options granted under the Equity Plan, options
to purchase approximately 1,141,000 shares of Common Stock at a weighted average
exercise price of $1.92 per share were outstanding and approximately 835,000
shares remained available for future option grants. The Equity Plan will
terminate on May 2, 2001 unless sooner terminated by the Board of Directors. To
date, no stock bonuses, restricted stock, or stock appreciation rights have been
granted under the Equity Plan.
1996 EMPLOYEE STOCK PURCHASE PLAN
In March 1996, the Company adopted the Employee Stock Purchase Plan (the
"Purchase Plan") covering an aggregate of 300,000 shares of Common Stock. The
Purchase Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Internal Revenue Code. Under the Purchase
Plan, the Board of Directors may authorize participation by eligible employees,
including officers, in periodic offerings following the adoption of the Purchase
Plan. The offering period for any offering will be no more than 27 months.
Employees are eligible to participate if they are employed by the Company or
an affiliate of the Company designated by the Board of Directors for at least 20
hours per week and are employed by the Company or a subsidiary of the Company
designated by the Board for at least five months per calendar year. Employees
who participate in an offering can have up to 15% of their earnings withheld
pursuant to the Purchase Plan. The amount withheld will then be used to purchase
shares of the Common Stock on specified dates determined by the Board of
Directors. The price of Common Stock purchased under the Purchase Plan will be
equal to 85% of the lower of the fair market value of the Common Stock on the
commencement date of each offering period or the relevant purchase date.
Employees may end their participation in the offering at any time during the
offering period except as provided in the terms of the offering, and
participation ends automatically on termination of employment with the Company.
In the event of certain transactions by which the Company is acquired or
becomes controlled by a single investor or group of investors, the Board of
Directors has discretion to provide that each right to purchase Common Stock
will be assumed or an equivalent right substituted by the successor corporation,
if any, or the Board may shorten the offering period and provide for all sums
collected by payroll deductions to be applied to purchase stock immediately
prior to such transaction. The Purchase Plan will terminate in March 2006 unless
earlier terminated by the Board of Directors. The Board has the authority to
amend or terminate the Purchase Plan, subject to the limitation that no such
action may adversely affect any outstanding rights to purchase Common Stock. No
shares have been issued under the Purchase Plan in 1996.
41
<PAGE>
CERTAIN TRANSACTIONS
In connection with the formation of the Company, the Company issued 195,455
shares of Series A Preferred Stock to FI.M.A.I. in consideration for $650,000 in
cash and $1,500,000 in cancellation of indebtedness to Imatron and 195,455
shares of Series A Preferred Stock to Imatron in consideration for $250,000 in
cash and Imatron's licensing of certain technology to Imatron Industrial
Products, Inc., a joint venture between Imatron and FI.M.A.I., pursuant to the
Technology License Agreement, dated as of September 11, 1990 between the Company
and Imatron, Inc. (the "Technology Agreement"). In addition, in connection with
the formation of the Company, FI.M.A.I. entered into a Manufacturing and
Distribution Agreement dated as of September 11, 1990 (the "Distribution
Agreement") with which agreement appointed FI.M.A.I. as the exclusive
manufacturer, purchaser and distributor for the CTX 5000 in Europe. FI.M.A.I.
transferred its rights under the Distribution Agreement to ElectroParts and
HARAX in April 1995 in connection with the transfer from FI.M.A.I. to HARAX and
ElectroParts of FI.M.A.I.'s equity interest in the Company. In June 1995, the
Company issued 56,818 shares of Series D Preferred Stock to ElectroParts, S.A.
and 170,455 shares of Series D Preferred Stock to HARAX in exchange for the
cancellation of the Distribution Agreement. FI.M.A.I.'s entire equity interest
in the Company was transferred to ElectroParts and HARAX who are affiliated with
FI.M.A.I.
Pursuant to the Technology Agreement, the Company received an exclusive,
worldwide, perpetual and fully paid right and license to use Imatron's Ultra
Fast E-Beam CT technology developed for medical scanners for military field
applications and mail, freight, parcel or baggage scanner products. In exchange,
the Company granted to Imatron an exclusive, royalty free, worldwide license to
use the Company's technology in the field of medical scanner products.
In July 1991, the Company entered into a Standby Financing Agreement with
FI.M.A.I. (the "Standby Financing") pursuant to which FI.M.A.I. agreed to
provide an equity investment in the Company of up to $3,000,000 and to guarantee
a line of credit for the Company of up to $3,000,000. From July 1991 to April
1994, FI.M.A.I. guaranteed approximately $3,000,000 in bank indebtedness and
purchased 151,515 shares of Series C Preferred Stock at a purchase price of
$19.80 per share or an aggregate of $3,000,000. In June 1994, the Company issued
802,957 shares of Series D Preferred Stock to FI.M.A.I. at a purchase price of
$3.74 per share or an aggregate purchase price of $3,000,000. The funds received
from the sale of the Series D Preferred Stock were used to pay down $3,000,000
of the Company's then current $5,300,000 outstanding under its line of credit
and to terminate FI.M.A.I.'s guarantee with respect to such amount. The Series D
Preferred Stock was issued to FI.M.A.I. on the same terms offered to all
investors in the Company's Series D Preferred Stock.
From July 1993 to November 1994, the Company borrowed approximately
$2,325,000 from HARAX at an interest rate of prime plus 1%. In May 1995, the
Company issued 649,434 shares of Series D Preferred Stock to HARAX at a purchase
price of $3.74 per share in exchange for the cancellation by HARAX of the
principal amount and interest of such indebtedness, or an aggregate purchase
price of $2,428,882.
HARAX and ElectroParts are participation holding companies that are
affiliated with FI.M.A.I. HARAX currently holds approximately 35.2% of the
outstanding equity of the Company and will hold approximately 22.2% of the
outstanding equity of the Company following this offering. ElectroParts
currently holds 5.9% of the outstanding equity of the Company and will hold 3.7%
of the outstanding equity of the Company following this offering.
HARAX is controlled by Eugenio Rendo, who is a major stockholder of the
Company. Mr. Rendo is a senior executive of the Italimprese Group, a large,
privately-held conglomerate based in Italy. Mr. Rendo, like a number of other
senior executives of Italian corporations in recent years, has been charged in
Italy with bribery of public officials in connection with obtaining public
sector contracts. Mr. Rendo denies such allegations and is vigorously defending
himself in such matter. In particular, Mr. Rendo asserts that the payments made
by him which have been called into question were lawful contributions to a
political party and he denies that any favor or other improper benefit was
received in exchange. The proceedings with respect to such charges have been
relocated from Milan, Italy to Rome, Italy. No hearing or trial date has been
set with respect to such charges. Under Italian law, two trials must be held
before a conviction is obtained.
42
<PAGE>
On October 13, 1994, the Company issued 3,818 shares of Series D Preferred
Stock to Louis Turpen in consideration of services previously rendered by Mr.
Turpen. Mr. Turpen served as a director of the Company from December 1992 until
June 1995.
On November 11, 1994, the Company issued 5,455 shares of Series D Preferred
Stock to Lucio Lanza in consideration of services previously rendered by Mr.
Lanza. Mr. Lanza acted as Chairman of the Board of the Company from December
1992 until November 1993.
In October 1994, Dr. Sergio Magistri loaned the Company $50,000 for working
capital. In June 1995 the Company issued 13,368 shares of Series D Preferred
Stock to Dr. Sergio Magistri in exchange for the cancellation by Dr. Magistri of
such indebtedness.
In August 1996, Anaconda Opportunity Fund, L.P. ("Anaconda"), the successor
to Anaconda Partners, L.P., exercised warrants to purchase 420,454 shares of
Common Stock at an exercise price of $4.40 per share and 58,864 shares of Common
Stock at an exercise price of $5.50 per share. The original warrants were issued
to Anaconda in connection with a certain Bridge Loan and Security Agreement
entered into between the Company and Anaconda Partners, L.P. as of December 28,
1995. Also in August 1996, LEO Holding, Inc. exercised a warrant to purchase
34,090 shares of Common Stock at an exercise price of $4.40 per share and 4,772
shares of Common Stock at an exercise price of $5.50 per share. Such warrant was
originally issued to Anaconda Partners, L.P. and subsequently transferred to LEO
Holding, Inc. In connection with the warrant issuance the Company agreed to
register the offer and sale of shares issuable upon exercise of the warrants. In
June 1996, the Company registered the offer and sale of such shares, which
registration statement is currently out of date and may not be used. The Company
will update such registration statement at Anaconda's request. The Company
believes that the foregoing transactions were in its best interests and were on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties.
43
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of February 15, 1997, and as adjusted to
reflect the sale of Common Stock offered hereby, by: (i) each person known by
the Company to beneficially own 5% or more of the Common Stock; (ii) each
director of the Company who beneficially owns Common Stock; (iii) each Named
Executive Officer who beneficially owns Common Stock; and (iv) all directors and
executive officers of the Company as a group. Unless otherwise indicated below,
to the knowledge of the Company, all persons listed below have sole voting and
investment power with respect to their shares of Common stock, except to the
extent authority is shared by spouses under applicable law. The information set
forth in the table and accompanying footnotes has been furnished by the named
beneficial owners.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) SHARES OFFERING(1)
------------------------ BEING ------------------------
NAME NAME PERCENTAGE OFFERED NUMBER PERCENTAGE
- ----------------------------------------------------- ---------- ------------ --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
HARAX Holding, S.A.(2)............................... 3,226,180 35.2% 776,239 2,449,941 22.2%
Eugenio Rendo(3)..................................... 3,226,180 35.2 776,239 2,449,941 22.2
ElectroParts S.A.(4)................................. 540,642 5.9 130,083 410,559 3.7
Mario Rendo(4)....................................... 540,642 5.9 130,083 410,559 3.7
HAKON Holdings, S.A.(5).............................. 485,474 5.3 116,808 368,666 3.3
Anaconda Opportunity Fund, L.P.(6)................... 479,318 5.2 0 479,318 4.3
PASTEC Holding, S.A.................................. 441,888 4.8 106,321 335,567 3.0
EG&G International Ltd............................... 183,750 2.0 91,875 91,875 *
Dr. Sergio Magistri(7)............................... 242,736 2.6 10,000 232,736 2.1
Sauveur Chemouni(8).................................. 53,632 * 5,363 48,269 *
Curtis P. DiSibio(9)................................. 56,974 * 0 56,974 *
David M. Pillor(10).................................. 141,873 1.5 0 141,873 1.3
Fredrick L. Roder.................................... 32,000 * 3,200 28,800 *
Dr. Benno Stebler(11)................................ 64,429 * 6,443 57,986 *
Stephen Wolff(12).................................... 36,675 * 3,668 33,007 *
Dr. Douglas P. Boyd(13).............................. 62,533 * 0 62,533 *
Dr. Giovanni Lanzara(14)............................. 534,421 5.8 106,321 428,100 3.9
Dr. Bruno Trezza(15)................................. 531,086 5.8 116,808 414,278 3.7
All directors and executive officers as a group (10
persons)(16)....................................... 1,756,359 17.8 251,803 1,504,556 12.8
</TABLE>
- ------------------------
* Less than 1% of the outstanding Common Stock.
(1) Applicable percentage of ownership at February 15, 1997 is based upon
9,169,185 shares of Common Stock outstanding. Applicable percentage
ownership after this offering is based upon 11,059,659 shares of Common
Stock outstanding. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and includes voting and
investment power with respect to shares shown as beneficially owned. Shares
of Common Stock subject to options currently exercisable or exercisable
within 60 days are deemed outstanding for computing the percentage ownership
of the person holding such options, but are not deemed outstanding for
computing the percentage ownership of any other person.
(2) The business address for the named stockholder is 231, Val des Bons
Malades, Luxembourg-Kirchberg, Luxembourg L-2121.
(3) The business address for the named individual is Via de Notaris No. 3
Pairoli, Rome, Italy 00161. Includes 3,226,180 shares held by HARAX. Eugenio
Rendo is the controlling stockholder of HARAX and is deemed the beneficial
owner of such shares.
(4) The business address for the named stockholder is 12 Avenue de la Liberte,
L-190 Luxembourg. Includes 540,648 shares held by ElectroParts. Mario Rendo
is the controlling stockholder of ElectroParts and is deemed the beneficial
owner of such shares.
(5) The business address for the named stockholder is 2 Boulevard Royal,
Luxembourg.
(6) The business address for the named stockholder is c/o Anaconda Capital
Management, LLC, 730 Fifth Avenue, 15th Floor, New York, NY 10019.
45
<PAGE>
(7) Includes 216,000 shares issuable pursuant to options exercisable within 60
days of February 15, 1997.
(8) Represents 53,632 shares issuable pursuant to options exercisable within 60
days of February 15, 1997.
(9) Represents 56,974 shares issuable pursuant to options exercisable within 60
days of February 15, 1997.
(10) Represents 141,873 shares issuable pursuant to option exercisable within 60
days of February 15, 1997.
(11) Includes 400 shares held by Dr. Stebler's wife and 64,029 shares issuable
pursuant to options exercisable within 60 days of February 15, 1997.
(12) Represents 36,675 shares issuable pursuant to options exercisable within 60
days February 15, 1997.
(13) Includes 54,442 shares issuable pursuant to options exercisable within 60
days February 15, 1997.
(14) Includes 441,888 shares held by PASTEC, Holding, S.A. Giovanni Lanzara is
the controlling stockholder of PASTEC. Also includes 34,090 shares issuable
pursuant to option exercisable within 60 days February 15, 1997.
(15) Includes 485,474 shares held by HAKON Holding, S.A. Bruno Trezza is the
controlling stockholder of HAKON. Also includes 45,612 shares issuable
pursuant to options exercisable within 60 days February 15, 1997.
(16) Includes 927,362 shares held by entities affiliated with certain directors
of the Company as described in footnotes 14 and 15 above and 703,327 shares
subject to options exercisable within 60 days February 15, 1997.
46
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, par value $0.001, and 5,000,000 shares of Preferred Stock, par
value $0.001. As of March 1, 1997, 9,171,926 shares of Common Stock were
outstanding, held of record by 176 stockholders. After completion of this
offering, there will be 11,062,400 shares of Common Stock outstanding
(11,531,150 shares if the Underwriters' over-allotment option is exercised in
full). No shares of Preferred Stock are currently outstanding.
The following description of the capital stock of the Company and certain
provisions of the Company's Amended and Restated Certificate of Incorporation
and Amended Bylaws is a summary and is qualified in its entirety by the
provisions of the Amended and Restated Certificate of Incorporation and Bylaws,
which have been filed as exhibit to the Company's Registration Statement, of
which this Prospectus is a part. All material elements of the capital stock of
the Company and the Company's Amended and Restated Certificate of Incorporation
and Amended Bylaws are included in the following description.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The holders of
Common Stock are not entitled to cumulative voting rights with respect to the
election of directors, and as a consequence, minority stockholders will not be
able to elect directors on the basis of their votes alone.
Subject to preferences that may be applicable to any outstanding shares of
Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." In the event of liquidation,
dissolution or winding up of the Company, holders of the Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preference of any then outstanding shares of Preferred
Stock. Holders of Common Stock have no preemptive rights and no right to convert
their Common Stock into any other securities. There are no redemption or sinking
fund provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and all shares of Common Stock to be outstanding upon completion of
this offering will be, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized to issue up to 5,000,000 shares of
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of such series, without any further vote or action by the stockholders. The
issuance of Preferred Stock could adversely affect the voting power of holders
of Common Stock and the likelihood that such holders will receive dividend
payments and payments upon liquidation may have the effect of delaying,
deferring or preventing a change in control of the Company, which could have a
depressive effect on the market price of the Company's Common Stock. The Company
has no present plan to issue any shares of Preferred Stock.
WARRANTS
In connection with the Company's initial public offering, the Company issued
to Donald & Co. Securities, Inc. a warrant (the "Warrant") to purchase 180,000
shares of Common Stock at an exercise price of $6.60 per share. Such warrant
contains provisions for the adjustment of the exercise price and the aggregate
number of shares issuable upon exercise of the warrant under certain
circumstances, including stock dividends, stock splits, reorganizations,
reclassification and consolidations and will become exercisable one year after
the effective date of the Company's initial public offering and will expire on
the fifth anniversary of such offering.
47
<PAGE>
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
Shareholders rights and related matters are governed by the Delaware General
Corporation Law, (as amended, (the "Delaware Laws") and the Company's Amended
and Restated Certificate of Incorporation (the "Certificate") and Bylaws (the
"Bylaws").
LIMITATION OF LIABILITY AND INDEMNIFICATION. The Company's Certificate
contains certain provisions permitted under Delaware Law relating to the
liability of directors. These provisions eliminate a director's personal
liability for monetary damages resulting from a breach of fiduciary duty, except
in certain circumstances involving certain wrongful acts, such as (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware Law, or (iv) for any transaction from which the director derives an
improper personal benefit. These provisions do not limit or eliminate the rights
of the Company or any stockholder to seek non-monetary relief, such as an
injunction or rescission, in the event of a breach of director's fiduciary duty.
These provisions will not alter a director's liability under federal securities
laws. The Company's Certificate also contains provisions indemnifying the
directors and officers of the Company to the fullest extent permitted by
Delaware Law. The Company believes that these provisions will assist the Company
in attracting and retaining qualified individuals to serve as directors.
CERTAIN ANTI-TAKEOVER PROVISIONS. The Company is subject to the provisions
of Section 203 of the Delaware Laws, an anti-takeover law. In general, the
statute prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the stockholder. For purposes of Section
203, an "interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
The foregoing provisions of the Delaware Law as well as the right of the
Board of Directors to designate the features of, and issue shares of, Preferred
Stock without a shareholder vote, and the staggered election of the Board of
Directors may tend to discourage attempts by third parties to acquire any
substantial ownership position in the Common Stock and may adversely affect the
price that such a potential purchaser would be willing to pay for the Common
Stock.
DIRECTORS-NUMBER, VACANCIES, REMOVAL AND NOMINATION. Pursuant to the
Certificate, the number of directors is determined by resolutions adopted by the
Board, which currently consists of four members. The authorized number of
directors is currently five. The Certificate provides that each director will
serve for a three-year term and that approximately one-third of the directors
are to be elected annually. Candidates for directors shall be nominated only by
the Board of Directors or by a stockholder who gives written notice to the
Company at least 20 days before the annual meeting. Between stockholder
meetings, the Board may appoint new directors to fill vacancies or newly created
directorships. The Certificate does not provide for cumulative voting at
stockholder meetings for election of directors. Stockholders controlling more
than 50% of the outstanding Common Stock can elect the entire Board of
Directors, while stockholders controlling 49% of the outstanding Common Stock
may not be able to elect any directors. A director may be removed from office
only for cause by the affirmative vote of a majority of the combined voting
power of the then outstanding shares of stock entitled to vote generally in the
election of directors. See "Management--Directors and Executive Officers."
RESTRICTIONS ON SPECIAL MEETINGS. The Company's Certificate requires that
any action required or permitted to be taken by stockholders of the Company must
be effected at a duly called annual or special meeting of stockholders and may
not be effected by a consent in writing. Under the Bylaws, special meetings of
the shareholders may be called only by the President, the Chairman of the Board,
a majority of the directors, or the holders of record of 10% or more of the
Company's outstanding shares of stock entitled to vote at such meeting.
48
<PAGE>
This provision may impede a shareholder who wishes to require the Company to
call a special meeting of shareholders to consider any proposed corporate
action.
TRANSFER AGENT
The transfer agent for the Common Stock of the Company is Continental Stock
Transfer & Trust Company.
REGISTRATION RIGHTS
The holders of 397,388 shares of Common Stock and a warrant to purchase up
to 180,000 shares of Common Stock (collectively, the "Registrable Securities")
or their transferees, have certain rights with respect to the registration of
such shares under the Securities Act. In addition, in June 1996 the Company
registered shares of Common Stock on a shelf registration statement pursuant to
registration rights held by a stockholder of the Company, of which 479,312 of
such shares have yet to be sold under such shelf registration statement.
49
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market following
this Offering could have an adverse effect on the trading price of the Common
Stock. Upon completion of this Offering, based on shares outstanding as of March
1, 1997, the Company will have outstanding approximately 11,062,400 shares of
Common Stock assuming no exercise of options after December 31, 1996 other than
the options to purchase 15,474 shares that will be exercised by Selling
Stockholders and sold in this Offering. Of the shares outstanding, 7,052,416
shares, including the 3,125,000 shares offered hereby, (7,521,166 shares if the
Underwriters' overallotment option is exercised in full) will be freely
tradeable without restriction or further registration under the Securities Act,
unless purchased by "affiliates" of the Company as that term is defined in Rule
144 under the Securities Act. The remaining 4,009,984 shares of Common Stock
outstanding upon completion of this Offering are "restricted securities" as that
term is defined in Rule 144. As a result of lock-up agreements between certain
security holders and representatives of the Underwriters, approximately
4,656,263 shares of Common Stock will become available for immediate sale in the
public market beginning 120 days after the date of this Prospectus, subject in
certain cases to the volume, holding period and other restrictions of Rule 144.
In addition, the Company has entered into an agreement with a stockholder
pursuant to which 420,454 shares are currently registered for resale under the
Securities Act, which registration statement is currently out of date and may
not be used. The Company will update such registration statement at Anaconda's
request. In addition, the Company has entered into other agreements with certain
of its stockholders and others pursuant to which such persons following this
offering have the right to require the Company to register up to an aggregate of
577,388 additional shares of Common Stock for resale under the Securities Act.
Of such shares, 397,388 are currently outstanding and the remaining 180,000
shares are issuable upon the exercise of currently outstanding warrants. See
"Description of Capital Stock--Registration Rights" and "Certain Transactions."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years, including a person who may be deemed an affiliate of the
Company, is entitled to sell, within any three-month period, a number of shares
of Common Stock that does not exceed the greater of one percent of the
then-outstanding shares of Common Stock (approximately 122,941 shares after
completion of this offering) or the average weekly reported trading volume of
the Common Stock during the four calendar weeks preceding such sale. Sales under
Rule 144 are subject to certain restrictions relating to manner of sale, notice,
and availability of current public information about the Company. In addition,
under Rule 144(k), a person who is not an affiliate and has not been an
affiliate at any time during the 90 days preceding a sale, and who has
beneficially owned shares for at least two years, would be entitled to sell such
shares immediately following this offering without regard to the volume
limitations, manner of sale provisions or notice or other requirements of Rule
144.
Sales of substantial amounts of such shares in the public market, or the
perception that such sales might occur, could adversely affect the market price
of the Common Stock and could impair the Company's future ability to raise
capital through an offering of its equity securities. See "Risk Factors--Shares
Eligible for Future Sale; Registration Rights."
50
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representatives,
Robertson, Stephens & Company LLC, Prudential Securities Incorporated, Schroder
Wertheim & Co. Incorporated and Donald & Co. Securities Inc. (the
"Representatives"), have severally agreed with the Company and the Selling
Stockholders, subject to the terms and conditions of the Underwriting Agreement,
to purchase from the Company and the Selling Stockholders the numbers of shares
of Common Stock set forth opposite their names below. The Underwriters are
committed to purchase and pay for all such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- -------------------------------------------------------------------------------------------- ----------
<S> <C>
Robertson, Stephens & Company LLC...........................................................
Prudential Securities Incorporated..........................................................
Schroder Wertheim & Co. Incorporated........................................................
Donald & Co. Securities Inc.................................................................
----------
Total..................................................................................... 3,125,000
----------
----------
</TABLE>
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession of not more than $ per share, of which $ may
be reallowed to other dealers. After the public offering, the public offering
price, concession and reallowance to dealers may be reduced by the
Representatives. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover page of this Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 468,750
additional shares of Common Stock at the same price per share as the Company and
the Selling Stockholders receive for the 3,125,000 shares that the Underwriters
have agreed to purchase. To the extent that the Underwriters exercise such
option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage of such additional shares that the number of
shares of Common Stock to be purchased by it shown in the above table represents
as a percentage of the 3,125,000 shares offered hereby. If purchased, such
additional shares will be sold by the Underwriters on the same terms as those on
which the shares are being sold.
The Underwriting Agreement contains covenants of indemnity between the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act.
Each executive officer and director of the Company and certain other
securityholders of the Company have agreed with the Representatives for a period
of 120 days from the date of this Prospectus (the "Lock-Up Period") not to offer
to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or grant
any rights with respect to any shares of Common Stock, any options or warrants
to purchase any shares of Common Stock, or any securities convertible into or
exchangeable for shares of Common Stock, now owned or hereafter acquired
directly by such holders or with respect to which such holders have or
hereinafter acquire the power of disposition without the prior written consent
of Robertson, Stephens & Company LLC, which may, in its sole discretion and at
any time or from time to time, without notice, release all or any portion of the
shares subject to the lock-up agreements. In addition, the Company has agreed
that during the Lock-Up Period, it will not, without the prior written consent
of Robertson, Stephens & Company LLC, issue, sell, contract to sell or otherwise
dispose of any shares of Common Stock, any options or warrants to purchase any
shares of Common Stock or any securities convertible into, exercisable for or
exchangeable for shares of Common Stock other than the issuance of Common Stock
upon the exercise of outstanding options and under the existing employee stock
purchase plan and the Company's issuance of options under existing employee
stock option plans.
51
<PAGE>
The offering price of the Common Stock will be determined by negotiations
among the Company and the Representatives of the Underwriters, based largely
upon the market price for the Common Stock as reported on the Nasdaq SmallCap
Market.
In connection with this offering, certain Underwriters and selling group
members (if any) who are qualified market makers on The Nasdaq Stock Market may
engage in passive market making transactions in the Common Stock on The Nasdaq
Stock Market in accordance with Rule 103 of Regulation M under the Securities
Exchange Act of 1934, as amended, during the business day prior to the pricing
of the offering before the commencement of offers of sales of the Common Stock.
Passive market makers must comply with applicable volume and price limitations
and must be identified as such. In general, a passive market maker must display
its bid at a price not in excess of the highest independent bid for such
security; if all independent bids are lowered below the passive market maker's
bid, however, such bid must then be lowered when certain purchase limits are
exceeded.
Certain persons participating in this Offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids or effecting syndicate covering
transactions. A stabilizing bid means the placing of any bid or effecting of any
purchase, for the purpose of pegging, fixing or maintaining the price of the
common stock. A syndicate covering transaction means the placing of any bid on
behalf of the underwriting syndicate or the effecting of any purchase to reduce
a short position created in connection with the offering. Such transactions may
be effected on The Nasdaq Stock Market, in the over-the-counter market, or
otherwise. Such stabilizing, if commenced, may be discontinued.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cooley Godward LLP, Palo Alto, California. Certain legal
matters will be passed upon for the Underwriters by Brobeck, Phleger & Harrison
LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements as of December 31, 1995 and 1996 and
for each of the three years in the period ended December 31, 1996 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C. a Registration Statement on Form S-1 under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus, which constitutes part of the
Registration Statement, omits certain of the information contained in the
Registration Statement and the exhibits and schedules thereto on file with the
Commission pursuant to the Securities Act and the rules and the regulations of
the Commission thereunder. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, and each such
statement is qualified in all respects by such reference. The Company is subject
to the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy
statements, and other information with the Commission. Such reports, proxy
statements and other information can be inspected and copies at the public
reference facilities maintained by the Commission at Judiciary Plaza, Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Seven World Trade Center, Suite 1300, New York, New
York 10048; and 500 West Madison Avenue, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the public reference section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates, or from the Commission's Internet web site at http://www.sec.gov. In
addition, such materials also may be inspected and copied at the offices of The
Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
52
<PAGE>
INVISION TECHNOLOGIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996............................................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995 and 1996................. F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996................. F-5
Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 1994, 1995 and
1996..................................................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
InVision Technologies, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of stockholders' equity
(deficit) present fairly, in all material respects, the financial position of
InVision Technologies, Inc. and its subsidiary at December 31, 1995 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Jose, California
February 20, 1997
F-2
<PAGE>
INVISION TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................................................... $ 1,927 $ 2,363
Accounts receivable...................................................................... 735 5,987
Inventories.............................................................................. 3,413 4,810
Prepaid expenses......................................................................... 252 292
--------- ---------
Total current assets................................................................. 6,327 13,452
Property and equipment, net................................................................ 914 1,804
Other assets............................................................................... 75 --
--------- ---------
$ 7,316 $ 15,256
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable......................................................................... $ 3,035 $ 2,541
Accrued liabilities...................................................................... 1,217 1,020
Short-term debt.......................................................................... 2,260 --
Advances from stockholders............................................................... 200 --
Deferred revenue......................................................................... 3,082 2,443
Current maturities of obligations under capital lease.................................... 10 68
--------- ---------
Total current liabilities............................................................ 9,804 6,072
--------- ---------
Long-term obligations under capital lease, less current portion............................ 34 110
--------- ---------
Commitments (Notes 9, 11 and 12)
Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value; 5,000 shares authorized; 2,619 shares and
none issued and outstanding............................................................ 12,212 --
Preferred stock, $0.001 par value; 5,000 shares authorized; none issued and
outstanding............................................................................ -- --
Common stock, $0.001 par value; 20,000 shares authorized; 124 and 9,160 shares issued and
outstanding............................................................................ -- 9
Additional paid-in capital............................................................... 1,885 28,919
Deferred stock compensation expense...................................................... (692) (355)
Accumulated deficit...................................................................... (15,927) (19,499)
--------- ---------
Total stockholders' equity (deficit)................................................. (2,522) 9,074
--------- ---------
$ 7,316 $ 15,256
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
INVISION TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenues.......................................................................... $ -- $ 9,066 $ 15,841
Cost of revenues.................................................................. -- 6,777 9,736
--------- --------- ---------
Gross profit.................................................................... -- 2,289 6,105
--------- --------- ---------
Operating expenses:
Research and development........................................................ 1,582 1,940 2,785
Sales and marketing............................................................. 664 1,866 2,976
General and administrative...................................................... 1,078 1,471 2,577
--------- --------- ---------
Total operating expenses...................................................... 3,324 5,277 8,338
--------- --------- ---------
Loss from operations.............................................................. (3,324) (2,988) (2,233)
Interest expense (including related party interest expense of
$90; $104; and $54)............................................................. (410) (338) (1,511)
Other income, net................................................................. 7 34 172
--------- --------- ---------
Net loss.......................................................................... $ (3,727) $ (3,292) $ (3,572)
--------- --------- ---------
--------- --------- ---------
Net loss per share (Note 2)....................................................... $ (0.50) $ (0.44)
--------- ---------
--------- ---------
Shares used in per share calculations (Note 2).................................... 6,642 8,142
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
INVISION TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................................................ $ (3,727) $ (3,292) $ (3,572)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................. 255 239 371
Amortization of bridge loan warrant expense................................... -- -- 1,330
Stock compensation expense.................................................... -- 369 489
Changes in assets and liabilities:
Accounts receivable......................................................... 163 (611) (5,252)
Inventories................................................................. (939) (1,887) (1,397)
Prepaid expenses............................................................ -- -- (34)
Other assets................................................................ (29) (135) --
Accounts payable............................................................ 618 2,219 (522)
Accrued liabilities......................................................... 121 915 (202)
Deferred revenues........................................................... 2,948 134 (639)
--------- --------- ---------
Net cash used in operating activities..................................... (590) (2,049) (9,428)
--------- --------- ---------
Cash flows from investing activities:
Acquisition of property and equipment........................................... (117) (590) (1,074)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from short-term debt................................................... 2,250 1,000 1,000
Repayments of short-term debt................................................... -- -- (4,200)
Proceeds from capital lease financing........................................... -- 53 169
Repayments of capital lease financing........................................... -- (9) (35)
Proceeds from issuance of preferred stock....................................... 464 1,244 --
Proceeds from issuance of common stock, net..................................... 22 37 14,004
--------- --------- ---------
Net cash provided by financing activities................................... 2,736 2,325 10,938
--------- --------- ---------
Net increase (decrease) in cash for the period.................................... 2,029 (314) 436
Cash at beginning of period....................................................... 212 2,241 1,927
--------- --------- ---------
Cash at end of period............................................................. $ 2,241 $ 1,927 $ 2,363
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid................................................................... $ 319 $ 220 $ 233
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:
Issuance of common stock upon conversion of preferred stock..................... $ -- $ -- $ 12,212
Issuance of Series D preferred stock upon the conversion of short-term debt and
accrued interest.............................................................. $ 3,000 $ 2,604 $ --
Warrants issued in connection with bridge loan financing........................ $ -- $ 740 $ 590
Issuance of common stock in connection with acquisition of subsidiary........... $ -- $ -- $ 85
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
INVISION TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE DEFERRED
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCK
-------------------- ---------------------- PAID-IN COMPENSATION ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL EXPENSE DEFICIT
--------- --------- --------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993...... 586 $ 4,900 32 $ -- $ 25 $ -- $ (8,908)
Issuance of Series D preferred
stock........................... 926 3,464 -- -- -- -- --
Exercise of common stock
options......................... -- -- 26 -- 22 -- --
Net loss.......................... -- -- -- -- -- -- (3,727)
--------- --------- --------- --- ----------- ------------- ------------
Balance at December 31, 1994...... 1,512 8,364 58 -- 47 -- (12,635)
Issuance of Series D preferred
stock........................... 789 2,948 -- -- -- -- --
Issuance of Series D preferred
stock to stockholders for
distribution rights............. 227 -- -- -- -- -- --
Issuance of Series E preferred
stock........................... 91 900 -- -- -- -- --
Deferred stock compensation....... -- -- -- -- 1,061 (1,061) --
Amortization of deferred stock
compensation.................... -- -- -- -- -- 369 --
Issuance of warrant............... -- -- -- -- 740 -- --
Exercise of common stock
options......................... -- -- 66 -- 37 -- --
Net loss.......................... -- -- -- -- -- -- (3,292)
--------- --------- --------- --- ----------- ------------- ------------
Balance at December 31, 1995...... 2,619 12,212 124 -- 1,885 (692) (15,927)
Issuance of common stock pursuant
to initial public offering, net
of expenses..................... -- -- 2,070 2 9,530 -- --
Conversion of preferred stock to
common stock upon completion of
initial public offering......... (2,619) (12,212) 6,106 6 12,206 -- --
Deferred stock compensation....... -- -- -- -- 152 (152) --
Amortization of deferred stock
compensation.................... -- -- -- -- -- 489 --
Issuance of warrant............... -- -- -- -- 590 -- --
Exercise of common stock
options......................... -- -- 122 -- 84 -- --
Exercise of common stock
warrants........................ -- -- 518 1 2,318 -- --
Issuance of common stock pursuant
to EG&G agreement............... -- -- 184 -- 1,974 -- --
Issuances of common stock
primarily pursuant to
acquisition of subsidiary....... -- -- 36 -- 180 -- --
Net loss.......................... -- -- -- -- -- -- (3,572)
--------- --------- --------- --- ----------- ------------- ------------
Balance at December 31, 1996...... -- $ -- 9,160 $ 9 $ 28,919 $ (355) $ (19,499)
--------- --------- --------- --- ----------- ------------- ------------
--------- --------- --------- --- ----------- ------------- ------------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
(DEFICIT)
-------------
<S> <C>
Balance at December 31, 1993...... $ (3,983)
Issuance of Series D preferred
stock........................... 3,464
Exercise of common stock
options......................... 22
Net loss.......................... (3,727)
-------------
Balance at December 31, 1994...... (4,224)
Issuance of Series D preferred
stock........................... 2,948
Issuance of Series D preferred
stock to stockholders for
distribution rights............. --
Issuance of Series E preferred
stock........................... 900
Deferred stock compensation....... --
Amortization of deferred stock
compensation.................... 369
Issuance of warrant............... 740
Exercise of common stock
options......................... 37
Net loss.......................... (3,292)
-------------
Balance at December 31, 1995...... (2,522)
Issuance of common stock pursuant
to initial public offering, net
of expenses..................... 9,532
Conversion of preferred stock to
common stock upon completion of
initial public offering......... --
Deferred stock compensation....... --
Amortization of deferred stock
compensation.................... 489
Issuance of warrant............... 590
Exercise of common stock
options......................... 84
Exercise of common stock
warrants........................ 2,319
Issuance of common stock pursuant
to EG&G agreement............... 1,974
Issuances of common stock
primarily pursuant to
acquisition of subsidiary....... 180
Net loss.......................... (3,572)
-------------
Balance at December 31, 1996...... $ 9,074
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--THE COMPANY:
InVision Technologies, Inc. ("InVision," or the "Company") is the worldwide
leader in explosive detection technology. The Company develops, manufactures,
markets and supports an explosive detection system ("EDS") for civil aviation
security based on advanced computed tomography ("CT" or "CATScan" technology).
Formed in 1990, InVision exited the development stage in 1995 upon the first
commercial sales of its product, the CTX 5000 explosive detection system. The
CTX 5000 is sold to airport and regulatory authorities and airlines throughout
the world.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The consolidated financial statements include the financial statements of
the Company and its wholly owned subsidiary, Imatron Federal Systems, Inc.,
acquired in December 1996. All significant intercompany transactions and
accounts have been eliminated. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
STOCK SPLIT
Share information for all periods presented has been retroactively adjusted
to reflect a 1-for-11 reverse stock split of Common Stock and Preferred Stock
effected on March 15, 1996, and a 2-for-1 Common Stock dividend effected on
February 7, 1997.
REVENUE RECOGNITION
Revenue from product sales is recognized upon shipment unless extended
acceptance criteria exist, in which case revenue is recognized upon completion
of such acceptance criteria. Provision for estimated installation, training and
warranty costs is recorded at the time revenue is recognized.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method based upon the estimated useful lives of the assets,
which range from one to five years. Leasehold improvements are amortized using
the straight-line method over the shorter of their useful lives or the terms of
the leases.
In 1996, the Company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." Accordingly, the Company evaluates the recoverability
of its assets when events and changes in circumstances indicate that such
amounts may not be recoverable. The Company determines the recoverability of the
carrying amount of each intangible asset by reviewing the following factors: the
undiscounted value of expected operating cash flows in relation to its net
capital investment, the estimated useful or contractual life of the intangible
asset, the contract or product supporting the intangible asset, and in the case
of purchased technology, the Company periodically reviews the
F-7
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
recoverability of the asset value by evaluating its products with respect to
technological advances, competitive products and the long-lived asset impairment
losses.
DEFERRED REVENUE
Deferred revenue arises from advance payments received from customers for
systems to be delivered within the next year.
INCOME TAXES
The Company accounts for income taxes using an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred.
Contractually reimbursable costs for certain research and development activities
are reflected as a reduction to research and development expense in the period
the related costs are incurred (Note 4).
SOFTWARE DEVELOPMENT COSTS
To date, the period between achieving technological feasibility and the
general availability of software included in the Company's product has been
short and software development costs qualifying for capitalization have been
insignificant. Accordingly, the Company has not capitalized any software
development costs.
STOCK COMPENSATION
The Company accounts for employee stock-based compensation in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." In January 1996, the Company adopted the disclosure requirements of
Statement of Financial Accounting Standards No. 123 ("FAS 123"), "Accounting for
Stock-Based Compensation" (see Note 8).
EXPORT SALES AND CONCENTRATION OF CREDIT RISK
The Company markets its systems both internationally and domestically.
Product sales by geographic region are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Europe (primarily United Kingdom)......................................... $ 6,578 $ 7,488
United States............................................................. 975 3,766
Pacific Rim............................................................... 863 2,062
Middle East............................................................... 650 2,525
--------- ---------
$ 9,066 $ 15,841
--------- ---------
--------- ---------
</TABLE>
F-8
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash and accounts receivable.
The Company limits the amount of credit exposure of cash balances by maintaining
its accounts in a high credit quality financial institution. Except for the
Federal Aviation Administration contract (see Note 3), the Company's standard
credit policy requires prepayment of up to 50% prior to shipment on all sales.
To date, the Company has not experienced any material credit losses and
accordingly has not recorded an allowance for doubtful accounts at December 31,
1995 or 1996. The Company's revenues are denominated in U.S. dollars. At
December 31, 1996, two customers accounted for 59% and 18% of total accounts
receivable. Significant customers which represented 10% or more of revenues for
the respective periods were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------
1995 1996
--------------- ---------------
<S> <C> <C>
Customer A...................................................... 51% 22%
Customer B...................................................... 12% --
Customer C...................................................... 11% --
Customer D...................................................... -- 13%
Customer E...................................................... -- 12%
Customer F...................................................... -- 12%
Customer G...................................................... -- 16%
Customer H...................................................... -- 13%
</TABLE>
NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of Common
Stock and common equivalent shares, when dilutive, from stock options and
warrants (using the treasury stock method). Pursuant to Securities and Exchange
Commission Staff Accounting Bulletins, Common Stock and common equivalent shares
issued by the Company during the 12-month period prior to the Company's initial
public offering consisting of convertible preferred stock (using the
if-converted method), and stock options and warrants (using the treasury stock
method) have been included in the calculation as if they were outstanding for
all periods prior to and including March 31, 1996, even though their effect is
antidilutive. Historical net loss per share amounts have not been presented in
1994 because such amounts are not deemed meaningful due to the significant
changes in the Company's capital structure that occurred in connection with the
initial public offering.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to be consistent with the
1996 presentation.
NOTE 3--FEDERAL AVIATION ADMINISTRATION (FAA) CONTRACT:
In December 1996, the Company entered into a contract with the Federal
Aviation Administration ("FAA" and the "FAA Contract") to deliver fifty-four
(54) CTX 5000 systems to various airports in the United States beginning in
January and ending in December 1997. The minimum amount due from the FAA under
this contract, including all related products and associated installation and
support services, is $52.2 million. The Company will invoice and collect
progress payments while systems are being manufactured in an amount equal to 80%
of manufacturing costs incurred. The balance will be invoiced and collected
after delivery and installation of each system.
F-9
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--FEDERAL AVIATION ADMINISTRATION (FAA) CONTRACT: (CONTINUED)
The number of systems deliverable under the FAA contract during 1997 exceeds
the total number of systems manufactured by the Company to date. The Company has
determined that its existing manufacturing facilities are inadequate to meet its
obligation to deliver 54 systems under the FAA Contract and, accordingly, has
entered into a lease agreement for new primary operating facilities including
new manufacturing facilities (see Note 12). The Company believes that these new
facilities will be adequate to meet its current delivery obligations.
NOTE 4--RESEARCH AND DEVELOPMENT CONTRACTS:
The Company has been awarded various research and development contracts and
grants by the FAA to share in the costs of developing and enhancing the
Company's product. During 1994, 1995 and 1996, the Company was entitled to
reimbursements of $821,000, $593,000 and $1,476,000, respectively, under these
contracts and grants. Such reimbursements have been reflected as a reduction to
research and development expense in each period presented. Billings are rendered
to the FAA monthly on the basis of actual costs incurred. At December 1995 and
1996, the related receivable balance from the FAA was $17,000 and $331,000,
respectively.
NOTE 5--BALANCE SHEET COMPONENTS (IN THOUSANDS):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Accounts receivable:
Billed.................................................................. $ 388 $ 5,026
Unbilled................................................................ 347 961
--------- ---------
$ 735 $ 5,987
--------- ---------
--------- ---------
Inventories:
Raw material and purchased components................................... $ 1,853 $ 3,003
Work-in-process......................................................... 779 1,331
Finished goods.......................................................... 781 476
--------- ---------
$ 3,413 $ 4,810
--------- ---------
--------- ---------
Property and equipment:
Machinery and equipment................................................. $ 868 $ 1,400
Self constructed assets................................................. 606 1,140
Furniture and fixtures.................................................. 71 160
Leasehold improvements.................................................. 73 145
--------- ---------
1,618 2,845
Less accumulated depreciation and amortization.......................... (704) (1,041)
--------- ---------
$ 914 $ 1,804
--------- ---------
--------- ---------
</TABLE>
Self-constructed assets are manufactured by the Company for use in system
testing and support, and include the cost of parts and materials, and an
overhead allocation. The Company depreciates self-constructed assets over their
respective estimated useful lives which range from three to five years.
F-10
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--BALANCE SHEET COMPONENTS (IN THOUSANDS): (CONTINUED)
At December 31, 1995 and 1996 the Company had $53,000 and $222,000,
respectively, of capitalized lease equipment and related accumulated
amortization of $6,000 and $39,000, respectively.
<TABLE>
<S> <C> <C>
Accrued liabilities:
Warranty reserves........................................ $ 695 $ 645
Accrued employee compensation............................ 327 311
Other.................................................... 195 64
--------- ---------
$ 1,217 $ 1,020
--------- ---------
--------- ---------
</TABLE>
NOTE 6--SHORT-TERM DEBT:
At December 31, 1995, $2,000,000 of short-term debt was outstanding
representing all of the funds available under a line of credit agreement with a
bank. Interest accrued under the line of credit agreement at a rate of prime
plus 1%. The rate in effect at December 31, 1995 was 9.75%. All amounts
outstanding under this line of credit agreement were repaid in May 1996, and the
line of credit agreement was subsequently terminated.
In December 1995, the Company entered into a $2,000,000 Bridge Loan
Agreement (the "Bridge Loan") with a lender. Under the agreement, the Company
borrowed $1,000,000 in December 1995, and an additional $1,000,000 in February
1996. Principal outstanding under the agreement was secured by all assets of the
Company. The Bridge Loan was repaid in full on May 1, 1996, in accordance with
its terms.
In connection with the Bridge Loan, the lender received the Bridge Loan
Warrants described in Note 7, below. The aggregate fair value of the Bridge Loan
Warrants, as determined at their respective dates of issuance, was $1,330,000.
Such value represents a discount that was amortized as a financing cost over the
period that the Bridge Loan was outstanding.
At December 31, 1995, certain of the Company's stockholders had advanced
$200,000 directly to the Company. Interest accrued at prime plus 1%. This
advance was repaid in December 1996.
NOTE 7--STOCKHOLDERS' EQUITY (DEFICIT):
COMMON STOCK
In November 1996, the Company issued 183,750 shares of unregistered Common
Stock to EG&G International Ltd. at $10.88 per share, reflecting a 10% discount
from the market price of the Company's Common Stock in connection with the
signing of a Research, Development and License Agreement (Note 11). Net proceeds
totaled $1,974,000. These shares will be registered at the request of the
shareholder upon the earlier of a public offering by the Company resulting in
net proceeds of at least $10,000,000 or November 1997.
In April 1996, the Company issued 1,800,000 shares of Common Stock at $5.50
per share in conjunction with the Company's initial public offering ("IPO").
Proceeds to the Company, net of discounts, commissions and offering expenses,
totaled $8,211,000. In May 1996, the underwriters exercised their over-allotment
option to purchase 270,000 additional shares of Common Stock for total net
proceeds to the Company of $1,321,000. Proceeds from the IPO were used primarily
to repay short term debt, reduce outstanding accounts payable and to provide
working capital for the Company.
F-11
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--STOCKHOLDERS' EQUITY (DEFICIT): (CONTINUED)
In connection with the Company's IPO, Donald & Co. Securities Inc., the
underwriter, received, under the terms of the underwriting agreement, four-year
warrants to purchase 180,000 shares of the Company's Common Stock at a price of
$6.60 per share commencing April 23, 1997.
PREFERRED STOCK
In conjunction with the Company's IPO, all outstanding Convertible Preferred
Stock converted to Common Stock. As of December 31, 1996, there were 5,000,000
shares of Preferred Stock authorized and no shares were issued and outstanding.
The Board of Directors is authorized to issue Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences, and number of
shares constituting any series or the designation of such series, without
further action or vote by the Company's stockholders.
WARRANTS
In connection with the Bridge Loan, the company issued three-year warrants
to purchase 63,636 and 227,272 shares of Common Stock in 1995 at $5.50 and $4.40
per share, respectively, and 227,272 shares of Common Stock at $4.40 per share
in 1996. The Bridge Loan warrants were exercised in full at various times during
the month of August 1996, with the Company receiving net proceeds from the
exercise of $2,319,000.
NOTE 8--EMPLOYEE STOCK AND BENEFIT PLANS:
1996 EQUITY INCENTIVE PLAN
In March 1996, the Board of Directors approved the amended and restated 1991
Stock Option Plan, which was renamed the 1996 Equity Incentive Plan. The 1996
Equity Incentive Plan provides for the granting of incentive stock options and
non qualified stock options for the purchase of up to an aggregate of 2,221,818
shares of the Company's common stock by officers, employees, consultants and
directors of the Company. The Board of Directors is responsible for
administration of the 1996 Equity Incentive Plan. The Board of Directors
determines the term of each option, option exercise price, number of shares for
which each option is granted and the rate at which each option is exercisable.
Options granted under the 1996 Equity Incentive Plan generally vest over a four
year period.
Incentive and non qualified stock options may be granted at an exercise
price per share of not less than 85% of the fair value per common share on the
date of the grant (not less than 110% of the fair value in the case of holders
of more than 10% of the Company's voting stock). Options granted under the 1996
Equity Incentive Plan generally expire ten years from the date of the grant
(five years for incentive stock options granted to holders of more than 10% of
the Company's voting stock).
F-12
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--EMPLOYEE STOCK AND BENEFIT PLANS: (CONTINUED)
In December 1994, the Company repriced all outstanding options in order to
reconstitute the option pool as a result of the dilutive effect on common stock
of the issuance of Series D Preferred Stock during the year. The outstanding
options were cancelled and new options were issued at an exercise price of $0.55
per share, which represented the fair value of common stock as determined by the
Board of Directors. Cumulative vesting percentages applicable to the cancelled
options were given to the regranted options.
In connection with grants of stock options to employees and directors in
1995 and 1996, the Company recorded $1,061,000 and $152,000, respectively, of
deferred compensation representing the difference between the deemed fair value
of the Company's Common Stock and the exercise price at the date of grant. Of
such amounts, $369,000 and $489,000 were recorded to expense in 1995 and 1996,
respectively. The remaining $355,000 is being amortized over the remaining
vesting period of the related options.
Transactions under the 1996 Equity Incentive Plan are summarized as follows
(in thousands except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1994 1995 1996
------------------------ ------------------------ ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
----------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period.................... 234 $ 1.23 383 $ 0.57 1,190 $ 0.82
Granted............................................. 402 0.63 896 0.92 150 9.13
Exercised........................................... (26) 0.61 (66) 0.55 (122) 0.69
Canceled............................................ (227) 1.36 (23) 0.96 (77) 0.85
--- ----- ---------
Outstanding at period end............................. 383 0.57 1,190 0.82 1,141 1.93
--- ----- ---------
--- ----- ---------
Options exercisable at period end..................... 202 0.58 384 0.56 643 0.80
--- ----- ---------
--- ----- ---------
Weighted average grant date fair value of such options
granted during the year.............................. $ 4.04
---------
---------
Weighted average grant date fair value of options
granted during the year at exercise prices below
market prices........................................ $ --
---------
---------
</TABLE>
F-13
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--EMPLOYEE STOCK AND BENEFIT PLANS: (CONTINUED)
The following table summarizes information about employee and director stock
options outstanding at December 31, 1996 (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------- ----------------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ----------------------------------------------------- ------------- ------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
$0.55................................................ 479 7.9 $ 0.55 356 $ 0.55
$1.10................................................ 512 8.8 1.10 287 1.10
$3.30................................................ 9 9.0 3.30 -- --
$4.40................................................ 15 9.2 4.40 -- --
$5.50................................................ 28 9.4 5.54 -- --
$10.50............................................... 7 9.8 10,50 -- --
$11.25............................................... 41 10.0 11.25 -- --
$11.88............................................... 50 9.9 11.88 -- --
--
-----
1,141 8.5 1.92 643 0.80
--
--
-----
-----
</TABLE>
FAIR VALUE DISCLOSURES
Had compensation cost for options granted in 1995 and 1996 under the
Company's 1996 Equity Incentive Plan been determined based on the fair value at
the grant dates, as prescribed in FAS 123, the Company's net loss and pro forma
net loss per share would have been as follows (in thousands except per share
amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Net loss:
As reported.......................................................... $ (3,292) $ (3,572)
Pro forma............................................................ (3,330) (3,665)
Pro forma net loss per share:
As reported.......................................................... $ (0.50) $ (0.44)
Pro forma............................................................ (0.50) (0.47)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following assumptions used for grants during
the applicable period: dividend yield of 0.0% for both periods; risk-free
interest rates of 5.89% to 6.00% for options granted during the year ended
December 31, 1995 and 5.19% to 6.38% for options granted during the year ended
December 31, 1996; weighted average expected option term of five years for both
periods; and a volatility rate of 65%.
1996 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted in March 1996. A total of 300,000 shares of Common Stock has been
reserved for issuance under the Purchase Plan. As of December 31, 1996, no
shares have been issued under the Purchase Plan.
F-14
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--COMMITMENTS:
The Company leases facilities and equipment under non-cancelable leases
expiring at various times through 2000. Future minimum lease payments under
these leases at December 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING DECEMBER 31, LEASE LEASE
- ---------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
1997................................................................. $ 370 $ 89
1998................................................................ 286 89
1999................................................................ -- 37
--- ---
$ 656 215
---
---
Less amount representing interest................................... (37)
---
Present value of capital lease obligation........................... 178
Less current portion................................................ (68)
---
Long term capital lease obligation................................ $ 110
---
---
</TABLE>
Rent expense for 1994, 1995 and 1996 was $252,000, and $289,000 and
$328,000, respectively.
NOTE 10--INCOME TAXES:
As a result of the losses generated during 1994, 1995 and 1996 the Company
has recorded no provision for income taxes and therefore a reconciliation of the
federal statutory rate to the effective rate is not meaningful.
Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Net operating loss carryforwards....................................... $ 2,810 $ 4,256
Credit carryforwards................................................... 750 877
Depreciation and amortization.......................................... 31 (103)
Accrued expenses....................................................... 380 490
Other.................................................................. 199 60
--------- ---------
Gross deferred tax assets.............................................. 4,170 5,580
Deferred tax asset valuation allowance................................. (4,170) (5,580)
--------- ---------
Net deferred tax assets................................................ $ -- $ --
--------- ---------
--------- ---------
</TABLE>
The Company provides a valuation allowance for deferred tax assets when it
is more likely than not, based upon currently available evidence including its
prior history of losses, that some portion or all of the deferred tax assets
will not be realized.
At December 31, 1996, the Company had federal net operating loss
carryforwards of approximately $10,969,000 available to reduce future federal
and state taxable income. The Company's net operating loss carryforwards expire
from 2005 to 2011. The tax benefit of the net operating loss and credit
carryforwards may be limited due to the impact of the Tax Reform Act of 1986.
Events which may cause the tax benefit to be limited include, but are not
limited to, a cumulative stock ownership change of more than 50%, as defined,
over a three-
F-15
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--INCOME TAXES: (CONTINUED)
year period and the timing of utilization of various tax benefits carried
forward. As a result of changes in ownership that have occurred, future
utilization of certain of the Company's carryforwards will be limited to
approximately $500,000 per year. Accordingly, the balance of net operating loss
carryforwards at December 31, 1996 has been adjusted to reflect the limitation.
NOTE 11--RELATED PARTY TRANSACTIONS:
In November 1996, the Company entered into a Research, Development and
License Agreement with EG&G Astrophysics, an affiliate of EG&G International
Ltd. Under the terms of this agreement, the Company and EG&G Astrophysics are
each committed to contribute up to $1,000,000 to fund a joint research and
development effort to develop an explosive detection system with enhanced
capability for reliable detection of explosives at higher rates of through-put
than the Company's existing system. Any new technology developed in connection
with the research and development effort will be jointly owned. The agreement
terminates in May 1998. As of December 31, 1996, the Company has made no
expenditures related to its commitment under this agreement.
The Company was originally formed as a joint venture arrangement between
Imatron, Inc. ("Imatron", a publicly traded company in the U.S.) and F.I.M.A.I.
Holding, S.A. ("FIMAI", a Luxembourg corporation). In connection with the
formation of the Company, the Company and FIMAI entered into a Manufacturing and
Distribution Agreement (the "Distribution Agreement") which appointed FIMAI as
the exclusive manufacturer, purchaser and distributor for the Company's CTX 5000
systems in Europe. At December 31, 1994, the Company had obtained a temporary
consent from FIMAI for the Company to manufacture and sell the CTX 5000 in
Europe. In April 1995, FIMAI transferred all of its shares of the Company to
HARAX Holding, S.A. ("HARAX," a Luxembourg Corporation) and ElectroParts
Holding, S.A. ("ElectroParts," a Luxembourg Corporation). Both Harax and
ElectroParts have significant common ownership with FIMAI. As a consequence of
the transfer of ownership, FIMAI's rights under the Distribution Agreement were
transferred to HARAX and ElectroParts.
In June 1995, the Company issued 113,636 and 340,910 shares of Series D
Preferred Stock to ElectroParts and HARAX, respectively, in exchange for the
cancellation of the Distribution Agreement. Pursuant to Securities and Exchange
Commission Staff Accounting Bulletin No. 48, this transaction is valued at zero,
the historical cost basis of the Distribution Agreement to ElectroParts and
HARAX.
During 1995 and 1996, the Company paid $116,000 and $264,000, respectively
to certain of the Company's directors for professional and/or consulting
services. In June 1995, the Company issued 13,368 shares of Series D Preferred
Stock to an officer of the Company in satisfaction of $50,000 in indebtedness.
NOTE 12--SUBSEQUENT EVENTS:
The Board of Directors has authorized the Company to file a registration
statement with the Securities and Exchange Commission under the Securities Act
of 1933 to sell Common Stock of the Company in a public offering.
NEW FACILITY LEASE
In February 1997, the Company entered into a new lease for its future
primary operating facility. The Company plans to relocate to the new facility in
mid-1997 upon the completion of tenant improvement construction. The lease
covers an initial ten year term and includes a five year renewal option. The
initial rental
F-16
<PAGE>
INVISION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--SUBSEQUENT EVENTS: (CONTINUED)
rate of $672,000 per year increases annually to $1,326,000 in year ten. The
Company plans to sub-lease its current primary operating facilities subsequent
to its relocation. Based on current market rental rates for similar facilities,
the Company estimates that sub-lease rental rates will not be less than the
Company's existing rental rate for the remainder of the lease term.
LINE OF CREDIT
In February 1997, the Company entered into two one-year revolving line of
credit agreements with Silicon Valley Bank. The first agreement provides for
maximum borrowings generally in an amount up to the lower of 80% of eligible
domestic accounts receivable or $4.5 million. Borrowings under this agreement
generally bear interest at the bank's prime rate plus 1.00% per annum (9.25% at
December 31, 1996). The second agreement is partially guaranteed by the
Export-Import Bank of the United States and provides for maximum borrowings
generally in an amount up to the lower of the sum of 90% of eligible export
accounts receivable plus 70% of eligible raw materials and work-in-process
inventory designated for export customers or $4.5 million. Borrowings under this
agreement generally bear interest at the bank's prime rate plus 0.75% per annum
(9.00% at December 31, 1996). Borrowings under both agreements are secured by
all of the Company's assets. The agreements require that the Company maintain
certain financial ratios and levels of tangible net worth and profitability and
also prohibit the Company from paying cash dividends. Proceeds of loans under
both lines of credit may be used for general corporate purposes.
F-17
<PAGE>
[BROADVISION LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts are estimates except for
the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee.................................................. $ 18,242
NASD filing fee................................................... 6,430
Nasdaq National Market application fee............................ 49,414
Blue sky qualification fees and expenses.......................... 10,000
Printing and engraving expenses................................... 135,000
Legal fees and expenses........................................... 175,000
Accounting fees and expenses...................................... 100,000
Transfer agent and registrar fees................................. 10,000
Miscellaneous..................................................... 95,914
---------
Total......................................................... $ 600,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). The Registrant's Bylaws also
provide that the Registrant will indemnify its directors and executive officers
and may indemnify its other officers, employees and agents to the fullest extent
permitted by Delaware law.
The Registrant's Certificate of Incorporation provides for the elimination
of liability for monetary damages for breach of the directors' fiduciary duty of
care to the Registrant and its stockholders. These provisions do not eliminate
the directors' duty of care and, in appropriate circumstances, equitable
remedies such an injunctive or other forms of non-monetary relief will remain
available under Delaware law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement, will provide for indemnification by the Underwriters and their
controlling persons, on the one hand, and of the Registrant and its controlling
persons on the other hand, for certain liabilities arising under the Securities
Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1994, the Registrant has sold and issued the following
unregistered securities:
(1) In January 1994 the Company issued 50,505 shares of Series C
Preferred Stock to FI.M.A.I. in exchange for the cancellation by FI.M.A.I.
of indebtedness totalling $1,000,000.
(2) In June 1995, the Company issued 56,818 shares of Series D
Preferred Stock to ElectroParts and 170,454 shares of Series D Preferred
Stock to HARAX in exchange for the cancellation of exclusive manufacturing
and distribution rights in Europe.
II-1
<PAGE>
(3) In June 1994, the Company issued 917,015 shares of Series D
Preferred Stock to an aggregate of 11 investors at a purchase price of $3.74
per share or an aggregate purchase price of $3,429,636.
(4) In May 1995, the Company issued 741,502 shares of Series D
Preferred Stock to an aggregate of 10 investors at a purchase price of $3.74
per share or an aggregate purchase price of $2,773,217.
(5) On October 13, 1994, the Company issued 3,818 shares of Series D
Preferred Stock to Louis Turpen pursuant to a termination agreement with Mr.
Turpen.
(6) On November 11, 1994, the Company issued 5,455 shares of Series D
Preferred Stock to Lucio Lanza pursuant to a termination agreement with Mr.
Lanza.
(7) On June 10, 1995 the Company issued 13,368 shares of Series D
Preferred Stock to Dr. Sergio Magistri in exchange for the cancellation by
Dr. Magistri of $50,000 in indebtedness.
(8) In August 1995, the Company issued 33,636 shares of Series D
Preferred Stock to ElectroParts Holding, S.A. at a purchase price of $3.74
per share or an aggregate purchase price of $125,800.
(9) On December 28, 1995, the Company issued a warrant to Anaconda to
purchase 239,659 shares of Common Stock, 210,227 of which were exercisable
at a price of $8.80 per share (420,454 shares at $4.40 per share on a
post-split basis) and 29,432 of which were exercisable at a price of $11.00
per share (58,864 shares at $5.50 per share on a post-split basis). The
warrant was subsequently exercised in August 1996.
(10) On December 29, 1995 the Company issued 90,909 shares of Series E
Preferred Stock to Kay's Corporation at a price of $9.90 per share.
(11) On April 3, 1996, the Company issued a warrant to LEO Holding, Inc.
to purchase 19,431 shares of Common Stock, 17,045 of which were exercisable
at a price of $8.80 per share (34,090 shares at $4.40 per share on a
post-split basis) and 2,386 of which were exercisable at a price of $11.00
per share (4,772 shares at $5.50 per share on a post-split basis). The
warrant was originally issued to Anaconda on December 29, 1995, subsequently
transfered to LEO Holding and exercised by LEO Holding in August 1996.
(12) On November 12, 1996, the Company issued 183,750 shares of Common
Stock to EG&G International, Ltd. at a price of $10.88 per share.
(13) On July 1, 1996, the Company issued 4,546 shares of Common Stock to
Scot Land in consideration of a three-way release among himself, the Company
and the Italimprese Group.
(14) On December 31, 1996, the Company issued 32,000 shares of Common
Stock to Fredrick L. Roder in consideration of all of the outstanding common
voting stock of Imatron Federal Systems, Inc.
The sales and issuances of securities described in paragraphs 1 through 14
above were made to "Accredited Investors" as such term is defined under Rule 501
of the Securities Act and were therefore deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) and Rule 506 of the
Securities Act.
Appropriate legends are affixed to the stock certificates issued in the
aforementioned transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. All recipients either received adequate
information about the Registrant or had access, through employment or other
relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a list of exhibits filed as a part of this
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1+ Amended and Restated Certificate of Incorporation of the Registrant.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.2+ Bylaws of Registrant.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2+ Representative's Warrant Agreement.
5.1* Opinion of Cooley Godward LLP.
10.1+ Technology License Agreement, dated September 11, 1990, by and between the Registrant and Imatron, Inc.
10.2+ Stockholders Agreement for the Formation of the Registrant, dated as of August 13, 1990, between Imatron
and FI.M.A.I and Amendment, dated as of September 7, 1990, as amended by the Termination Agreement,
dated as of December 9, 1992 among the Registrant, FI.M.A.I and Imatron.
10.3+ Lease, dated as of May 20, 1992, as amended May 4, 1995, between the Registrant and BVY Group.
10.4+ Registrant's Equity Incentive Plan, dated March 9, 1996.
10.5+ Registrant's 1996 Employee Stock Purchase Plan, dated March 9, 1996.
10.6+ Warrant to Purchase Stock pursuant to the Bridge Loan Financing Agreement, dated as of December 28,
1995, by and between the Registrant and Anacondona Partners, L.P.
10.7+ Standby Financing Agreement, dated as of July 26, 1991, by and between the Company and FI.M.A.I.
10.10+ Investor Rights Agreement, dated as of December 29, 1995, by and between the Registrant and Kay's
Corporation.
10.12 Lease, dated as of February 11, 1997, between the Registrant and WHLNF Real Estate L.P.
10.13 Purchase Agreement, dated as of December 24, 1996, between the Registrant and the U.S. Federal Aviation
Administration.
10.15 Stock Purchase Agreement, dated as of November 12, 1996, between the Registrant and EG&G International,
Ltd.
10.16 Stock Purchase Agreement, dated as of December 31, 1996, between the Registrant and Fredrick L. Roder.
10.17 Loan and Security Agreement, dated as of February 20, 1997, between the Registrant and Silicon Valley
Bank.
10.18 Revolving Promissory Note, dated February 20, 1997, between the Registrant and Silicon Valley Bank.
10.19 Export-Import Bank Loan and Security Agreement, dated as of February 20, 1997, between the Registrant
and Silicon Valley Bank.
10.20 Intellectual Property Security Agreement, dated as of February 20, 1997, between the Registration and
Silicon Valley Bank.
10.21 Key Employee Agreement, dated April 21, 1994, between the Registrant and Curtis P. DiSibio.
10.22 Key Employee Agreement, dated April 22, 1994, between the Registrant and Sergio Magistri, and amendment
thereto, dated October 16, 1995.
10.23 Key Employee Agreement, dated March 1, 1996, between the Registrant and David M. Pillor.
10.24 Key Employee Agreement, dated April 21, 1994, between the Registrant and Benno Stebler.
11.1 Statement of computation regarding per share earnings.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
23.1 Consent of Price Waterhouse LLP.
23.2* Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
25.1 Power of Attorney (see Page II-5).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
(+) Filed as an exhibit to Registrant's Registration Statement on Form S-1 (No.
333-380) or amendments thereto and incorporated herein by reference.
* To be filed by amendment
(b) Financial schedules are omitted because they are not required, are not
applicable or the information is included in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will governed by the final adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act, the information omitted from the form of
prospectus filed as part of the registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared effective, and
(2) for the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Foster
City, County of San Mateo, State of California, on the 14th day of March 1997.
INVISION TECHNOLOGIES, INC.
By: /s/ SERGIO MAGISTRI
-----------------------------------------
Sergio Magistri
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dr. Sergio Magistri and Curtis P. DiSibio and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and his name, place and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments and registration statements filed pursuant to Rule
462) to this Registration Statement, 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 to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes, any lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ SERGIO MAGISTRI President, Chief Executive March 14, 1996
- ------------------------------ Officer and Director
Sergio Magistri (Principal Executive
Officer)
/s/ CURTIS P. DISIBIO Vice President and Chief March 14, 1997
- ------------------------------ Financial Officer
Curtis P. DiSibio (Principal Financial and
Accounting Officer)
/s/ DOUGLAS P. BOYD Director March 14, 1997
- ------------------------------
Douglas P. Boyd
/s/ GIOVANNI LANZARA Director March 14, 1997
- ------------------------------
Giovanni Lanzara
/s/ BRUNO TREZZA Director March 14, 1997
- ------------------------------
Bruno Trezza
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1+ Amended and Restated Certificate of Incorporation of the Registrant.
3.2+ Bylaws of Registrant.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2+ Representative's Warrant Agreement.
5.1* Opinion of Cooley Godward LLP.
10.1+ Technology License Agreement, dated September 11, 1990, by and between the Registrant and Imatron, Inc.
10.2+ Stockholders Agreement for the Formation of the Registrant, dated as of August 13, 1990, between Imatron
and FI.M.A.I and Amendment, dated as of September 7, 1990, as amended by the Termination Agreement,
dated as of December 9, 1992 among the Registrant, FI.M.A.I and Imatron.
10.3+ Lease, dated as of May 20, 1992, as amended May 4, 1995, between the Registrant and BVY Group.
10.4+ Registrant's Equity Incentive Plan, dated March 9, 1996.
10.5+ Registrant's 1996 Employee Stock Purchase Plan, dated March 9, 1996.
10.6+ Warrant to Purchase Stock pursuant to the Bridge Loan Financing Agreement, dated as of December 28,
1995, by and between the Registrant and Anaconda Partners, L.P.
10.7+ Standby Financing Agreement, dated as of July 26, 1991, by and between the Company and FI.M.A.I.
10.10+ Investor Rights Agreement, dated as of December 29, 1995, by and between the Registrant and Kay's
Corporation.
10.12 Lease, dated as of February 11, 1997, between the Registrant and WHLNF Real Estate L.P.
10.13 Purchase Agreement, dated as of December 24, 1996, between the Registrant and the U.S. Federal Aviation
Administration.
10.15 Stock Purchase Agreement, dated as of November 12, 1996, between the Registrant and EG&G International,
Ltd.
10.16 Stock Purchase Agreement, dated as of December 31, 1996, between the Registrant and Fredrick L. Roder.
10.17 Loan and Security Agreement, dated as of February 20, 1997, between the Registrant and Silicon Valley
Bank.
10.18 Export-Import Bank Loan and Security Agreement, dated as of February 20, 1997, between the Registrant
and Silicon Valley Bank.
10.19 Intellectual Property Security Agreement, dated as of February 20, 1997, between the Registration and
Silicon Valley Bank.
10.20 Key Employee Agreement, dated April 21, 1994, between the Registrant and Curtis P. DiSibio.
10.21 Key Employee Agreement, dated April 22, 1994, between the Registrant and Sergio Magistri, and amendment
thereto, dated October 16, 1995.
10.22 Key Employee Agreement, dated March 1, 1996, between the Registrant and David M. Pillor.
10.23 Key Employee Agreement, dated April 21, 1994, between the Registrant and Benno Stebler.
11.1 Statement of computation regarding per share earnings.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
23.1 Consent of Price Waterhouse LLP.
23.2* Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
25.1 Power of Attorney (see Page II-5).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
(+) Filed as an exhibit to Registrant's Registration Statement on Form S-1 (No.
333-380) or amendments thereto and incorporated herein by reference.
* To be filed by amendment
<PAGE>
LEASE AGREEMENT
(NNN R&D)
Basic Lease Information
Lease Date: February 11, 1997
Landlord: WHLNF REAL ESTATE LIMITED PARTNERSHIP, a Delaware
limited partnership
Landlord's Address: c/o Lincoln Property Company Management Services,
Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404-1167
Tenant: InVision Technologies, Inc., a Delaware
corporation
Tenant's Address: 7151 Gateway Boulevard
Newark, California 94560
Premises: Approximately 95,245 rentable square feet as shown
on Exhibit A
Premises Address: 7151 Gateway Boulevard
Newark, California 94560
Building II: Approximately 95,245 rentable square feet
Lot (Building's tax parcel): 092A-2500-006, 537-0460-021,537-0460-022,
537-0460-023, 537-0460-024 and 537-0460-025
Park: Lincoln Bridgeway
Technology Center: Approximately 170,675 rentable square feet
Term: May 20, 1997 ("Commencement Date"), through
May 19, 2007 ("Expiration Date")
Base Rent (Section 3): Zero Dollars ($0.00) per month. (Months 1-2)
Adjustments to Base Rent: July 20, 1997 $50,151.00 (Months 3-4)
Sept. 20, 1997 $71,433.75 (Months 5-12)
May 20, 1998 $80,958.25 (Months 13-24)
May 20, 1999 $83,815.60 (Months 25-36)
May 20, 2000 $87,625.40 (Months 37-48)
May 20, 2001 $91,435.20 (Months 49-60)
May 20, 2002 $95,245.00 (Months 61-72)
May 20, 2003 $99,054.80 (Months 73-84)
May 20, 2004 $102,864.60 (Months 85-96)
May 20, 2005 $106,674.40 (Months 97-108)
May 20, 2006 $110,484.20 (Months 109-120)
Security Deposit
(Section 4): One hundred ten thousand four hundred eighty-four
and 00/100 Dollars($I 10,484.00) ("First Security
Deposit"), plus a eighthundred thousand and 00/100
Dollars ($800,000.00) standby Letter of Credit
("Second Security Deposit").
*Tenant's Share of Operating Expenses (Section 6.1): 55.81% of the Park
*Tenant's Share of Tax Expenses (Section 6.2): 55.81% of the Lot
*Tenant's Share of Common Area Utility Costs (Section 7): 55.81% of the Park
*Tenant's Share of Utility Expenses (Section 7): 55.81% of the Park
*The amount of Tenant's Share of the expenses as referenced above shall be
subject to modification as set forth
in this Lease.
Permitted Uses (Section 9): General office use, research and development,
light assembly, distribution and storage of
explosive devices and other associated uses for
aviation security products, but only to the extent
permitted by the City of Newark and all agencies
and governmental authorities having jurisdiction
thereof.
Unreserved
Parking Spaces: Three hundred thirty-three (333) nonexclusive and
undesignated spaces
Broker (Section 38): Cornish & Carey for Tenant
Bishop Hawk for Landlord
Exhibits: EXHIBIT A - PREMISES, BUILDING, LOT AND/OR PARK
EXHIBIT B - TENANT IMPROVEMENTS
EXHIBIT C - RULES AND REGULATIONS
EXHIBIT D - COVENANTS, CONDITIONS AND RESTRICTIONS
(INTENTIONALLY OMITTED)
EXHIBIT E - HAZARDOUS MATERIALS DISCLOSURE
CERTIFICATE - EXAMPLE
EXHIBIT F - CHANGE OF COMMENCEMENT DATE - EXAMPLE
1
<PAGE>
EXHIBIT G - TENANT'S INITIAL HAZARDOUS MATERIALS
DISCLOSURE CERTIFICATE
EXHIBIT H - SIGN CRITERIA (INTENTIONALLY OMITTED)
Addenda: ADDENDUM 1: OPTION TO EXTEND
2
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1. PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. ADJUSTMENT OF COMMENCEMENT DATE; CONDITION OF THE PREMISES . . . . 4
3. RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. SECURITY DEPOSIT. . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. TENANT IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 6
6. ADDITIONAL RENT . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7. UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8. LATE CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9. USE OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . .10
10. ALTERATIONS AND ADDITIONS AND SURRENDER OF PREMISES . . . . . . . .11
11. REPAIRS AND MAINTENANCE . . . . . . . . . . . . . . . . . . . . . .11
12. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
13. WAIVER OF SUBROGATION . . . . . . . . . . . . . . . . . . . . . . .14
14. LIMITATION OF LIABILITY AND INDEMNITY . . . . . . . . . . . . . . .14
15. ASSIGNMENT AND SUBLEASING . . . . . . . . . . . . . . . . . . . . .14
16. AD VALOREM TAXES. . . . . . . . . . . . . . . . . . . . . . . . . .16
17. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . .16
18. RIGHT OF ENTRY. . . . . . . . . . . . . . . . . . . . . . . . . . .16
19. ESTOPPEL CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . .16
20. TENANT'S DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . .17
21. REMEDIES FOR TENANT'S DEFAULT . . . . . . . . . . . . . . . . . . .17
22. HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
23. LANDLORD'S DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . .18
24. PARKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
25. SALE OF PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . .19
26. WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
27. CASUALTY DAMAGE . . . . . . . . . . . . . . . . . . . . . . . . . .19
28. CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS . . . . . . . . . . . . .20
30. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . .22
31. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . .22
32. SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
33. MORTGAGEE PROTECTION. . . . . . . . . . . . . . . . . . . . . . . .24
34. QUITCLAIM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
35. MODIFICATIONS FOR LENDER. . . . . . . . . . . . . . . . . . . . . .24
36. WARRANTIES OF TENANT. . . . . . . . . . . . . . . . . . . . . . . .24
37. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT . . . . . . . . . .24
38. BROKERAGE COMMISSION. . . . . . . . . . . . . . . . . . . . . . . .25
39. QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . .25
40. LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED OBLIGATIONS. . .25
41. LANDLORD'S WAIVER . . . . . . . . . . . . . . . . . . . . . . . . .25
3
<PAGE>
LEASE AGREEMENT
DATE:This Lease is made and entered into as of the Lease Date set forth on Page
1. The Basic Lease, Information set forth on Page 1 and this Lease are and
shall be construed as a single instrument.
1. PREMISES: Landlord hereby leases the Premises to Tenant upon the terms and
conditions contained herein. Landlord hereby grants to Tenant a license for the
right to use, on a non-exclusive basis, parking areas and ancillary facilities
located within the Common Areas of the Park, subject to the terms of this Lease.
Landlord and Tenant hereby agree that for purposes of this Lease, as of the
Lease Date, the rentable square footage area of the Premises, the Building, the
Lot and the Park shall be deemed to be the number of rentable square feet as set
forth in the Basic Lease Information on Page 1. Tenant hereby acknowledges that
the rentable square footage of the Premises may include a proportionate share of
certain areas used in common by all of the Building and/or the Park (for example
an electrical room or telephone room). Tenant further agrees that the number of
rentable square feet of the Building, the Lot and the Park may subsequently
change after the Lease Date commensurate with any modifications to any of the
foregoing by Landlord, and Tenant's Share shall accordingly change.
2. ADJUSTMENT OF COMMENCEMENT DATE; CONDITION OF THE PREMISES:
2.1 If Landlord cannot deliver possession of the Premises on the
Commencement Date, Landlord shall not be subject to any liability nor shall
the validity of the Lease be affected; provided, the Lease Term and the
obligation to pay Rent shall commence on the date possession is tendered and
the Expiration Date shall be extended commensurately. In the event the
commencement date and/or the expiration date of this Lease is other than the
Commencement Date and/or Expiration Date provided on Page 1, as the case may
be, Landlord and Tenant shall execute a written amendment to this Lease,
substantially in the form of Exhibit F hereto, wherein the parties shall
specify the actual commencement date, expiration date and the date on which
Tenant is to commence paying Rent. The word "Term" whenever used herein
refers to the initial term of this Lease and any extension thereof. Except
as otherwise provided herein, by taking possession of the Premises, Tenant
shall be deemed to have accepted the Premises in good, condition and state of
repair, subject to punchlist items. Landlord shall repair, at its sole cost
and expense, after receipt of Tenant's written notice thereof, which notice
must be delivered to Landlord within the first one hundred-eighty (180) days
of the term of this Lease, any (i) latent defects in the Premises, and (ii)
any mechanical HVAC, roof and electrical systems serving the Premises which
are not in good working order to the extent Tenant has not caused such
systems to not be in good working order. If Tenant fails to timely deliver
to Landlord any such written notice of the aforementioned defects or
deficiencies within said one hundred-eighty (180) days period, Landlord shall
have no obligation to perform any such work thereafter, except as
specifically provided in this Lease. Landlord shall allow Tenant to,
concurrently with Landlord (if Landlord so desires, otherwise separately),
make a claim against Landlord's general contractor for any patent or latent
defects in the initial design or construction of the Tenant Improvements for
a period of five (5) years after the date on which the Tenant Improvements
are Substantially Completed. In addition to the foregoing, Tenant shall be
entitled to enforce, concurrently with Landlord, any warranties made or given
to Landlord from the general contractor and any major subcontractors with
respect to the Tenant Improvements. Tenant shall be a third party
beneficiary of Landlord's construction agreement, and accordingly, Landlord
agrees to include a provision in Landlord's construction contract to
effectuate same. Tenant hereby acknowledges and agrees that neither Landlord
nor Landlord's agents or representatives has made any representations or
warranties as to the suitability, safety or fitness of the Premises for the
conduct of Tenant's business, Tenant's intended use of the Premises or for
any other purpose. The Building shell construction shall include all items
listed on Exhibit B-1.
Landlord and Tenant hereby acknowledge and agree that as of the Lease
Date the Building construction has not been completed on the Lot.
Notwithstanding the foregoing to the contrary, (A) in the event that for
reasons other than the occurrence of a Force Majeure Delay (as hereinafter
defined) or a Tenant Delay (as hereinafter defined) the Commencement Date has
not occurred by the date which is ninety (90) days after the Commencement
Date stated on Page 1, ("Last Occupancy Date"), Tenant may elect to terminate
the Lease. Termination of the Lease by Tenant as provided for herein shall be
the sole and exclusive remedy of Tenant for Landlord's failure to deliver the
Premises. Tenant shall exercise the right to terminate provided for herein
by giving Landlord written notice of its intent to so terminate ("Termination
Notice"). The Termination Notice shall be given, if at all, on or before the
date which is five (5) days after the Last Occupancy Date. Termination of the
Lease shall be effective fifteen (15) days after Landlord's receipt of the
Termination Notice. In the event that Tenant gives the Termination Notice,
and in the further event that during such fifteen (15) day period, the
Commencement Date occurs, the Tenant shall not be entitled to terminate the
Lease as provided for herein. For purposes of this paragraph the term "Force
Majeure Delay" shall mean any actual delay beyond the reasonable control of
Landlord in completion of the Tenant Improvements which is not a Tenant Delay
and which is caused by, with limitation, any one or more of the following:
(a) wars; (b) fire; (c) earthquake, flood or other natural disaster, (d)
unusual and unforeseeable delay not within the reasonable control of
Landlord; (e) casualties; (f) other acts of God; or (g) governmental action
or inaction (including failure, refusal or delay in issuing permits,
approvals and/or authorizations), or injunction, permit appeal or court order
requiring cessation of construction taking place in the Premises. The Term
"Tenant Delay" shall mean any delay in completion of the Tenant Improvements
resulting from any or all of the following: (i) Tenant's failure to timely
perform any of its obligations under the Lease, including any failure to
complete on or before the date due thereof, any actual item which is Tenant's
responsibility to complete or perform; (ii) Tenant's delay in approving
plans, specifications, drawings, and any other documents setting forth and/or
describing the Tenant Improvements, including, without limitation, the Final
Drawings, beyond those periods of time permitted by the terms of the Lease;
(iii) Tenant's changes to Landlord and Tenant approved plans, specifications,
drawings or any other documents describing and/or depicting the Tenant
Improvements; (iv) Tenant's request for
4
<PAGE>
materials, finishes, or installations which are not readily available or
which are incompatible with Landlord's standard materials, finishes or
installations for the Premises; (v) Tenant's use or occupancy of the Premises
during the construction of the Tenant Improvements or any act or failure to
act by Tenant in connection with its use or occupancy of the Premises during
the construction of the Tenant Improvements. Upon termination of the Lease
by Tenant pursuant to the terms of this paragraph, Landlord shall promptly
return all prepaid Rent to Tenant.
2.2 In the event Landlord permits Tenant to occupy the Premises prior
to the Commencement Date, for purposes other than those permitted pursuant to
Paragraph 13 of Exhibit B of the Lease, such occupancy shall be at Tenant's
sole risk and subject to all the provisions of this Lease, including, but not
limited to, the requirement to pay Rent and the Security Deposit, and to
obtain the insurance required pursuant to this Lease and to deliver insurance
certificates as required herein. In addition to the foregoing, Landlord
shall have the right to impose such additional conditions on Tenant's early
entry as Landlord shall deem appropriate. If, at any time, Tenant is in
default of any term, condition or provision of this Lease, any such waiver by
Landlord of Tenant's requirement to pay rental payments shall be null and
void and Tenant shall immediately pay to Landlord all rental payments so
waived by Landlord.
3. RENT: On the date that Tenant executes this Lease, Tenant shall deliver
to Landlord the original executed Lease, the Base Rent (which shall be
applied against the Rent payable for the first month Tenant is required to
pay Base Rent), the Security Deposit, and all insurance certificates
evidencing the insurance required to be obtained by Tenant under Section 12
of this Lease. Tenant agrees to pay Landlord, without prior notice or
demand, or abatement, offset, deduction or claim, except as otherwise
provided herein, the Base Rent described on Page I, payable in advance at
Landlord's address shown on Page I on the first day of each month throughout
the Term of the Lease. In addition to the Base Rent set forth on Page i,
Tenant shall pay Landlord in advance and on the first (lst) day of each month
throughout the Term of this Lease, as Additional Rent, Tenant's Share of
Operating Expenses, Tax Expenses, Common Area Utility Costs, and Utility
Expenses. Tenant shall also pay to Landlord as Additional Rent hereunder,
immediately) on Landlord's demand therefor, any and all reasonable costs and
expenses incurred by Landlord to enforce the provisions of this Lease,
including, but not limited to, costs associated with the delivery of notices,
delivery and recordation of notice(s) of default, reasonable attorneys' fees,
expert fees, court costs and filing fees (collectively, the "Enforcement
Expenses"). The term "Rent" whenever used herein refers to the aggregate of
all these amounts. If Landlord permits Tenant to occupy the Premises without
requiring Tenant to pay rental payments for a period of time, the waiver of
the requirement to pay rental payments shall only apply to waiver of the Base
Rent and Tenant shall otherwise perform all other obligations of Tenant
required hereunder. The Rent for any fractional part of a calendar month at
the commencement or termination of the Lease term shall be a prorated amount
of the Rent for a full calendar month based upon a thirty (30) day month.
The prorated Rent shall be paid on the Commencement Date and the first day of
the calendar month in which the date of termination occurs, as the case may
be.
4. SECURITY DEPOSIT:
4.1 FIRST SECURITY DEPOSIT: Upon Tenant's execution of this Lease,
Tenant shall deliver to Landlord, as a First Security Deposit for the
performance by Tenant of its obligations under this Lease, the amount
described on Page 1. If Tenant is in default, Landlord may, but without
obligation to do so, use the First Security Deposit, or any portion thereof,
to cure the default or to compensate Landlord for all damages sustained by
Landlord resulting from Tenant's default, including, but not limited to the
Enforcement Expenses. Tenant shall, immediately on demand, pay to Landlord a
sum equal to the portion of the First Security Deposit so applied or used so
as to replenish the amount of the First Security Deposit held to increase
such deposit to the amount initially deposited with Landlord. Within thirty
(30) days after the termination of this Lease, if possible Landlord shall
return the First Security Deposit to Tenant, less such amounts as are
reasonably necessary, as determined reasonably by Landlord, to remedy
Tenant's default(s) hereunder or to otherwise restore the Premises to a clean
and safe condition, reasonable wear and tear excepted. If the cost to
restore the Premises exceeds the amount of the First Security Deposit, Tenant
shall promptly deliver to Landlord any and all of such excess sums as
reasonably determined by Landlord. Landlord shall not be required to keep
the First Security Deposit separate from other finds, and, unless otherwise
required by law, Tenant shall not be entitled to interest on the First
Security Deposit. In no event or circumstance shall Tenant have the right to
any use of the First Security Deposit and, specifically, Tenant may not use
the First Security Deposit as a credit or to otherwise offset any payments
required hereunder, including, but not limited to, Rent or any portion
thereof.
4.2 SECOND SECURITY DEPOSIT: For purposes of this Section 4.2 any and
all references herein to Tenant shall alternatively mean and refer to a
Permitted Transferee(hereafter defined in Section 15}if Tenant assigns the
Premises to a Permitted Transferee in accordance with the provisions of
Section 15 of this Lease. On or before full Lease execution, Tenant shall
deliver to Landlord, as a second security deposit (the "Second Security
Deposit") for the full and faithful performance by Tenant of all of its
obligations under this Lease, an irrevocable negotiable letter of credit, in
the form and containing the terms required herein, payable in the City of
Foster City, California running in favor of Landlord issued by a solvent bank
under the supervision of the Superintendent of Banks of the State of
California, or a National Banking Association, in the amount of eight hundred
thousand and 00/100 dollars ($800,000.00) (the "Letter of Credit"). The
Letter of Credit shall be (a) at sight and irrevocable (b) maintained in
declining amounts stated below, whether through replacement, renewal or
extension, until the eighth anniversary of the Lease or until Tenant has
achieved two consecutive years of profitability in either of which cases,
Tenant shall 'no longer by required to maintain the Second Security Deposit.
Provided, however if Tenant is or has been in default of any provision of the
Lease beyond any applicable cure period set forth in the Lease at the time of
the eighth anniversary of the Lease, the Second
5
<PAGE>
Security Deposit shall be maintained as described herein throughout the Term
of the Lease (the "Letter of Credit Expiration Date"), and Tenant shall
deliver a new Letter of Credit or certificate of renewal or extension to
Landlord at least thirty (30) days prior to the expiration of the Letter of
Credit, without any action whatsoever on the part of Landlord, (c) subject to
the Uniform Customs and Practices for Documentary Credits (1983-Rev)
International Chamber of Commerce Publication//400, and (d) acceptable to
Landlord in its sole discretion. The Letter of Credit amount shall decline
and be renewed or extended as follows:
Origination or
Renewal/Extension Date Expiration Date Amount
--------------- ------
Lease Execution May 20, 2000 $800,000.00
April 20, 2000 May 20, 2001 $775,020.00
April 20, 2001 May 20, 2002 $566,265.00
April 20, 2002 May 20, 2003 $377,510.00
April 20, 2003 May 20, 2004 $188,755.00
The above Letter of Credit amounts include the full amount of the amortized
excess Tenant Improvement costs as defined in paragraph 10 of Exhibit B of
the Lease. In the event that the full amount of the Excess Tenant
Improvement costs are not provided by Landlord then the original Letter of
Credit amounts shall be reduced by the amount of the Excess Tenant
Improvement Costs that are not provided by Landlord. The subsequent Letter
of Credit amounts shall be reduced by twenty (20) percent for each
renewal/extension period as outlined above.
In addition to the foregoing, the form and terms of the Letter of Credit (and
the bank issuing the same) shall be acceptable to Landlord, in Landlord's
sole discretion, and shall provide, among other things, in effect that: (1)
Landlord, or its then managing agent, shall have the right to draw down an
amount up to the face amount of the Letter of Credit upon the presentation to
the issuing bank of Landlord's (or Landlord's then managing agent's)
statement that such amount is due to Landlord under the terms and conditions
of this Lease, it being understood that if Landlord or its managing agent be
a corporation, partnership or other entity, then such statement shall be
signed by an officer (if a corporation), a general partner (if a
partnership), or any authorized party (if another entity); (2) the Letter of
Credit will be honored by the issuing bank without inquiry as to the accuracy
thereof and regardless of whether the Tenant disputes the content of such
statement; (3) in the event of a transfer of Landlord's interest in any of
the Buildings of which the Premises are a part, Landlord shall have the right
to transfer the Letter of Credit, in whole or in part (or cause a substitute
letter of credit to be delivered, as applicable), to the transferee and upon
such transferee's assumption of Landlord's obligations under the Lease, the
Landlord shall, without any further agreement between the parties, be
released by Tenant from all liability therefor, and it is agreed that the
provisions hereof shall apply to every transfer or assignment of the whole or
any portion of said Letter of Credit to a new Landlord. If, as a result of
any such application of all or any part of such security, the amount secured
by the Letter of Credit shall be less than two hundred fifty-two thousand two
hundred eighty-eight and 00/100 dollars ($252,288.00) or the required Letter
of Credit amount for the corresponding dates above, Tenant shall forthwith
provide Landlord with additional letter(s) of credit or cash in an amount
equal to the deficiency and each such additional letter of credit shall
comply with all of the provisions of this Section 4.2. Tenant further
covenants and warrants that it will not assign nor encumber the Letter of
Credit or any part thereof and that neither Landlord nor its successors or
assigns will be bound by any such assignment, encumbrance, attempted
assignment or attempted encumbrance. Without limiting the generality of the
foregoing, if the Letter of Credit expires earlier than the Letter of Credit
Expiration Date, Landlord will accept a renewal thereof or substitute letter
of credit (such renewal or substitute letter of credit to be in effect not
later than thirty (30) days prior to the expiration thereof), irrevocable and
automatically renewable as above provided through the Letter of Credit
Expiration Date upon the same terms as the expiring letter of credit or such
other terms as may be acceptable to Landlord. However, if the Letter of
Credit is not timely renewed or a substitute letter of credit or cash is not
timely received, or if Tenant fails to maintain the Letter of Credit in the
amount and terms set forth in this Section 4.2, Tenant, at least thirty (30)
days prior to the expiration of the Letter of Credit, or immediately upon its
failure to comply with each and every term of this Section 4.2, must deposit
with Landlord cash security in the amounts required by, and to be held
subject to and in accordance with, all of the terms and conditions set forth
this Section 4.2 and all other applicable provisions of this Lease, failing
which the Landlord may present such Letter of Credit to the bank in
accordance with the terms of this Section 4.2, and the entire sum secured
thereby shall be paid to Landlord, to be held by Landlord as provided in this
Section 4.2. If Tenant is in default after the expiration of any applicable
cure period, Landlord may, but without obligation to do so, use the Second
Security Deposit, or any portion thereof, to cure the default or to
compensate Landlord for all reasonable damages sustained by Landlord
resulting from Tenant's default, including, but not limited to the
Enforcement Expenses. Tenant shall, within ten (10) business days after the
expiration of any applicable cure period on demand, pay to Landlord a sum
equal to the portion of the Second Security Deposit so applied or used so as
to replenish the amount of the Second Security Deposit held to increase such
deposit to the amount initially deposited with Landlord.
5. TENANT IMPROVEMENTS: Tenant hereby accepts the Premises in the
condition in EXHIBIT B attached hereto. If so specified in EXHIBIT B hereto,
Landlord or Tenant, as the case may be, shall install the improvements
("Tenant Improvements") in the Premises in accordance with the terms,
conditions, criteria and provisions set forth in EXHIBIT B hereto. Tenant
acknowledges that neither Landlord nor any of Landlord's agents,
representatives or employees has made any representations as to the
suitability or fitness of the Premises for the conduct of Tenant's business,
including without limitation, any storage incidental thereto, or for any
other purpose, and that neither Landlord nor any of Landlord's agents,
representatives or employees has agreed to undertake any alterations or
construct any Tenant Improvements to the Premises except as expressly
provided in EXHIBIT B to this Lease.
6
<PAGE>
6. ADDITIONAL RENT: It is intended by Landlord and Tenant that this Lease
be a "triple net lease". The costs and expenses described in this Section 6
and all other sums, charges, costs and expenses specified in this Lease other
than Base Rent are to be paid by Tenant to Landlord as additional rent
(collectively, "Additional Rent").
6.1 OPERATING EXPENSES: In addition to the Base Rent set forth in
Section 3, Tenant shall pay Tenant's Share, which is defined on Page 1, of
all Operating Expenses as Additional Rent. The term "Operating Expenses" as
used herein shall mean the total amounts paid or payable by Landlord in
connection with the ownership, maintenance, repair and operation of the
Premises, the Building and the Lot, and where applicable, of the Park
referred to on Page 1. The amount of Tenant's Share of Operating Expenses
shall be reviewed from time to time by Landlord and shall be subject to
modification by Landlord if there is a change in the rentable square footage
of the Premises, the Building and/or the Park. These Operating Expenses may
include, but are not limited to:
6.1.1 Landlord's cost of repairs to, and maintenance of, the
roof, the roof membrane and the exterior walls of the Building;
6.1.2 Landlord's cost of maintaining the outside paved area,
landscaping and other common areas for the Park. The term "Common Areas"
shall mean all areas and facilities within the Park exclusive of the Premises
and the other portions of the Park leased exclusively to other tenants. The
Common Areas include, but are not limited to, interior lobbies, mezzanines,
parking areas, access and perimeter roads, sidewalks, rail spurs, landscaped
areas and similar areas and facilities;
6.1.3 Landlord's annual cost of insurance insuring against fire
and extended coverage (including, if Landlord elects, "all risk" coverage)
and all other insurance, including, but not limited to, earthquake, flood
and/or surface water endorsements for the Building, the Lot and the Park
(including the Common Areas), rental value insurance against loss of Rent in
an amount equal to the amount of Rent for a period of at least six (6) months
commencing on the date of loss, and subject to the provisions of Section 27
below, any deductible;
With respect to property insurance maintained by Landlord
hereunder, except as set forth below, Tenant shall not be
required to reimburse Landlord for any premiums paid by Landlord
for insurance covering loss due to earthquake in excess of the
Base Amount. For purposes of the foregoing, the term "Base
Amount" shall mean (i) with respect to the first twelve (12)
months of the term of this Lease following the Commencement Date,
a sum equal to only the portion of the insurance premium
attributable to insurance covering loss due to earthquake, and
(ii) with respect to each twelve (12) month period thereafter, a
sum equal to the amount included in Operating Expenses during
the immediately preceding twelve (12) month period with respect
to such premiums, with actual increase not to exceed ten percent
(10%). However, (a) if any mortgagee of Landlord requires
Landlord to maintain earthquake insurance, then Landlord shall
pay the excess premium costs over the Base Amount, and (b) if
all mortgagees of Landlord do not require Landlord to maintain
earthquake insurance and the premiums paid for earthquake
insurance exceed the Base Amount, then if Tenant does not elect
to pay such excess premium costs, Landlord may elect not to
maintain such earthquake insurance.
6.1.4 Landlord's cost of modifications to the Building, the
Common Areas and/or the Park occasioned by any rules, laws or regulations
effective subsequent to the date on which the Building was originally
constructed;
6.1.5 If Landlord elects to so procure, Landlord's cost of
preventative maintenance, and repair contracts including, but not limited to,
contracts for elevator systems and heating, ventilation and air conditioning
systems, lifts for disabled persons, and trash or refuse collection;
6.1.6 Landlord's cost of security and fire protection services
for the Building and/or the Park, as the case may be, if in Landlord's sole
discretion such services are provided;
6.1.7 Landlord's establishment of reasonable reserves for
replacements and/or repairs of Common Area improvements, equipment and
supplies;
6.1.8 Landlord's cost of supplies, equipment, rental equipment
and other similar items used in the operation and/or maintenance of the Park;
6.1.9 Landlord's cost for the repairs and maintenance items set
forth in Section 11.2 below; and
6.1.10 Landlord's cost for the management and administration of
the Premises, the Building, the Common Areas and the Park, including without
limitation, a property management fee, accounting, auditing, billing,
salaries for clerical and supervisory employees (whether located within the
Park or off-site) and all fees, licenses and permits related to the
ownership, operation and management of any portion of the Park in an amount
not to exceed three percent (3 %) of the Rent, excluding for purposes of
calculating this sum, the costs described in this Section 6.1.11.
7
<PAGE>
Notwithstanding anything to the contrary contained in this Lease,
in no event shall Operating Expenses include the following (collectively
"Costs"):
(a) Costs relating to repairs, alterations, improvements,
equipment and tools which would be property capitalized under generally
accepted accounting principles, except to the extent of Lessee's share
of such costs of the capital items in question;
(b) Costs incurred by Lessor to the extent that Lessor is
reimbursed by insurance proceeds or otherwise;
(c) Costs, including permit, license and inspecting costs,
incurred with respect to the installation of improvements made for
tenants or other occupants in the Building or incurred with respect to
the installation of improvements made for tenants or other occupants in
the Building or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant space for tenants or other
occupants of the Building;
(d) Depreciation, amortization and interest payments, except
to the extent provided herein pursuant to paragraph (b) above, and
except on materials, tools, supplies and vendor-type equipment purchased
by Lessor to enable Lessor to supply services Lessor might otherwise
contract for with a third party where such depreciation, amortization
and interest payments would otherwise have been included in the charge
for such third party's services, all as determined in accordance with
generally accepted accounting principles, consistently applied (as
applied to commercial real estate), and when depreciation or
amortization is permitted or required, the item shall be amortized over
its reasonably anticipated useful life (as reasonably determined by
Lessor):
(e) Leasing commissions, attorneys' fees, space planning
costs, and other costs and expenses in connection with negotiations with
present or prospective tenants or other occupants of the Building;
(f) Expenses in connection with serves or other benefits
which are not offered to Lessee or for which Lessee is charged directly
but which are provided to another tenant or occupant of the Building;
(g) Overhead and profit increments paid to Lessor or to
subsidiaries or affiliates of Lessor for goods and/or services to the
extent the same exceed the costs of such goods and/or services rendered
by unaffiliated third parties on a competitive basis;
(h) Costs (including in connection therewith all attorneys'
fees and costs of settlement, judgments and payments in lieu thereof)
arising from claims, disputes or potential disputes (other than claims
or disputes, including, but not limited to, tax disputes where the
tenants of the Building would receive benefits if Lessor prevails) in
connection with potential or actual claims, litigation or arbitrations
pertaining to Lessor and/or the Building; and
(i) Any expense not an Operating Expense as defined under GAAP.
6.2 TAX EXPENSES: In addition to the Base Rent set forth in Section
3, Tenant shall pay its share, which is defined on Page l, of all real
property taxes applicable to the land and improvements included within the
Lot on which the Premises are situated and one hundred percent (100%) of all
personal property taxes now or hereafter assessed or levied against the
Premises or Tenant's personal property. The amount of Tenant's Share of Tax
Expenses shall be reviewed from time to time by Landlord and shall be subject
to modification by Landlord if there is a change in the rentable square
footage of the Premises, the Building and/or the Park. Tenant shall also pay
one hundred percent (100 %) of any increase in real property taxes
attributable, in Landlord's sole but reasonable discretion, to any and all
alterations, Tenant Improvements or other improvements of any kind, which are
above standard improvements customarily installed for similar buildings
located within the Building or the Park (as applicable), whatsoever placed
in, on or about the Premises for the benefit of, at the request of, or by
Tenant. The term "Tax Expenses" shall mean and include, without limitation,
any form of tax and assessment (general, special, supplemental, ordinary or
extraordinary), commercial rental tax, payments under any improvement bond or
bonds, license fees, license tax, business license fee, rental tax,
transaction tax, levy, or penalty imposed by authority having the direct or
indirect power of tax (including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other
improvement district thereof) as against any legal or equitable interest of
Landlord in the Premises, the Building, the Lot or the Park, as against
Landlord's right to rent, or as against Landlord's business of leasing the
Premises or the occupancy of Tenant or any other tax, fee, or excise, however
described, including, but not limited to, any value added tax, or any tax
imposed in substitution (partially or totally) of any tax previously included
within the definition of real property taxes, or any additional tax the
nature of which was previously included within the definition of real
property taxes. The term "Tax Expenses" shall not include any franchise,
estate, inheritance, net income, or excess profits tax imposed upon Landlord.
6.3 PAYMENT OF EXPENSES: Landlord shall estimate Tenant's Share of
the Operating Expenses and Tax Expenses for the calendar year in which the
Lease commences. Commencing on the Commencement Date, one-twelfth (1/12th)
of this estimated amount shall be paid by Tenant to Landlord, as Additional
Rent, on the first (lst) day of each month and throughout the remaining
months of such calendar year. Thereafter, Landlord may estimate such
expenses as of the beginning of each calendar year and Tenant shall pay
one-twelfth (1/12th) of such estimated amount as Additional Rent hereunder on
the first day of each month during such calendar year
8
<PAGE>
and for each ensuing calendar year throughout the Term of this Lease.
Tenant's obligation to pay its Tenant's Share of Operating Expenses and Tax
Expenses shall survive the expiration or earlier termination of this Lease.
6.4 ANNUAL RECONCILIATION: By June 30th of each calendar year, or as
soon thereafter as reasonably possible, Landlord shall endeavor to furnish
Tenant with an accounting of actual Operating Expenses and Tax Expenses.
Within thirty (30) days of Landlord's delivery.of such accounting, Tenant
shall pay to Landlord the amount of any underpayment. Notwithstanding the
foregoing, failure by Landlord to give such accounting by such date shall not
constitute a waiver by Landlord of its right to collect any of Tenant's
underpayment at any time. Landlord shall credit the amount of any
overpayment by Tenant toward the next estimated monthly installment(s)
falling due, or where the Term of the Lease has expired, refund the amount of
overpayment to Tenant within thirty (30) days of such accounting. If the
Term of the Lease expires prior to the annual reconciliation of expenses
Landlord shall have the right to reasonably estimate Tenant's Share of such
expenses, and if Landlord determines that an underpayment is due, Tenant
hereby agrees that Landlord shall be entitled to deduct such underpayment
from Tenant's Security Deposit. If Landlord reasonably determines that an
overpayment has been made by Tenant, Landlord shall refund said overpayment
to Tenant as soon as practicable thereafter. Notwithstanding the foregoing,
failure of Landlord to accurately estimate Tenant's Share of such expenses or
to otherwise perform such reconciliation of expenses, including without
limitation, Landlord's failure to deduct any portion of any underpayment from
Tenant's Security Deposit, shall not constitute a waiver of Landlord's right
to collect any of Tenant's underpayment at any time during the Term of the
Lease or at any time after the expiration or earlier termination of this
Lease.
6.5 AUDIT: After delivery to Landlord of at least five (5) business
days prior written notice, Tenant, at its sole cost and expense through any
accountant designated by it, shall have the right to examine and/or audit the
books and records evidencing such costs and expenses for the previous one (1)
calendar year, during Landlord's reasonable business hours but not more
frequently than once during any calendar year. Any such accounting firm
designated by Tenant may not be compensated on a contingency fee basis. The
results of any such audit (and any negotiations between the parties related
thereto) shall be maintained strictly confidential by Tenant and its
accounting firm and shall not be disclosed, published or otherwise
disseminated to any other party other than to Landlord and its authorized
agents. Landlord and Tenant shall use its best efforts to cooperate in such
negotiations and to promptly resolve any discrepancies between Landlord and
Tenant in the accounting of such costs and expenses. In the event that a
refund is determined by Landlord and Tenant or Tenant's accounting firm, to
be due to Tenant, then such refund amount shall be paid, together with
interest thereupon at ten percent (10%) per annum from the date of Landlord's
delivery of its accounting until the payment of such refund.
7. UTILITIES: Utility Expenses, Common Area Utility Costs and all other
sums or charges set forth in this Section 7 are considered part of Additional
Rent. Tenant shall pay the cost of all water, sewer use, sewer discharge
fees and sewer connection fees, gas, heat, electricity, refuse pickup,
janitorial service, telephone and other utilities billed or metered
separately to the Premises and/or Tenant. Tenant shall also pay its share of
any assessments or charges for utility or similar purposes included within
any tax bill for the Lot on which the Premises are situated, including,
without limitation, entitlement fees, allocation unit fees, and/or any
similar fees or charges, and any penalties related thereto. For any such
utility fees or use charges that are not billed or metered separately to
Tenant, Tenant shall pay to Landlord, as Additional Rent, without prior
notice or demand, on the first (lst) day of each month throughout the Term of
this Lease the amount which is attributable to Tenant's use of the utilities
or similar services, as reasonably estimated and determined by Landlord based
upon factors such as size of the Premises and intensity of use of such
utilities by Tenant such that Tenant shall pay the portion of such charges
reasonably consistent with Tenant's use of such utilities and similar
services ("Utility Expenses"). If Tenant disputes any such estimate or
determination, then Tenant shall either pay the estimated amount or cause the
Premises to be separately metered at Tenant's sole expense. In addition,
Tenant shall pay to Landlord Tenant's Share, which is set forth on Page 1, as
Additional Rent, without prior notice or demand, on the first (lst) day of
each month throughout the Term of this Lease, of any Common Area utility
costs, fees, charges or expenses ("Common Area Utility Costs"). Tenant shall
pay to Landlord one-twelfth (1/12th) of the estimated amount of Tenant's
Share of the Common Area Utility Costs in the same manner and time periods as
specified in Section 6.3 above and any reconciliation thereof shall also be
in the same manner as specified in Sections 6.3 and 6.4 above. The amount of
Tenant's Share of Common Area Utility Costs shall be reviewed from time to
time by Landlord and shall be subject to modification by Landlord if there is
a change in the rentable square footage of the Premises, the Building and/or
the Park. Tenant acknowledges that the Premises may become subject to the
rationing of utility services or restrictions on utility use as required by a
public utility company, governmental agency or other similar entity having
jurisdiction thereof. Notwithstanding any such rationing or restrictions on
use of any such utility services, Tenant acknowledges and agrees that its
tenancy and occupancy hereunder shall be subject to such rationing
restrictions as may be imposed upon Landlord, Tenant, the Premises, the
Building or the Park, and Tenant shall in no event be excused or relieved
from any covenant or obligation to be kept or performed by Tenant by reason
of any such rationing or restrictions. Tenant further agrees to timely and
faithfully pay, prior to delinquency, any amount, tax, charge, surcharge,
assessment or imposition levied, assessed or imposed upon the Premises, or
Tenant's use and occupancy thereof.
8. LATE CHARGES: Any and all sums or charges set forth in this Section 8
are considered part of Additional Rent. Tenant acknowledges that late
payment (the sixth day of each month or any time thereafter) by Tenant to
Landlord of Base Rent, Tenant's Share of Operating Expenses, Tax Expenses,
Common Area Utility Costs, and Utility Expenses or other sums due hereunder,
will cause Landlord to incur costs not contemplated by this Lease, the exact
amount of such costs being extremely difficult and impracticable to fix.
Such costs include, without limitation, processing and accounting charges,
and late charges that may be imposed on Landlord by the terms of any note
secured by any encumbrance against the Premises, and late charges and
penalties due to
9
<PAGE>
the late payment of real property taxes on the Premises. Therefore, if any
installment of Rent or any other sum due from Tenant is not received by
Landlord when due or by the expiration of any applicable grace period
provided for herein, Tenant shall promptly pay to Landlord all of the
following, as applicable: (a) an additional sum equal to ten percent (10%) of
such delinquent amount plus interest on such delinquent amount at the rate
equal to the prime rate plus three percent (3 %) for the time period such
payments are delinquent as a late charge for every month or portion thereof
that such sums remain unpaid, (b) the amount of seventy-five dollars ($75)
for each three-day notice prepared for, or served on, Tenant, (c) the amount
of fifty dollars ($50) relating to checks for which there are not sufficient
funds. If Tenant delivers to Landlord a check for which there are not
sufficient funds, Landlord may, at its sole option, require Tenant to replace
such check with a cashier's check for the amount of such check and all other
charges payable hereunder. The parties agree that this late charge and the
other charges referenced above represent a fair and reasonable estimate of
the costs that Landlord will incur by reason of late payment by Tenant.
Acceptance of any late charge or other charges shall not constitute a waiver
by Landlord of Tenant's default with respect to the delinquent amount, nor
prevent Landlord from exercising any of the other rights and remedies
available to Landlord for any other breach of Tenant under this Lease. If a
late charge or other charge becomes payable for any three (3) installments of
Rent within any twelve (12) month period, then Landlord, can require the Rent
be paid monthly in advance by cashier's check or by electronic funds
transfer. Notwithstanding anything to the contrary contained within this
Lease. Landlord shall reduce the late charge to seven (7%) percent, but not
more than twice during any Lease year. If Tenant pays Rent late more than
twice per Lease year as provided above, Landlord shall be free to impose the
ten (10%) percent late charge.
9. USE OF PREMISES:
9.1 COMPLIANCE WITH LAWS, RECORDED MATTERS, AND RULES AND
REGULATIONS: The Premises are to be used solely for the uses stated on Page 1
and for no other uses or purposes without Landlord's prior written consent,
which consent shall not be unreasonably withheld or delayed, but, may be
given or withheld in Landlord's sole discretion. The use of the Premises by
Tenant and its employees, representatives, agents, invitees, licensees,
subtenants, customers or contractors (collectively, "Tenant's
Representatives") shall be subject to, and at all times in compliance with,
(a) any and all applicable laws, ordinances, statutes, orders and regulations
as same exist from time to time (collectively, the "Laws"), (b) any and all
documents, matters or instruments, including without limitation, any
declarations of covenants, conditions and restrictions, and any supplements
thereto, each of which has been or hereafter is recorded in any official or
public records with respect to the Premises, the Building, the Lot and/or the
Park, or any portion thereof (collectively, the "Recorded Matters"), and (c)
any and all rules and regulations set forth in Exhibit C, attached to and
made a part of this Lease, and any other reasonable rules and regulations
promulgated by Landlord now or hereafter enacted relating to parking and the
operation of the Premises, the Building and the Park (collectively, the
"Rules and Regulations"), provided that any Rules and Regulations hereafter
enacted solely by Landlord shall not unreasonably interfere with Tenant's use
of, or access to the Premises. Tenant agrees to, and does hereby, assume
full and complete responsibility to ensure that the Premises are adequate to
fully meet the needs and requirements of Tenant's intended operations of its
business within the Premises, and Tenant's use of the Premises and that same
are in compliance with all applicable Laws throughout the Term of this Lease.
Additionally, Tenant shall be solely responsible for the payment of all
costs, fees and expenses associated with any modifications to the Premises,
Building, the Common Areas and/or the Park occasioned by the enactment of, or
changes to, any Laws arising from Tenant's particular use of the Premises
regardless of when such Laws become effective.
Tenant shall not be responsible for making any structural changes to
the Premises in order to bring the Premises into compliance with any laws,
codes, ordinances, orders or regulations in effect as of the date of this
Lease, unless (i) such structural changes are necessitated as a result of
Tenant's particular use of the Premises or (ii) the requirements for such
changes are triggered as a result of any action by Tenant or Tenant's
representatives on or about the Premises.
9.2 PROHIBITION ON USE: Tenant shall not use the Premises or permit
anything to be done in or about the Premises nor keep or bring anything
therein which will in any way conflict with any of the requirements of the
Board of Fire Underwriters or similar body now or hereafter constituted or in
any way increase the existing rate of or affect any policy of fire or other
insurance upon the Building or any of its contents, or cause a cancellation
of any insurance policy. No auctions may be held or otherwise conducted in,
on or about the Premises, the Building, the Lot or the Park without
Landlord's written consent thereto, which consent may be given or withheld in
Landlord's sole discretion. Tenant shall not do or permit anything to be
done in or about the Premises which will in any way obstruct or interfere
with the rights of Landlord, other tenants or occupants of the Building,
other buildings in the Park, or other persons or businesses in the area, or
injure or annoy other tenants or use or allow the Premises to be used for any
unlawful or objectionable purpose, as determined by Landlord, in its
reasonable discretion, for the benefit, quiet enjoyment and use by Landlord
and all other tenants or occupants of the Building or other buildings in the
Park; nor shall Tenant cause, maintain or permit any private or public
nuisance in, on or about the Premises, Building, Park and/or the Common
Areas, including, but not limited to, any offensive odors, noises, fumes or
vibrations. Tenant shall not damage or deface or otherwise commit or suffer
to be committed any waste in, upon or about the Premises. Tenant shall not
place or store, nor permit any other person or entity to place or store, any
property, equipment, materials, supplies, personal property or any other
items or goods outside of the Premises for any period of time. Tenant shall
not permit any animals, including, but not limited to, any household pets, to
be brought or kept in or about the Premises. Tenant shall place no loads
upon the floors, walls, or ceilings in excess of the maximum designed load
permitted by the applicable Uniform Building Code or which may damage the
Building or outside areas; nor place any harmful liquids in the drainage
systems; nor dump or store waste materials, refuse or other such materials,
or allow such to remain outside the Building area, except in refuse
10
<PAGE>
dumpsters or in any enclosed trash areas provided. Tenant shall honor the
terms of all Recorded Matters relating to the Premises, the Building, the Lot
and/or the Park. Tenant shall honor the Rules and Regulations. If Tenant
fails to comply with such Laws, Recorded Matters, Rules and Regulations or
the provisions of this Lease, Landlord shall have the right to collect from
Tenant all rights and remedies of Landlord hereunder including, but not
limited to, the payment by Tenant to Landlord of all Enforcement Expenses and
Landlord's reasonable costs and expenses, if any, to cure any of such
failures of Tenant, if Landlord, at its sole option, elects to undertake such
cure.
10. ALTERATIONS AND ADDITIONS AND SURRENDER OF PREMISES:
10.1 ALTERATIONS AND ADDITIONS: Tenant shall not install any signs?
fixtures, improvements, nor make or permit any other alterations or additions
to the Premises without the prior written consent of Landlord which shall not
be unreasonably withheld. If any such alteration or addition is expressly
permitted by Landlord, Tenant shall deliver at least twenty (20) days prior
notice to Landlord, from the date Tenant intends to commence construction,
sufficient to enable Landlord to post a Notice of Non-Responsibility. In all
events, Tenant shall obtain all required permits or other governmental
approvals prior to commencing any of such work and deliver a copy of same to
Landlord. All alterations and additions shall be installed by a licensed
contractor approved by Landlord, in its reasonable discretion, at Tenant's
sole expense in compliance with all applicable Laws (including, but not
limited to, the ADA as defined herein), Recorded Matters, and Rules and
Regulations. Tenant shall keep the Premises and the property on which the
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by or on behalf of Tenant. As a
condition to Landlord's consent to the installation of any fixtures,
additions or other improvements, excluding the original Tenant Improvements,
Landlord may require Tenant to post and obtain a completion and indemnity
bond for up to one hundred percent (100%) of the cost of the work.
Notwithstanding anything to the contrary contained herein, Tenant may
install, make and permit to be made improvements, alterations and additions
to the Premises without first obtaining Landlord's written consent thereto,
provided that such improvements, alterations or additions to the Premises (a)
are not structural and do not affect the structural integrity of the Premises
and/or the Building, and/or (b) do not requires the issuance of a building
permit by the City of Newark, and/or (c) do not involve electrical and/or
plumbing improvements, additions or alterations, and/or (d) do not require
penetrations to the roof of the Building, and provided further that the
cumulative cost of all such improvements, alterations and additions does not
exceed ten thousand and 00/100 dollars ($10,000.00) in the aggregate over
each twelve month period of the Term ("Permitted Improvements"). In all
events, Tenant shall be required to submit to Landlord, at least ten (10)
business days prior to commencement of any improvements, written notification
of Tenant's intention to complete improvements along with all plans,
specifications, or construction drawings of such improvements or alterations,
Tenant shall cause all Permitted Improvements to be installed by a licensed
contractor and Tenant shall keep the Premises and the property on which the
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by or on behalf of Tenant. Upon
Landlord's request, at Tenant's sole expense, all such Permitted Improvements
installed by Tenant shall be removed and the Premises shall be restored to
its original condition at the expiration or earlier termination of this Lease.
10.2 SURRENDER OF PREMISES: Upon the termination of this Lease,
whether by forfeiture, lapse of time or otherwise, or upon the termination of
Tenant's right to possession of the Premises, Tenant will at once surrender
and deliver up the Premises, together with the fixtures, additions and
improvements which Landlord has notified Tenant, in writing, that Landlord
will require Tenant not to remove, to Landlord in good condition and repair
including, but not limited to, replacing all light bulbs and ballasts not in
good working condition, excepting for reasonable wear and tear and damage
caused by an event of casualty. Reasonable wear and tear shall not include
any damage or deterioration to the floors of the Premises arising from the
use of forklifts in, on or about the Premises (including, without limitation,
any marks or stains of any portion of the floors), and any damage or
deterioration that would have been prevented by proper maintenance by Tenant
or Tenant otherwise performing all of its obligations under this Lease. Upon
such termination of this Lease, Tenant shall remove all tenant signage, trade
fixtures, furniture, furnishings, personal property, additions, and other
improvements unless Landlord requests, in writing, that Tenant not remove
some or all of such trade fixtures, additions or improvements installed by,
or on behalf of Tenant not including the Tenant Improvements as described in
Exhibit B, or situated in or about the Premises. By the date which is twenty
(20) days prior to such termination of this Lease, Landlord shall notify
Tenant in writing of those fixtures, alterations, additions and other
improvements which Landlord shall require Tenant not to remove from the
Premises unless Landlord shall have notified Tenant of such non removal
obligation at the time of granting approval for the same. Tenant shall
repair any damage caused by the installation or removal of such signs, trade
fixtures, furniture, furnishings, fixtures, additions and improvements which
are to be removed from the Premises by Tenant hereunder. If Landlord fails
to so notify Tenant at least twenty (20) days prior to such termination of
this Lease, then Tenant shall remove all tenant signage, fixtures,
alterations, furniture, furnishings, trade fixtures, additions and other
improvements installed in or about the Premises by, or on behalf of Tenant.
Tenant shall ensure that the removal of such items and the repair of the
Premises will be completed prior to such termination of this Lease.
Notwithstanding anything to the contrary herein, Tenant shall not be required
to remove the Tenant Improvements installed at the commencement of the term
of this Lease in accordance with Exhibit B.
11. REPAIRS AND MAINTENANCE:
11.1 TENANT'S REPAIRS AND MAINTENANCE OBLIGATIONS: Except for those
portions of the Building to be maintained by Landlord, as provided in Section
11.2 below, Tenant shall, at Tenant's sole cost and expense, keep and
maintain the Premises and the adjacent areas (including, without limitation,
any portion of the Common Areas used by Tenant or Tenant's Representatives)
in good, clean and safe condition and repair
11
<PAGE>
to the satisfaction of Landlord including, but not limited to, repairing any
damage caused by Tenant or Tenant's Representatives and replacing any
property so damaged by Tenant or Tenant's Representatives. Without limiting
the generality of the foregoing, Tenant shall be solely responsible for
maintaining, repairing and replacing (a) all mechanical systems, heating,
ventilation and air conditioning systems, (b) all plumbing, electrical wiring
and equipment serving the Premises, (c) all interior lighting (including,
without limitation, light bulbs and/or ballasts) and exterior lighting
serving the Premises or adjacent to the Premises, (d) all glass, windows,
window frames, window casements, skylights; interior and exterior doors, door
frames and door closers, (e) all roll-up doors, ramps and dock equipment,
including without limitation, dock bumpers, dock plates, dock seals, dock
levelers and dock lights, (f) all tenant signage, (g) lifts for disabled
persons serving the Premises, (h) sprinkler systems, fire protection systems
and security systems, (i) all partitions, fixtures, equipment, interior
painting, and interior walls and floors of the Premises and every part
thereof (including, without limitation, any demising walls contiguous to any
portion of the Premises). Tenant's obligation to keep, maintain, preserve
and repair the Premises and the adjacent area shall specifically extend to
the cleanup and removal of any and all Hazardous Materials (hereafter
defined) occurring in, on or about the Premises.
11.2 REIMBURSABLE REPAIRS AND MAINTENANCE OBLIGATIONS: Subject to the
provisions of Sections 6 and 9 of this Lease and except for (i) the
obligations of Tenant set forth in Section 11.1 above, and (ii) the repairs
rendered necessary by the intentional or negligent acts or omissions of
Tenant or Tenant's Representatives, Landlord agrees, at Landlord's expense,
subject to reimbursement pursuant to Section 6 above, to keep in good repair
the plumbing and mechanical systems exterior to the Premises, any rail spur
and rail crossing, the roof, roof membranes, exterior walls of the Building,
signage (exclusive of tenant signage), and exterior electrical wiring and
equipment, exterior lighting, exterior glass, exterior doors/entrances and
door closers, exterior window casements, exterior painting of the Building
(exclusive of the Premises), and underground utility and sewer pipes outside
the exterior walls of the Building. For purposes of this Section 11.2, the
term "exterior" shall mean exterior to, and not serving the Premises. Unless
otherwise notified by Landlord, in writing, that Landlord has elected to
procure and maintain the following described contract(s), Tenant shall
procure and maintain (a) the heating, ventilation and air conditioning
systems preventative maintenance and repair contract(s); such contract(s) to
be on a bi-monthly or quarterly basis, as reasonably determined by Landlord,
and (b) the fire and sprinkler protection services and preventative
maintenance and repair contract(s) (including, without limitation, monitoring
services); such contract(s) to be on a bi-monthly or quarterly basis, as
reasonably determined by Landlord. Landlord reserves the right, but without
the obligation to do so, to procure and maintain (i) the heating, ventilation
and air conditioning systems preventative maintenance and repair contract(s),
and/or (ii) the fire and sprinkler protection services and preventative
maintenance and repair contract(s) (including, without limitation, monitoring
services). If Landlord so elects to procure and maintain any such
contract(s), Tenant will reimburse Landlord for the cost thereof in
accordance with the provisions of Section 6 above. If Tenant procures and
maintains any of such contract(s), Tenant will promptly deliver to Landlord a
true and complete copy of each such contract and any and all renewals or
extensions thereof, and each service report or other summary received by
Tenant pursuant to or in connection with such contract(s). Notwithstanding
anything to the contrary herein, capital expenditures incurred by Landlord
shall be amortized according to standard commercial real estate accounting
practices, but in no event over a period in excess of fifteen (15) years.
11.3 LANDLORD'S REPAIRS AND MAINTENANCE OBLIGATIONS: Except for
repairs rendered necessary by the intentional or negligent acts or omissions
of Tenant or Tenant's Representatives, Landlord agrees, at Landlord's sole
cost and expense, to (a) keep in good repair the structural portions of the
floors, foundations and exterior perimeter walls of the Building (exclusive
of glass and exterior doors), and (b) replace the structural portions of the
roof of the Building (excluding the roof membrane) as, and when, Landlord
determines such replacement to be necessary in Landlord's sole but reasonable
discretion.
11.4 TENANT'S FAILURE TO PERFORM REPAIRS AND MAINTENANCE OBLIGATIONS:
Except for normal maintenance and repair of the items described above, Tenant
shall have no right of access to or right to install any device on the roof
of the Building nor make any penetrations of the roof of the Building without
the express prior written consent of Landlord which consent shall not be
unreasonably withheld or delayed. If Tenant refuses or neglects to repair
and maintain the Premises and the adjacent areas properly as required herein
and to the reasonable satisfaction of Landlord, Landlord may, but without
obligation to do so, with five (5) business days prior notice to Tenant,
unless, (in Landlord's discretion,) the nature of the repair can not be
delayed five (5) business days, at any time make such repairs and/or
maintenance without Landlord having any liability to Tenant for any loss or
damage that may accrue to Tenant's merchandise, fixtures or other property,
or to Tenant's business by reason thereof, except to the extent any damage is
caused by the willful misconduct or gross negligence of Landlord or its
authorized agents and representatives. In the event Landlord makes such
repairs and/or maintenance, upon completion thereof Tenant shall pay to
Landlord, as additional rent, the Landlord's costs for making such repairs
and/or maintenance, plus the greater of one hundred and 00/100 dollars
($100.00) or five percent (5%) of the cost of the repair and/or maintenance
for overhead, upon presentation of a bill therefor, plus any Enforcement
Expenses. The obligations of Tenant hereunder shall survive the expiration
of the Term of this Lease or the earlier termination thereof. Tenant hereby
waives any right to repair at the expense of Landlord under any applicable
Laws now or hereafter in effect respecting the Premises.
12. INSURANCE:
12.1 TYPES OF INSURANCE: Tenant shall maintain in full force and
effect at all times during the Term of this Lease, at Tenant's sole cost and
expense, for the protection of Tenant and Landlord, as their interests may
appear, policies of insurance issued by a carrier or carriers reasonably
acceptable to Landlord and its lender(s) which afford the following
coverages: (i) worker's compensation: statutory limits; (ii) employer's
12
<PAGE>
liability, as required by law, with a minimum limit of $100,000 per employee
and $500,000 per claim; (iii) primary commercial general liability insurance
(occurrence form) providing coverage against any and all claims for bodily
injury and property damage occurring in, on or about the Premises arising out
of Tenant's and Tenant's Representatives' use and/or occupancy of the
Premises. Such insurance shall include coverage for blanket contractual
liability, fire damage, premises, personal injury, completed operations,
products liability, personal and advertising. Such insurance shall have a
combined single limit of not less than One Million Dollars ($1,000,000) per
occurrence with a Two Million Dollar ($2,000,000) aggregate limit and excess
umbrella insurance in the amount of Two Million Dollars ($2,000,000). If
Tenant has other locations which it owns or leases, the policy shall include
an aggregate limit per location endorsement. If necessary, as reasonably
determined by Landlord, Tenant shall provide for restoration of the aggregate
limit; (iv) comprehensive automobile liability insurance: a combined single
limit of not less than $2,000,000 per occurrence and insuring Tenant against
liability for claims arising out of the ownership, maintenance, or use of any
owned, hired or non-owned automobiles; (v) "all risk" property insurance,
including without limitation, sprinkler leakage, boiler and machinery
comprehensive form, if applicable, covering damage to or loss of any personal
property, trade fixtures, inventory, fixtures and equipment located in, on or
about the Premises, and in addition, coverage for flood, earthquake if
available at commercially reasonable rates, and business interruption of
Tenant, together with, if the property of Tenant's invitees is to be kept in
the Premises, warehouser's legal liability or bailee customers insurance for
the full replacement cost of the property belonging to invitees and located
in the Premises to the extent required by such customers pursuant to the
terms of the contract of carriage. Such insurance shall be written on a
replacement cost basis (without deduction for depreciation) in an amount
equal to one hundred percent (100%) of the full replacement value of the
aggregate of the items referred to in this subparagraph (v); and (vi) such
other insurance as Landlord deems reasonably necessary and prudent or as may
otherwise be required by any of Landlord's lenders or joint venture partners.
12.2 INSURANCE POLICIES: Insurance required to be maintained by Tenant
shall be written by companies (i) licensed to do business in the State of
California, (ii) domiciled in the United States of America, and (iii) having
a "General Policyholders Rating" of at least A:X (or such higher rating as
may be required by a lender having a lien on the Premises) as set forth in
the most current issue of "Best's Insurance Reports." Any deductible amounts
under any of the insurance policies required hereunder shall not exceed
commercially reasonable deductible amounts and shall be subject to Landlord's
reasonable approval, except that the deductible amounts for Tenant's property
damage insurance for Tenant's personal property, trade fixtures and inventory
described in Section 12.1(v) above shall be in such amounts as Tenant shall
determine in accordance with its standard corporate policies, it being
acknowledged, however, by Tenant that all such deductible amounts and self
insurance shall be deemed self-insured with full waiver of subrogation as set
forth below in Section 12.3. Tenant shall deliver to Landlord certificates of
insurance and true and complete copies of any and all endorsements required
herein for all insurance required to be maintained by Tenant hereunder at the
time of execution of this Lease by Tenant. Tenant shall, at least thirty (30)
days prior to expiration of each policy, furnish Landlord with certificates
of renewal or "binders" thereof. Each certificate shall expressly provide
that such policies shall not be cancelable or otherwise subject to
modification except after thirty (30) days prior written notice to the
parties named as additional insureds as required in this Lease (except for
cancellation for nonpayment of premium, in which event cancellation shall not
take effect until at least ten (10) days' notice has been given to Landlord).
Tenant shall have the right to provide insurance coverage which it is
obligated to carry pursuant to the terms of this Lease under a blanket
insurance policy, provided such blanket policy expressly affords coverage for
the Premises and for Landlord as required by this Lease.
12.3 ADDITIONAL INSUREDS AND COVERAGE: Landlord, any property
management company and/or agent of Landlord for the Premises, the Building,
the Lot or the Park, any lender(s) of Landlord having a lien against the
Premises, the Building, the Lot or the Park, and any joint venture partners
of Landlord shall be named as additional insureds under all of the policies
required in Section 12. l(iii) above. Additionally, such policies shall
provide for severability of interest. All insurance to be maintained by
Tenant shall, except for workers' compensation and employer's liability
insurance, be Primary, without right of contribution from insurance
maintained by Landlord. Any umbrella liability policy or excess liability
policy (which shall be in "following form") shall provide that if the
underlying aggregate is exhausted, the excess coverage will drop down as
primary insurance. The limits of insurance maintained by Tenant shall not
limit Tenant's liability under this Lease. It is the parties' intention that
the insurance to be procured and maintained by Tenant as required herein
shall provide coverage for any and all damage or injury arising from or
related to Tenant's operations of its business and/or Tenant's or Tenant's
Representatives' use of the Premises and/or any of the areas within the Park,
whether such events occur within the Premises (as described in Exhibit A
hereto) or in any other areas of the Park. It is not contemplated or
anticipated by the parties that the aforementioned risks of loss be borne by
Landlord's insurance carriers, rather it is contemplated and anticipated by
Landlord and Tenant that such risks of loss be borne by Tenant's insurance
carriers pursuant to the insurance policies procured and maintained by Tenant
as required herein.
12.4 FAILURE OF TENANT TO PURCHASE AND MAINTAIN INSURANCE: In the
event Tenant does not purchase the insurance required in this Lease or keep
the same in full force and effect throughout the Term of this Lease
(including any renewals or extensions), Landlord may, but without obligation
to do so, purchase the necessary insurance and pay the premiums therefor. If
Landlord so elects to purchase such insurance, Tenant shall promptly pay to
Landlord as Additional Rent, the amount so paid by Landlord, upon Landlord's
demand therefor. In addition, Landlord may recover from Tenant and Tenant
agrees to pay, as Additional Rent, any and all Enforcement Expenses and
damages which Landlord may sustain by reason of Tenant's failure to obtain
and maintain such insurance. If Tenant fails to maintain any insurance
required in this Lease, Tenant shall be liable for all losses, damages and
costs resulting from such failure.
13
<PAGE>
12.5 LANDLORD'S INSURANCE: The initial Landlord shall obtain and keep
in force during the term of this Lease a policy of combined single limit
bodily injury and property damage insurance, insuring Landlord, against
liability for bodily injury and property damage. Landlord shall obtain and
keep in force during the term of this Lease a policy or policies of insurance
covering loss or damage to the Building, and the Tenant Improvements to the
extent of Landlord's actual interest therein, but not including Tenant's
Property or alterations or improvements made to the Premises by or on behalf
of Tenant (excluding the Tenant Improvements as limited above), in an amount
of eighty percent (80%) of the full replacement value thereof excluding land
costs, excavation costs, footings and foundations. The foregoing insurance
shall provide protection against all perils within the classification of
fire, extended coverage (as such term is used in the insurance industry),
vandalism, malicious mischief, and to the extent available at commercially
reasonable rates (as solely determined by Landlord), flood and/or earthquake
insurance. The foregoing insurance policies may be procured and carried
pursuant to a blanket policy of insurance covering additional properties
other than the Building. Landlord's cost of obtaining and maintaining such
insurance policies are included as one of the items comprising the Operating
Expenses.
13. WAIVER OF SUBROGATION: Landlord and Tenant hereby mutually waive their
respective rights of recovery against each other for any loss of, or damage
to, either parties' property to the extent that such loss or damage is
insured by an insurance policy required to be in effect at the time of such
loss or damage. Each party,shall obtain any special endorsements, if
required by its insurer whereby the insurer waives its rights of subrogation
against the other party. This provision is intended to waive fully, and for
the benefit of the parties hereto, any rights and/or claims which might give
rise to a right of subrogation in favor of any insurance carrier. The
coverage obtained by Tenant pursuant to Section 12 of this Lease shall
include, without limitation, a waiver of subrogation endorsement attached to
the certificate of insurance. The provisions of this Section 13 shall not
apply in those instances in which such waiver of subrogation would invalidate
such insurance coverage or would cause either party's insurance coverage to
be voided or otherwise uncollectible.
14. LIMITATION OF LIABILITY AND INDEMNITY: Except for damage resulting from
the sole gross negligence or willful misconduct of Landlord or its authorized
representatives, Tenant agrees to protect, defend (with counsel reasonably
acceptable to Landlord) and hold Landlord and Landlord's lender(s), partners,
employees, representatives, legal representatives, successors and assigns
(collectively, the "Indemnitees") harmless and indemnify the Indemnitees from
and against all liabilities, damages, claims, losses, judgments, charges and
expenses (including reasonable attorneys' fees, costs of court and expenses
necessary in the prosecution or defense of any litigation including the
enforcement of this provision) arising from or in any way related to,
directly or indirectly, Tenant's or Tenant's Representatives' use of the
Premises, Building and/or the Park, or the conduct of Tenant's business, or
from any activity, work or thing done, permitted or suffered by Tenant in or
about the Premises, or in any way connected with the Premises or with the
improvements or personal property therein, including, but not limited to, any
liability for injury to person or property of Tenant, Tenant's
Representatives, or third party persons. Tenant agrees that the obligations
of Tenant herein shall survive the expiration or earlier termination of this
Lease.
Except for damage resulting from the sole active gross negligence or
willful misconduct of Landlord or its authorized representatives, Landlord
shall not be liable to Tenant for any loss or damage to Tenant or Tenant's
property, for any injury to or loss of Tenant's business or for any damage or
injury to any person from any cause whatsoever, including, but not limited
to, any acts, errors or omissions by or on behalf of any other tenants or
occupants of the Building and/or the Park. Tenant shall not, in any event or
circumstance, be permitted to offset or otherwise credit against any payments
of Rent required herein for matters for which Landlord may be liable
hereunder. Landlord and its authorized representatives shall not be liable
for any interference with light or air, or for any latent defect in the
Premises or the Building. To the fullest extent permitted by law except for
damage resulting from the sole active gross negligence or willful misconduct
of Landlord or its authorized representatives, Tenant agrees that neither
Landlord nor any of Landlord's lender(s), partners, employees,
representatives, legal representatives, successors and assigns shall at any
time or to any extent whatsoever be liable, responsible or in any way
accountable for any loss, liability, injury, death or damage to persons or
property which at any time may be suffered or sustained by Tenant or by any
person(s) whomsoever who may at any time be using, occupying or visiting the
Premises, the Building or the Park.
15. ASSIGNMENT AND SUBLEASING:
15.1 PROHIBITION: Except as expressly set forth herein with respect to
a Permitted Transferee, Tenant shall not assign, mortgage, hypothecate,
encumber, grant any license or concession, pledge or otherwise transfer this
Lease (collectively, "assignment"), in whole or in part, whether voluntarily
or involuntarily or by operation of law, nor sublet or permit occupancy by
any person other than Tenant of all or any portion of the Premises without
first obtaining the prior written consent of Landlord, which consent shall
not be unreasonably withheld or delayed. Tenant hereby agrees that Landlord
may withhold its consent to any proposed sublease or assignment if the
proposed sublessee or assignee or its business is subject to compliance with
additional requirements of the ADA (defined below) beyond those requirements
which are applicable to Tenant, unless the proposed sublessee or assignee
shall (a) first deliver plans and specifications for complying with such
additional requirements and obtain Landlord's written consent thereto, which
consent shall not be unreasonably withheld or delayed and (b) comply with all
Landlord's conditions for or contained in such consent, including without
limitation, requirements for security to assure the lien-free completion of
such improvements. If Tenant seeks to sublet or assign all or any portion of
the Premises, Tenant shall deliver to Landlord at least twenty (20) days
prior to the proposed commencement of the sublease or assignment (the
"Proposed Effective Date") the following: (i) the name of the proposed
assignee or sublessee; (ii) such information as to such assignee's or
sublessee's financial responsibility and standing as Landlord may reasonably
require; and (iii) the aforementioned plans and specifications, if any.
Within ten (10) days after Landlord's receipt of a written
14
<PAGE>
request from Tenant that Tenant seeks to sublet or assign all or any portion
of the Premises, Landlord shall deliver to Tenant a copy of Landlord's
standard form of sublease or assignment agreement (as applicable), which
instrument shall be utilized for each proposed sublease or assignment (as
applicable) or another form acceptable to Landlord, and such instrument shall
include a provision whereby the assignee or sublessee assumes all of Tenant's
obligations hereunder and agrees to be bound by the terms hereof. As
Additional Rent hereunder, Tenant shall pay to Landlord a fee in the amount
of five hundred dollars ($500) plus Tenant shall reimburse Landlord for
actual legal and other expenses incurred by Landlord in connection with any
actual or proposed assignment or subletting. In the event the sublease (1)
by itself or taken together with prior sublease(s) except with respect to a
Permitted Transferee is for a term which by itself or taken together with
prior or other subleases is for the period remaining in the term of this
Lease as of the time of the Proposed Effective Date, then Landlord shall have
the right, to be exercised by giving written notice to Tenant, to recapture
the space described in the sublease. If such recapture notice is given, it
shall serve to terminate this Lease with respect to the proposed sublease
space, or, if the proposed sublease space covers all the Premises, it shall
serve to terminate the entire term of this Lease in either case, as of the
Proposed Effective Date. However, no termination of this Lease with respect
to part or all of the Premises shall become effective without the prior
written consent, where necessary, of the holder of each deed of trust
encumbering the Premises or any part thereof. If this Lease is terminated
pursuant to the foregoing with respect to less than the entire Premises, the
Rent shall be adjusted on the basis of the proportion of square feet retained
by Tenant to the square feet originally demised and this Lease as so amended
shall continue thereafter in full force and effect. Each permitted assignee
or sublessee, including without limitation, a Permitted Transferee shall
assume and be deemed to assume this Lease and shall be and remain liable
jointly and severally with Tenant for payment of Rent and for the due
performance of, and compliance with all the terms, covenants, conditions and
agreements 'herein contained on Tenant's part to be performed or complied
with, for the term of this Lease. Notwithstanding the preceding sentence, in
the event only a portion of the Premises is subleased, each sublessee shall
assume the Lease and shall be and remain liable, jointly and severally with
Tenant for the payment of Rent on that portion of the Premises subleased. No
assignment or subletting shall affect the continuing primary liability of
Tenant (which, following assignment, shall be joint and several with the
assignee), and Tenant shall not be released from performing any of the terms,
covenants and conditions of this Lease. Tenant hereby acknowledges and
agrees that it understands that Landlord's accounting department may process
and accept Rent payments without verifying that such payments are being made
by Tenant, a permitted sublessee or a permitted assignee in accordance with
the provisions of this Lease. Although such payments may be processed and
accepted by such accounting department personnel, any and all actions or
omissions by the personnel of Landlord's accounting department shall not be
considered as acceptance by Landlord of any proposed assignee or sublessee
nor shall such actions or omissions be deemed to be a substitute for the
requirement that Tenant obtain Landlords prior written consent to any such
subletting or assignment, and any such actions or omissions by the personnel
of Landlord's accounting department shall not be considered as a voluntary
relinquishment by Landlord of any of its rights hereunder nor shall any
voluntary relinquishment of such rights be inferred therefrom. For purposes
hereof, in the event Tenant is a corporation, partnership, joint venture,
trust or other entity other than a natural person, any change in the direct
or indirect ownership of Tenant (whether pursuant to one or more transfers
other than any public trading of the outstanding shares (stock) of Tenant
which does not result in a change of the management and control of Tenant)
which results in a change of more than fifty percent (50%) in the direct or
indirect ownership of Tenant shall be deemed to be an assignment within the
meaning of this Section 15 and shall be subject to all the provisions hereof.
Except for a permissible assignment to a Permitted Transferee, any and all
options, first rights of refusal, tenant improvement allowances and other
similar rights granted to Tenant in this Lease, if any, shall not be
assignable by Tenant unless expressly authorized in writing by Landlord.
Notwithstanding anything to the contrary contained herein, so long as Tenant
delivers to Landlord (1) at least fifteen (15) business days after written
notice of its intention to assign or sublease the Premises to any Permitted
Transferee, which notice shall set forth the name of the Permitted
Transferee, (2) a copy of the proposed agreement pursuant to which such
assignment or sublease shall be effectuated, and (3) such other information
concerning the Permitted Transferee as Landlord may reasonably require,
including without limitation, information regarding any change in the
proposed use of any portion of the Premises and any financial information
with respect to such Permitted Transferee, and so long as Landlord approves,
in writing, of any change in the proposed use of the subject portion of the
Premises, then Tenant may assign this Lease or sublease any portion of the
Premises (X) to any Permitted Transferee, or (Y) in connection with any
merger, consolidation or sale of substantially all of the assets of Tenant,
(collectively "Permitted Transferee") without having to obtain the prior
written consent of Landlord thereto. For purposes of this Lease the term
"Permitted Transferee" shall mean and refer to any corporation or entity
which controls, is controlled by or is under common control with Tenant, the
event of any transfer of more than 50% of the stock of Tenant over a publicly
traded stock exchange since Tenant is a publicly traded company, as all of
such terms are customarily used in the industry, and with an equal or greater
net worth as Tenant has as of the proposed transfer date. Any assignment to
a Permitted Transferee shall in no way relieve Tenant of any liability Tenant
may have under this Lease and such assignee or sublessee shall be jointly and
severally liable with Tenant hereunder.
15.2 EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION: In the event
of any sublease or assignment of all or any portion of the Premises, except
for Permitted Transferee, where the rent or other consideration provided for
in the sublease or assignment either initially or over the term of the
sublease or assignment exceeds the Rent or pro rata portion of the Rent, as
the case may be, for such space reserved in the Lease, Tenant shall pay the
Landlord monthly, as Additional Rent, at the same time as the monthly
installments of Rent are payable hereunder, fifty percent (50%) of the excess
of each such payment of rent or other consideration in excess of the Rent
called for hereunder, after deducting all cost incurred by Tenant in
obtaining such assignee or sublessee, including, without limitation,
brokerage commission, attorney's fees, advertising expenses and rental
concessions.
15
<PAGE>
15.3 WAIVER: Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Landlord to any
assignee or sublessee, or failure by Landlord to take action against any
assignee or sublessee, Tenant waives notice of any default of any assignee or
sublessee and agrees that Landlord may, at its option, proceed against Tenant
without having taken action against or joined such assignee or sublessee,
except that Tenant shall have the benefit of any indulgences, waivers and
extensions of time granted to any such assignee or sublessee.
16. AD VALOREM TAXES: Prior to delinquency, Tenant shall pay all taxes and
assessments levied upon trade fixtures, alterations, additions, improvements,
inventories and personal property located and/or installed on or in the
Premises by, or on behalf of, Tenant; and if requested by Landlord, Tenant
shall promptly deliver to Landlord copies of receipts for payment of all such
taxes and assessments. To the extent any such taxes are not separately
assessed or billed to Tenant, Tenant shall pay the amount thereof as invoiced
by Landlord.
17. SUBORDINATION: Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, and at the
election of Landlord or any bona fide mortgagee or deed of trust beneficiary
with a lien on all or any portion of the Premises or any ground lessor with
respect to the land of which the Premises are a part, the rights of Tenant
under this Lease and this Lease shall be subject and subordinate at all times
to: (i) all ground leases or underlying leases which may now exist or
hereafter be executed affecting the Building or the land upon which the
Building is situated or both, and (ii) the lien of any mortgage or deed of
trust which may now exist or hereafter be executed in any amount for which
the Building, the Lot, ground leases or underlying leases, or Landlord's
interest or estate in any of said items is specified as security.
Notwithstanding the foregoing, Landlord or any such ground lessor, mortgagee,
or any beneficiary shall have the right to subordinate or cause to be
subordinated any such ground leases or underlying leases or any such liens to
this Lease. If any ground lease or underlying lease terminates for any
reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu
of foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination and upon the request of such successor to Landlord, attorn to
and become the Tenant of the successor in interest to Landlord, provided such
successor in interest will not disturb Tenant's use, occupancy or quiet
enjoyment of the Premises so long as Tenant is not in default of the terms
and provisions of this Lease. The successor in interest to Landlord
following foreclosure, sale or deed in lieu thereof shall not be (a) liable
for any act or omission of any prior lessor or with respect to events
occurring prior to acquisition of ownership; (b) subject to any offsets or
defenses which Tenant might have against any prior lessor; (c) bound by
prepayment of more than one (1) month's Rent; or (d) liable to Tenant for any
Security Deposit not actually received by such successor in interest to the
extent any portion or all of such Security Deposit has not already been
forfeited by, or refunded to, Tenant. Landlord shall be liable to Tenant for
all or any portion of the Security Deposit not forfeited by, or refunded to
Tenant, until and unless Landlord transfers such Security Deposit to the
successor in interest. Tenant covenants and agrees to execute (and
acknowledge if required by Landlord, any lender or ground lessor) and
deliver, within ten (10) days of a demand or request by Landlord and in the
form requested by Landlord, ground lessor, mortgagee or beneficiary, any
additional documents evidencing the priority or subordination of this Lease
with respect to any such ground leases or underlying leases or the lien of
any such mortgage or deed of trust. Tenant's failure to timely execute and
deliver such additional documents shall, at Landlord's option, constitute a
material default hereunder. It is further agreed that Tenant shall indemnify
Landlord from and against any loss, cost, damage or expense, arising
directly, from any failure of Tenant to execute or deliver to Landlord any
such additional documents, together with any and all Enforcement Expenses.
Tenant's agreement to subordinate this Lease to any future ground or
underlying lease or any future deed of trust or mortgage pursuant to the
foregoing provisions of the Section 17 is conditioned upon Landlord
delivering to Tenant from the lessor under such future ground or underlying
lease or the holder of any such mortgage or deed of trust, a non-disturbance
agreement agreeing, among other things, that Tenant's right to possession of
the Premises pursuant to the terms and conditions of this Lease shall not be
disturbed provided Tenant is not in default under this Lease beyond the
applicable notice and cure periods hereunder. Landlord has advised Tenant
that at sometime after the date on which this Lease is executed by the
parties Landlord will obtain a permanent loan which will be secured by a lien
of a deed of trust against the Premises, the Building and/or the Lot.
Landlord and Tenant agree that if Landlord at any time during the term of the
Lease causes the Premises, the Building and/or the Lot to be encumbered by a
mortgage, deed of trust or similar security instrument and the Lease is
subordinate to such encumbrance or the beneficiary thereof requires this
Lease and Tenant's rights and interest in this Lease to be subordinate to
such encumbrance or lien, Landlord will provide to Tenant a subordination,
nondisturbance and_attornment agreement from such beneficiary or lien-holder
in form reasonably acceptable to Landlord, the subject beneficiary and Tenant.
18. RIGHT OF ENTRY: Tenant grants Landlord or its agents the right to enter
the Premises at all reasonable times with forty-eight (48) hours prior
written notice, if possible, for purposes of inspection, exhibition, posting
of notices, repair or alteration. At Landlord's option, Landlord shall at
all times have and retain a key with which to unlock all the doors in, upon
and about the Premises, excluding Tenant's vaults and safes. It is further
agreed that Landlord shall have the right to use any and all means Landlord
deems necessary to enter the Premises in an emergency. Landlord shall also
have the right to,place "for rent" and/or "for sale" signs on the outside of
the Premises during the last twelve (12) months of the lease term. Tenant
hereby waives any claim from damages or for any injury or inconvenience to or
interference with Tenant's business, or any other loss occasioned thereby
except for any claim for any of the foregoing arising out of the sole gross
negligence or willful misconduct of Landlord or its authorized
representatives.
19. ESTOPPEL CERTIFICATE: Landlord and Tenant shall execute (and
acknowledge if required by any lender, ground lessor, or Other third party)
and deliver to the other party, within not less than ten (10) days after
Landlord or Tenant, as applicable, provides such to the other party, a
statement in writing certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification),
the
16
<PAGE>
date to which the Rent and other charges are paid in advance, if any,
acknowledging that there are not, to such party's knowledge, any uncured
defaults on the part of the other party hereunder or specifying such defaults
as are claimed, and such other matters as Landlord or Tenant, as applicable,
may reasonably require. Any such statement may be conclusively relied upon
by the party requesting such statement and any prospective purchaser or
encumbrancer of the Premises or other third party. Landlord or Tenant's, as
applicable, failure to deliver such statement within such time shall be
conclusive upon the party which failed to deliver the certificate that (a)
this Lease is in full force and effect, without modification except as may be
represented by such party; (b) there are no uncured defaults in the other
party's performance; and (c) not more than one month's Rent has been paid in
advance. Failure by Tenant to so deliver such certified estoppel certificate
shall be a default of the provisions of this Lease. Tenant shall indemnify
Landlord from and against any loss, cost, damage or expense, arising
directly, from any failure of Tenant to execute or deliver to Landlord any
such certified estoppel certificate, together with any and all Enforcement
Expenses.
20. TENANT'S DEFAULT: The occurrence of any one or more of the following
events shall, at Landlord's option, constitute a default and breach of this
Lease by Tenant:
20.1 The vacation or abandonment of the Premises by Tenant for a
period of ten (10) consecutive days in combination with Tenant's failure to
pay Rent or any other sum due to Landlord, or the vacation of the Premises by
Tenant which would cause any insurance policy to be invalidated or otherwise
lapse. Tenant agrees to notice and service of notice as provided for in this
Lease and waives any right to any other or further notice or service of
notice which Tenant. may have under any statute or law now or hereafter in
effect;
20.2 The failure by Tenant to make any payment of Rent, Additional
Rent or any other payment required hereunder within five (5) days after the
delivery by Landlord of written notice that such payment is past due. Tenant
agrees that such written notice by Landlord shall serve as the statutorily
required notice under the Law (including without limitation, any unlawful
detainer statutes), and Tenant further agrees to notice and service of notice
as provided for in this Lease and waives any right to any other or further
notice or service of notice which Tenant may have under any statute or law
now or hereafter in effect;
20.3 The failure by Tenant to observe, perform or comply with any of
the conditions, covenants or provisions of this Lease (except failure to make
any payment of Rent and/or Additional Rent) and such failure is not cured
within the time period required under the provisions of this Lease. If such
failure is susceptible of cure but cannot reasonably be cured within the
aforementioned time period (if any), as determined solely but reasonably by
Landlord, Tenant shall promptly commence the cure of such failure and
thereafter diligently prosecute such cure to completion within the time
period specified by Landlord in any written notice regarding such failure as
may be delivered to Tenant by Landlord. In no event or circumstance shall
Tenant have more than fifteen (15) days to complete any such cure, unless
otherwise expressly agreed to in writing by Landlord (in Landlord's sole
discretion), or the nature of such default shall require more than fifteen
(15) days to cure;
20.4 The making of a general assignment by Tenant for the benefit of
creditors, the filing of a voluntary petition by Tenant or the filing of an
involuntary petition by any of Tenant's creditors seeking the rehabilitation,
liquidation, or reorganization of Tenant under any law relating to
bankruptcy, insolvency or other relief of debtors and, in the case of an
involuntary action, the failure to remove or discharge the same within sixty
(60) days of such filing, the appointment of a receiver or other custodian to
take possession of substantially all of Tenant's assets or this leasehold,
Tenant's insolvency or inability to pay Tenant's debts or failure generally
to pay Tenant's debts when due, any court entering a decree or order
directing the winding up or liquidation of Tenant or of substantially all of
Tenant's assets, Tenant taking any action toward the dissolution or winding
up of Tenant's affairs, the cessation or suspension of Tenant's use of the
Premises, or the attachment, execution or other judicial seizure of
substantially all of Tenant's assets or this leasehold (or any involuntary
action against Tenant, Tenant shall have sixty (60) days to discharge such
action);
20.5 Tenant's use or storage of Hazardous Materials in, on or about
the Premises, the Building, the Lot and/or the Park other than as expressly
permitted by the provisions of Section 29 below;
20.6 The making of any material misrepresentation or omission by
Tenant in any materials delivered by or on behalf of Tenant to Landlord
pursuant to this Lease; or
21. REMEDIES FOR TENANT'S DEFAULT:
21.1 LANDLORD'S RIGHTS: In the event of Tenant's default or breach of
the Lease, which default or breach is not cured within the applicable cure
period, Landlord may terminate Tenant's right to possession of the Premises
by any lawful means in which case upon delivery of written notice by Landlord
this Lease shall terminate on the date specified by Landlord in such notice
and Tenant shall immediately surrender possession of the Premises to
Landlord. In addition, the Landlord shall have the immediate right of
re-entry whether or not this Lease is terminated, and if this right of
re-entry is exercised following abandonment of the Premises by Tenant,
Landlord may consider any personal property belonging to Tenant and left on
the Premises to also have been abandoned. No re-entry or taking possession
of the Premises by Landlord pursuant to this Section 21 shall be construed as
an election to terminate this Lease unless a written notice of such intention
is given to Tenant. If Landlord relets the Premises or any portion thereof,
(i) Tenant shall be liable immediately to Landlord for all reasonable costs
Landlord incurs in reletting the Premises or any part thereof, including,
without limitation, broker's commissions, expenses of cleaning, and repairing
the Premises and other similar costs (collectively, the "Reletting Costs"),
and (ii) the rent received by Landlord from such reletting shall be applied
to the payment of, first, any indebtedness from Tenant to Landlord other than
Base Rent, Operating
17
<PAGE>
Expenses, Tax Expenses, Common Area Utility Costs, and Utility Expenses;
second, all reasonable costs including maintenance, incurred by Landlord in
reletting; and, third, Base Rent, Operating Expenses, Tax Expenses, Common
Area Utility Costs, Utility Expenses, and all other sums due under this
Lease. Any and all of the Reletting Costs shall be fully chargeable to
Tenant and shall not be prorated or otherwise amortized in relation to any
new lease for the Premises or any portion thereof. After deducting the
payments referred to above, any sum remaining from the rental Landlord
receives from reletting shall be held by Landlord and applied in payment of
future Rent as Rent becomes due under this Lease. In no event shall Tenant
be entitled to any excess rent received by Landlord. Reletting may be for a
period shorter or longer than the remaining term of this Lease. No act by
Landlord other than giving written notice to Tenant shall terminate this
Lease. Acts of maintenance, efforts to relet the Premises or the appointment
of a receiver on Landlord's initiative to protect Landlord's interest under
this Lease shall not constitute a termination of Tenant's right to
possession. So long as this Lease is not terminated, Landlord shall have the
right to remedy any default of Tenant, to maintain or repair the Premises, to
cause a receiver to be appointed to administer the Premises and new or
existing subleases and to add to the Rent payable hereunder all of Landlord's
reasonable costs in so doing, with interest at the maximum rate permitted by
law from the date of such expenditure.
21.2 DAMAGES RECOVERABLE: If Tenant breaches this Lease and abandons
the Premises before the end of the Term, or if Tenant's right to possession
is terminated by Landlord because of a breach or default of the Lease, then
in either such case, Landlord may recover from Tenant all damages suffered by
Landlord as a result of Tenant's failure to perform its obligations
hereunder, including, but not limited to, the cost of any unamortized Tenant
Improvements constructed by or on behalf of Tenant pursuant to Exhibit B
hereto, the portion of any broker's or leasing agent's commission incurred
with respect to the leasing of the Premises to Tenant for the balance of the
Term of the Lease remaining after the date on which Tenant is in default of
its obligations hereunder, and all Reletting Costs, and the worth at the time
of the award (computed in accordance with paragraph (3) of Subdivision (a) of
Section 1951.2 of the California Civil Code) of the amount by which the Rent
then unpaid hereunder for the balance of the Lease Term exceeds the amount of
such loss of Rent for the same period which Tenant proves could be reasonably
avoided by Landlord and in such case, Landlord prior to the award, may relet
the Premises for the purpose of mitigating damages suffered by Landlord
because of Tenant's failure to perform its obligations hereunder; provided,
however, that even though Tenant has abandoned the Premises following such
breach, this Lease shall nevertheless continue in full force and effect for
as long as Landlord does not terminate Tenant's right of possession, and
until such termination, Landlord shall have the remedy described in Section
1951.4 of the California Civil Code (Landlord may continue this Lease in
effect after Tenant's breach and abandonment and recover Rent as it becomes
due, if Tenant has the right to sublet or assign, subject only to reasonable
limitations) and may enforce all its rights and remedies under this Lease,
including the right to recover the Rent from Tenant as it becomes due
hereunder. The "worth at the time of the award" within the meaning of
Subparagraphs (a)(1) and (a)(2) of Section 1951.2 of the California Civil
Code shall be computed by allowing interest at the rate of ten percent (10%)
per annum. Tenant waives redemption or relief from forfeiture under
California Code of Civil Procedure Sections 1174 and 1179, or under any other
present or future law, in the event Tenant is evicted or Landlord takes
possession of the Premises by reason of any default of Tenant hereunder.
21.3 RIGHTS AND REMEDIES CUMULATIVE: The foregoing rights and remedies
of Landlord are not exclusive; they are cumulative in addition to any rights
and remedies now or hereafter existing at law, in equity by statute or
otherwise, or to any equitable remedies Landlord may have, and to any
remedies Landlord may have under bankruptcy laws or laws affecting creditor's
rights generally. In addition to all remedies set forth above, if Tenant
defaults or otherwise breaches this Lease, any and all Base Rent waived by
Landlord under Section 3 above, prorated for the remaining portion of the
Lease shall be immediately due and payable to Landlord and all options
granted to Tenant hereunder shall automatically terminate, unless otherwise
expressly agreed to in writing by Landlord.
21.4 WAIVER OF A DEFAULT: The waiver by Landlord or Tenant of any
default or breach of any provision of this Lease shall not be deemed or
construed a waiver of any other breach or default by Tenant or Landlord
respectively, hereunder or of any subsequent breach or default of this Lease,
except for the default specified in the waiver.
22. HOLDING OVER: If Tenant holds possession of the Premises after the
expiration of the Term of this Lease with Landlord's consent, Tenant shall
become a tenant from month-to-month upon the terms and provisions of this
Lease, provided the monthly Base Rent during such hold over period shall be
150% of the Base Rent due on the last month of the Lease Term, payable in
advance on or before the first day of each month. Acceptance by Landlord of
the monthly Base Rent without the additional .fifty percent (50%) increase of
Base Rent shall not be deemed or construed as a waiver by Landlord of any of
its rights to collect the increased amount of the Base Rent as provided
herein at any time. Such month-to-month tenancy shall not constitute a
renewal or extension for any further term. All options, if any, granted
under the terms of this Lease shall be deemed automatically terminated and be
of no force or effect during said month-to-month tenancy. Tenant shall
continue in possession until such tenancy shall be terminated by either
Landlord or Tenant giving written notice of termination to the other party at
least thirty (30) days prior to the effective date of termination. This
paragraph shall not be construed as Landlord's permission for Tenant to hold
over. Acceptance of Base Rent by Landlord following expiration or termination
of this Lease shall not constitute a renewal of this Lease.
23. LANDLORD'S DEFAULT: Landlord shall not be deemed in breach or default
of this Lease unless Landlord fails within a reasonable time to perform an
obligation required to be performed by Landlord hereunder. For purposes of
this provision, a reasonable time shall not be less than thirty (30) days
after receipt by Landlord of written notice specifying the nature of the
obligation Landlord has not performed; provided, however, that
18
<PAGE>
if the nature of Landlord's obligation is such that more than thirty (30)
days, after receipt of written notice, is reasonably necessary for its
performance, then Landlord shall not be in breach or default of this Lease if
performance of such obligation is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
24. PARKING: Tenant shall have a license to use the number of undesignated
and nonexclusive parking spaces set forth on Page 1. Landlord shall exercise
reasonable efforts to insure that such spaces are available to Tenant for its
use, but Landlord shall not be required to enforce Tenant's right to use the
same. So long as Tenant does not disrupt other tenants' conduct of their
business within the Park and Tenant does not otherwise breach the quiet
enjoyment of such other tenants. Tenant may take such reasonable measures to
enforce its license to use such undesignated parking spaces.
25. SALE OF PREMISES: In the event of any sale of the Premises by Landlord
or the cessation otherwise of Landlord's interest therein, Landlord shall be
and is hereby entirely released from any and all of its obligations to
perform or further perform under this Lease and from all liability hereunder
as of the date of such sale except for obligations of Landlord under this
Lease arising prior to any such sale or transfer or the Premises;
and.the.purchaser, at such sale or any subsequent sale of the Premises shall
be deemed, without any further agreement between the parties or their
successors in interest or between the parties and any such purchaser, to have
assumed and agreed to carry out any and all of the covenants and obligations
of the Landlord under this Lease. For purposes of this Section 25, the term
"Landlord" means only the owner and/or agent of the owner as such parties
exist as of the date on which Tenant executes this Lease. A ground lease or
similar long term lease by Landlord of the entire Building, of which the
Premises are a part, shall be deemed a sale within the meaning of this
Section 25. Tenant agrees to attorn to such new owner provided such new
owner does not disturb Tenant's use, occupancy or quiet enjoyment of the
Premises so long as Tenant is not in default of any of the provisions of this
Lease.
26. WAIVER: No delay or omission in the exercise of any right or remedy of
either party hereto on any default by the other party shall impair such a
right or remedy or be construed as a waiver. The subsequent acceptance of
Rent by Landlord after breach by Tenant of any covenant or term of this Lease
shall not be deemed a waiver of such breach, other than a waiver of timely
payment for the particular Rent payment involved, and shall not prevent
Landlord from maintaining an unlawful detainer or other action based on such
breach. No payment by Tenant or receipt by Landlord of a lesser amount than
the monthly Rent and other sums due hereunder shall be deemed to be other
than on account of the earliest Rent or other sums due, nor shall any
endorsement or statement on any check or accompanying any check or payment be
deemed an accord and satisfaction; and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
Rent or other sum or pursue any other remedy provided in this Lease. No
failure, partial exercise or delay on the part of the either party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
27. CASUALTY DAMAGE:
27.1 CASUALTY. If the Premises or any part thereof (excluding any
alterations or improvements installed by or for the benefit of Tenant) shall
be damaged or destroyed by fire or other casualty, Tenant shall give
immediate written notice thereof to Landlord. Within thirty (30) days after
receipt by Landlord of such notice, Landlord shall notify Tenant, in writing,
whether the necessary repairs can reasonably be made: (a) within one hundred
eighty (180) days; or (b) in more than one hundred eighty (180) days, from
the date of destruction.
27.1.1 MINOR INSURED DAMAGE. If the Premises are damaged only to
such extent that repairs, rebuilding and/or restoration can be reasonably
completed within one hundred eighty (180) days from the date of destruction,
this Lease shall not terminate and, provided that insurance proceeds are
available to fully repair the damage, Landlord shall repair the Premises to
substantially the same condition that existed prior to the occurrence of such
casualty, except Landlord shall not be required to rebuild, repair, or
replace any alterations or improvements installed by or for the benefit of
Tenant or any part of Tenant's furniture, furnishings or fixtures and
equipment removable by Tenant. The Rent payable hereunder, from the date of
destruction until the Premises are fully restored, shall be abated
proportionately to the extent that Tenant's use of the Premises is impaired.
27.1.2 MAJOR INSURED DAMAGE. If the Premises are damaged to such
extent that repairs, rebuilding and/or restoration cannot be reasonably
completed within one hundred eighty (180) days, then either Landlord or
Tenant may terminate this Lease by giving written notice within twenty (20)
days after notice from Landlord regarding the time period of repair. If
either party notifies the other of its intention to so terminate the Lease,
then this Lease shall terminate and the Rent shall be abated from the date
Tenant vacates the Premises. If neither party elects to terminate this
Lease, Landlord shall promptly commence and diligently prosecute to
completion the repairs to the Premises, provided insurance proceeds are
available '_o fully repair the damage (except that Landlord shall not be
required to rebuild, repair, or replace any alterations or improvements
installed by or for the benefit of Tenant or any part of Tenant's furniture,
furnishings or fixtures and equipment removable by Tenant). During the time
when Landlord is prosecuting such repairs to completion, the Rent payable
hereunder, from the date of destruction until the Premises are fully
restored, shall be abated proportionately to the extent that Tenant's use of
the Premises is impaired.
27.1.3 DAMAGE NEAR END OF TERM. Notwithstanding anything to the
contrary contained in this Lease except for the provisions of Section 27.2
below, if the Premises are damaged or destroyed during the last year of then
applicable term of this Lease, Landlord or Tenant may, at its option, cancel
and terminate
19
<PAGE>
this Lease by giving written notice to the other party of its election to do
so within thirty (30) days after receipt by Landlord of notice from Tenant of
the occurrence of such casualty. If Landlord or Tenant so elects to
terminate this Lease, all rights of Tenant hereunder shall cease and
terminate ten (10) days after the other party's receipt of such notice.
27.2 TENANT'S OR TENANT'S REPRESENTATIVE'S FAULT. If any portion of
the Premises is damaged or destroyed due to the fault, negligence (active or
passive) or breach of this Lease by Tenant or any of Tenant's
Representatives, Rent shall not be diminished during the repair of such
damage and Tenant shall be liable to Landlord for the cost of the repair
caused thereby to the extent such cost is not covered by Tenant's insurance
proceeds.
27.3 UNINSURED CASUALTY. Tenant shall be responsible for and shall
pay to Landlord, as Additional Rent, any of Tenant's deductibles amount under
the property insurance for the Premises and/or the Building. If any portion
of the Premises is damaged and is not fully covered by insurance proceeds
received by Landlord (and Tenant elects not to pay any such difference) or if
the holder of any indebtedness secured by the Premises requires that the
insurance proceeds be applied to such indebtedness, then Landlord shall have
the right to terminate this Lease by delivering written notice of termination
to the other party within thirty (30) days after the date of notice to Tenant
of any such event, whereupon all rights and obligations shall cease and
terminate hereunder, except for those obligations expressly provided for in
this Lease to survive such termination of the Lease.
27.4 TENANT'S WAIVER. Landlord shall not be liable for any
inconvenience or annoyance to Tenant, injury to the business of Tenant, loss
of use of any part of the Premises by Tenant or loss of Tenant's personal
property', resulting in any way from such damage, destruction or the repair
thereof, except that, Rent shall abate in proportion to the damage to the
Premises as specifically provided above in this Section 27. With respect to
any damage or destruction which Landlord is obligated to repair or may elect
to repair, Tenant hereby waives all rights to terminate this Lease or offset
any amounts against Rent pursuant to rights accorded Tenant by any law
currently existing or hereafter enacted, including but not limited to, all
rights pursuant to the provisions of Sections 1932(2.), 1933(4.), 1941 and
1942 of the California Civil Code, as the same may be amended or supplemented
from time to time."
28. CONDEMNATION: If the Premises or twenty-five percent (25%) or more of
Tenant's portion of parking spaces is condemned by eminent domain, inversely
condemned or sold in lieu of condemnation for any public or quasi-public use
or purpose ("Condemned"), then Tenant or Landlord may terminate this Lease as
of the date when physical possession of the Premises is taken and title vests
in such condemning authority, and Rent shall be adjusted to the date of
termination. Tenant shall not because of such condemnation assert any claim
against Landlord or the condemning authority for any compensation because of
such condemnation, and Landlord shall be entitled to receive the entire
amount of any award without deduction for any estate of interest or other
interest of Tenant except for any award for Tenant's relocation expenses,
loss of personal property and fixtures installed by Tenant or unamortized
tenant improvements paid by Tenant. If a substantial portion of the
Premises, Building or the Lot is so Condemned, Landlord at its option may
terminate this Lease. If Landlord does not elect to terminate this Lease,
Landlord shall, if necessary, promptly proceed to restore the Premises or the
Building to substantially its same condition prior to such partial
condemnation, allowing for the reasonable effects of such partial
condemnation, and a proportionate allowance shall be made to Tenant, as
reasonably determined by Landlord, for the Rent corresponding to the time
during which, and to the part of the Premises of which, Tenant is deprived on
account of such partial condemnation and restoration. Landlord shall not be
required to spend funds for restoration in excess of the amount received by
Landlord as compensation awarded.
29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS:
29.1 HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE: Prior to executing
this Lease, Tenant has completed, executed and delivered to Landlord Tenant's
initial Hazardous Materials Disclosure Certificate (the "Initial HazMat
Certificate"), a copy of which is attached hereto as Exhibit G and
incorporated herein by this reference. Tenant covenants, represents and
warrants to Landlord that the information on the Initial HazMat Certificate
is true and correct and accurately describes the use(s) of Hazardous
Materials which will be made and/or used on the Premises by Tenant. Tenant
shall commencing with the date which is one year from the Commencement Date
and continuing every year thereafter, complete, execute, and deliver to
Landlord, a Hazardous Materials Disclosure Certificate ("the "HazMat
Certificate") describing Tenant's present use of Hazardous Materials on the
Premises, and any other reasonably necessary documents as requested by
Landlord. The HazMat Certificate required hereunder shall be in substantially
the form as that which is attached hereto as Exhibit E.
29.2 DEFINITION OF HAZARDOUS MATERIALS: As used in this Lease, the
term Hazardous Materials shall mean and include (a) any hazardous or toxic
wastes, materials or substances, and other pollutants by products, gasoline,
diesel fuel, crude oil or any fraction thereof; (c) asbestos and asbestos
containing material, in any form, whether friable or non-friable; (d)
polychlorinated biphenyls; (e) radioactive materials; (f) lead and
lead-containing materials; (g) any other material, waste or substance
displaying toxic, reactive, ignitable or corrosive characteristics, as all
such terms are used in their broadest sense, and are defined or become
defined by any Environmental Law (defined below); or (h) any materials which
cause or threatens to cause a nuisance upon or waste to any portion of the
Premises, the Building, the Lot, tile Park or any surrounding property; or
poses or threatens to pose a hazard to the health and safety of persons on
the Premises or any surrounding property. Hazardous Materials shall not
include typical household cleaning products or typical office supplies.
20
<PAGE>
29.3 PROHIBITION; ENVIRONMENTAL LAWS: Tenant shall not be entitled to
use nor store any Hazardous Materials on, in, or about the Premises, the
Building, the Lot and the Park, or any portion of tile foregoing, without, in
each instance, obtaining Landlord's prior written consent thereto. If
Landlord consents to any such usage or storage, then Tenant shall be
permitted to use and/or store only those Hazardous Materials that are
necessary for Tenant's business and to the extent disclosed in the HazMat
Certificate and as expressly approved by Landlord in writing, provided that
such usage and storage is only to the extent of the quantities of Hazardous
Materials as specified in the then applicable HazMat Certificate as expressly
approved by Landlord and provided further that such usage and storage is in
full compliance with any and all local, state and federal environmental,
health and/or safety-related laws, statutes, orders, standards, courts'
decisions, ordinances, rules and regulations (as interpreted by judicial and
administrative decisions), decrees, directives, guidelines, permits or permit
conditions, currently existing and as 'amended, enacted, issued or adopted in
the future which are or become applicable to Tenant or all or any portion of
the Premises (collectively, the "Environmental Laws"). Tenant agrees that
any changes to the type and/or quantities of Hazardous Materials specified in
the most recent HazMat Certificate may be implemented only with the prior
written consent of Landlord, which consent may be given or withheld in
Landlord's sole but reasonable discretion. Tenant shall not be entitled nor
permitted to install any tanks under, on or about the Premises for the
storage of Hazardous Materials without the express written consent of
Landlord, which may be given or withheld in Landlord's sole but reasonable
discretion. Landlord shall have the right at all times during the Term of
this Lease to (i) with forty-eight (48) hours prior notice, if possible,
inspect the Premises, (ii) conduct tests and investigations to determine
whether Tenant is in compliance with the provisions of this Section 29, and
(iii) request lists of all Hazardous Materials used, stored or otherwise
located on, under or about the Premises, the Common Areas and/or the parking
lots (to the extent the Common Areas and/or the parking lots are not
considered part of the Premises). The cost of all such inspections, tests
and investigations shall be borne solely by Tenant, if Landlord reasonably
believes they are necessary. The aforementioned rights granted herein to
Landlord and its representatives shall not create (a) a duty on Landlord's
part to inspect, test, investigate, monitor or otherwise observe the Premises
or the activities of Tenant and Tenant's Representatives with respect to
Hazardous Materials, including without limitation, Tenant's operation, use
and any remediation related thereto, or (b) liability on the part of Landlord
and its representatives for Tenant's use, storage, disposal or remediation of
Hazardous Materials, it being understood that Tenant shall be solely
responsible for all liability in connection therewith.
29.4 TENANT'S ENVIRONMENTAL OBLIGATIONS: Tenant shall give to Landlord
immediate verbal and follow-up written notice of any spills, releases,
discharges, disposals, emissions, migrations, removals or transportation of
Hazardous Materials on, under or about the Premises, or in any Common Areas
or parking lots (to the extent such areas are not considered part of the
Premises). Tenant, at its sole cost and expense, covenants and warrants to
promptly investigate, clean up, remove, restore and otherwise remediate
(including, without limitation, preparation of any required feasibility
studies or reports and the performance of any and all closures) any spill,
release, discharge, disposal, emission, migration or transportation of
Hazardous Materials arising from or related to the intentional or negligent
acts or omissions of Tenant or Tenant's Representatives such that the
affected portions of the Park and any adjacent property are returned to the
condition existing prior to the appearance of such Hazardous Materials. Any
such investigation, clean up, removal, restoration and other remediation
shall only be performed after Tenant has obtained Landlord's prior written
consent, which consent shall not be unreasonably withheld so long as such
actions would not potentially have a material adverse long-term or short-term
effect on the Premises, the Building, the Lot or the Park, or any portion of
any of the foregoing. Notwithstanding the foregoing, Tenant shall be
entitled to respond immediately to an emergency without first obtaining
Landlord's prior written consent. Tenant, at its sole cost and expense,
shall conduct and perform, or cause to be conducted and performed, in
connection with any of tile foregoing, all closures as required by any
Environmental Laws or any agencies or other governmental authorities having
jurisdiction thereof. If Tenant fails to so promptly investigate, clean up,
remove, restore, provide closure or otherwise so remediate, Landlord may, but
without obligation to do so, take any and all steps necessary to rectify the
same and Tenant shall promptly reimburse Landlord, upon demand, for all
reasonable costs and expenses to Landlord of performing investigation, clean
up, removal, restoration, closure and remediation work. All such work
undertaken by Tenant, as required herein, shall be performed in such a manner
so as to enable Landlord to make full economic use of the Premises, the
Building, the Lot and the Park after the satisfactory completion of such work.
29.5 ENVIRONMENTAL INDEMNITY: In addition to Tenant's obligations as
set forth hereinabove, Tenant and Tenant's officers and directors agree to,
and shall, protect, indemnify, defend (with counsel reasonably acceptable to
Landlord) and hold Landlord and Landlord's lenders, partners, property
management company (if other than Landlord), agents, directors, officers,
employees, representatives, contractors, shareholders, successors and assigns
and each of their respective partners, directors, employees, representatives,
agents, contractors, shareholders, successors and assigns harmless from and
against any and all claims, judgments, damages, penalties, fines,
liabilities, losses (including, without limitation, diminution in value of
the Premises, the Building, the Lot, the Park, or any portion of any of the
foregoing, damages for the loss of or restriction on the use of rentable or
usable space, and from any adverse impact of Landlord's marketing of any
space within the Building and/or Park), suits, administrative proceedings and
costs (including, but not limited to, reasonable attorneys' and consultant
fees and court costs) arising at any time during or after the Term of this
Lease in connection with or related to, directly or indirectly, the use,
presence, transportation, storage, disposal, migration, removal, spill,
release or discharge of Hazardous Materials on, in or about the Premises, or
in any Common Areas or parking lots (to the extent such areas are not
considered part of the Premises) as a result (directly or indirectly) of the
intentional or negligent acts or omissions of Tenant or Tenant's
Representatives. Neither the written consent of Landlord to the presence,
use or storage of Hazardous Materials in, on, under or about any portion of
the Premises, the Building, the Lot and the Park, nor the strict compliance
by Tenant with all Environmental Laws shall excuse Tenant and Tenant's
officers and directors
21
<PAGE>
from its obligations of indemnification pursuant hereto. To the extent
Landlord is strictly liable under any Environmental Laws, Tenant's
obligations to Landlord under this Section 29 and the indemnity contained
herein shall likewise be without regard to fault on Tenant's part with
respect to the violation of any Environmental Law which results in liability
to any of the aforementioned indemnitees.
29.6 SURVIVAL: Tenant's obligations and liabilities pursuant to the
provisions of this Section 29 shall survive the expiration or earlier
termination of this Lease. If it is reasonably determined by Landlord that
the condition of all or any portion of the Premises, the Building, the Lot
and/or the Park is not in compliance with the provisions of this Lease with
respect to Hazardous Materials, including without limitation all
Environmental Laws at the expiration or earlier termination of this Lease,
then at Landlord's sole option, Landlord may require Tenant to hold over
possession of the Premises until Tenant can surrender the Premises to
Landlord in the condition in which the Premises existed as of the
Commencement Date and prior to the appearance of such Hazardous Materials
except for reasonable wear and tear,-including without limitation, the
conduct or performance of any closures as required by any Environmental Laws.
The burden of proof hereunder shall be upon Tenant. For purposes hereof,
the term "reasonable wear and tear" shall not include any deterioration in
the condition or diminution of the value of any portion of the Premises, the
Building, the Lot and/or the Park in any manner whatsoever related to
directly, or indirectly, Hazardous Materials. Any such holdover by Tenant
will be with Landlord's consent, will not be terminable by Tenant in any
event or circumstance and will otherwise be subject to the provisions of
Section 22 of this Lease.
29.7 DISCLOSURE: Landlord has provided to Tenant a copy of that
certain report prepared by ACT Environmental Inc., regarding the results of a
preliminary site assessment at the Lot, dated November 27, 1996 (the
"Environmental Report"). Tenant hereby acknowledges and agrees that Landlord
has delivered to Tenant a copy of the Environmental Report prior to Tenant
entering into this Lease. Landlord hereby represents to Tenant that as of the
Lease Date and based solely upon the Environmental Report, Landlord does not
have actual (not constructive) knowledge of the presence of Hazardous
Materials in, on or about the Premises, the Building, the Lot or the Park.
Landlord has received no written notice, claim, warning, enforcement,
cleanup, removal or other regulatory or judicial action by any governmental
agency, court or other person with respect to the Premises that relates to
Hazardous Materials.
30. FINANCIAL STATEMENTS: Tenant, for the reliance of Landlord, any lender
holding or anticipated to acquire a lien upon the Premises, the Building or
the Park or any portion thereof, or any prospective purchaser of the Building
or the Park or any portion thereof, within ten (10) days after Landlord's
request therefor, but not more often than once annually so long as Tenant is
not in default of this Lease, shall deliver to Landlord the then current
audited financial statements of Tenant (including interim periods following
the end of the last fiscal year for which annual statements are available)
which statements shall be prepared or compiled by a certified public
accountant and shall present fairly the financial condition of Tenant at such
dates and the result of its operations and changes in its financial positions
for the periods ended on such dates. If an audited financial statement has
not been prepared, Tenant shall provide Landlord with an unaudited financial
statement and/or such other information, the type and form of which are
acceptable to Landlord in Landlord's reasonable discretion, which reflects
the financial condition of Tenant. If Landlord so requests, but not more
often than once annually Tenant shall deliver to Landlord an opinion of a
certified public accountant, including a balance sheet and profit and loss
statement for the most recent prior year, all prepared in accordance with
generally accepted accounting principles consistently applied. Any and all
options granted to Tenant hereunder shall be subject to and conditioned upon
Landlord's reasonable approval of Tenant's financial condition at the time of
Tenant's exercise of any such-option.
31. GENERAL PROVISIONS:
31.1 TIME. Time is of the essence in this Lease and with respect to
each and all of its provisions in which performance is a factor.
31.2 SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties
hereto.
31.3 RECORDATION. Tenant shall not record this Lease or a short form
memorandum hereof without the prior written consent of the Landlord, which
consent shall not be unreasonably withheld or delayed.
31.4 LANDLORD'S PERSONAL LIABILITY. The liability of Landlord (which,
for purposes of this Lease, shall include Landlord and the owner of the
Building if other than Landlord) to Tenant for any default by Landlord under
the terms of this Lease shall be limited to the actual interest of Landlord
arid its present or future panners in the Premises or the Building and/or the
Park, and Tenant agrees to look solely to the Premises for satisfaction of
any liability and shall not look to other assets of Landlord nor seek any
recourse against the assets of the individual partners, directors, officers,
shareholders, agents or employees of Landlord; it being intended that
Landlord and the individual partners, directors, officers, shareholders,
agents or employees of Landlord shall not be personally liable in any manner
whatsoever for any judgment or deficiency. The liability of Landlord under
this Lease is limited to its actual period of ownership of title to the
Building, and Landlord shall be automatically released from further
performance under this Lease and from all further liabilities and expenses
hereunder upon transfer of Landlord's interest in the Premises or the
Building, except for liabilities and expenses arising prior to such transfer.
22
<PAGE>
31.5 SEPARABILITY. Any provisions of this Lease which shall prove to
be invalid, void or illegal shall in no way affect, impair or invalidate any
other provisions hereof and such other provision shall remain in full force
and effect.
31.6 CHOICE OF LAW. This Lease shall be governed by the laws of the
State of California.
31.7 ATTORNEYS' FEES. In the event any dispute between the parties
results in litigation or other proceeding, the prevailing party shall be
reimbursed by the party not prevailing for all reasonable costs and expenses,
including, without limitation, reasonable attorneys' and experts' fees and
costs incurred by the prevailing party in connection with such litigation or
other proceeding, and any appeal thereof. Such costs, expenses and fees
shall be included in and made a part of the judgment recovered by the
prevailing party, if any.
31.8 ENTIRE AGREEMENT. This Lease supersedes any prior agreements,
representations, negotiations or correspondence between the parties, and
contains the entire agreement of the parties on matters covered. No other
agreement, statement or promise made by any party, that is not in writing and
signed by all parties to this Lease, shall be binding.
31.9 WARRANTY OF AUTHORITY. On the date that Tenant executes this
Lease, Tenant shall deliver to Landlord an original certificate of status for
Tenant issued by the California Secretary of State or statement of
partnership for Tenant recorded in the county in which the Premises are
located, as applicable, and such other documents as Landlord may reasonably
request with regard to the lawful existence of Tenant. Each person executing
this Lease on behalf of a party represents and warrants that (1) such person
is duly and validly authorized to do so on behalf of the entity it purports
to so bind, and (2) if such party is a partnership, corporation or trustee,
that such partnership, corporation or trustee has full right and authority to
enter into this Lease and perform all of its obligations hereunder. In
addition to any other remedies available to Landlord under this Lease, if
there is any breach of the foregoing warranty, the person(s) executing this
Lease on behalf of Tenant shall be personally liable for all of Tenant's
obligations under this Lease, including, but not limited to, the payment by
such person(s) to Landlord of any and all losses, liabilities, costs,
expenses and damages incurred by Landlord hereunder.
31.10 NOTICES. Any and all notices and demands required or permitted
to be given hereunder to Landlord shall be in writing and shall be sent: (a)
by United States mail, certified and postage prepaid; or (b) by personal
delivery; or (c) by overnight courier, addressed to Landlord at 101 Lincoln
Centre Drive, Fourth Floor, Foster City, California 94404-1167, facsimile
#(415) 571-2211. Any and all notices and demands required or permitted to be
given hereunder to Tenant shall be in writing and shall be sent: (i) by
United States mail, certified and postage prepaid; or (ii) by personal
delivery to any employee or agent of Tenant over-the age of eighteen (18)
years of age; or (iii) by overnight courier, all of which shall be addressed
to Tenant at the Premises; or (iv) by facsimile at the facsimile number at
the Premises, if any, as provided by Tenant on Page 1 of this Lease or
otherwise provided to Landlord, with a hardcopy to follow by another means
listed above, deposited with the appropriate carrier within one business day
of forwarding by facsimile. Notice and/or demand shall be deemed given upon
the earlier of actual receipt or the third day following deposit in the
United States mail. Notice and/or demand by facsimile shall be complete upon
transmission over the telephone line. Any notice or requirement of service
required by any statute or law now or hereafter in effect, including, but not
limited to, California Code of Civil Procedure Sections 1161, 1161.1, and
1162, is hereby waived by Tenant.
31.11 JOINT AND SEVERAL. If Tenant consists of more than one person or
entity, the obligations of all such persons or entities shall be joint and
several.
31.12 COVENANTS AND CONDITIONS. Each provision to be performed by
Tenant hereunder shall be deemed to be both a covenant and a condition.
31.13 WAIVER OF JURY TRIAL. The parties hereto shall and they hereby
do waive trial by jury in any action, proceeding or counterclaim brought by
either of the parties hereto against the other on any matters whatsoever
arising out of or in any way related to this Lease, the relationship of
Landlord and Tenant, Tenant's use or occupancy of the Premises, the Building
or the Park, and/or any claim of injury, loss or damage.
31.14 COUNTERCLAIMS. In the event Landlord commences any proceedings
for nonpayment of Rent, Additional Rent, or any other sums or amounts due
hereunder, Tenant shall not interpose any counterclaim of whatever nature or
description in any such proceedings, provided, however, nothing contained
herein shall be deemed or construed as a waiver of the Tenant's right to
assert such claims in any separate action brought by Tenant or the right to
offset the amount of any final judgment owed by Landlord to Tenant.
31.15 UNDERLINING. The use of underlining within the Lease is for
Landlord's reference purposes only and no other meaning or emphasis is
intended by this use, nor should any be inferred.
32. SIGNS: All signs and graphics of every kind visible in or from public
view or corridors or the exterior of the Premises shall be subject to
Landlord's prior written approval, which shall not be unreasonably withheld
or delayed, and shall be subject to any applicable governmental laws,
ordinances, and regulations and in compliance with Landlord's sign criteria
as same may exist from time to time or as set forth in Exhibit H hereto and
made a part hereof. Tenant shall remove all such signs and graphics prior to
the termination of this Lease. Such installations and removals shall be made
in a manner as to avoid damage or defacement of the Premises; and Tenant
shall repair any damage or defacement, including without limitation,
discoloration caused by such
23
<PAGE>
installation or removal. In the event that Tenant fails to remove such signs
and graphics as requested hereunder, Landlord shall have the right, at its
option, to deduct from the Security Deposit such sums as are reasonably
necessary to remove such signs, including, but not limited to, the costs and
expenses associated with any repairs necessitated by such removal.
Notwithstanding the foregoing, in no event shall any: (a) neon, flashing or
moving sign(s) or (b) sign(s) which shall interfere with the visibility of
any sign, awning, canopy, advertising matter, or decoration of any kind of
any other business or occupant of the Building or the Park be permitted
hereunder. Tenant further agrees to maintain any such sign, awning, canopy,
advertising matter, lettering, decoration or other thing as may be approved
in good condition and repair at all times.
33. MORTGAGEE PROTECTION: Upon any breach or default on the part of
Landlord, Tenant will give written notice by registered or certified mail to
any beneficiary of a deed of trust or mortgagee of a mortgage covering the
Premises who has provided Tenant with notice of their interest together with
an address for receiving notice, and shall offer such beneficiary or
mortgagee a reasonable opportunity to cure the default (which, in no event
shall be less than ninety (90) days), including time to obtain possession of
the Premises by power of sale or a judicial foreclosure, if such should prove
necessary to effect a cure. If such breach or default cannot be cured within
such time period, then such additional time as may be necessary will be given
to such beneficiary or mortgagee to effect such cure so long as such
beneficiary or mortgagee has commenced the cure within the original time
period and thereafter diligently pursues such cure to completion, in which
event this Lease shall not be terminated while such cure is being diligently
pursued. Tenant agrees that each lender to whom this Lease has been assigned
by Landlord is an express third party beneficiary hereof. Tenant shall not
make any prepayment of Rent more than one (1) month in advance without the
prior written consent of each such lender, except if Tenant is required to
make quarterly payments of Rent in advance pursuant to the provisions of
Section 8 above. Tenant waives the collection of any deposit from such
lender(s) or any purchaser at a foreclosure sale of such lender(s)' deed of
trust unless the lender(s) or such purchaser shall have actually received and
not refunded the deposit. Tenant agrees to make all payments under this
Lease to the lender with the most senior encumbrance upon receiving a
direction, in writing, to pay said amounts to such lender. Tenant shall
comply with such written direction to pay without determining whether an
event of default exists under such lender's loan to Landlord. Landlord
agrees that (i) Tenant may conclusively rely upon any written notice Tenant
receives from such beneficiary of any mortgage or deed of trust ("Lender"),
encumbering the Building and/or the land upon which the Building is situated,
notwithstanding any claim by Landlord contesting the validity of any term or
condition of such notice, including, but not limited to, any default claimed
by Lender and (ii) that Landlord shall not make any claim of any kind against
Tenant or Tenant's leasehold interest with respect to amounts paid to Lender
by Tenant or any acts performed by Tenant which are made or done in strict
accordance with such written notice.
34. QUITCLAIM: Upon any termination of this Lease, Tenant shall, at
Landlord's request, execute, have acknowledged and deliver to Landlord a
quitclaim deed of Tenant's interest in and to the Premises. If Tenant fails
to so deliver to Landlord such a quitclaim deed, Tenant hereby agrees that
Landlord shall have the full authority and right to record such a quitclaim
deed signed only by Landlord and such quitclaim deed shall be deemed
conclusive and binding upon Tenant.
35. MODIFICATIONS FOR LENDER: If, in connection with obtaining financing
for the Premises or any portion thereof, Landlord's lender shall request
reasonable modification(s) to this Lease as a condition to such financing,
Tenant shall not unreasonably withhold, delay or defer its consent thereto,
provided such modifications do not materially adversely affect Tenant's
rights hereunder or the use, occupancy or quiet enjoyment of Tenant hereunder.
36. WARRANTIES OF TENANT: Tenant hereby warrants and represents to
Landlord, for the express benefit of Landlord, that Tenant has undertaken a
complete and independent evaluation of the risks inherent in the execution of
this Lease and the operation of the Premises for the use permitted hereby,
and that, based upon said independent evaluation, Tenant has elected to enter
into this Lease and hereby assumes all risks with respect thereto. Tenant
hereby further warrants and represents to Landlord, for the express benefit
of Landlord, that in entering into this Lease, Tenant has not relied upon any
statement, fact, promise or representation (whether express or implied,
written or oral) not specifically set forth herein in writing and that any
statement, fact, promise or representation (whether express or implied,
written or oral) made at any time to Tenant, which is not expressly
incorporated herein in writing, is hereby waived by Tenant.
37. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT: As of the Commencement
Date the Premises and the Building are in compliance with the applicable
requirements of the City of Newark with respect to matters governed by the
ADA. Landlord and Tenant hereby agree and acknowledge that the Premises, the
Building and/or the Park may be subject to the requirements of the Americans
with Disabilities Act, a federal law codified at 42 U.S.C. 12101 et seq,
including, but not limited to Title III thereof, all regulations and
guidelines related thereto, together with any and all laws, rules,
regulations, ordinances, codes and statutes now or hereafter enacted by local
or state agencies having jurisdiction thereof, including all requirements of
Title 24 of the State of California, as the same may be in effect on the date
of this Lease and may be hereafter modified, amended or supplemented
(collectively, the "ADA"). Any Tenant Improvements to be constructed
hereunder shall be in compliance with the requirements of the ADA, and all
costs incurred for purposes of compliance therewith shall be a part of and
included in the costs of the Tenant Improvements. Tenant shall be solely
responsible for conducting its own independent investigation of this matter
with respect to the condition of the Building, Tenant's use of the Premises
and for all improvements to be made to the Premises after the actual
Commencement Date (other than the Tenant Improvements); provided, however,
with respect to the Tenant Improvements Landlord shall be solely responsible
for ensuring that the design of all Tenant Improvements are not in violation
of the then applicable requirements of the ADA. Subject to reimbursement
pursuant to Section 6 of the Lease, if any barrier removal work or other work
is required to the Building, the Common Areas or
24
<PAGE>
the Park under the ADA, then such work shall be the responsibility of
Landlord; provided, if such work is required under the ADA as a result of
Tenant's use of the Premises or any work or alteration made to the Premises
by or on behalf of Tenant, then such work shall be performed by Landlord at
the sole cost and expense of Tenant. Except as otherwise expressly provided
in this provision, Tenant shall be responsible at its sole cost and expense
for fully and faithfully complying with all applicable requirements of the
ADA, including without limitation, not discriminating against any disabled
persons in the operation of Tenant's business in or about the Premises, and
offering or otherwise providing auxiliary aids and services as, and when,
required by the ADA. Within ten (10) days after receipt, Landlord and Tenant
shall advise the other party in writing, and provide the other with copies of
(as applicable), any notices alleging violation of the ADA relating to any
portion of the Premises or the Building; any claims made or threatened in
writing regarding noncompliance with the ADA and relating to any portion of
the Premises or the Building; or any governmental or regulatory actions or
investigations instituted or threatened regarding noncompliance with the ADA
and relating to any portion of the Premises or the Building. Tenant shall
and hereby agrees to protect, defend (with counsel reasonably acceptable to
Landlord) and hold Landlord and Landlord's lender(s), partners, employees,
representatives, legal representatives, successors and assigns (collectively,
the "Indemnitees") harmless and indemnify the Indemnitees from and against
all liabilities, damages, claims, losses, penalties, judgments, charges and
expenses (including reasonable attorneys' fees, costs of court and expenses
necessary in the prosecution or defense of any litigation including the
enforcement of this provision) arising from or in any way related to,
directly or indirectly, Tenant's or Tenant's Representatives' violation or
alleged violation of the ADA. Tenant agrees that the obligations of Tenant
herein shall survive the expiration or earlier termination of this Lease.
38. BROKERAGE COMMISSION: Landlord and Tenant each represents and warrants
for the benefit of the other that it has had no dealings with any real estate
broker, agent or finder in connection with the Premises and/or the
negotiation of this Lease, except for the Broker(s) (as set forth on Page 1),
and that it knows of no other real estate broker, agent or finder who is or
might be entitled to a real estate brokerage commission or finder's fee. in
connection with this Lease or otherwise based upon contacts between the
claimant and Tenant. Each party shall indemnify and hold harmless the other
from and against any and all liabilities or expenses arising out of claims
made for a fee or commission by any real estate broker, agent or finder in
connection with the Premises and this Lease other than Broker(s), if any,
resulting from the actions of the indemnifying party. Any real estate
brokerage commission or finder's fee payable to the Broker(s) in connection
with this Lease shall be payable by Landlord and only be payable and
applicable to the extent of the initial Term of the Lease and to the extent
of the Premises as same exist as of the date on which Tenant executes this
Lease. Unless expressly agreed to in writing by Landlord and Broker(s), no
real estate brokerage commission or finder's fee shall be owed to, or
otherwise payable to, the Broker(s) for any renewals or other extensions of
the initial Term of this Lease or for any additional space leased by Tenant
other than the Premises as same exists as of the date on which Tenant
executes this Lease. Tenant further represents and warrants to Landlord that
Tenant will not receive (i) any portion of any brokerage commission or
finder's fee payable to the Broker(s) in connection with this Lease or (ii)
any other form of compensation or incentive from the Broker(s) with respect
to this Lease.
39. QUIET ENJOYMENT: Landlord covenants with Tenant, upon the paying of
Rent and observing and keeping the covenants, agreements and conditions of
this Lease on its part to be kept, and during the periods that Tenant is not
otherwise in default of any of the terms or provisions of this Lease, and
subject to the rights of any of Landlord's lenders, (i) that Tenant shall and
may peaceably and quietly hold, occupy and enjoy the Premises and the Common
Areas during the Term of this Lease, and (ii) neither Landlord, nor any
successor or assign of Landlord, shall disturb Tenant's occupancy or
enjoyment of the Premises and the Common Areas.
40. LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED OBLIGATIONS:
Notwithstanding anything to the contrary contained in this Lease, if Tenant
shall fail to perform any of the terms, provisions, covenants or conditions
to be performed or complied with by Tenant pursuant to this Lease, and/or if
the failure of Tenant relates to a matter which in Landlord's judgment
reasonably exercised is of an emergency nature and such failure shall remain
uncured for a period of time commensurate with such emergency, then Landlord
may, at Landlord's option without any obligation to do so, and in its sole
discretion as to the necessity therefor, perform any such term, provision,
covenant, or condition, or make any such payment and Landlord by reason of so
doing shall not be liable or responsible for any loss or damage thereby
sustained by Tenant or anyone holding under or through Tenant. If Landlord
so performs any of Tenant's obligations hereunder, the full amount of the
cost and expense entailed or the payment so made or the amount of the loss so
sustained shall immediately be owing by Tenant to Landlord, and Tenant shall
promptly pay to Landlord upon demand, as Additional Rent, the full amount
thereof with interest thereon from the date of payment at the greater of (i)
ten percent (10%) per annum, or (ii) the highest rate permitted by applicable
law and Enforcement Expenses.
41. Landlord agrees that Tenant shall have the right, at its discretion,
and after giving Landlord at least twenty (20) days prior written notice of
the terms, conditions and identifying the mortgagee or beneficiary of such
security interest, to mortgage, hypothecate or convey a security interest in
tenant's equipment and personal property (but not any fixtures attached to
the Premises) within the Premises as security for its obligations under any
equipment lease or other financing arrangement related to the conduct of
Tenant's business, provided that any such lender shall have no right to
occupy the Premises or any portion thereof to hold an auction or other
proceeding at the Premises, any such lender and Tenant would agree to repair
and restore, within ten (10) days of written demand by Landlord, any and all
damage caused by such mortgagee, beneficiary, its agents and/or employees,
and lender and Tenant shall indemnify, protect, defend (by counsel acceptable
to Landlord) and hold Landlord harmless from any and all loss, cost, damage,
liability, claim, cause of action and expense (including, without limitation,
reasonable attorney's fees and costs) arising out of or related to the
granting by Tenant of any such security interest, hypothecation, mortgage
and/or conveyance.
25
<PAGE>
IN WITNESS WHEREOF, this Lease is executed by the parties as of the
Lease Date referenced on page I of this Lease.
TENANT:
InVision Technologies, Inc.,
a Delaware corporation
By:
-------------------------------------
Its:
------------------------------------
Date:
-----------------------------------
LANDLORD:
WHLNF REAL ESTATE LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Lincoln Property Company Management Services, Inc.,
as manager and agent for Landlord
By:
--------------------------------------
Vice President
26
<PAGE>
EXHIBIT A - PREMISES
This exhibit, entitled "Premises", is and shall constitute EXHIBIT A to that
certain Lease Agreement dated December 4, 1996 (the "Lease"), by and between
WHLNF REAL ESTATE LIMITED PARTNERSHIP, a-Delaware limited partnership
("Landlord") and InVision Technologies, Inc., a Delaware corporation
("Tenant") for the leasing of certain premises located in the Lincoln
Bridgeway Technology Center at 7151 Gateway Boulevard, Newark, California
(the "Premises").
The Premises consist of the rentable square footage of space specified in the
Base Lease Information and has the address specified in the Base Lease
Information. The Premises are a part of and are contained in the Building
specified in the Base Lease Information. The cross-hatched area depicts the
Premises within the Project:
INITIALS:
TENANTS:
------------------
LANDLORD:
------------------
<PAGE>
EXHIBIT B TO LEASE AGREEMENT
TENANT IMPROVEMENTS
This exhibit, entitled' "Tenant Improvements", is and shall constitute
EXHIBIT B to that certain Lease Agreement dated February 11, 1997 (the
"Lease"), by and between WHLNF REAL ESTATE LIMITED PARTNERSHIP, a Delaware
limited partnership ("Landlord") and InVision Technologies, Inc., a Delaware
corporation ("Tenant") for the leasing of certain premises located in the
Lincoln Bridgeway Technology Center at 7151 Gateway Boulevard, Newark,
California (the "Premises"). The terms, conditions and provisions of this
EXHIBIT B are hereby incorporated into and are made a part of the Lease. Any
capitalized terms used herein and not otherwise defined herein shall have the
meaning ascribed to such terms as set forth in the Lease:
1. TENANT IMPROVEMENTS. Subject to the conditions set forth below,
Landlord agrees to construct and install certain improvements ("Tenant
Improvements") in the Building of which the Premises*are a part in accordance
with the Final Drawings (defined below) and pursuant to the terms of this
EXHIBIT B.
2. DEFINITION. "Tenant Improvements" as used in this Lease shall include
only those interior portions of the Building which are described below.
"Tenant Improvements" shall specifically not include any alterations,
additions or improvements installed or constructed by Tenant, and any of
Tenant's trade fixtures, equipment, furniture, furnishings, telephone
equipment or other personal property (collectively, "Personal Property").
The Tenant Improvements shall include any and all interior improvements to be
made to the Premises as specified in the Final Drawings (defined below), as
specified and agreed to by Tenant and Landlord.
3. TENANT'S INITIAL PLANS; THE WORK. Tenant desires Landlord to perform
certain Tenant Improvements in the Premises. Within three (3) days of the
execution of the Lease by Landlord and Tenant, Tenant shall notify Landlord,
in writing, that it desires Landlord to plan, install and construct the
Tenant Improvements in the Building (the "Initial Notice"). The Tenant
Improvements shall be in substantial accordance with the plan(s) or scope of
work (collectively, the "Initial Plans") which will be prepared by Lincoln
Property Company after Tenant delivers to Landlord the Initial Notice and the
parties meet and confer to agree on a scope of work. Within seven (7) days
from the date Landlord and Tenant meet to discuss the scope of work, Landlord
shall deliver to Tenant the Initial Plans. A copy of the Initial Plans shall
be attached hereto as Schedule 1 as soon as practicable. Such work, as shown
in the Initial Plans and as more fully detailed in the Final Drawings (as
defined and described in Section 4 below), shall be hereinafter referred to
as the "Work". Not later than five (5) days after the Initial Plans are
prepared and delivered to Tenant, Tenant and/or Tenant's Representatives
shall furnish to Landlord such additional plans, drawings, specifications and
finish details as Landlord may reasonably request to enable Landlord's
architects and engineers, as applicable, to prepare mechanical, electrical
and plumbing plans and to prepare the Final Drawings, including, but not
limited to, a final telephone layout and special electrical connections, if
any. All plans, drawings, specifications and other details describing the
Work which have been, or are hereafter, furnished by or on behalf of Tenant
shall be subject to Landlord's approval, which approval shall not be
unreasonably withheld. Landlord shall not be deemed to have acted
unreasonably if it withholds its approval of any plans, specifications,
drawings or other details or of any Change Request (hereafter defined in
Section 11 below) because, in Landlord's reasonable opinion, the work as
described in any such item, or any Change Request, as the case may be: (a) is
likely to adversely affect Building systems, the structure of the Building or
the safety of the Building and/or its occupants; (b) might impair Landlord's
ability to furnish services to Tenant or other tenants in the Building; (c)
would increase the cost of operating the Building or the Park; (d) would
violate any applicable governmental, administrative body's or agencies' laws,
rules, regulations, ordinances, codes or similar requirements (or
interpretations thereof); (e) contains or uses Hazardous Materials; (f) would
adversely affect the appearance of the Building or the Park; (g) might
adversely affect another tenant's premises or such other tenant's use and
enjoyment of such premises; (h) is prohibited by any ground lease affecting
the Building, the Lot and/or the Park, any Recorded Matters or any mortgage,
trust deed or other instrument encumbering the Building, the Lot and/or the
Park; (i) is likely to be substantially delayed because of unavailability or
shortage of labor or materials necessary to perform such work or the
difficulties or unusual nature of such work; (j) is not, at a minimum, in
accordance with Landlord's Building Standards (defined below), or (k) would
increase the Tenant Improvement Costs (defined in Section 9 below) by more
than ten percent (10%) from the cost originally estimated and anticipated by
the parties. The foregoing reasons, however, shall not be the only reasons
for which Landlord may withhold its approval, whether or not such other
reasons are similar or dissimilar to the foregoing. Neither the approval by
Landlord of the Work or the Initial Plans or any other plans, specifications,
drawings or other items associated with the Work nor Landlord's performance,
supervision or monitoring of the Work shall constitute any warranty or
covenant by Landlord to Tenant of the adequacy of the design for Tenant's
intended use of the Premises. Tenant agrees to, and does hereby, assume full
and complete responsibility to ensure that the Work and the Final Drawings
are adequate to fully meet the needs and requirements of Tenant's intended
operations of its business within the Premises and Tenant's use of the
Premises.
4. FINAL DRAWINGS. If necessary for the performance of the Work and to
the extent not already included as part of the Initial Plans attached hereto,
Landlord shall prepare or cause to be prepared final working drawings and
specifications for the Work (the "Final Drawings") based on and consistent
with the Initial Plans and the other plans, specifications, drawings, finish
details or other information furnished by Tenant or Tenant's Representatives
to Landlord and approved by Landlord pursuant to Section 3 above. Tenant
shall cooperate diligently with Landlord and Landlord's architect, engineer
and other representatives and Tenant shall furnish within five (5) days after
any request therefor, all information required by Landlord or Landlord's
architect, engineer or other representatives for completion of the Final
Drawings. So long as the Final Drawings are substantially consistent with
the Initial Plans, Tenant shall approve the Final Drawings within three (3)
business days after receipt of same from Landlord. Landlord and Tenant shall
indicate their approval of the Final
1
<PAGE>
Drawings by initialing each sheet of the Final Drawings and delivering to one
another a true and complete copy of such initialed Final Drawings. A true
and complete copy of the approved and initialed Final Drawings shall be
attached to the Lease as EXHIBIT B-1 and shall be made a part thereof.
Tenant's failure to approve or disapprove such Final Drawings within the
foregoing three (3) business day time period, shall be conclusively deemed to
be approval of same by Tenant. If Tenant reasonably disapproves of any
matters included in the Final Drawings because such items are not
substantially consistent with the Initial Plans, Tenant shall, within the
aforementioned three (3) business day period, deliver to Landlord written
notice of its disapproval and Tenant shall specify in such written notice, in
sufficient detail as Landlord may reasonably require, the matters
disapproved, the reasons for such disapproval, and the specific changes or
revisions necessary to be made to the Final Drawings to cause such drawings
to substantially conform to the Initial Plans. Any additional costs
associated with such requested changes or revisions shall be paid for solely
by Tenant, as the Excess Tenant Improvement Costs (defined in Section 10
below), in cash upon written demand therefor by Landlord. Any changes or
revisions requested by Tenant must first be approved by Landlord, which
approval shall not be unreasonably withheld, subject to the provisions of
Section 3 above. If Landlord approves such requested changes or revisions or
delayed, Landlord shall cause the Final Drawings to be revised accordingly
and Landlord and Tenant shall initial each sheet of the Final Drawings as
revised and attach a true and complete copy thereof to the Lease as EXHIBIT
B-1. Landlord and Tenant hereby covenant to each other to cooperate with
each other and to act reasonably in the preparation and approval of the Final
Drawings.
5. PERFORMANCE OF WORK. As soon as practicable after Tenant and Landlord
initial and attach to the Lease as EXHIBIT B-1 a true and complete copy of
the Final Drawings, Landlord shall submit the Final Drawings to the
governmental authorities having rights of approval over the Work and shall
apply for the necessary approvals and building permits. Subject to the
satisfaction of all conditions precedent and subsequent to its obligations
under this EXHIBIT B, and further subject to the provisions of Section I0
hereof, as soon as practicable after Landlord or its representatives have
received all necessary approvals and building permits, Landlord will put the
Final Drawings out for bid to several, but in no event less than three (3),
licensed, bonded and insured general contractors. The Tenant Improvements
shall be constructed by a general contractor selected by Landlord (the
"General Contractor"). Landlord shall commence construction, or cause the
commencement of construction by the General Contractor, of the Tenant
Improvements, as soon as practicable after selection of the General
Contractor. Except as hereinafter expressly provided to the contrary,
Landlord shall cause the performance of the Work using (except as may be
stated or otherwise shown in the Final Drawings) building standard materials,
quantities and procedures then in use by Landlord ("Building Standards").
6. SUBSTANTIAL COMPLETION. Landlord and Tenant shall cause the General
Contractor to Substantially Complete (defined below) the Tenant Improvements
in accordance with the Final Drawings by the Commencement Date of the Lease
as set forth in Section 2 of the Lease (the "Completion Date"), subject to
delays due to (a) acts or events beyond its control including, but not
limited to, acts of God, earthquakes, strikes, lockouts, boycotts,
casualties, discontinuance of any utility or other service required for
performance of the Work, moratoriums, governmental agencies and weather, (b)
the lack of availability or shortage of specialized materials used in the
construction of the Tenant Improvements, (c) any matters beyond the
reasonable control of Landlord, the General Contractor or any subcontractors,
(d) any changes required by the fire department, building and/or planning
department, building inspectors or any other agency having jurisdiction over
the Building, the Work and/or the Tenant Improvements (except to the extent
such changes are directly attributable to Tenant's use or Tenant's
specialized tenant improvements, in which event such delays are considered
Tenant Delays) (the events and matters set forth in Subsections (a), (b), (c)
and (d) are collectively referred to as "Force Majeure Delays"), or (e) any
Tenant Delays (defined in Section 7 below). The Tenant Improvements shall be
deemed substantially complete on the date that the building officials of the
applicable governmental agency(s) issues its final approval of the
construction of the Tenant Improvements whether in the form of the issuance
of a final permit, certificate of occupancy or the written approval
evidencing its final inspection on the building permit(s), or the date on
which Tenant first takes occupancy of the Premises, whichever first occurs
("Substantial Completion", or "Substantially Completed, or "Substantially
Complete"). Except as otherwise set forth in Section 2.1. hereof, if the
Work is not deemed to be Substantially Completed on or before the scheduled
Completion Date, (i) Landlord agrees to use reasonable efforts to
Substantially Complete the Work as soon as practicable thereafter, (ii) the
Lease shall remain in full force and effect, (iii) Landlord shall not be
deemed to be in breach or default of the Lease or this EXHIBIT B as a result
thereof and Landlord shall have no liability to Tenant as a result of any
delay in occupancy (whether for damages, abatement of all or any portion of
the Rent, or otherwise), and (iv) except to the extent of any Tenant Delays,
which will not affect the Commencement Date but will extend the Completion
Date without any penalty or liability to Landlord, and notwithstanding
anything to the contrary contained in the Lease, the Commencement Date and
the Expiration Date of the term of the Lease (as defined in Section 2 of the
Lease) shall be extended commensurately by the amount of time attributable to
such Force Majeure Delays, and Landlord and Tenant shall execute a written
amendment to the Lease evidencing such extensions of time, substantially in
the form of Exhibit F to the Lease. Subject to the provisions of Section
10.2 of the Lease, the Tenant Improvements shall belong to Landlord and shall
be deemed to be incorporated into the Premises for all purposes of the Lease,
unless Landlord, in writing, indicates otherwise to Tenant.
Upon substantial completion of the Tenant Improvements, Landlord and
Tenant shall inspect the Premises and the Tenant Improvements and develop a
list of "punch list" items. Such list shall be subject to the reasonable
approval of Landlord and Tenant. Upon such approval, Landlord shall promptly
commence the correction of all punch list items and diligently pursue such
work to completion within thirty (30) days of the Commencement Date.
Landlord agrees to complete such items in a manner so as to minimize
interference with Tenant's business. Landlord also agrees, after substantial
completion of the Tenant Improvements, to cause the Premises to be bloom
cleaned.
2
<PAGE>
7. TENANT DELAYS. There shall be no extension of the scheduled
Commencement Date or Expiration Date of the term of the Lease (as otherwise
permissibly extended in accordance with the provisions of Section 6 above) if
the Work has not been Substantially Completed by the scheduled Commencement
Date due to any delay attributable to Tenant and/or Tenant's Representatives
or Tenant's intended use of the Premises (collectively, "Tenant Delays"),
including, but not limited to, any of the following described events or
occurrences: (a) delays related to changes made or requested by Tenant to the
Work and/or the Final Drawings; (b) the failure of Tenant to furnish all or
any plans, drawings, specifications, finish details or other information
required under Sections 3 and 4 above; (c) the failure of Tenant to comply
with the requirements of Section 10 below; (d) Tenant's requirements for
special work or materials, finishes, or installations other than the Building
Standards or Tenant's requirements for special construction or phasing; (e)
any changes required by the fire department, building or planning department,
building inspectors or any other agency having jurisdiction over the
Building, the Work and/or the Tenant Improvements if such changes are
directly attributable to Tenant's use or Tenant's specialized tenant
improvements; (f) the performance of any additional work pursuant to a Change
Request (defined below in Section 11) which is requested by Tenant; (g) the
performance of work in or about the Premises by any person, firm or
corporation employed by or on behalf of Tenant, including, without
limitation, any failure to complete or any delay in the completion of such
work; or (h) any an.d all delays caused by or arising from acts or omissions
of Tenant and/or Tenant's Representatives, in any manner whatsoever,
including, but not limited to, any and all revisions to the Final Drawings.
Any delays in the construction of the Tenant Improvements due to any of the
events described above, shall in no way extend or affect the date on which
Tenant is required to commence paying Rent under the terms of the Lease. It
is the intention of the parties that all of such delays will be considered
Tenant Delays for which Tenant shall be wholly and completely responsible for
any and all consequences related to such delays, including, without
limitation, any costs and expenses attributable to increases in labor or
materials.
8. TENANT IMPROVEMENT ALLOWANCE. Landlord and Tenant hereby acknowledge
and agree that the Tenant Improvement Costs (defined in Section 9 below) for
the Tenant Improvements, shall be based upon the Final Drawings approved by
Landlord and Tenant in accordance with the provisions of Section 4 above. If
the actual Tenant Improvement Costs varies from the Tenant Improvement
Allowance (hereinafter defined) by more than twenty-five percent (25%), then
Landlord may require any of the following, in its sole discretion: (a)
changes be made to the Final Drawings to reduce the cost of the Tenant
Improvements and Landlord may refuse to sign any construction contract or
Change Orders to the construction contract, as the case may be, until such
changes are made to the sole satisfaction of Landlord; (b) Tenant to deposit
into a separate escrow account cash in an amount equal to the Excess Tenant
Improvement Costs (defined in Section 10 below); (c) Tenant to provide to
Landlord evidence satisfactory to Landlord, in its sole discretion, that
Tenant has adequate financial resources to pay for the Excess Tenant
Improvement Costs, as solely determined by Landlord; and/or (d) Tenant to pay
all of the Excess Tenant Improvement Costs before Landlord's contribution of
the Tenant Improvement Allowance (defined in Section 10 below); provided,
however, in no event or circumstance shall the Tenant Improvement Costs
exceed the maximum amount of two million eight hundred fifty-seven thousand
three hundred fifty and 00/100 Dollars ($2,857,350.00), which amount is based
on the amount of thirty and 00/100 Dollars ($30.00) per rentable square foot
for 95,245 square feet of the Premises which is to be improved, as described
in the Initial Plans. SUBJECT TO THE FOREGOING, LANDLORD SHALL PROVIDE AN
ALLOWANCE FOR THE PLANNING AND CONSTRUCTION OF THE TENANT IMPROVEMENTS FOR
THE WORK TO BE PERFORMED IN THE PREMISES, AS DESCRIBED IN THE INITIAL PLANS
AND THE FINAL DRAWINGS, IN THE AMOUNT OF ONE MILLION FOUR HUNDRED
TWENTY-EIGHT THOUSAND SIX HUNDRED SEVENTY-FIVE AND 00/100 DOLLARS
($1,428,675.00) (THE "TENANT IMPROVEMENT ALLOWANCE") BASED UPON AN ALLOWANCE
OF FIFTEEN AND 00/100 DOLLARS ($15.00) PER RENTABLE SQUARE FOOT FOR 95,245
SQUARE FEET OF THE PREMISES WHICH IS TO BE IMPROVED, AS DESCRIBED IN THE
INITIAL PLANS AND THE FINAL DRAWINGS. Tenant shall not be entitled to any
credit, abatement or payment from Landlord in the event that the amount of
the Tenant Improvement Allowance specified above exceeds the actual Tenant
Improvement Costs. The Tenant Improvement Allowance shall only be used for
tenant improvements typically installed by Landlord in R&D buildings. The
Tenant Improvement Allowance shall be the maximum contribution by Landlord
for the Tenant Improvement Costs and shall be subject to the provisions of
Section 10 below.
9. TENANT IMPROVEMENT COSTS. The Tenant Improvements' cost (Tenant
Improvement Costs") shall mean and include any and all costs and expenses of
the Work, including, without limitation, all of the following:
(a) All costs of preliminary space planning and final architectural
and engineering plans and specifications (including, without limitation, the
scope of work, all plans and specifications, the Initial Plans and the Final
Drawings) for the Tenant Improvements, and architectural fees, engineering
costs and fees, and other costs associated with completion of said plans;
(b) All costs of obtaining building permits and other necessary
authorizations and approvals from the City of Newark and other applicable
jurisdictions;
(c) All costs of interior design and finish schedule plans and
specifications including as-built drawings;
(d) All direct and indirect costs of procuring, constructing and
installing the Tenant Improvements in the Premises, including, but not
limited to, the construction fee for overhead and profit, the cost of all
on-site supervisory and administrative staff, office, equipment and temporary
services rendered by Landlord's consultants and the General Contractor in
connection with construction of the Tenant Improvements, and all labor
(including overtime) and materials constituting the Work;
3
<PAGE>
(e) All fees payable to the General Contractor, architect and
Landlord's engineering firm if they are required by Tenant to redesign any
portion of the Tenant Improvements following Tenant's approval of the Final
Drawings; and
(f) A construction management fee payable to Landlord in the amount of
four percent (4%) of all direct and indirect costs of procuring, constructing
and installing the Tenant Improvements in the Premises and the Building.
10. EXCESS TENANT IMPROVEMENT COSTS. Prior to commencing the Work,
Landlord shall submit to Tenant a written statement of the actual Tenant
Improvement Costs (the "Actual TI Costs") (which shall include the amount of
any overtime projected as necessary to Substantially Complete the Work by the
Completion Date) as then known by Landlord, and such statement shall indicate
the amount, if any, by which the Actual TI Costs exceeds the Tenant
Improvement Allowance (the "Excess Tenant Improvement Costs"). The term
"Excess Tenant Improvement Costs" shall also include the costs related to any
and all Change Orders. Tenant agrees, within three (3) days after submission
to it of such statement, to execute and deliver to Landlord, in the form then
in use by Landlord, an authorization to proceed with the Work and notice of
its election to either amortize the.Excess Tenant Improvement Costs over the
initial term of the Lease or to pay to Landlord such Excess Tenant
Improvement Costs in cash in one of the following described manners: (a) A
portion of the Excess Tenant Improvement Costs up to a maximum amount of four
hundred seventy-six thousand two hundred twenty-five and 00/100 Dollars
($476,225.00), based on five and 00/100 Dollars ($5.00) per rentable square
foot for 95,245 square feet of the Premises, shall be amortized over the
initial term of the Lease at the rate of ten percent (10%) per annum and such
amortized amount shall be paid by Tenant with, and as part of, the Rent for
the Premises in accordance with the provisions and requirements of Section 3
of the Lease (the "Amortized Excess TI Costs"). The portion of the Excess
Tenant Improvement Costs in excess of the Amortized Excess TI Costs shall be
paid by Tenant, in cash, to Landlord concurrently with Tenant's delivery to
Landlord of the aforementioned signed written authorization to proceed. No
Work shall be commenced until Tenant has fully complied with the preceding
provisions of this Section 10. If Tenant fails to remit the sums so demanded
by Landlord pursuant to Section 8 above and this Section 10 within the time
periods required, Landlord may, at its option, declare Tenant in default
under the Lease; or (b) Tenant shall faithfully pay all of the Excess Tenant
Improvement Costs to Landlord in cash, concurrently with Tenant's delivery to
Landlord of the aforementioned signed written authorization to proceed. No
Work shall be commenced until Tenant has fully complied with the preceding
provisions of this Section 10. If Tenant fails to remit the sums so demanded
by Landlord pursuant to Section 8 above and this Section 10 within the time
periods required, Landlord may, at its option, declare Tenant in default
under the Lease.
11. CHANGE REQUESTS. No changes or revisions to the approved Final
Drawings shall be made by either Landlord or Tenant unless approved in
writing by both parties. Upon Tenant's request and submission by Tenant (at
Tenant's sole cost and expense) of the necessary information and/or plans and
specifications for any changes or revisions to the approved Final Drawings
and/or for any work other than the Work described in the approved Final
Drawings ("Change Requests") and the approval by Landlord of such Change
Request(s), which approval Landlord agrees shall not be unreasonably withheld
or delayed, Landlord shall perform the additional work associated with the
approved Change Request(s), at Tenant's sole cost and expense, subject,
however, to the following provisions of this Section 11. Prior to commencing
any additional work related to the approved Change Request(s), Landlord shall
submit to Tenant a written statement of the cost of such additional work and
a proposed tenant change order therefor ("Change Order") in the standard form
then in use by Landlord. Tenant shall execute and deliver to Landlord such
Change Order and shall pay the entire cost of such additional work in the
following described manner. Any costs related to such approved Change
Request(s), Change Order and any delays associated therewith, shall be added
to the Tenant Improvement Costs and, if the total of such Tenant Improvement
Costs exceed the Tenant Improvement Allowance, shall be paid for by Tenant as
and with any Excess Tenant Improvement Costs as set forth in Section 10
above. The billing for such additional costs to Tenant shall be accompanied
by evidence of the amounts billed as is customarily used in the business.
Costs related to approved Change Requests and Change Orders shall include,
without limitation, any architectural or design fees, Landlord's construction
fee for overhead and profit, the cost of all on-site supervisory and
administrative staff, office, equipment and temporary services rendered by
Landlord and/or Landlord's consultants in connection with such Change
Request, and the General Contractor's price for effecting the change. If
Tenant fails to execute or deliver such Change Order, or to pay the costs
related thereto, then Landlord shall not be obligated to do any additional
work related to such approved Change Request(s) and/or Change Orders, and
Landlord may proceed to perform only the Work, as specified in the Final
Drawings.
12. TERMINATION. If the Lease is terminated prior to the Completion Date,
for any reason due to the default of Tenant hereunder, in addition to any
other remedies available to Landlord under the Lease, Tenant shall pay to
Landlord as Additional Rent under the Lease, within five (5) days of receipt
of a statement therefor, any and all costs incurred by Landlord and not
reimbursed or otherwise paid by Tenant through the date of termination in
connection with the Tenant Improvements to the extent planned, installed
and/or constructed as of such date of termination, including, but not limited
to, any costs related to the removal of all or any portion of the Tenant
Improvements and restoration costs related thereto. Subject to the
provisions of Section 10.2 of the Lease, upon the expiration or earlier
termination of the Lease, Tenant shall not be required to remove the Tenant
Improvements it being the intention of the parties that the Tenant
Improvements are to be considered incorporated into the Building.
Notwithstanding anything to the contrary contained herein, Landlord shall
have the right to terminate the Lease, upon written notice to Tenant, if
Landlord is unable to obtain a building permit for the Tenant Improvements
within ninety (90) days from the date the Lease is signed by Tenant, despite
Landlord's diligent efforts to do so.
4
<PAGE>
13. TENANT ACCESS. Landlord, hereby grants Tenant the right to have access
to the Premises prior to the Completion Date to allow Tenant to do other work
required by Tenant to make the Premises ready for Tenant's use and occupancy
(the "Tenant's Pre-Occupancy Work"). It shall be a condition to the grant by
Landlord and continued effectiveness of such right that:
(a) Tenant shall give to Landlord a written request to have such
access not less than five (5) business days prior to the date on which such
proposed access will commence (the "Access Notice"). The Access Notice shall
contain or be accompanied by each of the following items, all in form and
substance reasonably acceptable to Landlord: (i) a detailed description of
and schedule for Tenant's Pre-Occupancy Work; (ii) the names and addresses of
all contractors, subcontractors and material suppliers and all other
representatives of Tenant who or which will be entering the Premises on
behalf of Tenant to perform Tenant's Pre-Occupancy Work or will be supplying
materials for such work, and the approximate number of individuals, itemized
by trade, who will be present in the Premises; (iii) copies of all contracts,
subcontracts, material purchase orders, plans and specifications pertaining
to Tenant's Pre-Occupancy Work; (iv) copies of all licenses and permits
required in connection with the performance of Tenant's Pre-Occupancy Work;
(v) certificates of insurance (in amounts satisfactory to Landlord and with
the parties identified in, or required by, the Lease named as additional
insureds) and instruments of indemnification against all claims, costs,
expenses, penalties, fines, and damages which may arise in connection with
Tenant's Pre-Occupancy Work; and (vi) assurances of the ability of Tenant to
pay for all of Tenant's Pre-Occupancy Work and/or a letter of credit or other
security deemed appropriate by Landlord securing Tenant's lien-free
completion of Tenant's Pre-Occupancy Work.
(b) Such pre-term access by Tenant and Tenant's employees, agents,
contractors, consultants, workmen, mechanics, suppliers and invitees shall be
subject to scheduling by Landlord.
(c) Tenant's employees, agents, contractors, consultants, workmen,
mechanics, suppliers and invitees shall fully cooperate, work in harmony and
not, in any manner, interfere with Landlord or Landlord's agents or
representatives in performing the Work and any additional work pursuant to
approved Change Orders, Landlord's work in other areas of the Building or the
Park, or the general operation. of the Building. If at any time any such
person representing Tenant shall not be cooperative or shall otherwise cause
or threaten to cause any such disharmony or interference, including, without
limitation, labor disharmony, and Tenant fails to immediately institute and
maintain corrective actions as directed by Landlord, then Landlord may revoke
access to such party upon twenty-four (24) hours' prior written notice to
Tenant.
(d) Any such entry into and occupancy of the Premises or any portion
thereof by Tenant or any person or entity working for or on behalf of Tenant
shall be deemed to be subject to all of the terms, covenants, conditions and
provisions of the Lease, excluding only the covenant to pay Rent. Landlord
shall not be liable for any injury, loss or damage which may occur to any of
Tenant's Pre-Occupancy Work made in or about the Premises or to any property
placed therein prior to the commencement of the term of the Lease, the same
being at Tenant's sole risk and liability. Tenant shall be liable to
Landlord for any damage to any portion of the Premises, the Work or the
additional work related to any approved Change Orders caused by Tenant or any
of Tenant's employees, agents, contractors, consultants, workmen, mechanics,
suppliers and invitees. In the event that the performance of Tenant's
Pre-Occupancy Work causes extra costs to be incurred by Landlord or requires
the use of other Building services, Tenant shall promptly reimburse Landlord
for such extra costs and/or shall pay Landlord for such other Building
services at Landlord's standard rates then in effect.
14. LEASE PROVISIONS; CONFLICT. The terms and provisions of the Lease,
insofar as they are applicable, in whole or in part, to this EXHIBIT B, are
hereby incorporated herein by reference, and specifically including all of
the provisions of Section 31 of the Lease. In the event of any conflict
between the terms of the Lease and this EXHIBIT B, the terms of this EXHIBIT
B shall prevail. Any amounts payable by Tenant to Landlord hereunder shall
be deemed to be Additional Rent under the Lease and, upon any default in the
payment of same, Landlord shall have all rights and remedies available to it
as provided for in the Lease.
5
<PAGE>
EXHIBIT B-1 TO LEASE AGREEMENT
LINCOLN BRIDGEWAY TECHNOLOGY CENTER
BUILDING SHELL
* High quality, painted tilt-up concrete construction
* 5" reinforced, sealed concrete slab
* 6" concrete truck dock aprons (reinforced with 6" gravel base)
* 8 - 9' x 10' dock height truck doors per building
* 2 - 10' x 12' drive through truck doors per building
* 20' - 24' clear height, 12.5 lbs./sf rated roof
* 2000A, 480v, 3 phase electrical service per building
* 0.60 GPM on 3,000 sf fire sprinklers
INITIALS:
TENANTS:
------------------
LANDLORD:
------------------
1
<PAGE>
EXHIBIT C TO LEASE AGREEMENT
RULES & REGULATIONS
This exhibit, entitled "Rules & Regulations", is and shall constitute EXHIBIT
C to that certain Lease Agreement dated February 11, 1997 (the "Lease"), by
and between WHLNF REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited
partnership ("Landlord") and InVision Technologies, Inc., a Delaware
corporation ("Tenant") for the leasing of certain premises located in the
Lincoln Bridgeway Technology Center Park at 7151 Gateway Boulevard, Newark,
California (the "Premises"). The terms, conditions and provisions of this
EXHIBIT C are hereby incorporated into and are made a part of the Lease. Any
capitalized terms used herein and not otherwise defined herein shall have the
meaning ascribed to such terms as set forth in the Lease:
1. No advertisement, picture or sign of any sort shall be displayed on or
outside the Premises or the Building without the prior written consent
of Landlord. Landlord shall have the right to remove any such
unapproved item without notice and at Tenant's expense.
2. Tenant shall not regularly park motor vehicles in designated parking
areas after the conclusion of normal daily business activity.
3. Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord without the prior written consent of
Landlord, which shall not be unreasonably withheld or delayed.
4. All window coverings installed by Tenant and visible from the outside
of the Building require the prior written approval of Landlord.
5. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance or any flammable or combustible materials on
or around the Premises, the Building or the Park, except as otherwise
permitted in this Lease.
6. Tenant shall not alter any lock or install any new locks or bolts on
any door at the Premises without giving Landlord prior notice.
7. Tenant agrees not to make any duplicate keys without the prior consent
of Landlord.
8. Tenant shall park motor vehicles in those general parking areas as
designated by Landlord except for loading and unloading. During those
periods of loading and unloading, Tenant shall not unreasonably
interfere with traffic flow within the Park and loading and unloading
areas of other tenants.
9. Tenant shall not disturb, solicit or canvas any occupant of the
Building or Park and shall cooperate to prevent same.
10. No person shall go on the roof without Landlord's permission.
11. Business machines and mechanical equipment belonging to Tenant which
cause noise or vibration that may be transmitted to the structure of
the Building, to such a degree as to be objectionable to Landlord or
other Tenants, shall be placed and maintained by Tenant, at Tenant's
expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration.
12. All goods, including material used to store goods, delivered to the
Premises of Tenant shall be immediately moved into the Premises and
shall not be left in parking or receiving areas overnight.
13. Tractor trailers which must be unhooked or parked with dolly wheels
beyond the concrete loading areas must use steel plates or wood blocks
under the dolly wheels to prevent damage to the asphalt paving
surfaces. No parking or storing of such trailers will be permitted in
the auto parking areas of the Park or on streets adjacent thereto.
14. Forklifts which operate on asphalt paving areas shall not have solid
rubber tires and shall only use tires that do not damage the asphalt.
15. Tenant is responsible for the storage and removal of all trash and
refuse. All such trash and refuse shall be contained in suitable
receptacles stored behind screened enclosures at locations approved by
Landlord.
16. Tenant shall not store or permit the storage or placement of goods, or
merchandise or pallets or equipment of any sort in or around the
Premises, the Building, the Park or any of the Common Areas of the
foregoing. No displays or sales of merchandise shall be allowed in the
parking lots or other Common Areas.
17. Tenant shall not permit any animals, including, but not limited to, any
household pets, to be brought or kept in or about the Premises, the
Building, the Park or any of the Common Areas of the foregoing.
18. Tenant shall not permit any motor vehicles to be washed on any portion
of the Premises or in the Common Areas of the Park, nor shall Tenant
permit mechanical work or maintenance of motor vehicles to be performed
on any portion of the Premises or in the Common Areas of the Park.
<PAGE>
INITIALS:
TENANTS: ------------------
LANDLORD: ------------------
<PAGE>
EXHIBIT E
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is
necessary for the Landlord (identified below) to evaluate and finalize a
lease agreement with you as tenant. After a lease agreement is signed by you
and the Landlord (the "Lease Agreement"), on an annual basis in accordance
with the provisions of Section 29 of the signed Lease Agreement, you are to
provide an update to the information initially provided by you in this
certificate. The information contained in the initial Hazardous Materials
Disclosure Certificate and each annual certificate provided by you thereafter
will be maintained in confidentiality by Landlord subject to release and
disclosure as required by (i) any lenders and owners and their respective
environmental consultants, (ii) any prospective purchaser(s) of all or any
portion of the property on which the Premises are located, (iii) Landlord to
defend itself or its lenders, partners or representatives against any claim
or demand, and (iv) any laws, rules, regulations, orders, decrees, or
ordinances, including, without limitation, court orders or subpoenas. Any
and all capitalized terms used herein, which are not otherwise defined
herein, shall have the same meaning ascribed to such term in the signed Lease
Agreement. Any questions regarding this certificate should be directed to,
and when completed, the certificate should be delivered to:
Landlord:
---------------------------------------------------------------------
---------------------------------------------------------------------
c/o Lincoln Property Company Management Services, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404
Attn:
Phone: (415) 571-2200
Name of (Prospective) Tenant:
---------------------------------------------------
Mailing Address:
----------------------------------------------------------------
- --------------------------------------------------------------------------------
Contact Person, Title and Telephone Number(s):
----------------------------------
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Address of (Prospective) Premises:
----------------------------------------------
Length of (Prospective) initial Term:
-------------------------------------------
1. GENERAL INFORMATION:
Describe the initial proposed operations to take place in, on, or about
the Premises, including, without limitation, principal products
processed, manufactured or assembled services and activities to be
provided or otherwise conducted. Existing tenants should describe any
proposed changes to on-going operations.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials be used, generated, stored or
disposed of in, on or about the Premises? Existing tenants should
describe any Hazardous Materials which continue to be used,
generated, stored or disposed of in, on or about the Premises.
Wastes Yes / / No / /
Chemical Products Yes / / No / /
Other Yes / / No / /
If Yes is marked, please explain:
-----------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
2.2 If Yes is marked in Section 2.1, attach a list of any Hazardous
Materials to be used, generated, stored or disposed of in, on or
about the Premises, including the applicable hazard class and an
estimate of the quantities of such Hazardous Materials at any
given time; estimated annual throughput; the proposed location(s)
and method of storage (excluding nominal amounts of ordinary
household cleaners and janitorial supplies which are not
regulated by any Environmental Laws); and the proposed
location(s) and method of disposal for each Hazardous Material,
including, the estimated frequency, and the proposed contractors
or subcontractors. Existing tenants should attach a list setting
forth the information requested
1
<PAGE>
above and such list should 'include actual data from on-going
operations and the identification of any variations in such
information from the prior year's certificate.
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage of gasoline, diesel,
petroleum, or other Hazardous Materials in tanks or sumps
proposed in, on or about the Premises? Existing tenants should
describe any such actual or proposed activities.
Yes / / No / /
If Yes, please explain:
---------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste Generator
I.D. Number? Existing tenants should describe any additional
identification numbers issued since the previous certificate.
Yes / / No / /
4.2 Has your company filed a biennial or quarterly reports as a
hazardous waste generator? Existing tenants should describe any
new reports filed.
Yes / / No / /
If Yes, attach a copy of the most recent report filed.
If yes, attach a copy of the most recent report filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
storm drain? sewer?
-------- --------
surface water? no wastewater or other wastes
-------- -------- discharged.
Existing tenants should indicate any actual discharges. If so,
describe the nature of any proposed or actual discharge(s).
--------------------------------------------------------------------
--------------------------------------------------------------------
5.2 Will any such wastewater or waste be treated before discharge?
Yes / / No / /
If Yes, describe the type of treatment proposed to be conducted.
Existing tenants should describe the actual treatment conducted.
--------------------------------------------------------------------
--------------------------------------------------------------------
6. AIR DISCHARGES
6.1 Do you plan for any air filtration systems or stacks to be used
in your company's operations in, on or about the Premises that
will discharge into the air; and will such air emissions be
monitored? Existing tenants should indicate whether or not there
are any such air filtration systems or stacks in use in, on or
about the Premises which discharge into the air and whether such
air emissions are being monitored.
Yes / / No / /
If Yes, please describe.
--------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
6.2 Do you propose to operate any of the following types of
equipment, or any other equipment requiring an air emissions
permit? Existing tenants should specify any such equipment being
operated in, on or about the Premises.
Spray booth(s) Incinerator(s)
-------- --------
Dip tank(s) Other (please describe)
-------- --------
2
<PAGE>
Drying oven(s) No Equipment Requiring air Permits
-------- --------
If Yes, please describe.
--------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare a
Hazardous, Materials management plan ("Management Plan") pursuant
to Fire Department or other governmental or regulatory agencies'
requirements? Existing tenants should indicate whether or not a
Management Plan is required and has been prepared.
Yes / / No / /
If yes, attach a copy of the Management Plan. Existing tenants
should attach a copy of any required updates to the Management
Plan.
7.2 Are any of the Hazardous Materials, and in particular chemicals,
proposed to be used in your operations in, on or about the
Premises regulated under Proposition 65? Existing tenants should
indicate whether or not there are any new Hazardous Materials
being so used which are regulated under Proposition 65.
Yes / / No / /
If Yes, please explain:
---------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws, has
your company ever been subject to any agency enforcement actions,
administrative orders, or consent decrees or has your company
received requests for information, notice or demand letters, or
any other inquiries regarding its operations? Existing tenants
should indicate whether or not any such actions, orders or
decrees have been, or are in the process of being, undertaken or
if any such requests have been received.
Yes / / No / /
If yes, describe the actions, orders or decrees and any
continuing compliance obligations imposed as a result of these
actions, orders or decrees and also describe any requests,
notices or demands, and attach a copy of all such documents.
Existing tenants should describe and attach a copy of any new
actions, orders, decrees, requests, notices or demands not
already delivered to Landlord pursuant to the provisions of
Section 29 of the signed Lease Agreement.
8.2 Have there ever been, or are there now pending, any lawsuits
against your company regarding any environmental or health and
safety concerns?
Yes / / No / /
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and all other
documents related thereto as requested by Landlord. Existing
tenants should describe and attach a copy of any new
complaint(s), cross-complaint(s), pleadings and other related
documents not already delivered to Landlord pursuant to the
provisions of Section 29 of the signed Lease Agreement.
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
8.3 Have there been any problems or complaints from adjacent tenants,
owners or other neighbors at your company's current facility with
regard to environmental or health and safety concerns? Existing
tenants should indicate whether or not there have been any such
problems or complaints from adjacent tenants, owners or other
neighbors at, about or near the Premises.
Yes / / No / /
If yes, please describe. Existing tenants should describe any
such problems or complaints not already disclosed to Landlord
under the provisions of the signed Lease Agreement.
--------------------------------------------------------------------
--------------------------------------------------------------------
3
<PAGE>
9. PERMITS AND LICENSES
9.1 Attach copies of all Hazardous Materials permits and licenses
including a Transporter Permit number issued to your company with
respect to its proposed operations in, on or about the Premises,
including, without limitation, any wastewater discharge permits,
air emissions permits, and use permits or approvals. Existing
tenants should attach copies of any new permits and licenses as
well as any renewals of permits or licenses previously issued.
The undersigned hereby acknowledges and agrees that (A) this Hazardous
Materials Disclosure Certificate is being delivered in connection with, and
as required by, Landlord in connection with the evaluation and finalization
of a Lease Agreement and will be attached thereto as an exhibit; (B) that
this Hazardous Materials Disclosure Certificate is being delivered in
accordance with, and as required by, the provisions of Section 29 of the
Lease Agreement; and (c) that Tenant shall have and retain full and complete
responsibility and liability with respect to any of the Hazardous Materials
disclosed in the HazMat Certificate notwithstanding Landlord's/Tenant's
receipt and/or approval of such certificate. Tenant further agrees that none
of the following described acts or events shall be construed or otherwise
interpreted as either (a) excusing, diminishing or otherwise limiting Tenant
from the requirement to fully and faithfully perform its obligations under
the Lease with respect to Hazardous Materials, including, without limitation,
Tenant's indemnification of the Indemnitees and compliance with all
Environmental Laws, or (b) imposing upon Landlord, directly or indirectly,
any duty or liability with respect to any such Hazardous Materials,
including, without limitation, any duty on Landlord to investigate or
otherwise verify the accuracy of the representations and statements made
therein or to ensure that Tenant is in compliance with all Environmental
Laws; (i) the delivery of such certificate to Landlord and/or Landlord's
acceptance of such certificate, (ii) Landlord's review and approval of such
certificate, (iii) Landlord's failure to obtain such certificate from Tenant
at any time, or (iv) Landlord's actual or constructive knowledge of the types
and quantities of Hazardous Materials being used, stored, generated, disposed
of or transported on or about the Premises by Tenant or Tenant's
Representatives. Notwithstanding the foregoing or anything to the contrary
contained herein, the undersigned acknowledges and agrees that Landlord and
its partners, lenders and representatives may, and will, rely upon the
statements, representations, warranties, and certifications made herein and
the truthfulness thereof in entering into the Lease Agreement and the
continuance thereof throughout the term, and any renewals thereof, of the
Lease Agreement.
I (print name) , acting with full authority to bind the
(proposed) Tenant and on behalf of the (proposed) Tenant, certify, represent
and warrant that the information contained in this certificate is true and
correct.
(PROSPECTIVE) TENANT:
By:
----------------------------------------------------
Title:
-------------------------------------------------
Date:
--------------------------------------------------
INITIALS:
TENANT:
----------------
LANDLORD:
----------------
4
<PAGE>
EXHIBIT F
FIRST AMENDMENT TO LEASE AGREEMENT
CHANGE OF COMMENCEMENT DATE
This First Amendment to Lease Agreement (the "Amendment") is made and entered
into as of ____________________, by and between ___________________
("Landlord"), and ("Tenant"), with reference to the following facts:
RECITALS
A. Landlord and Tenant have entered into that certain Lease Agreement
dated ______________ (the "Lease"), for the leasing of certain
premises containing approximately _____________ rentable square feet of
space located at , California (the "Premises") as such Premises are
more fully described in the Lease.
B. Landlord and Tenant wish to amend the Commencement Date of the Lease.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. RECITALS: Landlord and Tenant agree that the above recitals are
true and correct.
2. The Commencement Date of the Lease shall be The last day of the
Term of the Lease (the "Expiration Date") shall be The dates on
which the Base Rent will be adjusted are:
3. The last day of the Term of the Lease (the "Expiration Date") shall
be __________.
4. The date on which the Base Rent will be adjusted are:
for the period _______ to ________ the monthly Base Rent shall be
$_____________;
for the period _______ to ________ the monthly Base Rent shall be
$_____________; and
for the period _______ to ________ the monthly Base Rent shall be
$_____________
5. EFFECT OF AMENDMENT: Except as modified herein, the terms and
conditions of the Lease shall remain unmodified and continue in
full force and effect. In the event of any conflict between the
terms and conditions of the Lease and this Amendment, the terms
and conditions of this Amendment shall prevail.
6. DEFINITIONS: Unless otherwise defined in this Amendment, all
terms not defined in this Amendment shall have the meaning set
forth in the Lease.
7. AUTHORITY: Subject to the provisions of the Lease, this Amendment
shall be binding upon and inure to the benefit of the parties
hereto, their respective heirs, legal representatives, successors
and assigns. Each party hereto and the persons signing below
warrant that the person signing below on such party's behalf is
authorized to do so and to bind such party to the terms of this
Amendment.
8. The terms and provisions of the Lease are hereby incorporated in
this Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
and year first above written.
INITIALS:
TENANTS:
------------------
LANDLORD:
------------------
<PAGE>
EXHIBIT G
TENANT'S INITIAL HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is
necessary for the Landlord (identified below) to evaluate and finalize a
lease agreement with you as tenant. After a lease agreement is signed by you
and the Landlord (the "Lease Agreement"), on an annual basis in accordance
with the provisions of Section 29 of the signed Lease Agreement, you are to
provide an update to the information initially provided by you in this
certificate. The information contained in the initial Hazardous Materials
Disclosure Certificate and each annual certificate provided by you thereafter
will be maintained in confidentiality by Landlord subject to release and
disclosure as required by (i) any lenders and owners and their respective
environmental consultants, (ii) any prospective purchaser(s) of all or any
portion of the property on which the Premises are located, (iii) Landlord to
defend itself or its lenders, partners or representatives against any claim
or demand, and (iv) any laws, rules, regulations, orders, decrees, or
ordinances, including, without limitation, court orders or subpoenas. Any
and all capitalized terms used herein, which are not otherwise defined
herein, shall have the same meaning ascribed to such term in the signed Lease
Agreement. Any questions regarding this certificate should be directed to,
and when completed, the certificate should be delivered to:
Landlord:
--------------------------------------------------------------------
--------------------------------------------------------------------
c/o Lincoln Property Company Management Services, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404
Attn:
Phone: (415) 571-2200
Name of (Prospective) Tenant:
---------------------------------------------------
Mailing Address:
----------------------------------------------------------------
- --------------------------------------------------------------------------------
Contact Person, Title and Telephone Number(s):
----------------------------------
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Address of (Prospective) Premises:
----------------------------------------------
Length of (Prospective) initial Term:
-------------------------------------------
1. GENERAL INFORMATION:
Describe the initial proposed operations to take place in, on, or about
the Premises, including, without limitation, principal products
processed, manufactured or assembled services and activities to be
provided or otherwise conducted. Existing tenants should describe any
proposed changes to on-going operations.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials be used, generated, stored or
disposed of in, on or about the Premises? Existing tenants should
describe any Hazardous Materials which continue to be used,
generated, stored or disposed of in, on or about the Premises.
Wastes Yes / / No / /
Chemical Products Yes / / No / /
Other Yes / / No / /
If Yes is marked, please explain:
-----------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
2.2 If Yes is marked in Section 2.1, attach a list of any Hazardous
Materials to be used, generated, stored or disposed of in, on or
about the Premises, including the applicable hazard class and an
estimate of the quantities of such Hazardous Materials at any
given time; estimated annual throughput; the proposed
location(s) and method of storage (excluding nominal amounts of
ordinary household cleaners and janitorial supplies which are not
regulated by any Environmental Laws); and the proposed
location(s) and method of disposal for each Hazardous Material,
including, the estimated frequency, and the proposed contractors
or subcontractors. Existing tenants should attach a list setting
forth the information requested
1
<PAGE>
above and such list should 'include actual data from on-going
operations and the identification of any variations in such
information from the prior year's certificate.
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage of gasoline, diesel,
petroleum, or other Hazardous Materials in tanks or sumps
proposed in, on or about the Premises? Existing tenants should
describe any such actual or proposed activities.
Yes / / No / /
If Yes, please explain:
---------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste Generator
I.D. Number? Existing tenants should describe any additional
identification numbers issued since the previous certificate.
Yes / / No / /
4.2 Has your company filed a biennial or quarterly reports as a
hazardous waste generator? Existing tenants should describe any
new reports filed.
Yes / / No / /
If Yes, attach a copy of the most recent report filed.
If yes, attach a copy of the most recent report filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
storm drain? sewer?
-------- --------
surface water? no wastewater or other wastes
-------- -------- discharged.
Existing tenants should indicate any actual discharges. If so,
describe the nature of any proposed or actual discharge(s).
--------------------------------------------------------------------
--------------------------------------------------------------------
5.2 Will any such wastewater or waste be treated before discharge?
Yes / / No / /
If Yes, describe the type of treatment proposed to be conducted.
Existing tenants should describe the actual treatment conducted.
--------------------------------------------------------------------
--------------------------------------------------------------------
6. AIR DISCHARGES
6.1 Do you plan for any air filtration systems or stacks to be used
in your company's operations in, on or about the Premises that
will discharge into the air; and will such air emissions be
monitored? Existing tenants should indicate whether or not there
are any such air filtration systems or stacks in use in, on or
about the Premises which discharge into the air and whether such
air emissions are being monitored.
Yes / / No / /
If Yes, please describe.
--------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
6.2 Do you propose to operate any of the following types of
equipment, or any other equipment requiring an air emissions
permit? Existing tenants should specify any such equipment being
operated in, on or about the Premises.
Spray booth(s) Incinerator(s)
-------- --------
Dip tank(s) Other (please describe)
-------- --------
2
<PAGE>
Drying oven(s) No Equipment Requiring air Permits
-------- --------
If Yes, please describe.
--------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare a
Hazardous, Materials management plan ("Management Plan") pursuant
to Fire Department or other governmental or regulatory agencies'
requirements? Existing tenants should indicate whether or not a
Management Plan is required and has been prepared.
Yes / / No / /
If yes, attach a copy of the Management Plan. Existing tenants
should attach a copy of any required updates to the Management
Plan.
7.2 Are any of the Hazardous Materials, and in particular chemicals,
proposed to be used in your operations in, on or about the
Premises regulated under Proposition 65? Existing tenants should
indicate whether or not there are any new Hazardous Materials
being so used which are regulated under Proposition 65.
Yes / / No / /
If Yes, please explain:
--------------------------------------------------------------------
--------------------------------------------------------------------
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws, has
your company ever been subject to any agency enforcement actions,
administrative orders, or consent decrees or has your company
received requests for information, notice or demand letters, or
any other inquiries regarding its operations? Existing tenants
should indicate whether or not any such actions, orders or
decrees have been, or are in the process of being, undertaken or
if any such requests have been received.
Yes / / No / /
If yes, describe the actions, orders or decrees and any
continuing compliance obligations imposed as a result of these
actions, orders or decrees and also describe any requests,
notices or demands, and attach a copy of all such documents.
Existing tenants should describe andattach a copy of any new
actions, orders, decrees, requests, notices or demands not
already delivered to Landlord pursuant to the provisions of
Section 29 of the signed Lease Agreement.
8.2 Have there ever been, or are there now pending, any lawsuits
against your company regarding any environmental or health and
safety concerns?
Yes / / No / /
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and all other
documents related thereto as requested by Landlord. Existing
tenants should describe and attach a copy of any new
complaint(s), cross-complaint(s), pleadings and other related
documents not already delivered to Landlord pursuant to the
provisions of Section 29 of the signed Lease Agreement.
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
8.3 Have there been any problems or complaints from adjacent tenants,
owners or other neighbors at your company's current facility with
regard to environmental or health and safety concerns? Existing
tenants should indicate whether or not there have been any such
problems or complaints from adjacent tenants, owners or other
neighbors at, about or near the Premises.
Yes / / No / /
If yes, please describe. Existing tenants should describe any
such problems or complaints not already disclosed to Landlord
under the provisions of the signed Lease Agreement.
--------------------------------------------------------------------
--------------------------------------------------------------------
3
<PAGE>
9. PERMITS AND LICENSES
9.1 Attach copies of all Hazardous Materials permits and licenses
including a Transporter Permit number issued to your company with
respect to its proposed operations in, on or about the Premises,
including, without limitation, any wastewater discharge permits,
air emissions permits, and use permits or approvals. Existing
tenants should attach copies of any new permits and licenses as
well as any renewals of permits or licenses previously issued.
The undersigned hereby acknowledges and agrees that (A) this Hazardous
Materials Disclosure Certificate is being delivered in connection with, and
as required by, Landlord in connection with the evaluation and finalization
of a Lease Agreement and will be attached thereto as an exhibit; (B) that
this Hazardous Materials Disclosure Certificate is being delivered in
accordance with, and as required by, the provisions of Section 29 of the
Lease Agreement; and (c) that Tenant shall have and retain full and complete
responsibility and liability with respect to any of the Hazardous Materials
disclosed in the HazMat Certificate notwithstanding Landlord's/Tenant's
receipt and/or approval of such certificate. Tenant further agrees that none
of the following described acts or events shall be construed or otherwise
interpreted as either (a) excusing, diminishing or otherwise limiting Tenant
from the requirement to fully and faithfully perform its obligations under
the Lease with respect to Hazardous Materials, including, without limitation,
Tenant's indemnification of the Indemnitees and compliance with all
Environmental Laws, or (b) imposing upon Landlord, directly or indirectly,
any duty or liability with respect to any such Hazardous Materials,
including, without limitation, any duty on Landlord to investigate or
otherwise verify the accuracy of the representations and statements made
therein or to ensure that Tenant is in compliance with all Environmental
Laws; (i) the delivery of such certificate to Landlord and/or Landlord's
acceptance of such certificate, (ii) Landlord's review and approval of such
certificate, (iii) Landlord's failure to obtain such certificate from Tenant
at any time, or (iv) Landlord's actual or constructive knowledge of the types
and quantities of Hazardous Materials being used, stored, generated, disposed
of or transported on or about the Premises by Tenant or Tenant's
Representatives. Notwithstanding the foregoing or anything to the contrary
contained herein, the undersigned acknowledges and agrees that Landlord and
its partners, lenders and representatives may, and will, rely upon the
statements, representations, warranties, and certifications made herein and
the truthfulness thereof in entering into the Lease Agreement and the
continuance thereof throughout the term, and any renewals thereof, of the
Lease Agreement.
I (print name) , acting with full authority to bind the
(proposed) Tenant and on behalf of the (proposed) Tenant, certify, represent
and warrant that the information contained in this certificate is true and
correct.
(PROSPECTIVE) TENANT:
By:
----------------------------------------------------
Title:
-------------------------------------------------
Date:
--------------------------------------------------
INITIALS:
TENANT:
----------------
LANDLORD:
----------------
4
<PAGE>
ADDENDUM 1
OPTION TO EXTEND THE LEASE
This Addendum 1 (:'Addendum") is incorporated as a part of that certain Lease
Agreement dated February 11, 1997 (the "Lease"), by and between INVISION
TECHNOLOGIES, INC., A DELAWARE CORPORATION ("TENANT"), AND WHLNF REAL ESTATE
LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP ("LANDLORD"), of the
premises located at 7151 Gateway Boulevard, Newark, California (the
"Premises"). Any capitalized terms used herein and not otherwise defined
herein shall have the meaning ascribed to such terms as set forth in the
Lease.
1. GRANT OF EXTENSION OPTION. So long as Tenant has not at any time
been, or the time of Tenant's exercise of this Option, is currently not, in
default in the performance of any of its obligations under this Lease beyond
and applicable cure period set forth in the Lease, and contingent upon review
and approval of Tenant's then current financial condition by Landlord, Tenant
shall have the right, at its option, to extend the term of the Lease for five
(5) years (the "Extended Term").
2. TENANT'S OPTION NOTICE. If Landlord does not receive written notice
from Tenant of its exercise of this option on a date which is not more than
three hundred sixty (360) days nor less than two hundred forty (240) days
prior to the end of the initial term of the Lease (the "Option Notice"), all
rights under this option shall automatically lapse and terminate and shall be
of no further force and effect. Time is of the essence herein.
3. ESTABLISHING THE MONTHLY BASE RENT FOR THE EXTENDED TERM. The
monthly Base Rent for the Extended Term shall be the then current market rent
for the highest and best use for similar space within the area of the
Premises in Newark, California (the "Fair Rental Value") agreed upon solely
by and between Landlord and Tenant and their agents appointed for this
purpose. If Landlord and Tenant are unable to agree on the Fair Rental Value
for either the Extended Term. within ten (10) days of receipt by Landlord of
the Option Notice for the Extended Term, Landlord and Tenant each, at its
cost and by giving notice to the other party, shall appoint a competent and
disinterested commercial real estate broker (hereinafter "broker") with at
least five (5) years' full-time commercial real estate brokerage experience
in the geographical area of the Premises to set the Fair Rental Value for the
Extended Term. If either Landlord or Tenant does not appoint a broker within
ten (10) days after the other party has given notice of the name of its
broker, the single broker appointed shall be the sole broker and shall set
the Fair Rental Value for the Extended Term. If two (2) brokers are
appointed by Landlord and Tenant as stated in this paragraph, they shall meet
promptly and attempt to set the Fair Rental Value. If the two (2) brokers
are unable to agree within ten (10) days after the second broker has been
appointed, they shall attempt to select a third broker, meeting the
qualifications stated in this paragraph within ten (10) days after the last
day the two (2) brokers are given to set the Fair Rental Value. Landlord and
Tenant each shall bear one-half (A) of the cost of appointing the third
broker and of paying the third broker's fee. The third broker, however
selected, shall be a person who has not previously acted in any capacity for
either Landlord or Tenant. Within fifteen (15) days after the selection of
the third broker, the third broker shall select one of the two Fair Rental
Values submitted by the first two brokers as the Fair Rental Value for the
Extended Term. If either of the first two brokers fails to submit their
opinion of the Fair Rental Value, then the single Fair Rental Value submitted
shall automatically be the monthly Base Rent for the Extended Term. The
"Fair Rental Value" of the Premises shall be defined to mean the fair market
rental value of the Premises as of the commencement of the Extended Term,
taking into consideration all relevant factors, including length of term, the
uses permitted under the Lease, the quality, size, design and location of the
Premises, including the condition and value of existing tenant improvements,
and the monthly base rent paid by tenants for premises comparable to the
Premises, and located in Newark, California. In no event shall the monthly
Base Rent for any period of the Extended Term be less than the highest
monthly Base Rent charged during the initial term of this Lease.
4. ADDITIONAL LEASE PROVISIONS FOR EXTENDED TERM. Upon determination of
the monthly Base Rent for the Extended Term, in accordance with the terms
outlined above, the parties shall immediately execute either the standard
lease agreement then in use by Landlord or an amendment to this Lease, at
Landlord's sole option. Such new lease agreement or amendment, as the case
may be, shall set forth among other things, the minimum monthly Base Rent for
the Extended Term and the actual commencement date and expiration date of the
Extended Term. Tenant shall have no other right to extend the term of the
Lease under this Addendum unless Landlord and Tenant otherwise agree in
writing. If Tenant duly exercises this option, in accordance with the terms
contained herein: (1) Tenant shall accept the Premises in its then "As-Is"
condition and, accordingly, Landlord shall not be required to perform any
additional improvements to the Premises; and (2) Tenant hereby agrees that it
will solely be responsible for any and all brokerage commissions and finder's
fees payable to any broker in connection with the option described herein,
and Tenant hereby further agrees that Landlord shall in no event or
circumstance be responsible for the payment of any such commissions and fees.
1
<PAGE>
5. LIMITATIONS ON, AND CONDITIONS TO, EXTENSIONS OPTIONS. This option
is personal to Tenant and may not be assigned, voluntarily or involuntarily,
separate from or as part of the Lease. At Landlord's option, all rights of
Tenant under this option shall terminate and be of no force and effect if any
of the following individual events occur or any combination thereof occur:
(I) Tenant has been in default at any time during the initial term of the
Lease, or is currently in default of any provision of the Lease; and/or (2)
Tenant has assigned its rights and obligations under all or part of the Lease
or Tenant has subleased all or part of the Premises, except for a Permitted
Transferee; and/or (3) Tenant's financial condition is unacceptable to
Landlord at the time the Option Notice is delivered to Landlord; and/or (4)
Tenant has failed to exercise this option in a timely manner in accordance
with the provisions of this Addendum; and/or ($) Tenant no longer has
possession of all or any part of the Premises under the Lease, except in the
case of a Permitted Transferee, or if Lease has been terminated earlier,
pursuant to the terms of the Lease.
INITIALS:
TENANT:
----------------
LANDLORD:
----------------
2
<PAGE>
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------------------
AWARD/CONTRACT | 1. THIS CONTRACT IS A RATED ORDER UNDER | RATING | PAGE OF PAGES
| DPAS (15 CFR 350) | | 1 of 106
- ------------------------------------------------------------------------------------------------------------------------------------
2. CONTRACT (Proc. Inst. Idens.)NO. | 3. EFFECTIVE DATE | 4. REQUISITION/PURCHASE REQUEST/PROJECT NO.
DTFA01-97-C-00021 | 12/24/96 | 705110
- ------------------------------------------------------------------------------------------------------------------------------------
5. ISSUED BY CODE | | 6. ADMINISTERED BY (If other than Item 5) CODE | |
| | | |
Federal Aviation Administration --------------| -----------
800 Independence Ave., S.W. |
Washington, DC 20591 |
Kyle Richmond, 202-267-7851 |
- ------------------------------------------------------------------------------------------------------------------------------------
7. NAME AND ADDRESS OF CONTRACTOR (No., street, city, county, State and ZIP Code) | 8. DELIVERY
| /X/ FOB ORIGIN / / OTHER (See below)
|--------------------------------------
Invision Technologies, Inc. | 9. DISCOUNT FOR PROMPT PAYMENT
3420 E. Third Ave. | NA
Foster City, California 94404 |--------------------------------------
| 10. SUBMIT INVOICES | ITEM
| (4 copies unless other- |
- ---------------------------------------------------------------------------------------------| wise specified) TO THE | 12
CODE | FACILITY CODE | ADDRESS SHOWN IN: |
- ------------------------------------------------------------------------------------------------------------------------------------
11. SHIP TO/MARK FOR CODE | | 12. PAYMENT WILL BE MADE BY CODE |
See Section F | | Federal Aviation Administration |
------------| Accounts Payable Branch, ABA-222 ------------
| 800 Independence Avenue, S.W.
| Washington, DC 20591
- ------------------------------------------------------------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION: | 14. ACCOUNTING AND APPROPRIATION DATA
/ / 10 USC 2304(c)( ) / / 41 USC 252(c)( ) | W/982A/0/F050/3A13AO/3146/98600106
- ------------------------------------------------------------------------------------------------------------------------------------
15. ITEM NO. | 15B. SUPPLIES/SERVICES | 15C. QUANTITY | 15D. UNIT | 15E. UNIT PRICE | 15F. AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
| See Section B | | | |
| | | | |
| | | | |
- ------------------------------------------------------------------------------------------------------------------------------------
15G. TOTAL AMOUNT OF CONTRACT | $ 52,278,800.00
- ------------------------------------------------------------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- ------------------------------------------------------------------------------------------------------------------------------------
(X) | SEC | DESCRIPTION | PAGE(S) | (X) | SEC | DESCRIPTION | PAGE(S)
- ------------------------------------------------------------------------------------------------------------------------------------
PART I - THE SCHEDULE | PART II - CONTRACT CLAUSES
- ------------------------------------------------------------------------------------------------------------------------------------
X | A | SOLICITATION/CONTRACT FORM | 1 | X | I | CONTRACT CLAUSES | 20
- ------------------------------------------------------------------------------------------------------------------------------------
X | B | SUPPLIES OR SERVICES AND | 4 | PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.
| | PRICES/COSTS | |
- ------------------------------------------------------------------------------------------------------------------------------------
X | C | DESCRIPTION/SPECS./WORK STATEMENT | 8 | X | J | LIST OF ATTACHMENTS | 22
- ------------------------------------------------------------------------------------------------------------------------------------
X | D | PACKAGING AND MARKING | 1 | PART IV - REPRESENTATIONS AND INSTRUCTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
X | E | INSPECTION AND ACCEPTANCE | 5 | X | K | REPRESENTATIONS, CERTIFICATIONS AND | 25
- ----------------------------------------------------------------| | | OTHER STATEMENTS OF OFFERORS |
X | F | DELIVERIES OR PERFORMANCE | 5 | | | |
- ------------------------------------------------------------------------------------------------------------------------------------
X | G | CONTRACT ADMINISTRATION DATA | 4 | N/A | L | INSTRS. CONDS. AND NOTICES TO OFFERORS |
- ------------------------------------------------------------------------------------------------------------------------------------
X | H | SPECIAL CONTRACT REQUIREMENTS | 11 | N/A | M | EVALUATION FACTORS FOR AWARD |
- ------------------------------------------------------------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- ------------------------------------------------------------------------------------------------------------------------------------
17. /X/ CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is required | 18./ / AWARD (Contractor is not required to sign this document.)
to sign this document and return 3 copies to issuing | Your offer on solicitation number____________, including the
office.) Contractor agrees to furnished and deliver all items | additions or changes made by your which additions or changes
or perform all the services set forth or otherwise identified | are set forth in full above, is hereby accepted as to the
above and on any continuation sheets for the consideration | contract which consists of the following documents: (a) the
stated herein. The rights and obligations of the parties to | Government's solicitation and your offer, and (b) this
this contract shall be subject to and governed by the following | award/contract. No further contractual document is necessary.
documents: (a) this award/contract, (b) the solicitation, if |
any, and (c) such provisions, representations, certifications, |
and specifications, as are attached or incorporated by reference |
herein. (ATTACHMENTS ARE LISTED HEREIN.) |
- ------------------------------------------------------------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (TYPE OR PRINT) | 20A. NAME OF CONTRACTING OFFICER
| John H. Graham
- ------------------------------------------------------------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR | 19C. DATE SIGNED | 20B. UNITED STATES OF AMERICA | 20C. DATE SIGNED
| | |
BY________________________________________ | | BY________________________________________ |
(Signature of person authorized to sign) | | (Signature of Contracting Officer) |
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PART I - THE SCHEDULE
SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
<PAGE>
Section B, Page i
PART I - THE SCHEDULE
SECTION B - SUPPLIES AND SERVICES AND PRICE/COST
TABLE OF CONTENTS
B.1 IDENTIFICATION OF SERVICES.......................................... 1
A. INDEFINITE DELIVERY/INDEFINITE QUANTITY REQUIREMENTS............ 1
B. TIME AND MATERIALS REQUIREMENTS................................. 3
B.2 SUMMATION........................................................... 5
<PAGE>
Section B, Page 1
PART 1 - THE SCHEDULE
SECTION B - SUPPLIES OR SERVICES AND PRICE/COST
B.1 IDENTIFICATION OF SERVICES
The Contractor shall provide the following supplies and services in accordance
with the terms and conditions of this contract, for a two-year performance
period commencing with date of contract award. All contract line items (CLINs)
will be activated by means of delivery or task orders.
A. INDEFINITE DELIVERY/INDEFINITE QUANTITY REQUIREMENTS
During the term of this contract, the Government shall order and the Contractor
shall furnish not more than the maximum number of items detailed below. For
details regarding minimum contract ordering requirements, please see Section H,
"Minimum and Maximum Contract Amounts."
MAX
MAX UNIT TOTAL
CLIN SUPPLIES/SERVICES QTY UNIT PRICE PRICE NOTE
0001 CTX 5000SP EXPLOSIVES 100 EA $900,000 $90,000,000 A
DETECTION SYSTEM
0002 IMAGE QUALITY TEST 100 EA NSP* Price included A
KIT (IQTK) in CLIN 0001
0003 POWER INCLINED 100 EA $36,000 $3,600,000 A
ENTRANCE CONVEYOR
0004 LUGGAGE POSITIONING 100 EA $57,000 $5,700,000 A
ADAPTER
0005 POWERED FLAT 100 EA $27,000 $2,700,000 A
ENTRANCE CONVEYOR
0006 PLC JUNCTION WITH 100 EA $13,000 $1,300,000 A
STANDARD INTERFACE
SOFTWARE
0007 EXIT SLIDE 100 EA $8,000 $800,000 A
0008 REMOTE LOCATION OF 100 EA $19,800 $1,980,000 A
OPERATOR CONSOLE
PACKAGE
0009 THREAT IMAGE 100 EA NSP* Price included A
PROJECTION (TIP) in CLIN 0001
PACKAGE
<PAGE>
Section B, Page 2
PART 1 - THE SCHEDULE
SECTION B - SUPPLIES OR SERVICES AND PRICE/COST
MAX
MAX UNIT TOTAL
CLIN SUPPLIES/SERVICES QTY UNIT PRICE PRICE NOTE
0010 TIP LIBRARY 1200 VOL NSP* Price included A
in CLIN 0001
0011 FIELD DATA 100 EA NSP* Price included A
REPORTING AND IMAGE in CLIN 0001
DISPLAY PACKAGE
0012 FIRST YEAR WARRANTY 100 EA NSP* Price included A
- PARTS AND LABOR in CLIN 0001
0013 FIRST YEAR WARRANTY 100 EA $23,000 $2,300,000 A
- EXTENDED HOURS
0014 OPERATOR TRAINING 100 EA $10,000 $1,000,000 A
CLASS
0015 INSTRUCTOR TRAINING 50 EA $20,000 $1,000,000 A
CLASS
0016 ENGINEER 50 EA $2,000 $100,000 A
MAINTENANCE
TRAINING CLASS
* NSP - Not separately priced. Price included in CLIN 0001.
<PAGE>
Section B, Page 3
PART 1 - THE SCHEDULE
SECTION B - SUPPLIES OR SERVICES AND PRICE/COST
B. TIME AND MATERIALS REQUIREMENTS
CLIN 0017 - TASK 1 - SITE-SPECIFIC SYSTEM SUPPORT
(To be definitized. See Section I, Clause 3.2.4-23 "Contract Price
Definitization.")
CATEGORY MAXIMUM HOURLY MAXIMUM NOTE
HOURS RATE AMOUNT
SOFTWARE ENGINEER 3,760 B
COMPUTER PROGRAMMER 3,760 B
FIELD SERVICE ENGINEER 3,760 B
SITE ENGINEER 3,760 B
APPLICATION ENGINEER 3,760 B
HARDWARE ENGINEER 3,760 B
DOCUMENT SPECIALIST 3,760 B
DESIGN ENGINEER 3,760 B
ASSEMBLY TECHNICIAN 3,760
FABRICATION TECHNICIAN 3,760
ESTIMATED TRAVEL NA NA $250,000 C
ESTIMATED MATERIAL AND NA NA $500,000 D
OTHER DIRECT COSTS --------
TOTAL
ITEM 0017 E
--------
--------
<PAGE>
Section B, Page 4
PART 1 - THE SCHEDULE
SECTION B - SUPPLIES OR SERVICES AND PRICE/COST
MAX
MAX UNIT TOTAL
CLIN SUPPLIES/SERVICES QTY UNIT PRICE PRICE NOTE
0018 TRAVEL AND NA NA NA $500,000 C
SUBSISTENCE FOR ITEM
0014 (FUNDED AMOUNT
SHOWN IS A
GOVERNMENT
ESTIMATE -
AUTHORIZED TRAVEL
AND SUBSISTENCE
COSTS SHALL BE NON-
FEE BEARING.)
0019 CONTRACT DATA NA NA NSP* Price included
REQUIREMENTS (See in CLIN 0001
Section J)
NOTES
NOTE "A" - Units will be order via individual delivery orders. See the Section H
clause "Delivery Order Procedures." Minimum and maximum contract amounts, by
item, are detailed in the Section H clause, "Minimum and Maximum Contract
Amounts."
NOTE "B" - Direct labor requirements will be ordered via task orders. See the
Section H clause "Task Order Procedures. Fully burdened, fixed hourly rates
apply to all direct labor input under the subject contract line item 0017.
NOTE "C" - The amount listed above is based upon a pre-contract Government
estimate. Travel requirements shall be set forth in individual delivery or task
orders. Travel costs shall be non-fee bearing.
NOTE "D" - The amount listed above is based upon a pre-contract Government
estimate. Material/Other Direct Costs requirements shall be set forth in
individual delivery or task orders. Material/Other Direct Costs shall be non-fee
bearing.
.
NOTE "E" - Total maximum amount, by item, shall be computed by summing labor
categories, estimated travel, and estimated material/ODC maximum amounts. Total
maximum amount, by item, shall then be transcribed by the offeror to the
corresponding item number amount in the summation table below.
<PAGE>
Section B, Page 5
PART 1 - THE SCHEDULE
SECTION B - SUPPLIES OR SERVICES AND PRICE/COST
B.2 SUMMATION
MAXIMUM TOTAL OF CLIN ITEMS 0001 THROUGH 0016 $110,480,000
MAXIMUM TOTAL OF CLIN ITEMS 0017 $Undefinitized
MAXIMUM TOTAL OF CLIN ITEM 0018 $500,000
MAXIMUM TOTAL OF CLIN ITEM 0019 $NSP
- --------------------------------------------------------------------------------
TOTAL MAXIMUM CONTRACT VALUE (Less CLIN 0017) $110,980,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I -THE SCHEDULE
SECTION C - DESCRIPTION/SPECIFICATIONS/WORK STATEMENT
<PAGE>
Section C, Page i
PART I - THE SCHEDULE
SECTION C - DESCRIPTION/SPECIFICATIONS/WORK STATEMENT
TABLE OF CONTENTS
C.1 PURPOSE................................................................. 1
C.2 WORK STATEMENT.......................................................... 1
CLIN 0001 - CTX 5000SP EXPLOSIVES DETECTION SYSTEM...................... 1
CLIN 0002 - IMAGE QUALITY TEST KIT (IQTK)............................... 2
CLIN 0003 - POWER INCLINED ENTRANCE CONVEYOR............................ 2
CLIN 0004 - LUGGAGE POSITIONING ADAPTER................................. 3
CLIN 0005 - POWERED FLAT ENTRANCE CONVEYOR.............................. 3
CLIN 0006 - PLC JUNCTION WITH STANDARD INTERFACE SOFTWARE............... 3
CLIN 0007 - EXIT SLIDE.................................................. 3
CLIN 0008 - REMOTE LOCATION OF OPERATOR CONSOLE PACKAGE................. 3
CLIN 0009 - THREAT IMAGE PROJECTION (TIP) PACKAGE....................... 3
CLIN 0010 - TIP LIBRARY................................................. 4
CLIN 0011 - FIELD DATA REPORTING AND IMAGE DISPLAY PACKAGE.............. 4
CLIN 0012 - FIRST YEAR WARRANTY - PARTS AND LABOR....................... 5
CLIN 0013 - FIRST YEAR WARRANTY - EXTENDED HOURS........................ 5
CLIN 0014 - OPERATOR TRAINING CLASS..................................... 5
CLIN 0015 - INSTRUCTOR TRAINING CLASS................................... 6
CLIN 0016 - ENGINEER MAINTENANCE TRAINING CLASS......................... 6
CLIN 0017 - TASK 1 -SITE-SPECIFIC SYSTEM SUPPORT........................ 6
CLIN 0018 - TRAVEL AND SUBSISTENCE...................................... 6
C.3 CONTRACT DATA REQUIREMENTS (CLIN 0019).................................. 6
C.3.1 Monthly Formal Progress Review.................................... 6
C.3.2 Maintenance Readiness Plan........................................ 7
C.3.3 Production Readiness Plan......................................... 7
C.3.4 TIP Library Development Plan...................................... 7
C.3.5 Training Expansion Plan........................................... 7
C.3.6 Operations Manual................................................. 7
C.3.7 Maintenance Manual................................................ 7
C.3.8 Integration Manual................................................ 8
C.3.9 Installation Manual............................................... 8
C.4 REFERENCES.............................................................. 8
<PAGE>
Section C, Page 1
PART I - THE SCHEDULE
SECTION C - DESCRIPTION/SPECIFICATIONS/WORK STATEMENT
C.1 PURPOSE
The purpose of this procurement is to acquire and deploy FAA certified
Explosives Detection Systems (EDS), specifically the CTX 5000SP manufactured by
InVision Technologies, Inc. of Foster City, CA. The equipment will be used to
automatically screen passenger baggage for explosives. This procurement is in
response to a specific mandate by the White House Commission on Aviation Safety
and Security pertaining to the deployment of existing advanced baggage screening
technologies. The goal of the Commission and of this procurement is to raise the
level of security for the traveling public by deploying this equipment.
C.2 WORK STATEMENT
The Contractor shall furnish and/or make available all necessary technical
and support labor, materials, equipment, facilities, services and data to
accomplish all requirements necessary for or incident to the performance of
this project. Specific deliverables are listed in Section B of this contract;
work areas associated with the each deliverable are discussed below. All
items furnished under this contract shall be operationally tested for
successful performance after installation on site by the Contractor on a
schedule as mutually agreed to by the FAA and the Contractor and in
accordance with industry standards and workmanship. The Contractor shall also
afford full cooperation as described in Section H. 1 herein with other
contractors separately engaged by the FAA for the purposes of system
integration and engineering. All CLINs involving software packages or
electronically stored data shall be assumed to be for single user licenses.
CLIN 0001 - CTX 5000SP EXPLOSIVES DETECTION SYSTEM
Contractor will manufacture and install at a specified location (airport) an
FAA-certified Automated Explosive Detection System (EDS) ready to be integrated
as specified for that particular location. Hereinafter, "system" shall refer to
the "CTX 5000SP". An FAA-certified EDS is defined as a device formally tested by
the FAA and proven to meet the requirements of the "Final Criteria for the
Certification of Explosive Detection Systems" as delineated in the FEDERAL
REGISTER on September 10, 1993 and hereinafter referred to as the "FAA
Certification Criteria." This deliverable includes all hardware, software, and
supporting services/materials required (excluding items specified separately in
subsequent CLINs) to operate the system to screen passenger baggage. The
following are required capabilities:
- - The system shall provide the probability of detection and probability of
False Alarm specified by the FAA Certification Criteria against the full
range of explosives required in the FAA Certification Criteria.
- - The system shall provide for a minimum automated throughput of 250 bags/hr.
<PAGE>
Section C, Page 2
- - The system shall have cabinet x-ray shielding in compliance with FDA 21 CFR
1020.40.
- - The systems shall include these other features:
- -- Third Generation Computed Tomography Scanner
- -- Integrated 2D x-ray pre-scanner ("SP")
- -- 70 degree fan beam x-ray source
- -- Solid state detector array
- -- High speed digital data acquisition and control system
- -- Multiple voltage isolation transformer
- -- Uninterrupted power supply (UPS) for computer system
- -- Standard Programmable Logic Controller ("PLC") interface Which allows for
infeed conveyor operation
- -- Modem for remote system diagnosis
- -- Operator Console including:
- Two 17", high resolution color monitors
- 25 ft. connecting cable
- -- Single user license for FAA CERTIFIED operating software, including:
Automated Explosive Detection, Motion Control, Display, Threat Resolution
and User Tools Package
- -- Up to two person weeks of pre-installation site survey and consultation,
including technical support as needed to work with FAA-designated system
integrator
- -- Operator's manual (English version)
The Contractor shall accomplish all requirements necessary to support the
installation of each system including: on-site set-up and assembly of the
system, but excluding site preparation and local handling, in order to render
the CTX 5000SP and associated hardware delivered under this contract ready for
operation in accordance with the Contractor's published installation manual.
CLIN 0002 - IMAGE QUALITY TEST KIT (IQTK)
The Image Quality Test Kit (IQTK) shall on demand, automatically check and
record a range of critical image quality parameters. The kit shall allow for
daily verification of the system's operation and longer term analysis of
hardware performance. Test results shall be maintained for a period of one year
to allow for off-line trend analysis. Operator demonstration of IQTK shall occur
at system site after system installation as scheduled by mutual agreement.
CLIN 0003 - POWER INCLINED ENTRANCE CONVEYOR
The Contractor shall deliver and install a luggage infeed conveyor for manual
loading. The conveyor shall be sloped from floor level to the CTX entrance. The
Contractor shall integrate the conveyor to the CTX system such that it is
controlled and powered by the system through its standard PLC interface.
<PAGE>
Section C, Page 3
CLIN 0004 - LUGGAGE POSITIONING ADAPTER
The Contractor shall deliver and install a luggage positioning adapter (LPA) for
automated luggage loading. The adapter shall automatically position luggage
prior to insertion into the CTX-5000SP for inspection. The adapter shall include
an out of gauge sensor to prevent bags that exceed allowable height from
entering the system. The Contractor shall integrate the LPA to the CTX system
such that it is controlled by the system through its internal PLC. Power for LPA
to be provided at site by user. The integration shall provide for manual
override to allow for manual insertion of bags into the system.
CLIN 0005 - POWERED FLAT ENTRANCE CONVEYOR
The Contractor shall deliver and install a powered flat entrance conveyor for
semi-automated luggage loading. The Contractor shall integrate the conveyor to
the CTX system such that it is controlled and powered by the internal PLC. The
integration shall provide for manual override to allow for manual insertion of
bags into the system.
CLIN 0006 - PLC JUNCTION WITH STANDARD INTERFACE SOFTWARE
The Contractor shall deliver and install a PLC junction interface for
intelligent connections between the CTX and on-site conveyor system. Interface
shall include eighteen (18) standard inputs/outputs (IO's).
CLIN 0007 - EXIT SLIDE
The Contractor shall deliver and install an unpowered luggage exit slide for
manual unloading of luggage. Slide shall be sloped from CTX exit to ground level
with luggage stop.
CLIN 0008 - REMOTE LOCATION OF OPERATOR CONSOLE PACKAGE
The Contractor shall deliver a package for locating the operator console up to
300 meters from CTX unit. The Contractor shall complete all connections at the
CTX unit and the console. This item does not include cabling nor its
installation.
CLIN 0009 - THREAT IMAGE PROJECTION (TIP) PACKAGE
The Contractor shall deliver and install a Threat Image Projection Package. The
package shall provide for random insertion of pre-recorded bag images (from a
volume of the TIP library described in CLIN 0010, below) between images from
real bags. The package shall record the date and time of the insertion, the
operator's response to the inserted images, the operator's name, and the image
ID (identification). The package shall also record data indicating numbers of
bags processed, machine alarms processed, and screener alarm rates for
individual screeners. The package shall maintain all TIP data on the system
for a minimum of one year.
The package shall provide for summary reports of the data collected in a useful
and easily produced fashion. The reports shall track screener performance over a
user-set rating period. Specifically, the reports shall track individual
operator performance on both Improvised Explosive Device (IED) and False
<PAGE>
Section C, Page 4
Alarm TIP images, the times each operator was logged into the system, number of
bags inspected by each operator, number of machine alarms handled by each
operator, and number of bags suspected. The package shall provide for printing
of the summary reports. Users will have access to raw data for off-line
preparation of custom reports.
The package shall provide for supervisor level access to. change the frequency
of insertion, and the balance of IEDs to False Alarms. The package shall
maintain a permanent record of any supervisor changes.
CLIN 0010 - TIP LIBRARY
The Contractor shall provide and install a TIP library which consists of 12
separate volumes. Each volume shall contain threat bag and false alarm bag
images for use by the TIP Package. Each volume shall contain at least 150 threat
bags and 50 false alarm bags. The threat bags shall represent the full range of
the explosives specified by the FAA EDS Certification Criteria. The specific
volume shall be selected by the government at the time of order. The Contractor
shall offer a selection of at least: Six (6) volumes with no shared bags between
volumes; six (6) additional volumes with at least fifty percent (50%) of the bag
images not shared between volumes nor with first set, and the remainder recycled
from the first set, but not shared among these six (6) volumes. The images in
the volumes shall represent all explosives categories in the FAA Certification
Standard. The FAA shall provide as Government Furnished Information (GFI) the
specification for IED configuration and placement for each volume in the TIP
library.
FAA shall provide access to all bags, contents, IED materials, mix of bag
requirements, and the CTX system installed at the William J. Hughes Technical
Center, sufficient to prepare all volumes in the TIP library.
CLIN 0011 - FIELD DATA REPORTING AND IMAGE DISPLAY PACKAGE
The Contractor shall deliver and install a hardware and software package to
collect and store data on system performance and baggage processing. The package
shall also allow for printing of system console screen images on demand.
The data shall be automatically collected and stored for each bag inspected by
the system. The data shall be exportable in a text format for processing by
other computer systems. The specific data to be collected shall at a minimum
match that exported by the CTX-5000SP to the current Remote Display Station
employed by Delta Airlines at Atlanta's Hartsfield Airport. The package shall be
expandable to include other data elements requested by the user. This package
shall maintain the data on the system for a minimum of one year.
The package shall also automatically capture the image on both screens of the
CTX 5000SP console and print them whenever the operator requests. The package
shall store in the CTX an electronic copy of any printed images for a minimum of
50 images. The package shall receive this request through a soft button added to
the current CTX operator interface. The system console screen images will be
printed on a color printer for association with the bag to assist in alarm
resolution.
<PAGE>
Section C, Page 5
CLIN 0012 - FIRST YEAR WARRANTY - PARTS AND LABOR
First year warranty includes all remedial and quarterly preventive maintenance
performed in accordance with Contractor's Standard Commercial Practice inclusive
of all parts, travel, and labor. Warranty service is provided during a
user-defined service schedule of eight consecutive hours between the hours of 6
AM and 10 PM (site local time), Monday through Friday. Any modification to
service schedule shall require 30 days advance notice and shall be mutually
agreed. During the warranty period, the Contractor shall provide:
1. An engineer on-site within 2 hours of service request;
2. 24-hour technical support via telephone;
3. Modem diagnostic support;
4. Comprehensive software maintenance including bug fixes and new features,
excluding any hardware, if necessary to support software upgrades.
After-hours, weekend, and holiday service will be obtained under CLIN 0013,
"First Year Warranty -- Extended Hours" or CLIN 0017, "Site Specific System
Support".
CLIN 0013 - FIRST YEAR WARRANTY - EXTENDED HOURS
Contractor shall extend the services offered under CLIN 0012 to 24 hour
coverage, 365 days per year.
CLIN 0014 - OPERATOR TRAINING CLASS
The Contractor shall conduct an operator training class in accordance with the
InVision training syllabus as approved by FAA. The class will consist of four
(4) days classroom training and six (6) days of on machine operation training.
An additional one-person week of InVision Application Engineer support shall be
available on an as needed basis determined by user and mutually scheduled by
user and Contractor. Class shall accommodate up to eight (8) operators.
Contractor will invite user to provide instruction of site-specific resolution
procedures. Upon successful completion of the training, trained operators will
be provided sufficient information and instruction to be proficient in the
startup, operation, shut down tasks as well as minor preventative maintenance
that may be required. The Contractor shall provide all necessary training
articles as approved by the FAA including:
1. Simulated IEDs (at least 15),
2. False alarm articles, and
3. Luggage
in real physical form in addition to system images.
At the government's option, training shall be conducted at the Contractor site.
If no site is specified in the task, training shall be conducted at the
operational (airport) site.
<PAGE>
Section C, Page 6
CLIN 0015 - INSTRUCTOR TRAINING CLASS
The Contractor shall provide training for a customer-selected instructor.
Training will prepare the attendee to conduct operator training courses.
Successful graduates of the course will be accredited by InVision to teach
operators of the CTX 5000SP. Training will occur at Contractor's site and will
include course and instruction documentation. Documentation will include a list
of all required training materials to conduct an operator training course.
CLIN 0016 - ENGINEER MAINTENANCE TRAINING CLASS
The Contractor shall provide training for a customer-selected maintenance
person. Training will occur at Contractor's site and will include course and
necessary maintenance documentation. At conclusion of training, students will be
provided sufficient information and instruction to be qualified to perform
maintenance under the Engineer Support Maintenance Plan.
CLIN 0017 - TASK 1 -SITE-SPECIFIC SYSTEM SUPPORT
The Contractor shall provide time and materials support for modifying items
purchased under this contract to meet site-specific requirements for
installation and operation as tasked. This task shall cover installation and
consultation work above and beyond what is provided in CLIN 0001. Additionally,
this task shall cover any additional maintenance service requested by the user
above and beyond what is included in CLIN 0012. The Contractor shall develop a
plan to address these requirements as needed and shall provide labor to
accomplish the modifications at the agreed upon rates for the following
categories:
Software Engineer Documentation Specialist
Computer Programmer Training Specialist
Field Service Engineer Design Engineer
Site Engineer Assembly Technician
Application Engineer Fabrication Technician
Hardware Engineer
CLIN 0018 - TRAVEL AND SUBSISTENCE
Funded amounts are indicated in Section B for travel and subsistence supporting
CLINs 0014 through 0016.
C.3 CONTRACT DATA REQUIREMENTS (CLIN 0019)
To facilitate management and administration of this contract, the Contractor
shall conduct activities and provide reports as specified. See also Section J,
List of Exhibits for schedules and distribution.
C.3.1 MONTHLY FORMAL PROGRESS REVIEW
The Contractor shall be responsible for conducting monthly progress reviews at
the Contractor site. Progress reviews shall include, at a minimum, a review of
all pertinent technical, and schedule aspects
<PAGE>
Section C, Page 7
of the contract, including an estimate of the work to be accomplished in the
next month. The reviews shall be documented and submitted as formal reports. The
Government reserves the right to replace a formal monthly review at the
Contractor site with a less formal update completed by teleconference, to change
the location of the reviews at any time, and to increase or decrease the
frequency of reviews as required.
C.3.2 MAINTENANCE READINESS PLAN
The Contractor shall prepare a plan describing the actions necessary to
implement the field support as specified by this contract. The plan will include
but will not be limited to:
a. Steps required and schedule for establishing regional service
representatives/engineers;
b. Steps required and schedule for establishing spare parts depots, to
include estimated spare parts inventories; and
c. Strategy for hiring maintenance personnel (i.e. new direct personnel,
or contracting of services locally),
C.3.3 PRODUCTION READINESS PLAN
The Contractor shall prepare and deliver a plan describing the actions necessary
to meet the production requirements and schedule for this contract.
C.3.4 TIP LIBRARY DEVELOPMENT PLAN
The Contractor shall prepare and deliver a plan describing the actions necessary
and schedule for developing the additional TIP libraries to be delivered under
CLIN 0010 of this contract.
C.3.5 TRAINING EXPANSION PLAN
The Contractor shall prepare and deliver a plan describing the actions necessary
and schedule to meet the training requirements of this contract.
C.3.6 OPERATIONS MANUAL
The Contractor shall deliver an Operations Manual and subsequent changes to meet
the operations requirements of this contract.
C.3.7 MAINTENANCE MANUAL
The Contractor shall deliver a maintenance manual, which will facilitate owner
and operator preventive and corrective maintenance of a non-complex nature.
<PAGE>
Section C, Page 8
C.3.8 INTEGRATION MANUAL
The Contractor shall deliver an Integration Manual which describes the actions
necessary to fully integrate a CTX 5000SP into a baggage system.
C.3.9 INSTALLATION MANUAL
The Contractor shall deliver an Installation Manual which describes actions
necessary properly install and render operational a CTX 5000SP.
C.4 REFERENCES
The Contractor will be guided by the following references in the performance of
this contract:
"Final Criteria for the Certification of Explosive Detection Systems," FEDERAL
REGISTER, September 10, 1993
<PAGE>
PART I - THE SCHEDULE
SECTION D - PACKAGING AND MARKING
<PAGE>
Section D, Page i
PART I - THE SCHEDULE
SECTION D - PACKAGING AND KING
TABLE OF CONTENTS
D.1 PACKING AND PACKAGING................................................... 1
D.2 MARKING OF DELIVERABLES................................................. 1
D.3 MARKING OF REPORTS...................................................... 1
<PAGE>
Section D, Page 1
PART I - THE SCHEDULE
SECTION D - PACKAGING AND MARKING
D.1 PACKING AND PACKAGING
All deliverables under this contract shall be preserved and packaged in
accordance with the most economical and best commercial practices to assure
delivery at the destination and to prevent deterioration and damage due to
shipping, handling and storage hazards.
D.2 MARKING OF DELIVERABLES
In addition to information provided with shipping instructions, all deliverables
shall be marked on the outside of the packaging with the following:
a. FAA contract number;
b. Contractor's name and address;
c. List of contents; and
d. Task order number.
D.3 MARKING OF REPORTS
The Contractor shall mark all reports as follows:
a. Task Order number
b. Report Title
c. Contract number
d. Date
e. Distribution
<PAGE>
PART I - THE SCHEDULE
SECTION E - INSPECTION AND ACCEPTANCE
<PAGE>
Section E, Page i
PART I - THE SCHEDULE
SECTION E - INSPECTION AND ACCEPTANCE
TABLE OF CONTENTS
E.1 3.1-1 CLAUSES AND PROVISIONS INCORPORATED BY REFERENCE (JUNE 1996)...... 1
E.2 SOFTWARE QUALITY ASSURANCE REQUIREMENTS................................. 1
E.3 ADDITIONAL CONTRACT QUALITY REQUIREMENTS................................ 2
E.4 ASSIGNMENT OF QUALITY RELIABILITY OFFICER (QRO)......................... 2
E.5 INSPECTION AND ACCEPTANCE............................................... 3
E.5.1 PRELIMINARY INSPECTION AND ACCEPTANCE............................. 3
E.5.2 FINAL INSPECTION AND ACCEPTANCE................................... 3
E.5.3 INSTALLATION INSPECTION AND ACCEPTANCE............................ 3
E.6 AVAILABILITY OF SPECIFICATIONS.......................................... 4
E.7 INSPECTION AND ACCEPTANCE OF CONTRACT DATA REQUIREMENTS................. 4
<PAGE>
Section E, Page 1
PART I - THE SCHEDULE
SECTION E - INSPECTION AND ACCEPTANCE
E.1 3.1-1 CLAUSES AND PROVISIONS INCORPORATED BY REFERENCE (JUNE 1996)
This screening information request (SIR) or contract, as applicable,
incorporates by reference one or more provisions or clauses with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make the full text available, or offerors and contractors may
obtain the full text via Internet from the Federal Aviation Administration (FAA)
home page (http://www.faa.gov).
3.10.4-2 Inspection of Supplies--Fixed-Price April 1996
3.10.4-4 Inspection of Services - Both Fixed-Price & April 1996
Cost Reimbursement
3.10.4-5 Inspection-Time-and-Materials and Labor-Hour April 1996
3.10.4-13 Higher-Level Contract Quality Requirement April 1996
3.10.4-16 Responsibility for Supplies April 1996
* Insert shall read: "ANSI/ASCQ Q-9003-1994, 'Quality Systems-Model
for Quality Assurance in Final Inspection and Test'"
E.2 SOFTWARE QUALITY ASSURANCE REQUIREMENTS
The Contractor shall provide and maintain a software quality assurance program.
This program shall be documented, and shall provide for the procedures and
controls to be utilized by the Contractor and/or subcontractor(s), if
applicable, for assuring that all requirements of the contract are met. As a
minimum, this program shall provide for:
a. A quality assurance (QA) organization that has sufficient
responsibility and authority to identify and evaluate quality problems, and to
initiate, recommend or provide solutions;
b. Procedures and controls to assure adequate configuration management
during all operations through final acceptance;
c. Controls to assure that all inspection and testing is performed in
compliance with contract requirements and that all test data is complete,
correct, traceable, repeatable, and acceptable;
d. Maintenance of a proper record keeping function to provide objective
evidence and traceability of operations performed;
e. If applicable, procedures and controls for assuring that all software
products or services procured from subcontractors conform to contract
requirements;
f. Procedures and controls to assure that all documentation is adequately
reviewed and meets contract requirements;
<PAGE>
Section E, Page 2
PART I - THE SCHEDULE
SECTION E - INSPECTION AND ACCEPTANCE
g. Procedures and controls for the prevention of software deficiencies,
detection and analysis of deficiencies when they do occur, as well as procedures
for corrective action;
h. A system of periodic internal quality audits or review to verify
whether quality activities and related results are in compliance with planned
arrangements, and to verify that the QA program is performing effectively.
E.3 ADDITIONAL CONTRACT QUALITY REQUIREMENTS
In addition to the contract quality requirements described elsewhere in this
document, ANSI/ASQC Q-9003-1994- Quality Systems-Model for Quality Assurance in
Final Inspection and Test shall apply.
E.4 ASSIGNMENT OF QUALITY RELIABILITY OFFICER (QRO)
The following provisions are a part of this contract.
(a) The Government's Quality and Reliability Officer (QRO) assigned to
this contract, and designated as such by the Government, has the authority to
verify that the Contractor's quality system complies with contract requirements,
including the Contractor's Quality System Plan (QSP) (if applicable), to witness
tests, and to inspect and accept or reject supplies provided under this
contract.
(b) Prior to shipment thereof, the Contractor shall submit to the QRO, for
inspection and acceptance, all supplies which are subject to final Government
inspection and acceptance at the Contractor's facilities. Acceptance by the QRO
constitutes verification by the Government that supplies comply with all
contract requirements which are to be completed prior to shipment, including
satisfactory completion of factory tests. Any supplies determined by the QRO to
be nonconforming shall be corrected prior to shipment. All other supplies,
except those specified to be accepted by the Contracting Officer, shall be
submitted to the QRO for final inspection and acceptance prior to shipment.
(c) Failure of the Contractor to maintain and operate a Quality System in
accordance with the terms of the contract may, based upon a written
determination of the QRO (and consistent with the quality system requirements of
the contract), be grounds for rejection of affected supplies.
(d) The Contractor shall provide appropriate office space for the QRO and
his/her staff for the performance of Government evaluations and administrative
functions. The office area shall be secure to accommodate meetings of a
sensitive nature. File cabinets and suitable desks, both with locking
capabilities, typewriters and chairs, all in good repair, and other
miscellaneous office equipment, as required, shall be supplied by the
Contractor. The Contractor shall provide secretarial help, as required by the
QRO, for typing documents related to the contract. A telephone shall be provided
to each desk, with no less than one line per two QRO staff members. The cost of
long distance calls placed by the QRO staff will be borne by the Government. The
Contractor shall provide parking space to the extent available. In the event a
change in location of the QRO staff is required, Contractor/QRO coordination
will take place in order to facilitate Government planning and implementation of
a smooth transition.
<PAGE>
Section E, Page 3
PART I - THE SCHEDULE
SECTION E - INSPECTION AND ACCEPTANCE
(e) Notification of Readiness for Inspection. Unless otherwise specified
in the contract, the Contractor shall notify the designated resident QRO in
writing within 2 workdays (7 workdays if there is not a resident FAA QRO) of the
time (1) when Contractor inspection or tests will be performed in accordance
with the conditions of the contract and (2) when the supplies or services
performed will be ready for government inspection.
E.5 INSPECTION AND ACCEPTANCE
E.5.1 PRELIMINARY INSPECTION AND ACCEPTANCE
Inspection and test associated with preliminary Government acceptance of systems
components and aggregates, including all Hardware/Equipment, along with all
Software, Firmware and Interface requirements shall be performed by the
Contractor at the Contractor's plant and shall be witnessed by the Government's
Quality and Reliability Officer (QRO). Such inspection and testing shall be in
accordance with the document titled "InVision Technologies, Inc., CTX Series
Explosive Detection System, Factory or Site Acceptance Test Procedure" (see
Attachment A, Section J). Additionally, the Government reserves the right to
randomly perform additional preliminary acceptance testing. Thirty days prior to
the performance of such additional testing, the Government shall notify the
Contractor of the general testing requirements.
Preliminary Government acceptance of systems components and aggregates,
including all Hardware/Equipment, along with all Software, Firmware and
Interface requirements shall be made by the Government QRO at the Contractor's
plant.
E.5.2 FINAL INSPECTION AND ACCEPTANCE
Inspection and Final Acceptance by the Government of all Supplies delivered
during performance of this contract shall be performed at the Contractor's plant
or facility by the Government. Inspection and testing performed prior to final
acceptance shall be in accordance with the final acceptance test procedures to
be mutually agreed upon by the Government and the Contractor prior to delivery
of the first CTX 5000SP system. Such final acceptance test procedures shall be
consistent with the FAA's "Final Criteria for the Certification of Explosive
Detection Systems" and the general system requirements detailed in this
contract.
E.5.3 INSTALLATION INSPECTION AND ACCEPTANCE
Installation Inspection and Acceptance shall be performed by the Government at
the installation site in accordance with the installation acceptance test
procedures to be mutually agreed upon by the Government and the Contractor prior
to installation of the first CTX 5000SP system.
<PAGE>
Section E, Page 4
PART I - THE SCHEDULE
SECTION E - INSPECTION AND ACCEPTANCE
E.6 AVAILABILITY OF SPECIFICATIONS
ANSI/ASQC Q-9003-1994 Quality Systems-Model for Quality Assurance in Final
Inspection and Test may be obtained from:
American Society for Quality Control
611 East Wisconsin Avenue
P.O. Box 3005
Milwaukee, Wisconsin 53201-3005
Phone (414) 272-8575
(800) 248-1946
Fax (414) 272-1734
E.7 INSPECTION AND ACCEPTANCE OF CONTRACT DATA REQUIREMENTS
Contract data requirements shall be inspected and accepted in accordance with
CDRL Forms shown in Section J.
<PAGE>
PART I - THE SCHEDULE
SECTION F - DELIVERIES OR PERFORMANCE
<PAGE>
Section F, Page i
PART I - THE SCHEDULE
SECTION F - DELIVERIES OR PERFORMANCE
TABLE OF CONTENTS
F.1 3.1-1 CLAUSES AND PROVISIONS INCORPORATED BY REFERENCE (JUNE 1996)...... 1
F.2 F.O.B. ORIGIN, CONTRACTOR'S FACILITY.................................... 1
F.3 PERIOD OF PERFORCE...................................................... 2
F.4 PLACE OF DELIVERY/PERFORMANCE - NON-DATA ITEMS.......................... 2
F.5 TIME AND PLACE OF DELIVERY - DATA ITEMS................................. 2
F.6 TIME OF DELIVERY - INDEFINITE DELIVERY/INDEFINITE QUANTITY ITEMS........ 3
F.7 TIME OF DELIVERY - TIME AND MATERIAL REQUIREMENTS....................... 5
<PAGE>
Section F, Page 1
PART I - THE SCHEDULE
SECTION F - DELIVERIES OR PERFORMANCE
F.1 3.1-1 CLAUSES AND PROVISIONS INCORPORATED BY REFERENCE (JUNE 1996)
This screening information request (SIR) or contract, as applicable,
incorporates by reference one or more provisions or clauses with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make the full text available, or offerors and contractors may
obtain the full text via Internet from the Federal Aviation Administration (FAA)
home page (http://www.faa.gov).
3.10.1-9 Stop Work Order October 3, 1996
3.10.1-11 Government Delay of Work April 1996
F.2 F.O.B. ORIGIN, CONTRACTOR'S FACILITY
A. The term "f.o.b. origin, Contractor's facility," as used in this clause,
means free of expense to the Government delivered on board the indicated type of
conveyance of the carrier (or of the Government, if specified) at the designated
facility, on the named street or highway, in the city, county, and State from
which the shipment will be made. In accordance with Clause 3.10.4-16,
Responsibility for Supplies, title to all supplies furnished under this
contract, shall pass to the Government upon delivery to the f.o.b. point.
B. The Contractor shall:
1. Pack and mark the shipment to comply with contract specifications; or
in the absence of specifications, prepare the shipment in conformance with
carrier requirements to protect the goods and to ensure assessment of the lowest
applicable transportation charge;
2. Order specified carrier equipment when requested by the Government; or
if not specified, order appropriate carrier equipment not in excess of capacity
to accommodate shipment.
3. Deliver the shipment in good order and condition to the carrier, and
load, stow, trim, block, and/or brace carload or truckload shipment (when loaded
by the Contractor) on or in the carrier's conveyance as required by carrier
rules and regulations.
4. Be responsible for any loss of and/or damage to the goods:
a. Occurring before delivery to the carrier.
b. Resulting from improper packing and marking; or
c. Resulting from improper loading, stowing, trimming, blocking,
and/or bracing of the shipment, if loaded by the Contractor on or in the
carrier's conveyance.
<PAGE>
Section F, Page 2
PART I - THE SCHEDULE
SECTION F - DELIVERIES OR PERFORMANCE
5. Complete the Government bill of lading supplied by the ordering agency
or, when a Government bill of lading is not supplied, prepare a commercial bill
of lading or other transportation receipt. The bill of lading shall show:
a. A description of the shipment in terms of the governing freight
classification or tariff (or Government rate tender) under which lowest freight
rates are applicable.
b. The seals affixed to the conveyance with their serial numbers or
other identification.
c. Lengths and capacities of cars or trucks ordered and furnished.
d. Other pertinent information required to effect prompt delivery to
the consignee, including name, delivery address, postal address and ZIP code of
consignee, routing, etc.
e. Special instructions or annotations requested by the ordering
agency for commercial bills of lading; e.g., (1) "to be converted to a
Government bill of lading," or (2) "this shipment is the property of, and the
freight charges paid to the carrier(s) will be reimbursed by, the Government."
f. The signature of the carrier's agent and the date the shipment is
received by the carrier.
6. Distribute the copies of the bill of lading, or other transportation
receipts, as directed by the ordering agency.
F.3 PERIOD OF PERFORCE
The period of performance of this contract shall be from date of contract award
through two (2) years from date of contract award.
F.4 PLACE OF DELIVERY/PERFORMANCE - NON-DATA ITEMS
The place of delivery or performance shall be as specified in individual
delivery orders.
F.5 TIME AND PLACE OF DELIVERY - DATA ITEMS
Time and place of delivery of all contract data requirements shall be as
detailed in the applicable Contract Data Requirements List (CDRL), Section J.
<PAGE>
Section F, Page 3
PART I - THE SCHEDULE
SECTION F - DELIVERIES OR PERFORMANCE
F.6 TIME OF DELIVERY - INDEFINITE DELIVERY/INDEFINITE QUANTITY ITEMS
The time of delivery schedule for all contract line items (CLINs) shall be as
specified in individual delivery orders; however, the Government shall not order
nor shall the Contractor be required to deliver indefinite delivery/indefinite
quantity units in excess of the rates indicated below. However, the Government
agrees to order the minimum quantity of 54 CLIN 0001 items in the initial
delivery order, concurrent with contract award.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLIN MAXIMUM SCHEDULE
QUANTITY
- --------------------------------------------------------------------------------
0001 100 Commencing January 1997, 1 each per month the first
three months; 2 each per month the fourth and fifth
months; 3 each the sixth month; 4 each the seventh
month; 6 each per month the eighth and ninth months; 8
each the tenth month; I0 each per month thereafter.
- --------------------------------------------------------------------------------
0002 100 Commencing January 1997, 0 each per month the first
two months, 3 each the third month; 2 each per month
the fourth and fifth months; 3 each the sixth month; 4
each the seventh month; 6 each per month the eighth
and ninth months; 8 each the tenth month; 10 each per
month thereafter.
- --------------------------------------------------------------------------------
0003 100 Commencing January 1997, 1 each per month the first
three months; 2 each per month the fourth and fifth
months; 3 each the sixth month; 4 each the seventh
month; 6 each per month the eighth and ninth months; 8
each the tenth month; 10 each per month thereafter.
- --------------------------------------------------------------------------------
0004 100 Commencing January 1997, 1 each per month the first
three months; 2 each per month the fourth and fifth
months; 3 each the sixth month; 4 each the seventh
month; 6 each per month the eighth and ninth months; 8
each the tenth month; 10 each per month thereafter.
- --------------------------------------------------------------------------------
0005 100 Commencing January 1997, 1 each per month the first
three months; 2 each per month the fourth and fifth
months; 3 each the sixth month; 4 each the seventh
month; 6 each per month the eighth and ninth months;
8 each the tenth month; 10 each per month thereafter.
- --------------------------------------------------------------------------------
<PAGE>
Section F, Page 4
PART I - THE SCHEDULE
SECTION F - DELIVERIES OR PERFORMANCE
- --------------------------------------------------------------------------------
0006 100 Commencing January 1997, 1 each per month the first
three months; 2 each per month the fourth and fifth
months; 3 each the sixth month; 4 each the seventh
month; 6 each per month the eighth and ninth months; 8
each the tenth month; 10 each per month thereafter.
- --------------------------------------------------------------------------------
0007 100 Commencing January 1997, 1 each per month the first
three months; 2 each per month the fourth and fifth
months; 3 each the sixth month; 4 each the seventh
month; 6 each per month the eighth and ninth months; 8
each the tenth month; 10 each per month thereafter.
- --------------------------------------------------------------------------------
0008 100 Commencing January 1997, 1 each per month the first
three months; 2 each per month the fourth and fifth
months; 3 each the sixth month; 4 each the seventh
month; 6 each per month the eighth and ninth months; 8
each the tenth month; 10 each per month thereafter.
- --------------------------------------------------------------------------------
0009 100 Commencing January 1997, 0 each per month the first
two months, 3 each the third month; 2 each per month
the fourth and fifth months; 3 each the sixth month; 4
each the seventh month; 6 each per month the eighth
and ninth months; 8 each the tenth month; 10 each per
month thereafter.
- --------------------------------------------------------------------------------
0010 100 Contractor shall deliver first volume no later than 31
March 1997 conditioned upon receipt from the FAA of
direction and GFP/GFE NLT Jan. 1997. For CTX-5000SP
systems delivered prior to 31 March 1997, initial
volume installation shall be performed by the
Contractor at system installation site. For CTX 5000SP
systems delivered after 31 March 1997, initial volume
shall be installed by the Contractor during
manufacture of CTX 5000SP.
Subsequent volume deliveries (replacements) will be
performed at the government's discretion upon a
reasonable schedule agreed to by the Contractor and
conditioned upon timely receipt of GFP/GFE.
- --------------------------------------------------------------------------------
0011 100 Commencing January 1997, 0 each per month the first
month, 2 each the second month, 1 each the third
month; 2 each per month the fourth and fifth months;
3 each the sixth month; 4 each the seventh month;
6 each per month the eighth and ninth months; 8 each
the tenth month; 10 each per month thereafter.
- --------------------------------------------------------------------------------
<PAGE>
Section F, Page 5
PART I - THE SCHEDULE
SECTION F - DELIVERIES OR PERFORMANCE
- --------------------------------------------------------------------------------
0012 100 Commencing January 1997, 1 each per month the first
three months; 2 each per month the fourth and fifth
months; 3 each the sixth month; 4 each the seventh
month; 6 each per month the eighth and ninth months; 8
each the tenth month; 10 each per month thereafter.
- --------------------------------------------------------------------------------
0013 100 Commencing January 1997, 1 each per month the first
three months; 2 each per month the fourth and fifth
months; 3 each the sixth month; 4 each the seventh
month; 6 each per month the eighth and ninth months; 8
each the tenth month; 10 each per month thereafter.
- --------------------------------------------------------------------------------
0014 100 Commencing January 1997, 1 each per month the first
three months, 2 each per month the fourth and fifth
months, 3 each the sixth month, 5 each per month
thereafter.
- --------------------------------------------------------------------------------
0015 100 Commencing January 1997, 1 each per month the first
three months, 2 each per month the fourth and fifth
months, 3 each the sixth month, 4 each per month
thereafter.
- --------------------------------------------------------------------------------
0016 100 Commencing January 1997, 1 each per month the first
three months, 2 each per month the fourth and fifth
months, 3 each the sixth month, 4 each per month
thereafter.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F.7 TIME OF DELIVERY - TIME AND MATERIAL REQUIREMENTS
The time of delivery schedule for all contract line item (CLIN) 0017
requirements shall be as specified in individual task orders.
<PAGE>
PART I - THE SCHEDULE
SECTION G - CONTRACT ADMINISTRATION DATA
<PAGE>
Section G, Page i
PART I - THE SCHEDULE
SECTION G - CONTRACT ADMINISTRATION DATA
TABLE OF CONTENTS
G.I CONTACT ADMINISTRATION (FAA)............................................ 1
G.2 FAAAMS 3.10.1-22 CONTRACTING OFFICER'S TECHNICAL REPRESENTATIVE......... 2
G.3 INVOICES................................................................ 2
G.4 ORDERING (FAAAMS 3.2.4-16, OCTOBER 3, 1996)............................. 3
G.5 CORRESPONDENCE PROCEDURES............................................... 3
G.6 TRAVEL COSTS (APPLICABLE TO CLINS 0014, 0017 AND 0018).................. 3
<PAGE>
Section G, Page 1
PART I - THE SCHEDULE
SECTION G - CONTRACT ADMINISTRATION DATA
G.I CONTACT ADMINISTRATION (FAA)
a. CONTRACTING OFFICER: The FAA Contracting Officer's name and address are as
follows:
Federal Aviation Administration
Mr. Kyle Richmond
ASU-360B
800 Independence Ave.
Washington, DC 20591
Telephone (202)267-7851
Fax (202)267-5149
b. SECURITY EQUIPMENT PRODUCT LEAD
Federal Aviation Administration
Mr. Ronald R. Polillo
AAR-600
800 Independence Ave.
Washington, DC 20591
Telephone (202) 493-4801
Fax(202) 267-7154
c. QUALITY RELIABILITY OFFICER (QRO)
TBD
d. CONTRACTING OFFICER'S TECHNICAL REPRESENTATIVE (COTR)
TBD
(1) The COTR is responsible for monitoring progress and overall technical
management of the work hereunder and shall be contacted regarding questions
or problems of a technical nature. In no event, however, will any
understanding or agreement, modification, change order, or other matter
deviating from the terms of the contract between the Contractor and any
person other than the Contracting Officer be effective or binding upon the
Government, unless a contract modification or letter of direction is
executed by the Contracting Officer prior to completion of this contract.
(2) On all matters that pertain to contract terms, the Contractor shall
contact the Contracting Officer. When, in the opinion of the Contractor,
the COTR requests effort outside the existing scope of the contract, the
Contractor will promptly notify the Contracting Officer. No action shall
<PAGE>
Section G, Page 2
PART I - THE SCHEDULE
SECTION G - CONTRACT ADMINISTRATION DATA
be taken by the Contractor under such request unless and until the
Contracting Officer has issued a letter of direction or a contract
modification.
G.2 FAAAMS 3.10.1-22 CONTRACTING OFFICER'S TECHNICAL REPRESENTATIVE
CONTRACTING OFFICER'S TECHNICAL REPRESENTATIVE (JULY 1996)
(a) The Contracting Officer may designate other Government personnel (known as
the Contracting Officer's Technical Representative) to act as his or her
authorized representative for contract administration functions which do not
involve changes to the scope, price, schedule, or terms and conditions of the
contract. The designation will be in writing, signed by the Contracting Officer,
and will set forth the authorities and limitations of the representative(s)
under the contract. Such designation will not contain authority to sign
contractual documents, order contract changes, modify contract terms, or create
any commitment or liability on the part of the Government different from that
set forth in the contract.
(b) The Contractor shall immediately contact the Contracting Officer is there
is any question regarding the authority of an individual to act on behalf of the
Contracting Officer under this contract.
(END OF CLAUSE)
G.3 INVOICES
The Federal Aviation Administration intends to make payment within 30 days of
receipt of a properly prepared invoice submitted to the billing office below:
Federal Aviation Administration
Accounts Payable Branch (ABA-222)
800 Independence Avenue, SW
Washington, DC 20591
The Contractor shall submit an original and three copies of all invoices to the
above designated billing office on a monthly basis. Certification of the
invoices will be based on ACO and/or COAR review.
The Contractor shall also provide simultaneously with the original, a copy of
each certified invoice to the following:
Federal Aviation Administration
Mr. Kyle Richmond
Contracting Officer, ASU-360B
800 Independence Avenue, SW
Washington, DC 20591
<PAGE>
Section G, Page 3
PART I - THE SCHEDULE
SECTION G - CONTRACT ADMINISTRATION DATA
The payment will be made pursuant to the "Mandatory Information for Electronic
Funds Transfer Payment Methods" clause in Section I of this contract.
G.4 ORDERING (FAAAMS 3.2.4-16, OCTOBER 3, 1996)
(a) Any supplies and services to be furnished under this contract shall be
ordered by issuance of delivery orders or task orders by the Contracting
Officer. Such orders may be issued for two years from the date of contract
award.
(b) All delivery orders or task orders are subject to the terms and conditions
of this contract. In the event of conflict between a delivery order or task
order and this contract, the contract shall control.
(c) If mailed, a delivery order or task order is considered "issued" when the
Government deposits the order in the mail. Orders may be issued orally, by
facsimile, or by electronic commerce methods only if authorized in the Schedule.
(END OF CLAUSE)
G.5 CORRESPONDENCE PROCEDURES
To promote timely and effective contract administration, correspondence
submitted under this contract shall be subject to the following procedures
(except for invoices and deliverable items):
a. All correspondence relative to this contract shall be addressed to the
Contracting Officer, ASU-360B. Correspondence of a technical nature shall
include an information copy addressed to the Contracting Officer's
Technical Representative (COTR).
b. MAIL: The Contractor shall use discretion in the use of"express" or
"overnight" mail. These premium services should be used sparingly and in
situations where the regular U.S. mail system would not be adequate for the
timely transfer of technical or contract related documentation. Use of
electronic mail or facsimile (FAX) service is encouraged where appropriate.
G.6 TRAVEL COSTS (APPLICABLE TO CLINS 0014, 0017 AND 0018)
a. Travel shall be reimbursed on a cost plus no fee basis, subject to Joint
Federal Travel Regulations (JFTR) guidelines and any other limitations
cited below.
1. The Government will reimburse the Contractor, up to amounts allowed by
the JFTR, for reasonable travel expenditures, incurred in the
performance of this contract. In maintaining a policy of keeping
travel costs 'reasonable' in the performance of this contract, the
Contractor agrees to use a cost effective approach and continuously
pursue opportunities to lower and contain travel costs using, where
practical, group rate arrangements, off-peak travel itineraries and
other similar travel cost containment
<PAGE>
Section G, Page 4
PART I - THE SCHEDULE
SECTION G - CONTRACT ADMINISTRATION DATA
methods. Further, the Contractor agrees to effect procedures to ensure
Government reimbursable travel expenditures are only incurred when
absolutely necessary. To assist it in determining reasonable travel
cost objectives, as needed, the Contractor is encouraged to contact
the FAA travel office for general guidance. Further, to mitigate the
inherently higher rates associated with urgent emergent travel, the
Contractor agrees to contact, reasonably in advance, the Contracting
Officer for assistance prior to executing such travel, unless
documented circumstances clearly indicate such advance contact was not
possible.
2. Incurred travel costs, listed below, will be disallowed for Government
reimbursement and considered as being expenditures to be absorbed by
the Contractor. Included are costs:
(i) in excess of amounts allowed by the JFTR;
(ii) within a Government installation, where Government
transportation is available;
(iii) for personal convenience, including daily travel to and from
work;
(iv) in the case of urgent emergent travel, in excess of amounts
allowed by the JFTR, due to the Contractor not requesting
Contracting Officer assistance reasonably in advance except
for justifiable and documented circumstances which prevented
such advance contact from being possible; and
(v) in the replacement of personnel, when such replacement is
accomplished for the Contractor's or employee's convenience
In the case of urgent emergent travel, if the Contracting Officer's assistance
has been reasonably requested in advance, or if requested as soon as practical
after commencement of travel and properly justified and documented, the
Contracting Officer may authorize, on a case-by-case basis, reimbursement for
amounts in excess of JFTR rates. The Contractor shall implement procedures to
minimize urgent emergent travel. Any Contracting Officer decision regarding
reimbursement of travel costs in excess of amounts allowed by JFTR, for urgent
emergent travel, shall be a unilateral decision, not subject to dispute or any
right contained in clause I.10 (disputes clause), of this contract.
3. Relocation and travel costs incident to relocation will only be
reimbursable by the Government if such costs are:
(i) in conformance with existing company policy;
(ii) represent the most cost effective approach among all other
potential alternatives; and
(iii) are specifically authorized by the Contracting Officer in advance
of being incurred.
If the Contractor anticipates relocation costs will be incurred, the Contractor
must submit, to the Contracting Officer, reasonably in advance, a written
request with detailed justification and a cost/benefit analysis of alternatives.
The Contracting Officer shall make a unilateral decision, on the request, which
will not be subject to dispute or any other recourse contained in this contract.
<PAGE>
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
<PAGE>
Section H, Page i
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
TABLE OF CONTENTS
H.1 SYSTEM INTEGRATION CONTRACTOR RELATIONSHIP.............................. 1
H.2 CONTRACT SUPPORT SERVICES - ESTABLISHMENT OF A CONTRACT
LIAISON OFFICE.......................................................... 3
H.3 MINIMUM AND MAXIMUM CONTRACT AMOUNTS.................................... 5
H.4 WARRANTY OF SUPPLIES.................................................... 6
H.5 TASK ORDER PROCEDURES (APPLICABLE TO CLIN # 0017)....................... 8
H.6 DELIVERY ORDER PROCEDURES (APPLICABLE TO CLIN #S 0001-0016 )............ 9
H.7 DISSEMINATION OF CONTRACT INFORMATION................................... 10
H.8 SECURITY CLEARANCES..................................................... 11
H.9 INCORPORATION OF REPRESENTATIONS AND CERTIFICATIONS BY
REFERENCE............................................................... 11
H.10 FINAL PAYMENT TERMS.................................................... 11
<PAGE>
Section H, Page 1
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
H.1 SYSTEM INTEGRATION CONTRACTOR RELATIONSHIP
a. The Contractor shall enter into a Liaison Agreement (the "Agreement") with
the FAA's System Integration Contractor. All parties to the Agreement shall
comply with the terms of the Agreement for the duration of this contract.
The System Integration Contractor shall not, by execution of the Agreement,
be considered as a subcontractor for the purposes of this contract. The FAA
Contracting Officer for the System Integration Contract is Ms. Mary
McGrath, ASU-360, FOB 10A, 800 Independence Avenue, SW, Washington, DC
20024,
b. The Agreements shall facilitate the exchange of data and information
between the System Integration Contractor and the Contractor as reasonable
and necessary for the successful integration and implementation of contract
deliverables in Section B.
c. As a minimum, the Agreements shall provide for the following:
1. As requested by the System Integration Contractor, the Contractor
shall provide the System Integration Contractor all necessary
interface data for the successful integration and implementation of
the contract deliverables.
2. Concurrent with its submittal to the Government of each proposed
engineering change, the Contractor shall provide to the System
Integration Contractor any interface data that the Contractor believes
is changed or impacted by the proposed engineering change. The
Contractor will communicate to the System Integration Contractor in a
reasonable and efficient manner the details of any known impact of the
proposed engineering change on the FAA's Configuration Management
Plan, and any information regarding the Contractor's projected and
actual costs and schedule that is necessary for the System Integration
Contractor to evaluate the proposed engineering change.
3. Concurrent with its submittal to the Government, the Contractor shall
coordinate each proposed contract specification change, deviation and
waiver that impacts the integration and implementation of the contract
deliverables with the System Integration Contractor. The Contractor
shall provide to the System Integration Contractor interface data that
is necessary for the System Integration Contractor to evaluate the
proposed specification change, deviation or waiver.
4. The Contractor shall promptly disclose to the System Integration
Contractor material interface problems known to the Contractor which,
if unresolved, would prevent successful integration and implementation
of the contract effort with other systems or subsystems. If an
interface problem is proposed to be resolved by a change in the
contract specifications, the Contractor shall do so as described in
c.2 above.
5. Unless restricted by the Government, the System Integration Contractor
shall be permitted to attend all meetings between the Contractor and
the Government pertaining to CTX 5000SP integration issues or matters
and the Contractor shall be permitted to attend all meetings between
the System Integration Contractor and the Government pertaining to CTX
5000SP integration issues.
<PAGE>
Section H, Page 2
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
6. As may be necessary to accomplish the purposes of the Agreement,
representatives of the Contractor shall meet from time to time at the
Contractor's facility with the System Integration Contractor.
7. The System Integration Contractor shall be permitted to monitor all
acceptance testing by the Contractor in connection with this contract
which the Government has the right to witness and the Contractor shall
be permitted to monitor all testing by the System Integration
Contractor in connection with the Systems Integration Contract as it
pertains to the CTX 5000SP.
8. In accordance with paragraph (d) of this agreement, the System
Integration Contractor and the Contractor shall agree on the
procedures for the proper protection of proprietary information owned
by the Contractor and disclosed to the System Integration Contractor,
and of proprietary information owned by other contractors and
disclosed to the Contractor. The System Integration Contractor will
agree to use the proprietary information owned by the Contractor,
whether provided by the Government, the Contractor or any other
contractor or subcontractor solely for the performance of the System
Integration Contract and execute an appropriate non-disclosure
agreement.
d. The Contractor may receive proprietary information owned by other FAA
contractors from the System Integration Contractor or the Government.
Except with the prior written permission of the owner of the proprietary
information, the Contractor shall not release, use or disclose, in whole or
part, proprietary information owned by another person. Neither this
contract nor the Agreement shall affect the right of the Government, the
Contractor, the Contractor's subcontractors, the System Integration
Contractor, the System Integration Contractor's subcontractors, or any
other FAA contractor to use proprietary information if such information is
lawfully obtained on an unrestricted basis from any source.
At no time during the performance of this contract is the Contractor
required to release proprietary information, or proprietary direct or
indirect rate information to the System Integration Contractor. Should any
inadvertent release occur, neither this contract nor the Agreement shall be
the basis for any liability on the part of the Government for the use,
release or disclosure, by the System Integration Contractor of any
proprietary information owned by the Contractor.
Raytheon Corporation, a System Integration Contractor, or one of its
subcontractors, will be responsible for in-plant acceptance testing and
site inspection tests. The Government will require Lockheed-Martin
Corporation, a System Integration Contractor, to provide an acceptable
Mitigation Plan in order to avoid an organizational conflict of interest.
The Contracting Officer responsible for the System Integration Contract
with Lockheed-Martin Corporation will be solely responsible for acceptance
or rejection of the Lockheed-Martin Mitigation Plan. The purpose of the
Mitigation Plan will be to prevent any competitive advantage which may
result from Lockheed-Martin receiving proprietary information possessed by
Invision Technologies, Inc. regarding the CTX 5000SP.
<PAGE>
Section H, Page 3
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
The Contractor agrees that it shall use proprietary information owned by
others, whether provided by the Government, the System Integration
Contractor or any other contractor or subcontractor, solely for the
performance of this contract. This provision, however, shall not affect the
right of the Contractor or any of its subcontractors to use such
proprietary information for other purposes if the information is lawfully
obtained on an unrestricted basis from any source.
e. The Contractor shall provide the Contracting Officer with one copy of each
Agreement entered into with the System Integration Contractor and any
Amendments thereto.
f. The Contractor shall use its best efforts to include the requirements of
this agreement in its subcontracts in excess of $100,000.
g. Nothing in this contract or in the Agreement shall be deemed to be a basis
for the alteration of, deviation from or failure to comply with, the terms
and provisions of this contract. In the event of a conflict between any of
the terms and provisions of this contract and the Agreement, the terms and
provisions of this contract shall control with respect to the parties to
this contract.
H.2 CONTRACT SUPPORT SERVICES - ESTABLISHMENT OF A CONTRACT LIAISON OFFICE
The Government has entered into a contract with CEXEC, Inc. for Contract Support
Services (CSS). Under the contract CEXEC is required to provide CSS to the
Contracting Officer through the establishment by CEXEC of a Contract Liaison
Office (CLO) in the Contractor's plant. The CLO will be staffed for the duration
of the contract by a Contracting Officers Administrative Representative (COAR)
and a Production Surveillance Representative (PSR). The COAR and the PSR will be
provided by CEXEC.
No contracting officer authority has been delegated to CEXEC, the COAR or the
PSR. The COAR and the PSR have no authority to change any of the terms of the
contract or to issue any direction, assignment of work or communication which
would be a basis for any change in the contract terms (including but not limited
to the contract delivery schedule or price) or which would affect the time or
cost of performance of the contract. If the Contractor believes that it has
received any direction from the COAR or PSR which would be a basis for a change
in any of the contract terms, or would affect the time or cost of performance of
the contract, the Contractor shall not comply with the direction and shall
notify the Contracting Officer immediately.
The COAR may attend negotiation sessions with the Contracting Officer, but has
no authority to negotiate directly or independently with the Contractor.
The duties of the COAR in support of the Contracting Officer include but are not
limited to the following:
<PAGE>
Section H, Page 4
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
A. Providing representative support to the Contracting Officer.
B. Participating in post award conferences.
C. Reviewing the Contractor's requests for payment.
D. Reviewing the Contractor's purchasing system.
E. Expediting actions for the Contracting Officer and the Contractor.
F. Reviewing proposed subcontracts for the Contracting Officer's consent.
G. Assuring Contractor compliance with subcontracting plans.
H. Assuring submission of required deliverables.
I. Reviewing and evaluating the Contractor's proposals, including costs, and
providing comments.
J. Reviewing labor relations matters.
K. Assisting the Contractor in obtaining contract interpretation from the
Contracting Officer.
The duties of the PSR may include but are not limited to the following:
A. Evaluating the Contractor's production plans, including the identification
of pacing events and critical milestones and verifying their
reasonableness.
B. Participating in design reviews and assessing producibility and
manufacturing capability.
C. Providing production surveillance through follow-on plant visits.
D. Assisting in problem resolution and providing expediting assistance.
E. Providing advice to the Contracting Officer on matters relating to
industrial management, industrial engineering, resource management, and
program planning.
From time to time the Contracting Officer will require CEXEC to provide other
services. In all cases, the Contracting Officer will notify the Contractor in
writing what specific duties the COAR and the PSR are required to perform.
Unless specified otherwise by the Contracting Officer, the COAR and the PSR
shall be provided access to all information pertinent to. the contract to which
the Government has a right of access.
The FAA Contracting Officer wants to ensure that the intent of the above
agreement involving the COAR and the PSR in the performance of their assigned
duties, is understood by all parties to be applicable to the COAR and PSR
positions, irrespective of changes in personnel employed by the FAA or CEXEC, or
of a change in the Contractor providing the contract support services. Further,
the terms information and data in this agreement apply to supporting
information/data for deliverables under the contract, whether or not the
information/data is a deliverable in itself. The Contractor will be under no
obligation to generate information/data for compliance.
The Contractor shall provide office space for the CLO (sufficient for three
persons) including furniture, file cabinets, local telephone service, internal
mail service, copying service and parking.
The cost of long distance calls placed by the Contract Liaison Office
representatives will be by Contractor-accepted practices for on-site Government
representatives.
<PAGE>
Section H, Page 5
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
H.3 MINIMUM AND MAXIMUM CONTRACT AMOUNTS
During the term of this contract, the Government shall order and the Contractor
shall furnish not less than the minimum and not more than the maximum number of
supplies detailed below.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CLIN DESCRIPTION MINIMUM MAXIMUM
- --------------------------------------------------------------------------------
0001 CTX 5000SP EXPLOSIVES DETECTION SYSTEM 54 100
- --------------------------------------------------------------------------------
0002 IMAGE QUALITY TEST KIT (IQTK) 54 100
- --------------------------------------------------------------------------------
0003 POWER INCLINED ENTRANCE CONVEYOR * 100
- --------------------------------------------------------------------------------
0004 LUGGAGE POSITIONING ADAPTER * 100
- --------------------------------------------------------------------------------
0005 POWERED FLAT ENTRANCE CONVEYOR * 100
- --------------------------------------------------------------------------------
0006 PLC JUNCTION WITH STANDARD INTERFACE SOFTWARE 10 100
- --------------------------------------------------------------------------------
0007 EXIT SLIDE 6 100
- --------------------------------------------------------------------------------
0008 REMOTE LOCATION OF OPERATOR CONSOLE PACKAGE 6 100
- --------------------------------------------------------------------------------
0009 THREAT IMAGE PROJECTION (TIP) PACKAGE 54 100
- --------------------------------------------------------------------------------
0010 TIP LIBRARY (VOLUMES) 648 1200
- --------------------------------------------------------------------------------
0011 FIELD DATA REPORTING AND IMAGE DISPLAY PACKAGE 54 100
- --------------------------------------------------------------------------------
0012 FIRST YEAR WARRANTY - PARTS AND LABOR 54 100
- --------------------------------------------------------------------------------
0013 FIRST YEAR WARRANTY - EXTENDED HOURS 10 100
- --------------------------------------------------------------------------------
0014 OPERATOR TRAINING CLASS 15 100
- --------------------------------------------------------------------------------
0015 INSTRUCTOR TRAINING CLASS 5 50
- --------------------------------------------------------------------------------
0016 ENGINEER MAINTENANCE TRAINING CLASS 5 50
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -- The COMBINED minimum order quantity for CLINs 0003, 0004 and 0005 under this
contract shall be 54 units.
<PAGE>
Section H, Page 6
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
H.4 WARRANTY OF SUPPLIES
a. Definitions
'ACCEPTANCE,' means the act of an authorized representative of the
Government by which the Government assumes for itself, or as an
agent of another, ownership of existing supplies, or approves
specific services as partial or complete performance of the contract.
'CORRECTION,' means the elimination of a defect.
'SUPPLIES,' means the end item furnished by the Contractor and related
services required under the contract. The word does not include
'data.'
b. Contractor's obligations
1. NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS CONTRACT, THIS WARRANTY
IS THE ONLY WARRANTY MADE BY INVISION WITH RESPECT TO SUPPLIES
DELIVERED HEREUNDER, AND MAY BE MODIFIED OR AMENDED ONLY BY A WRITTEN
INSTRUMENT SIGNED BY A DULY AUTHORIZED OFFICER OF INVISION AND
ACCEPTED BY THE GOVERNMENT. Notwithstanding inspection and acceptance
by the Government of supplies furnished under this contract, or any
condition of this contract concerning the conclusiveness thereof, the
Contractor warrants that for I year after system(s) final acceptance -
(i) All supplies furnished under this contract will be free from
defects in material or workmanship and will conform with all
requirements of this contract; and
(ii) The preservation, packaging, packing, marking, and the
preparation for, and method of shipment of such supplies will
conform with the requirements of this contract.
2. When return, correction, or replacement is required, transportation
charges and responsibility for the supplies while in transit shall be
borne by the Contractor. However, the Contractor's liability for the
transportation charges shall not exceed an amount equal to the cost of
transportation by the usual commercial method of shipment between the
place of delivery specified in this contract and the Contractor's
plant, and return.
3. For any supplies or parts thereof, corrected or furnished as a
replacement to the original system, the replacement part shall be
warranted for whatever time remained on the original system when the
original part being replaced failed. If the replacement part is
covered under a commercial warranty, and time remains on this
commercial warranty after the warranty time assigned to the original
system has expired, the replacement part will be warranted under that
commercial warranty until that commercial warranty expires.
<PAGE>
Section H, Page 7
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
The Contractor shall ensure the maintenance management system is
capable of determining whether provided system parts are warranted
under this contract or other commercial warranties or both and from
which historical part failure and use data can be extracted in
detailed and summary formats.
4. All implied warranties of merchantability and fitness for a particular
purpose are excluded from any obligation contained in this contract.
IN NO EVENT SHALL INVISION BE LIABLE FOR ANY INDIRECT, CONSEQUENTIAL,
OR SPECIAL DAMAGES (INCLUDING ANY LOSS OF USE, BUSINESS, OR THE LIKE,
EVEN IF INVISION HAS BEEN ADVISED OF THE POSSIBILITY OF THE. SAM]E),
ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY, USE, OR PERFORMANCE
OF INVISION'S PRODUCTS.
c. Remedies available to the Government
1. The Contracting Officer shall give written notice to the Contractor of
any breach of warranties within 30 days of discovery of the defect.
2. Within a reasonable time after the notice, the Contracting Officer may
either -
(i) Require, by written notice, the prompt correction or
replacement of any supplies or parts thereof (including
preservation, packaging, packing, and marking) that do not
conform with the requirements of this contract; or
(ii) Retain such supplies and reduce the contract price by an
amount equitable under the circumstances.
(iii) Notwithstanding 2(ii) above, in all cases the Contractor
will first be provided the opportunity to correct or replace
the supplies that do not conform to the requirements of the
contract.
3. (i) The Contracting Officer may, by contract or otherwise,
correct or replace the nonconforming supplies with similar
supplies from another source and charge to the Contractor
the cost occasioned to the Government thereby if the
Contractor---
A. Fails to make redelivery of the corrected or replaced
supplies within the time established for their return;
or
B. Fails either to accept return of the nonconforming
supplies or fails to make progress after their return
to correct or replace them so as to endanger
performance of the delivery schedule, and in either of
these circumstances does not cure such failure within a
period of 10 days (or
<PAGE>
Section H, Page 8
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
such longer period as the Contracting Officer may
authorize in writing) after receipt of notice from the
Contracting Officer specifying such failure.
(ii) Instead of correction or replacement by the Government, the
Contracting Officer may require an equitable adjustment of
the contract price. The C,O, may require such an equitable
adjustment only if the contractor fails to make redelivery
of the corrected or replaced supplies within the time
established for their return or within a reasonable time if
no time is established. In addition, if the Contractor fails
to furnish timely disposition instruction, the Contracting
Officer may dispose of the nonconforming supplies for the
Contractor's account in a reasonable manner. The Government
is entitled to reimbursement from the Contractor, or from
the proceeds of such disposal, for the reasonable expenses
of the care and disposition of the nonconforming supplies,
as well as for excess costs incurred or to be incurred.
4. The rights and remedies of the Government provided in this warranty
agreement are in addition to and do not limit any rights afforded to
the Government by any other non-warranty provision of this contract.
5. The Contractor shall be liable for the reasonable costs of disassembly
and/or reassembly of larger items when it is necessary to remove the
supplies to be inspected and/or returned for correction or
replacement.
H.5 TASK ORDER PROCEDURES (APPLICABLE TO CLIN # 0017)
a. GENERAL. Services to be performed under the referenced Contract Line Item
Numbers (CLINs) shall be ordered by the issuance of Task Orders.
b. FORMAT. The Contracting Officer will issue all Task Orders, in writing, to
the Contractor using FAA Form 4400-18 (Order for Supplies or Services), or
on Standard Form 30 (Amendment of Solicitation/Modification of Contract) in
the case of a modification to an order. Each Task Order issued shall
contain the following minimum information:
1. A Task Order number;
2. Appropriate FAA points-of-contact;
3. A period-of-performance;
4. A description of the work to be performed which is within the scope of
the statement-of-work for this contract;
5. A list of deliverables and the required delivery schedule;
6. A description of any authorized travel including to and from points;
7. A maximum allowable travel amount;
<PAGE>
Section H, Page 9
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
8. A maximum allowable material and Other Direct Costs (ODC) amount;
9. A description of any Government-Furnished Information or Property to be
provided with delivery locations and required delivery dates;
9. A Task Order maximum amount;
10. Applicable appropriation and accounting data;and
11. Applicable payment procedures
c. PROCEDURES. Each Task Order will be prepared by the COTR specified in
Section G.I, unless a subsequent modification to this contract has
designated another COTR for a specific Task Order, in which case, that COTR
shall prepare the Task Order. In preparing Task Orders, COTRs shall
coordinate with the Contractor to estimate resources (time, material,
travel and GFP/GFI support) needed to accomplish the Task Order
requirements. Upon final preparation, and at least 24 hours prior to
issuance of the Task Order, the COTR who prepared the Task Order and
Contractor's assigned Project Manager shall review, sign and date the
completed Task Order and forward it to the Contracting Officer by facsimile
transmission or other rapid communication method. Upon receipt, the
Contracting Officer shall check the Task Order for acceptability, accuracy
and completeness; include additional information if necessary; and forward
the Task Order to the Contractor at least 24 hours prior to commencement of
performance. Upon receipt, the Contractor shall review and acknowledge
acceptance of the Task Order by signing and dating the order and
expeditiously returning the signed Task Order to the Contracting Officer by
facsimile transmission or other rapid communication method. If the
Contractor determines that the Task Order, as written, is unacceptable, the
Contractor shall immediately notify the Contracting Officer and detail the
reasons for its position. Upon receipt of this notification, the
contracting Officer will initiate action, as appropriate. Upon receipt of
an acceptable signed Task Order from the Contractor, the Contracting
Officer will countersign and date the Task Order.
H.6 DELIVERY ORDER PROCEDURES (APPLICABLE TO CLIN #S 0001-0016 )
a. GENERAL. Items to be delivered under the referenced Contract Line Item
Numbers (CLINs) shall be ordered via the issuance of Delivery Orders.
b. FORMAT. The Contracting Officer will issue Delivery Orders, in writing, to
the Contractor, using FAA Form 4400-18 (Order for Supplies or Services), or on
Standard Form 30 (Amendment of Solicitation/Modification of Contract) in the
case of a modification to an order. Each Delivery order issued shall contain the
following minimum information
1. A Delivery Order number;
2. Appropriate FAA points-of-contact;
3. A period-of-performance;
4. A list of deliverables and the delivery schedule;
5. A description of authorized travel including to and from points
6. A maximum allowable travel amount;
<PAGE>
Section H, Page 10
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
7. A description of any Government-Furnished Information or Property to
be provided with delivery locations and required delivery dates;
8. A delivery order maximum amount;
9. Applicable appropriation and accounting data; and
10. Applicable payment procedures.
c. PROCEDURES. Each Delivery Order shall be prepared by the COTR and
forwarded to the Contracting Officer for review and signature. Upon receipt, the
Contracting Officer shall check the Delivery Order for acceptability, accuracy
and completeness and shall forward the Order to the Contractor. Upon receipt,
the Contractor shall review and acknowledge acceptance of the Delivery Order by
signing and dating the order and expeditiously returning the signed Delivery
Order to the Contracting Officer by facsimile transmission or other rapid
communication method. If the Contractor determines that the Delivery Order, as
written, is unacceptable, the Contractor shall immediately notify the
Contracting Officer and detail the reasons for its position. Upon receipt of
this notification, the Contracting Officer will initiate action, as appropriate.
Upon receipt of an acceptable, signed Delivery Order from the Contractor, the
Contracting Officer will countersign and date the Order.
d. MINIMUM LEAD TIME - ORDER TO DELIVERY. Via issuance of delivery orders,
the Government shall afford the Contractor a minimum lead time from date of
Contracting Officer signature to required date of item delivery, as follows:
CLIN LEAD TIME
0001 Except for units to be ordered at date of contract and to be delivered
in 1997, a minimum of 6 months from date of order to date of delivery.
0002 Except for units to be ordered at date of contract and to be delivered
in 1997, a minimum of 60 days from date of order to date of delivery.
0003-0008 Except for units to be ordered at date of contract and to be delivered
in January through March 1997, a minimum of 90 days from date of order
to date of delivery.
0009-0012 Not applicable. Item to be ordered with CLIN 0001.
0013-0016 Except for units to be ordered at date of contract and to be delivered
in January through March 1997, a minimum of 60 days from date of order
to date of delivery.
H.7 DISSEMINATION OF CONTRACT INFORMATION
The Contractor shall not publish, permit to be published, or distribute for
public consumption any information, oral or written, concerning the results or
conclusions made pursuant to the performance of this contract, without the prior
written consent of the Contracting Officer. This statement includes
<PAGE>
Section H, Page 11
PART I - THE SCHEDULE
SECTION H - SPECIAL CONTRACT REQUIREMENTS
seminars, professional society meeting/conferences and meetings with foreign
dignitaries both government and from the private sector. Two copies of any
material proposed to be published or distributed shall be submitted to the
Contracting Officer. The following schedule is established as a guideline when
requesting consent (calendar days):
- - Written information - 15 days
- - Oral information - 15 days
- - Congressional information - 10 days
Any Contractor proposals for perspective work, exclusive of this contract, for
which the Contractor may employ information generated in the performance of this
contract, the Contractor is required only to notify the Contracting Officer of
its intent to submit a proposal. Such notification shall include a brief
description of the requirement for which the Contractor is proposing and
indicate the Government or business entity to which the proposal is being
submitted.
H.8 SECURITY CLEARANCES
The Government reserves the right to require security clearances for FAA
locations, as deemed necessary. Should the clearance be required, the Contractor
shall follow FAA order 1600.54B, entitled FAA Automated Information Systems
Security Handbook.
H.9 INCORPORATION OF REPRESENTATIONS AND CERTIFICATIONS BY REFERENCE
All representations, certifications and other written statements made by the
Contractor in response to Section K of the SIR, incident to award of this
contract or modification of this contract, are hereby incorporated by reference
into this contract with the same force and effect as if they were given in full
text herein.
H.10 FINAL PAYMENT TERMS
1. Ninety five percent (95%) of the total price for all supplies delivered
hereunder (CLINs 0001-0012) is payable upon final acceptance at the
Contractor's plant or facility.
2. The outstanding five percent (5%) of the total price for all supplies
delivered hereunder (CLINs 0001-0012) is payable upon final acceptance of
the installation at the installation site.
3. All other supplies or services delivered hereunder shall be billed and paid
for as specified under individual Delivery or Task Orders.
<PAGE>
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
<PAGE>
Section I, Page i
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
TABLE OF CONTENTS
I.1 3.1-1 CLAUSES AND PROVISIONS INCORPORATED BY REFERENCE.................. 1
I.2 3.2.4-20 INDEFINITE QUANTITY............................................ 4
I.3 3.2.4-23 CONTRACT PRICE DEFINITIZATION (APPLICABLE TO CLIN 0017)........ 4
I.4 GOVERNMENT PROPERTY (FIXED-PRICE CONTRACTS)........................... 5
<PAGE>
Section I, Page 1
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
I.1 3.1-1 CLAUSES AND PROVISIONS INCORPORATED BY REFERENCE
CLAUSES AND PROVISIONS INCORPORATED BY REFERENCE (JUNE 1996)
This screening information request (SIR) or contract, as applicable,
incorporates by reference one or more provisions or clauses with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make the full text available, or offerors and Contractors may
obtain the full text via Internet from the Federal Aviation Administration (FAA)
home page (http://www.faa.gov).
(End of clause)
3.1.7-2 Organizational Conflicts of Interest April 1996
3.2.2.3-29 Integrity of Unit Prices April 1996
3.2.2.3-33 Order of Precedence April 1996
3.2.2.7-6 Protecting the Government's Interest when April 1996
Subcontracting w/Contractors Debarred,
Suspended, or Proposed for Debarment
3.2.2.8-1 New Material October 3, 1996
3.2.5-6 Restrictions on Subcontractor Sales to the FAA April 1996
Alternate I April 1996
3.2.5-8 Whistleblower Protection for Contractor Employees April 1996
3.3.1-1 Payments April 1996
3.3.1-5 Payments under Time-and-Materials and Labor-Hour October 3, 1996
Contracts
Alternate I October 3, 1996
3.3.1-6 Discounts from Prompt Payment April 1996
3.3.1-7 Limitation on Withholding of Payments April 1996
3.3.1-8 Extras April 1996
3.3.1-9 Interest April 1996
3.3.1-15 Assignment of Claims April 1996
3.3.1-17 Prompt Payment October 3, 1996
3.3.1-25 Mandatory Information for Electronic Funds October 3, 1996
Transfer Payment
<PAGE>
Section I, Page 2
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
3.3.2-1 FAA Cost Principles October 3, 1996
3.4.1-10 Insurance-Work on a Government Installation July 1996
3.4.1-11 Insurance--Liability to Third Persons October 3, 1996
3.4.1-12 Insurance July 1996
3.4.2-6 Taxes--Contracts Performed in U.S. Possessions October 3, 1996
or Puerto Rico
3.4.2-7 Federal, State and Local Taxes--Fixed-Price, April 1996
Noncompetitive Contract
3.5-1 Authorization and Consent April 1996
3.5-2 Notice and Assistance Regarding Patent and April 1996
Copyright Infringement
3.5-3 Patent Indemnity April 1996
3.5-13 Rights in Data--General October 3, 1996
3.5-18 Commercial Computer Software--Restricted Rights October 3, 1996
3.6.1-3 Utilization of Small, Small Disadvantaged and April 1996
Women-Owned Small Business Concerns
3.6.1-4 Small, Small Disadvantaged and Women-Owned April 1996
Small Business Subcontracting Plan
3.6.2-2 Convict Labor April 1996
3.6.2-4 Walsh-Healey Public Contracts Act April 1996
3.6.2-9 Equal Opportunity April 1996
3.6.2-10 Equal Opportunity Preaward Clearance of April 1996
Subcontracts
3.6.2-12 Affirmative Action for Special Disabled and July 1996
Vietnam Era Veterans
3.6.2-13 Affirmative Action for Handicapped Workers April 1996
3.6.2-14 Employment Reports on Special Disabled Veterans April 1996
and Veterans of Vietnam Era
3.6.3-2 Clean Air and Clean Water April 1996
3.6.4-2 Buy American Act--Supplies July 1996
<PAGE>
Section 1, Page 3
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
3.6.4-10 Restrictions on Certain Foreign Purchases April 1996
3.8.2-11 Continuity of Services April 1996
3.8.4-5 Government Supply Sources April 1996
3.9.1-1 Contract Disputes April 1996
3.9.1-2 Protest After Award April 1996
3.9.1-3 Protest August 8, 1996
3.10.1-7 Bankruptcy April 1996
3.10.1-9 Stop Work Order October 3, 1996
3.10.1-12 Changes--Fixed-Price April 1996
Alternate II April 1996
3.10.1-14 Changes--Time and Materials or Labor Hours April 1996
3.10.1-17 Change Order Accounting April 1996
3.10.1-18 Notification of Changes April 1996
(b) Notice. Contractor notify within 30
calendar days.
(c) Government response. Contracting Officer
respond within 30 calendar days.
3.10.2-1 Subcontracts (Fixed-Price Contracts) April 1996
3.10.2-3 Subcontracts (Time-and-Materials and Labor-Hour April 1996
Contracts)
3.10.2-5 Competition in Subcontracting April 1996
3.10.5-1 Product Improvement/Technology Enhancement April 1996
3.10.6-1 Termination for Convenience of the Government October 3, 1996
(Fixed Price)
3.10.6-3 Termination (Cost-Reimbursement) October 3, 1996
Alternate IV October 3, 1996
3.10.6-4 Default (Fixed-Price Supply and Services) October 3, 1996
3.10.6-7 Excusable Delays October 3, 1996
3.13-2 Security Requirements April 1996
<PAGE>
Section I, Page 4
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
CLAUSES IN FULL TEXT
I.2 3.2.4-20 INDEFINITE QUANTITY
INDEFINITE QUANTITY (JULY 1996)
(a) This is an indefinite-quantity contract for the supplies or services
specified, and effective for the period stated, in the Schedule. The quantities
of supplies and services specified in the Schedule are estimates only and are
not purchased by this contract.
(b) Delivery or performance shall be made only as authorized by orders
issued in accordance with the "Ordering" clause. The Contractor shall furnish
to the Government, when and if ordered, the supplies or services specified in
the Schedule up to and including the quantity designated in the Schedule as
the maximum. The Government shall order at least the quantity of supplies or
services designated in the Schedule as the minimum.
(c) Except for any limitations on quantities in the "Order Limitations"
clause or in the Schedule, there is no limit on the number of orders that may
be issued. The Government may issue orders requiring delivery to multiple
destinations or performance at multiple locations.
(d) Any order issued during the effective period of this contract and not
completed within that period shall be completed by the Contractor within the
time specified in the order. The contract shall govern the Contractor's and
Government's rights and obligations with respect to that order to the same
extent as if the order were completed during the contract's effective period;
provided, that the Contractor shall not be required to make any deliveries
under this contract after thirty (30) months have elapsed from date of
contract award.
(END OF CLAUSE)
I.3 3.2.4-23 CONTRACT PRICE DEFINITIZATION (APPLICABLE TO CLIN 0017)
CONTRACT PRICE DEFINITIZATION
(a) A TIME AND MATERIAL contract is contemplated. The Contractor agrees to
begin promptly negotiating with the Contracting Officer the price and any price
related terms of a Time and Material contract. The Contractor agrees to submit a
fixed price proposal and cost or pricing data supporting its proposal.
<PAGE>
Section I, Page 5
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
(b) The schedule for negotiating the price of this contract is:
Proposal Submission 01/10/97
Commence Negotiation 01/27/97
Contract Definitization 02/10/97
(c) If agreement on the contract price is not reached by the target date in
paragraph (b) above, or within any extension of it granted by the Contracting
Officer, the Contracting Officer may, with the approval of the head of the
contracting activity, determine a reasonable price or fee, subject to Contractor
appeal as provided in the "Contract Disputes" clause. In any event, the
Contractor shall proceed with completion of the contract, subject only to the
"Limitation of FAA Liability" clause.
(1) After the Contracting Officer's determination of price or fee, the
contract shall be governed by-
(i) All clauses required by the FAA Acquisition Management System on the date
of execution of this letter contract for either fixed-price or cost-
reimbursement contracts, as determined by the Contracting Officer under this
paragraph (c);
(ii) All clauses required by law as of the date of the Contracting Officer's
determination; and (iii) Any other clauses, terms, and conditions mutually
agreed upon.
(2) To the extent consistent with subparagraph (c)(1) above, all clauses,
terms, and conditions included in this letter contract shall continue in effect,
except those that by their nature apply only to a letter contract.
(END OF CLAUSE)
I.4 GOVERNMENT PROPERTY (FIXED-PRICE CONTRACTS)
(a) Government-furnished property.
(1) The Government shall deliver to the Contractor, for use in connection with
and under the terms of this contract, the Government-furnished property
described in the Schedule or specifications including specifically all bags,
contents, IED materials, the CTX System, and specifications regarding the mix of
bags and configuration of the IED as required in CLIN 0010, together with any
related data and information that the Contractor may request and is reasonably
required for the intended use of the property (hereinafter referred to as
Government-furnished property).
(2) The delivery or performance dates for this contract are based upon the
expectation that Government-furnished property suitable for use (except for
property furnished as-is) will be delivered to the Contractor at the times
stated in the Schedule or, if not so stated, in sufficient time to enable the
Contractor to meet the contract's delivery or performance dates.
<PAGE>
SECTION I, Page 6
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
(3) If Government-furnished property is received by the Contractor in a
condition not suitable for the intended use, the Contractor shall, upon receipt
of it, notify the Contracting Officer, detailing the facts, and, as directed by
the Contracting Officer and at Government expense, either repair, modify,
return, or otherwise dispose of the property. After completing the directed
action and upon written request of the Contractor, the Contracting Officer shall
make an equitable adjustment as provided in paragraph (h) of this clause.
(4) If Government-furnished property is not delivered to the Contractor by the
required time, the. Contracting Officer shall, upon the Contractors timely
written request, make a determination of the delay, if any, caused the
Contractor and shall make an equitable adjustment in accordance with paragraph
(h) of this clause.
(b) Changes in Government-furnished property.
(1) The Contracting Officer may, by written notice, (i) decrease the
Government-furnished property provided or to be provided under this contract, or
(ii) substitute other Government-furnished property for the property to be
provided by the Government, or to be acquired by the Contractor for the
Government, under this contract. The Contractor shall promptly take such action
as the Contracting Officer may direct regarding the removal, shipment, or
disposal of the property covered by such notice.
(2) Upon the Contractors written request, the Contracting Officer shall make
an equitable adjustment to the contract in accordance with paragraph (h) of this
clause, if the Government has agreed in the Schedule to make the property
available for performing this contract and there is any-
(i) Decrease or substitution in this property pursuant to subparagraph
(b)(1) above; or
(ii) Withdrawal of authority to use this property, if provided under
any other contract or lease.
(c) Title in Government property.
(1) The Government shall retain title to all Government-furnished property.
(2) All Government-furnished property and all property acquired by the
Contractor, title to which vests in the Government under this paragraph
(collectively referred to as Government property), are subject to the provisions
of this clause. Title to Government property shall not be affected by its
incorporation into or attachment to any property not owned by the Government,
nor shall Government property become a fixture or lose its identity as personal
property by being attached to any real property.
(3) Title to each item of facilities and special test equipment acquired by
the Contractor for the Government under this contract shall pass to and vest in
the Government when its use in performing this contract commences or when the
Government has paid for it, whichever is earlier, whether or not title
previously vested in the Government.
<PAGE>
SECTION I, Page 7
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
(4) If this contract contains a provision directing the Contractor to purchase
material for which the Government will reimburse the Contractor as a direct item
of cost under this contract-
(i) Title to material purchased from a vendor shall pass to and vest
in the Government upon the vendor's delivery of such material; and
(ii) Title to all other material shall pass to and vest in the
Government upon-
(A) Issuance of the material for use in contract performance;
(B) Commencement of processing of the material or its use in
contract performance; or
(c) Reimbursement of the cost of the material by the Government,
whichever occurs first.
(d) Use of Government property. The Government property shall be used only for
performing this contract, unless otherwise provided in this contract or approved
by the Contracting Officer.
(e) Property administration.
(1) The Contractor shall be responsible and accountable for all Government
property provided under this contract.
(2) The Contractor shall establish and maintain a program for the use,
maintenance, repair, protection, and preservation of Government property in
accordance with sound industrial practice.
(3) If damage occurs to Government property, the risk of which has been
assumed by the Government under this contract, the Government shall replace the
items or the Contractor shall make such repairs as the Government directs.
However, if the Contractor cannot effect such repairs within the time required,
the Contractor shall dispose of the property as directed by the Contracting
Officer. When any property for which the Government is responsible is replaced
or repaired, the Contracting Officer shall make an equitable adjustment in
accordance with paragraph (h) of this clause.
(4) The Contractor represents that the contract price does not include any
amount for repairs or replacement for which the Government is responsible.
Repair or replacement of property for which the Contractor is responsible shall
be accomplished by the Contractor at its own expense.
(f) Access. The Government and all its designees shall have access at all
reasonable times to the premises in which any Government property is located for
the purpose of inspecting the Government property.
(g) Risk of loss. Unless otherwise provided in this contract, the Contractor
assumes the risk of, and shall be responsible for, any loss or destruction of,
or damage to, Government property upon its delivery
<PAGE>
SECTION I, Page 8
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
to the Contractor or upon passage of title to the Government under paragraph (c)
of this clause. However, the Contractor is not responsible for reasonable wear
and tear to Government property, or for Government property properly consumed in
performing this contract.
(h) Equitable adjustment. When this clause specifies an equitable adjustment,
it shall be made to any affected contract provision in accordance with the
procedures of the Changes clause. When appropriate, the Contracting Officer may
initiate an equitable adjustment in favor of the Government. The right to an
equitable adjustment shall be the Contractor's exclusive remedy. The Government
shall not be liable to suit for breach of contract for-
(1) Any delay in delivery of Government-furnished property;
(2) Delivery of Government-furnished property in a condition not
suitable for its intended use;
(3) A decrease in or substitution of Government-furnished property;
(4) Failure to repair or replace Government property for which the
Government is responsible.
(i) Final accounting and disposition of Government property. Upon completing
this contract, or at such earlier dates as may be fixed by the Contracting
Officer, the Contractor shall submit, in a form acceptable to the Contracting
Officer, inventory schedules covering all items of Government property
(including any resulting scrap) not consumed in performing this contract or
delivered to the Government. The Contractor shall prepare for shipment, deliver
f.o.b. origin, or dispose of the Government property as may be directed or
authorized by the Contracting Officer. The net proceeds of any such disposal
shall be credited to the contract price or shall be paid to the Government as
the Contracting Officer directs.
(j) Abandonment and restoration of Contractor's premises. Unless otherwise
provided herein, the Government-
(1) May abandon any Government property in place, at which time all
obligations of the Government regarding such abandoned property shall
cease; and
(2) Has no obligation to restore or rehabilitate the Contractor's
premises under any circumstances (e.g., abandonment, disposition upon
completion of need, or upon contract completion). However, if the
Government-furnished property (listed in the Schedule or specifications)
is withdrawn or is unsuitable for the intended use, or if other Government
property is substituted, then the equitable adjustment under paragraph (h)
of this clause may properly include restoration or rehabilitation costs.
<PAGE>
Section I, Page 9
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
(k) Communications. All communications under this clause shall be in writing.
(1) Overseas contracts. If this contract is to be performed outside of the
United States of America, its territories, or possessions, the words Government
and Government-furnished (wherever they appear in this clause) shall be
construed as United States Government and United States Government-furnished,
respectively.
(End of clause)
1.5 GOVERNMENT PROPERTY (COST-REIMBURSEMENT, TIME-AND-MATERIAL, OR LABOR-HOUR
CONTRACTS)
(a) Government-Furnished Property...
(i) The term "Contractor's managerial personnel, as used in paragraph
(g) of this clause, means any of the Contractor's directors, officers, managers,
superintendents, or equivalent representative who have supervision or direction
of--
(i) All of substantially all of the Contractor's business;
(ii) All or substantially all of the Contractor's operation at any one
plant, or separate location at which the contract is being performed; or
(iii) A separate and complete major industrial operation connection with
performing this contract.
(2) The Government shall deliver to the Contractor, for use in
connection with and under the terms of this contract, the Government-furnished
property described in the Schedule or specifications, together with such related
data and information as the Contractor may request and as may be reasonably
required for the intended use of the property (hereinafter referred to as
"Government-furnished property").
(3) The delivery or performance dates for this contract are based upon
the expectation that Government furnished property suitable for use will be
delivered to the Contractor at the times stated in the Schedule or, if not so
stated, in sufficient time to enable the Contractor to meet the contract's
delivery or performance dates.
(4) If Government-furnished property is received by the Contractor in
a condition not suitable for the intended use, the Contractor shall, upon
receipt, notify the Contracting Officer, detailing the facts, and, as directed
by the Contracting Officer and at Government expense, either effect repairs or
modification or return or otherwise dispose of the property. After completing
the directed action and upon written request of the Contractor, the Contracting
Officer shall make an equitable adjustment as provided in paragraph (h) of this
clause.
(5) If Government-Furnished property is not delivered to the
Contractor by the required time or times, the Contracting Officer shall, upon
the Contractor's timely written request, make a determination of the delay, if
any, caused the Contractor and shall make an equitable adjustment in accordance
with paragraph (h) of this clause.
<PAGE>
Section I, Page 10
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
(b) Changes in Government-furnished property. (1) The Contracting
Officer may, by written notice, (1) decrease the Government-furnished property
provided or to be provided under this contract or (ii) substitute other
Government-furnished property for the property to be provided by the Government
or to be acquired by the Contractor for the Government under this contract. The
Contractor shall promptly take such action as the Contracting Officer may direct
regarding the removal, shipment, or disposal of the property covered by this
notice.
(2) Upon the Contractor's written request, the Contracting Officer
shall make an equitable adjustment to the contract in accordance with paragraph
(h) of this clause, if the Government has agreed in the Schedule to make such
property available for performing this contract and there is any--
(i) Decrease or substitution in this property pursuant to subparagraph
(b)(1) above; or (ii) Withdrawal of authority to use property, if'
provided under any other contract or lease.
(c) Title. (1) The Government shall retain title to all Government-
furnished property.
(2) Title to all property purchased by the Contractor for which the
Contractor is entitled to be reimbursed as a direct item of cost under this
contract shall pass to and vest in the Government upon the vendor's delivery of
such property.
(3) Title to all other property, the cost of which is reimbursable to
the Contractor, shall pass to and vest in the Government upon--
(i) Issuance of the property for use in contract performance;
(ii) Commencement of processing of the property for use in contract
performance; or
(iii) Reimbursement of the cost of the property by the Government,
whichever occurs first.
(4) All Government-furnished property and all property acquired by the
Contractor, title to which best in the Government under this paragraph
(collectively referred to as "Government property"), are subject to the
provision of this clause. Title to Government property shall not be affected by
its incorporation into or attachment to any property not owned by the
Government, or shall Government property become a fixture or lose its identity
as personal property by being attached to any real property.
(d) Use of Government property. The Government property shall be used
only for performing this contact, unless otherwise provided in this contract or
approved by the Contracting Officer.
(e) Property administration (1). The Contractor shall be responsible
and accountable for all Government property provided under the contract.
(2) The Contractor shall establish and maintain a program for the use,
maintenance, repair, protection, and preservation of Government property in
accordance with sound business practice and the applicable provision.
(3) If damage occurs to Government property, the risk of which has
been assumed by the Government under this contract, the Government shall replace
the items or the Contractor shall make such repairs as the Government directs.
However, if the Contractor cannot effect such repairs within the time required,
the Contractor shall dispose of the property as directed by the Contracting
Officer. When any property for which the Government is responsible is replaced
or repaired, the Contracting Officer shall make an equitable adjustment in
accordance with paragraph (h) of this clause.
<PAGE>
Section I, Page 11
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
(f) Access. The Government and all its designees shall have access at
all reasonable times to the premises in which any Government property is located
for the purpose of inspecting the Government property.
(g) Limited risk of loss. (1) The Contractor shall be liable for loss
or destruction of, or damage to, the Government property provided under this
contract or for expense incidental to such loss, destruction, or damage, except
as provided in subparagraphs (2) and (3) below.
(2) The Contractor shall be responsible for loss or destruction of, or
damage to, the Government property provided under this contract (including
expense incidental to such loss, destruction or damage)
(i) That results form a risk expressly required by be insured
under this contract, but only to the extent of the insurance required to be
purchased and maintained or to the extent of insurance actually purchased and
maintained, whichever is greater;
(ii) That results from a risk that is in fact covered by
insurance or for which the Contractor is otherwise reimbursed, but only to the
extent of such insurance of reimbursement;
(iii) For which the Contractor is otherwise responsible under the
express terms of this contract;
(iv) That results from willful misconduct or lack of good faith
on the part of the Contractor's management personnel; or
(v) That result from a failure on the part of the Contractor,
due to willful misconduct or lack of good faith on the part of the Contractor's
managerial personnel to establish and administer a program or system for the
control, use, protection, preservation, maintenance, and repair of Government
property as required by paragraph (e) of this clause.
(3)(i) If the Contractor falls to act as provided by subdivision
(g)(2)(v) above, after being notified (by certified mail addressed to one of the
Contractor's managerial personnel) of the Government's disapproval, withdrawal
of approval, or nonacceptance of the system or program, it shall be conclusively
presumed that such failure was due to willful misconduct or lack of good faith
on the part of the Contractor's managerial personnel.
(ii) In such event, any loss or destruction of or damage to, the
Government property shall be presumed to have resulted from such failure unless
the Contractor can established by clear and convincing evidence that such loss,
destruction, or damage--
(A) Did not result from the Contractor's failure to maintain an
approved program or system; or
(B) Occurred while an approved program or system was maintained
by the Contractor.
(4) If the Contractor transfers Government property to the possession
and control of a subcontractor, the transfer shall not affect the liability of
the Contractor for loss or destruction of, or damage to, the property as set
forth above. However the Contractor shall require the subcontractor to assume
the risk of, and be responsible for, any loss or destruction of, or damage to,
the property while in the subcontractor's possession or control, except to the
extent that the subcontract, with the advance approval of the Contracting
Officer, relieves the subcontractor from such liability. In the absence of such
approval, the subcontract shall contain appropriate provisions requiring the
return of all Government property in as good condition as when receive, accept
for reasonable wear and tear or for its use in accordance with the provisions of
the prime contract.
<PAGE>
Section I, Page 12
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
(5) Upon loss or destruction of, or damage to, Government property
provided under this contract, the Contractor shall so notify the Contracting
Officer and shall communicate with the loss and salvage organization, if any,
designated by the Contracting Officer. With the assistance of any such
organization, the Contractor shall take all reasonable action to protect the
Government property from further damage, separate the damaged and undamaged
Government property, put all the affected Government property in the best
possible order, and furnish to the Contracting Officer a statement of-
(i) The lost, destroyed, or damaged Government property;
(ii) The time and original date of the loss, destruction, or
damage;
(iii) All known interests in commingled property of which the
Government property is a part: and
(iv) The insurance, if any, covering any part of or interest in
such commingled property.
(6) The Contractor shall repair, renovate, and take such other action
with respect to damaged Government property as the Contracting Officer directs.
If the Government property is destroyed or damaged beyond practical repair, or
is damaged and so commingled or combined with property of others (including the
Contractor's) that separation is impractical, the Contractor may, with the
approval of the Contracting Officer, subject to any conditions imposed by the
Contracting Officer; sell such property for the account of the Government. Such
sales may be made in order to minimize the loss to the Government, to permit the
resumption of business, or to accomplish a similar purpose. The Contractor
shall be entitled to an equitable adjustment in the contract price for the
expenditures made in performing the obligation under this subparagraph (g)(6) in
accordance with paragraph (g) when making any such equitable adjustment.
(7) The Contractor shall not be reimbursed for, and shall not include
as an item of overhead, the cost of insurance or of any reserve covering risk of
loss or destruction of, or damage to, Government property, except to the extent
that the Government may have expressly required the Contractor to carry such
insurance under another provision of this contract.
(8) In the event the Contractor is reimbursed or otherwise compensated
for any loss or destruction of, or damage to, Government property, the
Contractor shall use the proceeds to repair, renovate, or replace the lost,
destroyed, or damaged property or shall otherwise credit the proceeds to, or
equitably reimburse, the Government, as directed by the Contracting Officer.
(9) The Contractor shall do nothing to prejudice the Government's
rights to recover against third parties for any loss or destruction of, or
damage to, Government property. Upon the request of the Contracting Officer,
the Contractor shall, at the Government's expense, furnish to the Government all
reasonable assistance and cooperation (including the prosecution of suit and the
execution of instruments of assignment in favor of the Government) in obtaining
recovery. In addition, where a subcontractor has no been relieved from
liability for any loss or destruction of, or damage to, Government property, the
Contractor shall enforce for the benefit of the Government the liability of the
subcontractor for such loss, destruction, or damage.
(h) Equitable adjustment. When this clause specifies an equitable
adjustment, it shall be made to any affected contract provision in accordance
with the procedures of the Changes clause. When appropriate, the Contracting
Officer may initiate an equitable adjustment in favor of the Government.
<PAGE>
Section I, Page 13
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
The right to an equitable adjustment shall be the Contractor's exclusive remedy.
The Government shall not be liable to suit for breach of contract for-
(l) Any delay in delivery of Government-furnished property;
(2) Delivery of Government-furnished property in a condition not
suitable for its intended use;
(3) A decrease in or substitution of Government-furnished
property; or
(4) Failure to repair or replace Government property for which
the Government is responsible.
(i) Final accounting and disposition of Government property. Upon
completing this contract, or at such earlier dates as may be fixed by the
Contracting Officer, the Contractor shall submit, in a form acceptable to the
Contracting Officer, inventory schedules covering all items of Government
property not consumed in performing this contract or delivered to the
Government. The Contractor shall prepare for shipment, deliver f.o.b. origin,
or dispose of the Government property as may be directed or authorized by the
Contracting Officer. The net proceeds of any such disposal shall be credited to
the cost of the work covered by this contract or paid to the Government as
directed by the Contracting Officer. The foregoing provisions shall apply to
scrap from Government property; provided, however, that the Contracting Officer
may authorize or direct the Contractor to omit from such inventory schedules any
scrap consisting of faulty castings or forgings or of cutting and processing
waste such as chips, cuttings, borings, turnings, short ends, circles,
trimmings, clippings, and remnants and to dispose of such scrap in accordance
with the Contractor's normal practice and account for it as a part of general
overhead or other reimbursable costs in accordance with the Contractor's
established accounting procedures.
(j) Abandonment and restoration of Contractor premises. Unless
otherwise provided herein, the Government-
(1) May abandon any Government property in place, at which time
all obligations of the Government regarding such abandoned property shall cease;
and
(2) Has no obligation to restore or rehabilitate the
Contractor's premises under any circumstance (e.g., abandonment, disposition
upon completion of need, or contract completion). However, if the Government-
furnished property (listed in the Schedule or specifications) is withdrawn or is
unsuitable for the intended use, or if other Government property is substituted,
then the equitable adjustment under paragraph (h) of this clause may properly
include restoration or rehabilitation costs.
(k) Communications. All communications under this clause shall be in
writing.
(l) Overseas contracts. If this contract is to be performed outside the
United States of America, its territories, or possessions, the words
"Government: and "Government-furnished" (wherever they appear in this clause)
shall be construed as "United States Government" and "United States Government-
furnished," respectively.
(End of Clause)
1.6 GOVERNMENT PROPERTY FURNISHED "AS IS"
<PAGE>
Section I, Page 14
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
(a) The Government makes no warranty whatsoever with respect to
Government property furnished "as is," except that the property is in the same
condition when placed at the f.o.b. point specified in the solicitation as when
inspected by the Contractor pursuant to the solicitation or, if not inspected by
the Contractor, as when last available for inspection under the solicitation.
All bags, contents for same, lED materials, the CTX System and specification
regarding the configuration of the lEDs as required in CLIN 0010, will be
provided in a condition fit for the purposes intended, and should not be
provided "as is."
(b) The Contractor may repair any property made available on an "as
is" basis. Such repair will be at the Contractor's expense except as otherwise
provided in this clause. Such property may be modified at the Contractor's
expense, but only with the written permission of the Contracting Officer. Any
repair or modification of property furnished "as is" shall not affect the title
of the Government.
(c) If there is any change in the condition of Government property
furnished "as is" from the time inspected or last available for inspection under
the solicitation to the time placed on board at the location specified in the
solicitation, and such change will adversely affect the Contractor, the
Contractor shall, upon receipt of the property, notify the Contracting Officer
detailing the facts and, as directed by the Contracting Officer, either (1)
return such property at the Government's expense or otherwise dispose of the
property or (2) effect repairs to return the property to its condition when
inspected under the solicitation or, if not inspected, last available for
inspection under the solicitation. After completing the directed action and
upon written request of the Contractor, the Contracting Officer shall equitably
adjust any contractual provisions affected by the return, disposition, or repair
in accordance with the procedures provided for in the Changes clause of this
contract. The foregoing provisions for adjustment are the exclusive remedy
available to the Contractor, and the Government shall not be otherwise liable
for any delivery of Government property furnished "as is" in a condition other
than that in which it was originally offered.
(d) Except as otherwise provided in this clause, Government property
furnished "as is" shall be governed by the Government Property clause of this
contract.
(End of clause)
1.7 PROGRESS PAYMENTS
Progress payments shall be made to the Contractor when requested as work
progresses, but not more frequently than monthly in amounts approved by the
Contracting Officer, under the following conditions:
(a) COMPUTATION OF AMOUNTS.
(1) Unless the Contractor requests a smaller amount, each
progress payment shall be computed as
(i) 80 percent of the Contractor's cumulative total costs
under this contract, as shown by records maintained by the Contractor for the
purpose of obtaining payment under Government contracts, plus
<PAGE>
Section I, Page 15
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
(ii) progress payments to subcontractors (see paragraph
(j) below), all less the sum of all previous progress payments made by the
Government under this contract. Cost of money that would be allowable under the
Federal Aviation Administration's Contract Cost Principles shall be deemed an
incurred cost for progress payment purposes.
(2) The following conditions apply to the timing of including
costs in progress payment requests:
(i) The costs of supplies and services purchased by the
Contractor directly for this contract may be included only after payment by
cash, check or other form of actual payment.
(ii) Costs for the following may be included when
incurred, even if before payment, when the Contractor is not delinquent in
payment of the costs of contract performance in the ordinary course of business:
(A) Materials issued from the Contractor's stores
inventory and placed in the production process for use on this contract.
(B) Direct labor, direct travel, and other direct
in-house costs.
(C) Properly allocable and allowable indirect
costs.
(iii) Accrued costs of Contractor contributions under
employee pension or other postretirement benefit, profit sharing, and stock
ownership plans shall be excluded until actually paid unless---
(A) The Contractors practice is to contribute to
the plans quarterly or more frequently; and
(B) The contribution does not remain unpaid 30
days after the end of the applicable quarter or shorter payment period (any
contributions remaining unpaid shall be excluded from the Contractors total
costs for progress payments until paid).
(iv) If the contract is subject to the special transition
method authorized in Cost Accounting Standard (CAS) 410, Allocation of Business
Unit General and Administrative Expense to Final Cost Objective, General and
Administrative expenses (G&A) shall not be included in progress payment requests
until the suspense account prescribed in CAS 410 is less than--
(A) Five million dollars; or
(B) The value of the work-in-process inventories
under contracts entered into after the suspense account was established (only a
pro rata share of the G&A allocable to the excess of the inventory over the
suspense account value is includable in progress payment requests under this
contract).
(3) The Contractor shall not include the following in total
costs for progress payment purposes in subparagraph (a)(1)(i) above:
(i) Costs that are not reasonable, allocable to this
contract, and consistent with sound and generally accepted accounting principles
and practices.
(ii) Costs incurred by subcontractors or suppliers.
(iii) Costs ordinarily capitalized and subject to
depreciation or amortization except for the properly depreciated or amortized
portion of such costs.
<PAGE>
Section I, Page 16
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
(iv) Payments made or amounts payable to subcontractors or
suppliers, except for-
(A) Completed work, including partial deliveries,
to which the Contractor has acquired title; and
(B) Work under cost-reimbursement or time-and-
material subcontracts to which the Contractor has acquired title.
(4) The amount of unliquidated progress payments may exceed neither
(i) the progress payments made against incomplete work
(including allowable unliquidated progress payments to subcontractors) nor
(ii) the value, for progress payment purposes, of the
incomplete work. Incomplete work shall be considered to be the supplies and
services required by this contract, for which delivery and invoicing by the
Contractor and acceptance by the Government are incomplete.
(5) The total amount of progress payments shall not exceed 80
percent of the total contract price.
(6) If a progress payment or the unliquidated progress payments
exceed the amounts permitted by subparagraphs (a)(4) or (a)(5) above, the
Contractor shall repay the amount of such excess to the Government on demand.
(b) LIQUIDATION.
Except as provided in the Termination for Convenience of the Government clause,
all progress payments shall be liquidated by deducting from any payment under
this contract, other than advance or progress payments, the unliquidated
progress payments, or 80 percent of the amount invoiced, whichever is less. The
Contractor shall repay to the Government any amounts required by a retroactive
price reduction, after computing liquidations and payments on past invoices at
the reduced prices and adjusting the unliquidated progress payments accordingly.
The Government reserves the right to unilaterally change from the ordinary
liquidation rate to an alternate rate when deemed appropriate for proper
contract financing.
(c) REDUCTION OR SUSPENSION.
The Contracting Officer may reduce or suspend progress payments, increase the
rate of liquidation, or take a combination of these actions, after finding on
substantial evidence any of the following conditions:
(1) The Contractor failed to comply with any material
requirement of this contract (which includes paragraphs (f) and (g) below).
(2) Performance of this contract is endangered by the
Contractor's
(i) failure to make progress or
(ii) unsatisfactory financial condition.
(3) Inventory allocated to this contract substantially exceeds
reasonable requirements.
(4) The Contractor is delinquent in payment of the costs of
performing this contract in the ordinary course of business.
(5) The unliquidated progress payments exceed the fair value of
the work accomplished on the undelivered portion of this contract.
(6) The Contractor is realizing less profit than that reflected
in the establishment of any alternate liquidation rate in paragraph (6) above,
and that rate is less than the progress payment rate stated in subparagraph
(a)(1) above.
<PAGE>
Section I, Page 17
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
(d) TITLE.
(l) Title to the property described in this paragraph (d) shall
vest in the Government. Vestiture shall be immediately upon the date of this
contract, for property acquired or produced before that date. Otherwise,
vestiture shall occur when the property is or should have been allocable or
properly chargeable to this contract.
(2) `Property,' as used in this clause, includes all of the
below-described items acquired or produced by the Contractor that are or should
be allocable or properly chargeable to this contract under sound and generally
accepted accounting principles and practices.
(i) Parts, materials, inventories, and work in process;
(ii) Special tooling and special test equipment to which
the Government is to acquire title under any other clause of this contract;
(iii) Nondurable (i.e., noncapital) tools, jigs, dies,
fixtures, molds, patterns, taps, gauges, test equipment, and other similar
manufacturing aids, title to which would not be obtained as special tooling
under subparagraph (ii) above; and
(iv) Drawings and technical data, to the extent the
Contractor or subcontractors are required to deliver them to the Government by
other clauses of this contract.
(3) Although title to property is in the Government under this
clause, other applicable clauses of this contract; e.g., the termination or
special tooling clauses, shall determine the handling and disposition of the
property.
(4) The Contractor may sell any scrap resulting from production
under this contract without requesting the Contracting Officer's approval, but
the proceeds shall be credited against the costs of performance.
(5) To acquire for its own use or dispose of property to which
title is vested in the Government under this clause, the Contractor must obtain
the Contracting Officer's advance approval of the action and the terms. The
Contractor shall
(i) exclude the allocable costs of the property from the
costs of contract performance, and
(ii) repay to the Government any amount of unliquidated
progress payments allocable to the property. Repayment may be by cash or credit
memorandum.
(6) When the Contractor completes all of the obligations under
this contract, including liquidation of all progress payments, title shall vest
in the Contractor for all property (or the proceeds thereof) not-
(i) Delivered to, and accepted by, the Government under
this contract; or
(ii) Incorporated in supplies delivered to, and accepted
by, the Government under this contract and to which title is vested in the
Government under this clause.
(7) The terms of this contract concerning liability for
Government-furnished property shall not apply to property to which
the.Government acquired title solely under this clause.
(e) RISK OF LOSS.
Before delivery to and acceptance by the Government, the Contractor shall bear
the risk of loss for property, the title to which vests in the Government under
this clause, except to the extent the Government expressly assumes the risk.
The Contractor shall repay the Government an amount equal
<PAGE>
Section I, Page 18
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
to the unliquidated progress payments that are based on costs allocable to
property that is damaged, lost, stolen, or destroyed.
(f) CONTROL OF COSTS AND PROPERTY
The Contractor shall maintain an accounting system and controls adequate for the
proper administration of this clause.
(g) REPORTS AND ACCESS TO RECORDS.
The Contractor shall promptly furnish reports, certificates, financial
statements, and other pertinent information reasonably requested by the
Contracting Officer for the administration of this clause. Also, the Contractor
shall give the Government reasonable opportunity to examine and verify the
Contractor's books, records, and accounts.
(h) SPECIAL TERMS REGARDING DEFAULT.
If this contract is terminated under the Default clause,
(i) the Contractor shall, on demand, repay to the Government the
amount of unliquidated progress payments and
(ii) title shall vest in the Contractor, on full liquidation of
progress payments, for all property for which the Government elects not to
require delivery under the Default clause. The Government shall be liable for
no payment except as provided by the Default clause.
(i) RESERVATIONS OF RIGHTS.
(1) No payment or vesting of title under this clause shall
(i) excuse the Contractor from performance of obligations
under this contract or
(ii) constitute a waiver of any of the rights or remedies
of the parties under the contract.
(2) The Government's rights and remedies under this clause
(i) shall not be exclusive but rather shall be in
addition to any other rights and remedies provided by law or this contract and
(ii) shall not be affected by delayed, partial, or omitted
exercise of any right, remedy, power, or privilege, nor shall such exercise or
any single exercise preclude or impair any further exercise under this clause or
the exercise of any other right, power, or privilege of the Government.
(j) PROGRESS PAYMENTS TO SUBCONTRACTORS.
The amounts mentioned in (a)(1)(ii) above shall be all progress payments to
subcontractors or divisions, if the following conditions are met:
(1) The amounts included are limited to
(i) the unliquidated remainder of progress payments made
plus
(ii) for small business concerns any unpaid subcontractor
requests for progress payments that the Contractor has approved for current
payment in the ordinary course of business.
<PAGE>
Section I, Page 19
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
(2) The subcontract or interdivisional order is expected to
involve a minimum of approximately 6 months between the beginning of work and
the first delivery, or, if the subcontractor is a small business concern, 4
months.
(3) The terms of the subcontract or interdivisional order
concerning progress payments-
(i) Are substantially similar to the terms of this
clause;
(ii) Are at least as favorable to the Government as the
terms of this clause;
(iii) Are not more favorable to the subcontractor or
division than the terms of this clause are to the Contractor;
(iv) Are in conformance with the requirements of paragraph
32.504(e) of the Federal Acquisition Regulation (cited here for informational
purposes only); and
(v) Subordinate all subcontractor rights concerning
property to which the Government has title under the subcontract to the
Government's right to require delivery of the property to the Government if
(A) the Contractor defaults or
(B) the subcontractor becomes bankrupt or
insolvent.
(4) The progress payment rate in the subcontract is the
customary rate used by the Contracting Agency, depending on whether the
subcontractor is or is not a small business concern.
(5) The parties agree concerning any proceeds received by the
Government for property to which title has vested in the Government under the
subcontract terms, that the proceeds shall be applied to reducing any
unliquidated progress payments by the Government to the Contractor under this
contract.
(6) If no unliquidated progress payments to the Contractor
remain, but there are unliquidated progress payments that the Contractor has
made to any subcontractor, the Contractor shall be subrogated to all the rights
the Government obtained through the terms required by this clause to be in any
subcontract, as if all such rights had been assigned and transferred to the
Contractor.
(7) The Contractor shall pay the subcontractor's progress
payment request under subdivision (j)(1)(ii) above, within a reasonable time
after receiving the Government progress payment covering those amounts.
(8) To facilitate small business participation in subcontracting
under this contract, the Contractor agrees to provide progress payments to small
business concerns, in conformity with the standards for customary progress
payments stated in Subpart 32.5 of the Federal Acquisition Regulation (cited
here for informational purposes only). The Contractor further agrees that the
need for such progress payments shall not be considered as a handicap or adverse
factor in the award of subcontracts.
(k) LIMITATIONS ON UNDEFINITIZED CONTRACT ACTIONS.
Notwithstanding any other progress payment provisions in this contract, progress
payments may not exceed 80 percent of costs incurred on work accomplished under
undefinitized contract actions. A 'contract action' is any action resulting in
a contract, including contract modifications for additional supplies or
services, but not including contract modifications that are within the scope and
under the terms of the contract, such as contract modifications issued pursuant
to the Changes clause, or funding and other administrative changes. This
limitation shall apply to the costs incurred, as computed in accordance with
paragraph (a) of this clause, and shall remain in effect until the contract
action is
<PAGE>
Section I, Page 20
PART I - THE SCHEDULE
SECTION I - CONTRACT CLAUSES
definitized. Costs incurred which are subject to this limitation shall be
segregated on Contractor progress payment requests and invoices from those costs
eligible for higher progress payment rates. For purposes of progress payment
liquidation, as described in paragraph (b) of this clause, progress payments for
undefinitized contract actions shall be liquidated at 80 percent of the amount
invoiced for work performed under the undefinitized contract action as long as
the contract action remains undefinitized. The amount of unliquidated progress
payments for undefinitized contract actions shall not exceed 80 percent of the
maximum liability of the Government under the undefinitized contract action or
such lower limit specified elsewhere in the contract. Separate limits may be
specified for separate actions.
(End of clause)
I.8 DATA RIGHTS TRANSFER
In the event that the Government transfers title to the supplies acquired under
this contract to a third party, the document titled "InVision Software License"
(Attachment B hereto) shall apply to the transferee. Government data rights
under this contract are as detailed in Section I clauses 3.5-13, "Rights in Data
- -- General" and 3.5-18 "Commercial Computer Software -- Restricted Rights." No
data rights of the Government shall be extinguished via transfer of title of
supplies delivered under this contract. Additionally, the Government shall not
be liable for any patent or copyright infringement resulting from such title
transfer.
<PAGE>
Section J, Page i
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
TABLE OF CONTENTS
J.1 CONTRACT DATA REQUIREMENTS LIST 1
(CDRL)
J.2 CDRL FORMS 4
ATTACHMENT A - INVISION TECHNOLOGIES, INC., CTX SERIES EXPLOSIVE DETECTION
SYSTEM, FACTORY OR SITE ACCEPTANCE TEST PROCEDURE
ATTACHMENT B - INVISION TECHNOLOGIES, INC., SOFTWARE LICENSE
<PAGE>
Section J, Page 1
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
J.1 CONTRACT DATA REQUIREMENTS LIST (CDRL)
The following definitions and notes apply to the CDRL Form block numbers. CDRLs
for this contract follow after paragraph J2
BLOCK 1 - LINE NUMBER
This block provides a line number which uniquely identifies the data item.
BLOCK 2 - TITLE
This block provides the title of the data item.
BLOCK 3 - SUBTITLE
This block provides additional title information for the data item if
further identification is required.
BLOCK 4 - DATA ITEM DESCRIPTION (DID) REFERENCE
This block gives the identification number and revision letter of the DID
which further specifies the requirements of the data item.
BLOCK 5 - CONTRACT REFERENCE
This block provides a reference to the specific contract line item number
or paragraph number of the Statement of Work which generates the
requirement for the data item.
BLOCK 6 - TECHNICAL OFFICE
This block identifies the FAA code for the contract Technical Officer.
BLOCK 7 - INSPECTION/ACCEPTANCE CODE
This block designates the location for performance of Government inspection
and acceptance of the data item. The location is indicated by a two-
character code as follows:
DD Inspection and acceptance at destination.
DS Inspection at destination, acceptance at source.
SD Inspection at source, acceptance at destination.
SS Inspection and acceptance at source.
<PAGE>
Section J, Page 2
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
LT Only a letter of transmittal required.
BLOCK 8 - APPROVAL CODE
This block indicates requirements for Government approval of the data item.
Requirements are identified by a code as follows:
AN Formal, written approval is required prior to final acceptance of the
data item by the Government. If it is determined that any contractual
requirements for this data item are not satisfied, the Government will
notify the Contractor of each deficient area and withhold final
acceptance pending correction of all deficiencies by the Contractor.
A distribution statement is not required.
AD Formal, written approval and a distribution statement are required.
D Only a distribution statement is required.
N Neither approval nor a distribution statement are required.
BLOCK 9 - Reserved for future use.
BLOCK 10 - FREQUENCY
This block specifies the frequency of submittal for the data item. Data of
a recurring type shall be submitted at the end of the reporting period
established in this field unless otherwise indicated in Blocks 12, 13, or
16. Codes used are as follows:
Daily Daily
Weekly Weekly
B/W Bi-Weekly
Monthly Monthly
S/M Semi-Monthly
B/M Bi-Monthly
Qrtly Quarterly
Annually Annually
One/R One time submittal, change pages, revisions
N/R N separate submittals, changes pages, revisions
R/ASR Revisions, change pages as required
A/R As required
BLOCK 11 - AS OF DATE
<PAGE>
Section J, Page 3
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
For data of a recurring type. This block is used for the starting and
ending dates of the required reporting period. "EOM" indicates "End of
Month."
BLOCK 12 - DATE OF FIRST SUBMITTAL
For data of a recurring type. This block is used to indicate the required
delivery date for the first submission of the data item. The following
codes apply:
W/D Working Day(s) EOM End of Month
C/D Calendar Day(s) EOP End of Reporting Period
C/Y Contract Year
BLOCK 13 - DATE OF SUBSEQUENT SUBMISSION
For data of a recurring type. This block is used to indicate the required
delivery date for subsequent submissions of the data item. The following
codes apply:
W/D Working Day(s) EOM End of Month
C/D Calendar Day(s) EOP End of Reporting Period
C/Y Contract Year
BLOCK 14 - DISTRIBUTION AND ADDRESSES
This block specifies the addresses and the number of copies each addressee
is to receive. The quantity of hard copies is indicated by the number to
the left of the slash. Unless otherwise indicated in Block 16, the medium
for submission shall be paper. The designation "LT" in this block, if
shown, indicates that only a copy of the letter of transmittal is required
for that addressee. "ORIG" designates original document.
A distribution list is shown below. All CDRL items shall be delivered to
the FAA at the following address, with the corresponding attention line:
Federal Aviation Administration
800 Independence Avenue, S.W.
Washington, DC 2059l
The "Attention" codes in Block 14 are as follows:
CO Contracting Officer, Resource Management Branch (ASU-360)
COTR Contracting Officer's Technical Representative
AP Accounts Payable (AAA-225)
<PAGE>
Section J, Page 4
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
BLOCK 15 - TOTAL COPIES
This block specifies the total number of copies required. Example: "ORIG +
3" means an original document plus three copies is the total requirement
for all addressees. The Government reserves the right to adjust the
distribution and total number of copies, and will issue modifications to
the contract if data requirements change.
BLOCK 16 - REMARKS
This block contains pertinent data item information not specified elsewhere
on the form and/or clarification data for other CDRL blocks. A full
description of the reports is provided in the Statement of Work. Precise
formats will be provided in this attachment at contract award.
J.2 CDRL FORMS
The following CDRL forms (Exhibits A through K in the following pages) apply to
this contract:
A01 Monthly Formal Progress Review (Section C3.1)
B01 Maintenance Readiness Plan (Section C.3.2)
CO1 Production Readiness Plan (Section C.3.3)
D02 Quality System Plan (Section E.2)
E01 TIP Library Development Plan (Section C.3.4)
F01 Training Expansion Plan (Section C.3.5)
G01 RESERVED
H01 Operations Manual (Section C.3.6)
I01 Maintenance Manual (Section (C.3.7)
J01 Integration Manual (Section C.3.8)
K01 Installation Manual (Section C.3.9)
<PAGE>
Section J, Page 5
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
EXHIBIT A
<TABLE>
<CAPTION>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACT DATA REQUIREMENTS LIST
- ----------------------------------------------------------------------------------------------------------------------------------
1. 2. & 3. 6. 10. 12. 14.
- ----------------------------------------------------------------------------------------------------------------------------------
AO1 Monthly Formal Progress Review (Briefing and Report) AAR-600 MONTHLY 30 C/D CO LT ONLY
AFTER COTR COPY/2
AWARD OTHER COPIES
- ------------------------------------------------------------------------------------------------------------------
4. 5. 7. 8. 9. 11. 13. (AS
- ------------------------------------------------------------------------------------------------------------------ REQ'D)
N/A C.3.1 SS D EOM 10 C/D
AFTER EOM
- ------------------------------------------------------------------------------------------------------------------
16.
- ------------------------------------------------------------------------------------------------------------------
The Contractor shall be responsible for conducting monthly progress reviews in accordance with Section C.3.1 of
the contract. Minutes from each review shall be documented and submitted as formal reports. The content shall
cover all contract and subcontract activities, including a synopsis of program activities over the previous
calendar month. The organization of the review must be sufficiently comprehensive to cover technical and schedule
aspects of the contract. Issues and concerns shall be individually identified and discussed separately. Following --------------
a description of the issue or concern, the Contractor shall assess criticality and time-sensitivity, risk analysis, 15.
and actions planned to mitigate or eliminate significant problems. Recommended resolution shall specifically
identify required involvement by Government or Contractor personnel. The conclusion of the review will delineate
all outstanding action items resulting from previous events, milestones, and reviews. The status shall indicate -------------
what actions are required to close the item and the necessary time frames. A post award conference mutually AS
scheduled will replace the first review. Contractor format for the Monthly Formal Progress Review is acceptable. REQ'D
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Section J, Page 6
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
EXHIBIT B
<TABLE>
<CAPTION>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACT DATA REQUIREMENTS LIST
- ----------------------------------------------------------------------------------------------------------------------------------
1. 2. & 3. 6. 10. 12. 14.
- ----------------------------------------------------------------------------------------------------------------------------------
BO1 MAINTENANCE READINESS PLAN AR-600 R/ASR 30 C/D CO LT ONLY
AFTER
AWARD COTR COPY/2
- -----------------------------------------------------------------------------------------------------------------
4. 5. 7. 8. 9. 11. 13.
- -----------------------------------------------------------------------------------------------------------------
N/A C.3.2 DD AN N/A 30 C/D
AFTER EOM
RECEIPT
OF IPT
DEPLOY
PLAN
- -----------------------------------------------------------------------------------------------------------------
16.
- -----------------------------------------------------------------------------------------------------------------
The Contractor shall prepare a Maintenance Readiness Plan in any acceptable format to implement the field support
required by this contract. Essential elements include but are not limited to: (1) steps required and schedule to --------------
establish regional service representatives/engineers; (2) steps required and schedule for establishing spare parts 15.
depots, with an estimate of required spare parts inventories; and (3) strategy for providing maintenance personnel
(e.g. new, direct employees or contract service employees). Government Furnished Information: Initial Deployment --------------
Plan, Final Deployment Plan and comments on the initial MRP to be provided by AAR-600. Thirty days after receipt COPIES 2
of the Final Deployment Plan and comments, the Contractor shall submit a revised MRP.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Section J, Page 7
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
EXHIBIT C
<TABLE>
<CAPTION>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACT DATA REQUIREMENTS LIST
- ----------------------------------------------------------------------------------------------------------------------------------
1. 2. & 3. 6. 10. 12. 14.
- ----------------------------------------------------------------------------------------------------------------------------------
CO1 PRODUCTION READINESS PLAN AR-600 ONE/R 30 C/D CO LT ONLY
AFTER
AWARD COTR COPY/2
- ------------------------------------------------------------------------------------------------------------
4. 5. 7. 8. 9. 11. 13.
- ------------------------------------------------------------------------------------------------------------
N/A C.3.3 DD AN N/A
16.
- -------------------------------------------------------------------------------------------------------------
The Contractor shall provide in an acceptable format a description of the actions necessary to meet production ----------------
requirements (quantities and schedules) set forth in this contract. Contractor format is acceptable. 15.
----------------
COPIES 2
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Section J, Page 8
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
EXHIBIT D
<TABLE>
<CAPTION>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACT DATA REQUIREMENTS LIST
- ----------------------------------------------------------------------------------------------------------------------------------
1. 2. & 3. 6. 10. 12. 14.
- ----------------------------------------------------------------------------------------------------------------------------------
DO1 QUALITY SYSTEM PLAN ASU-200(QRO) ONE/R 30 C/D CO LT ONLY
AFTER
AWARD QRO COPY/2
- ------------------------------------------------------------------------------------------------------------
4. 5. 7. 8. 9. 11. 13. COTR COPY/1
- ------------------------------------------------------------------------------------------------------------
See DID attached E.2 LT AN R/ASR N/A
- ------------------------------------------------------------------------------------------------------------
16.
- -------------------------------------------------------------------------------------------------------------
The Contractor shall submit an initial Quality System Plan thirty days after contract award. The Government ----------------
shall have thirty days to review and comment upon each submission of the QSP until it is approved by the 15.
Contracting Officer. After approval of the plan, the Contractor shall be in compliance with the plan within
ninety days. ----------------
COPIES 2
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Section J, Page 9
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
EXHIBIT E
<TABLE>
<CAPTION>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACT DATA REQUIREMENTS LIST
- ----------------------------------------------------------------------------------------------------------------------------------
1. 2. & 3. 6. 10. 12. 14.
- ----------------------------------------------------------------------------------------------------------------------------------
E01 TIP LIBRARY DEVELOPMENT PLAN AAR-600 A/R 30 C/D CO LT ONLY
AFTER
AWARD COTR COPY/2
- ------------------------------------------------------------------------------------------------------------
4. 5. 7. 8. 9. 11. 13.
- ------------------------------------------------------------------------------------------------------------
N/A C.3.4 LT AN N/A N/A
- ------------------------------------------------------------------------------------------------------------
16.
- -------------------------------------------------------------------------------------------------------------
The Contractor shall prepare and deliver a plan describing the actions necessary and schedule for ----------------
developing additional TIP volumes within the TIP library as described in CLIN 0010 of this contract. 15.
Contractor format is acceptable. Government Furnished Information: Specifications to the Contractor ----------------
on the proportion and configuration of the IED, and the location/packing of the IED. Government Furnished COPIES 2
Property: All bags, contents, IED materials and the CTX system installed at William J. Hughes Technical ----------------
Center.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Section J, Page 10
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
EXHIBIT F
<TABLE>
<CAPTION>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACT DATA REQUIREMENTS LIST
- ----------------------------------------------------------------------------------------------------------------------------------
1. 2. & 3. 6. 10. 12. 14.
- ----------------------------------------------------------------------------------------------------------------------------------
FO1 TRAINING EXPANSION PLAN (TEP) AAR-600 ONE/R 30 C/D CO LT ONLY
AFTER
AWARD COTR COPY/2
- ------------------------------------------------------------------------------------------------------------
4. 5. 7. 8. 9. 11. 13.
- ------------------------------------------------------------------------------------------------------------
N/A C.3.5 LT AN N/A N/A
- ------------------------------------------------------------------------------------------------------------
16.
- ------------------------------------------------------------------------------------------------------------
The Contractor shall prepare and deliver a plan describing the actions necessary and schedule to meet the
training requirements of this contract. Contractor format is acceptable. The TEP shall primarily focus on
the Operator Training Class, but shall also disucss expansion plans, if Contractor deems expansion necessary,
for maintenance and instructor training based on quantities specified in Section H.3 of this contract.
The TEP shall include but not be limited to discussions of the following:
- - Increased staffing requirements;
-------------------
- - IED and training bag development, including expected specifications from the FAA; 15.
- - How training program shall accommodate features such as Image Quality Test Kit procedures and TIP, as well
as any future capabilities that may be added to the CTX 5000SP;
- - Minor preventative maintenance for operators;
- - Recommendations for how CBT could enhance, modify or replace the classrooom instruction portion of the -------------------
current operator training program; COPIES 2
As an attachment to the TEP, Contractor shall provide a training syllabus for each of the three courses
(Operator, Instructor, and Engineer Maintenance) for review and approval in conjunction with the TEP review.
Syllabus submittal dates: Operator - 30 days after contract award; Instructor - 90 days after contract award;
and Engineer Maintenance - 90 days after contract award.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Section J, Page 11
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
EXHIBIT G
RESERVED
<PAGE>
Section J, Page 12
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
EXHIBIT H
<TABLE>
<CAPTION>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACT DATA REQUIREMENTS LIST
- ----------------------------------------------------------------------------------------------------------------------------------
1. 2. & 3. 6. 10. 12. 14.
- ----------------------------------------------------------------------------------------------------------------------------------
H01 OPERATIONS MANUAL AAR-600 R/ASR 30 C/D CO LT ONLY
AFTER
AWARD COTR COPY
- ------------------------------------------------------------------------------------------------------------ AS
4. 5. 7. 8. 9. 11. 13. REQD
- ------------------------------------------------------------------------------------------------------------
N/A C.3.6 LT AN N/A N/A
- ------------------------------------------------------------------------------------------------------------
16.
- -------------------------------------------------------------------------------------------------------------
The Contractor shall deliver an Operations Manual and subsequent changes to meet the operations requirements --------------------
of this contract. Elements of the Manual may consist of, but are not be limited to, Overview of the CTX 5000
SP, SystemControls, Machine Operations, Safety, Security, Bagging Handling Operations, Automatic Detection and 15.
Image Displays, Threat Resolution, Supervisor Menus, and Log In Procedures. --------------------
COPIES AS
REQD
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Section J, Page 13
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
EXHIBIT I
<TABLE>
<CAPTION>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACT DATA REQUIREMENTS LIST
- ----------------------------------------------------------------------------------------------------------------------------------
1. 2. & 3. 6. 10. 12. 14.
- ----------------------------------------------------------------------------------------------------------------------------------
I01 MAINTENANCE MANUAL AAR-600 R/ASR 30 C/D CO LT ONLY
AFTER
AWARD COTR COPY/
- ------------------------------------------------------------------------------------------------------------ AS
4. 5. 7. 8. 9. 11. 13. REQD
- ------------------------------------------------------------------------------------------------------------
N/A C.3.7 LT AN N/A N/A
- ------------------------------------------------------------------------------------------------------------
16.
- -------------------------------------------------------------------------------------------------------------
The Contractor shall deliver a maintenance manual which will facilitate owner and operator preventive and ------------------
corrective maintenance of a non-complex nature. 5.
------------------
COPIES AS
REQD
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Section J, Page 14
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
EXHIBIT J
<TABLE>
<CAPTION>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACT DATA REQUIREMENTS LIST
- ----------------------------------------------------------------------------------------------------------------------------------
1. 2. & 3. 6. 10. 12. 14.
- ----------------------------------------------------------------------------------------------------------------------------------
J01 INTEGRATION MANUAL AAR-600 R/ASR 30 C/D CO LT ONLY
AFTER
AWARD COTR COPY/2
- ------------------------------------------------------------------------------------------------------------
4. 5. 7. 8. 9. 11. 13.
- ------------------------------------------------------------------------------------------------------------
N/A C.3.8 LT AN N/A N/A
- ------------------------------------------------------------------------------------------------------------
16.
- -------------------------------------------------------------------------------------------------------------
The Contractor shall deliver an Integration Manual which describes the actions necessary to integrate a
CTX-5000 into a baggage system. Elements of the manual may consist of, but not be limited to, Physical
Components and Operational Impact, Integrated Operation: PLC Communication, and Site and Equipment
Specifications. ----------------
15.
----------------
COPIES AS
REQD
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Section J, Page 15
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
EXHIBIT K
<TABLE>
<CAPTION>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACT DATA REQUIREMENTS LIST
- ----------------------------------------------------------------------------------------------------------------------------------
1. 2. & 3. 6. 10. 12. 14.
- ----------------------------------------------------------------------------------------------------------------------------------
K01 INSTALLATION MANUAL AAR-600 R/ASR 30 C/D CO LT ONLY
AFTER
AWARD COTR COPY/
- ------------------------------------------------------------------------------------------------------------ AS
4. 5. 7. 8. 9. 11. 13. REQD
- ------------------------------------------------------------------------------------------------------------
N/A C.3.9 LT AN N/A N/A
- ------------------------------------------------------------------------------------------------------------
16.
- -------------------------------------------------------------------------------------------------------------
The Contractor shall deliver an Installation Manual which describes the actions necessary to install and
render operational a CTX-5000SP. Elements of the Manual may consist of, but not be limited to, Pre-
Installation, Preparation for Installation, CTX 5000 SP Specific Installation, System Electrical Connections, -----------------
and Installation Tests. 15.
----------------
COPIES AS
REQD
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Section J, Attachment A
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
ATTACHMENT A
INVISION TECHNOLOGIES, INC.
CTX SERIES EXPLOSIVE DETECTION SYSTEM
FACTORY OR SITE ACCEPTANCE TEST PROCEDURE
<PAGE>
INVISION TECHNOLOGIES, INC.
CTX SERIES EXPLOSIVE DETECTION SYSTEM
FACTOR OR SITE ACCEPTANCE TEST PROCEDURE
GENERAL INSPECTION OF SUPPLIED COMPONENTS ACCEPTED
CTX 5000 SP EDS Series Number____________ / /
Operators Console / /
Infeed Conveyor System Type ____________________ / /
Exit Conveyor System Type ____________________ / /
Integration Conveyor System Type ____________________ / /
Other Type ____________________ / /
FAA Certified Operating Software Type ____________________ / /
Physical inspection of components revealed no damage / /
Comments:______________________________________________________________________
_______________________________________________________________________________
OPERATIONAL DEMONSTRATION ACCEPTED
Hardware:
Xray generation system / /
Slip ring and brush-block assembly / /
Computer system and accessories / /
Conveyor systems, belt adjustment / /
Power connections / /
Software Features:
Start up and shut down procedures / /
Start up test & lamp test function / /
Hard key functions / /
Soft key functions / /
Counter system for total bags, xray system and operating time / /
Comments: ____________________________________________________________________
_______________________________________________________________________________
SAFETY DEMONSTRATION ACCEPTED
Emergency stop / /
Xray exposure safety curtain replacement / /
Mechanical safety / /
Electrical safety / /
Comments: ____________________________________________________________________
_______________________________________________________________________________
PERFORMANCE DEMONSTRATION ACCEPTED
Luggage Trial / /
Image Quality Test Bag / /
<PAGE>
Comments: _____________________________________________________________________
________________________________________________________________________________
CONTRACT COMPLIANCE - (SEE ATTACHED DELIVERABLES LIST) ACCEPTED
Review of InVision product deliverables: / /
Enter all open deliverables & schedule for completion below
Review of InVision service and/or engineering project deliverables: / /
Enter all open deliverables & schedule for completion below
InVision Customer Operations and Communications Protocols / /
INVISION CONTRACT DELIVERABLES AND ESTIMATED SCHEDULE OF COMPLETION ACCEPTED
Products and Services not Delivered Estimated
List all open items Delivery Date
________________________________________ ______________ / /
________________________________________ ______________ / /
________________________________________ ______________ / /
________________________________________ ______________ / /
________________________________________ ______________ / /
________________________________________ ______________ / /
Comments: _____________________________________________________________________
________________________________________________________________________________
Date Completed: ________________________________________
Completed by InVision Representative: ________________________________________
Witnessed by Purchaser Representative: ________________________________________
Agreed and Accepted:
INVISION TECHNOLOGIES, INC. PURCHASER
By:________________________________ By:____________________________________
Name:______________________________ Name:__________________________________
Title:_____________________________ Title:_________________________________
<PAGE>
INVISION TECHNOLOGIES, INC.
CTX SERIES EXPLOSIVE DETECTION SYSTEM
LIST OF CONTRACT DELIVERABLES
System Serial Number _______________________________________
Purchaser _______________________________________
InVision Contract Number _______________________________________
Installed Location _______________________________________
Warranty Start Date _______________________________________
System Configuration _______________________________________
Hardware
_______________________________________
_______________________________________
Software Configuration _______________________________________
_______________________________________
Services/Installation _______________________________________
_______________________________________
Services/Training _______________________________________
_______________________________________
Services/Integration _______________________________________
_______________________________________
Miscellaneous deliverables _______________________________________
_______________________________________
<PAGE>
Section J, Attachment B
PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
SECTION J - LIST OF EXHIBITS
ATTACHMENT B
INVISION TECHNOLOGIES, INC.
SOFTWARE LICENSE
<PAGE>
ATTACHMENT B
INVISION SOFTWARE LICENSE
Notwithstanding any other provision contained in this contract, where any
product or service provided to the Government under this contract includes
software, whether embedded or on a disk or tape or other media, including data
stored in such electronic form, upon payment to INVISION therefore, INVISION
hereby grants to PURCHASER a perpetual, non-exclusive, non-transferable, license
to use the software portion of such Product in connection with PURCHASER's own
use of the Product, with it being understood that INVISION retains all right,
title and interest in and to the software portion of the Product, and upgrades
(if any) to the software portion of the Product provided to PURCHASER in
connection with the Product being acquired hereunder. Without the express prior
written consent of INVISION, PURCHASER shall not reproduce, decompile, or
disassemble, all or any portion of the software portion of the Products or sub
license or divulge, disclose or in any way distribute all or any portion of the
software to any third party. This license may not be transferred except in
connection with the transfer of the Product itself.
<PAGE>
Section K, Page i
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
TABLE OF CONTENTS
K.1 REPRESENTATIONS/CERTIFICATIONS
CLAUSES AND PROVISIONS ..... 1
<PAGE>
Section K, Page 1
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
K.1 REPRESENTATIONS/CERTIFICATIONS CLAUSES AND PROVISIONS
3.1.1 Clauses and Provisions Incorporated by Reference
CLAUSES AND PROVISIONS INCORPORATED BY REFERENCE (JUNE 1996)
This screening information request (SIR) or contract, as applicable,
incorporates by reference one or more provisions or clauses with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make the full text available, or offerors and Contractors may
obtain the full text via Internet from the Federal Aviation Administration (FAA)
home page (http://www.faa.gov).
(End of clause)
The following clauses are incorporated by reference:
3.2.5-1 OFFICIALS NOT TO BENEFIT APRIL 1996
3.2.5-3 GRATUITIES OR GIFTS APRIL 1996
3.2.5-4 CONTINGENT FEES OCTOBER 3, 1996
3.2.5-5 ANTI-KICKBACK PROCEDURES OCTOBER 3, 1996
3.2.2.3-10 Type of Business Organization
TYPE OF BUSINESS ORGANIZATION (APRIL 1996)
The offeror or quoter, by checking the applicable box, represents that:
(a) It operates as /X/ a corporation incorporated under the laws of the
State of DELAWARE, / / an individual, / / a nonprofit organization, or / / a
joint venture; or
(b) If the offeror or quoter is a foreign entity, it operates as / / an
individual, / / a partnership, / / a nonprofit organization, / / a joint
venture, or//a corporation, registered for business in _______________ (country)
(End of provision)
<PAGE>
Section K, Page 2
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
3.2.2.3-15 Authorized Negotiators
AUTHORIZED NEGOTIATORS (APRIL 1996)
The offeror or quoter represents that the following persons are authorized to
negotiate on its behalf with the Government in connection with this request for
proposals or quotations:
DAVID PILLOR, Sr. VICE PRESIDENT
-----------------------------------------------------------------
FREDERICK F. MUNTZ, AREA MANAGER
-----------------------------------------------------------------
(End of provision)
3.2.2.3-23 Place of Performance
PLACE OF PERFORMANCE (APRIL 1996)
(a) The offeror or quoter, in the performance of this contract, / X /
intends, / / does not intend (check applicable block) to use one or more plants
or facilities located at a different address from the address of the offeror or
quoter as indicated in this proposal or quotation.
(b) If the offeror or quoter checks "intends" in paragraph (a) above, it
shall insert in the spaces provided below the required information.
Place of Performance Name and Address of Owner and
(Street, Address, City, Operator of the Plant or Facility if
County, State, Zip Code) Other than Offeror or Quoter
OFFEROR IS ACTIVELY SEEKING ADDITIONAL FACILITIES
----------------------------------------------------------------------
IN THE SAN FRANCISCO BAY AREA U.S.A.
----------------------------------------------------------------------
(End of provision)
<PAGE>
Section K, Page 3
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
3.2.2.3-35 Annual Representations and Certifications
ANNUAL REPRESENTATIONS AND CERTIFICATIONS (APRIL 1996)
The offeror certifies that annual representations and certifications (check the
appropriate block):
[ ] (a) Dated __________ (insert date of signature on submission) which
are incorporated herein by reference, have been submitted to the contracting
office issuing this contract and that the submittal is current, accurate, and
complete as of the date of this contract, except as follows (insert changes that
affect only this contract; if 'none,' so state):
[X] (b) Are enclosed.
(End of provision)
3.2.2.3-70 Taxpayer Identification
TAXPAYER IDENTIFICATION (APRIL 1996)
(a) Definitions.
(1) "Common parent," as used herein, means that corporate entity that owns
or controls an affiliated group of corporations that files its Federal income
tax returns on a consolidated basis, and of which the offeror is a member.
(2) "Corporate status," as used herein, means a designation as to whether
the offeror is a corporate entity, an unincorporated entity (e.g., sole
proprietorship or partnership), or a corporation providing medical and health
care services.
(3) "Taxpayer Identification Number (TIN)," as used herein, means the
number required by the IRS to be used by the offeror in reporting income tax and
other returns.
(b) All offerors are required to submit the information required in paragraphs
(c) through (e) of this provision in order to comply with reporting requirements
of 26 U.S.C. 6041, 6041A, and 6050M and implementing regulations issued by the
Internal Revenue Service (IRS). If the resulting contract is subject to the
reporting requirements, the failure or refusal by the offeror to furnish the
information may result in a 31 percent reduction of payments otherwise due under
the contract.
(c) Taxpayer Identification Number (TIN).
<PAGE>
Section K, Page 4
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
[X] TIN: 94-3123544
----------------------
[ ] TIN has been applied for.
[ ] TIN is not required because:
[ ] Offeror is a nonresident alien, foreign corporation, or foreign
partnership that does not leave income effectively connected with the
conduct of a trade or business in the U.S. and does not have all office or
place of business or a fiscal paying agent in the U.S.;
[ ] Offeror is an agency or instrumentality of a foreign government;
[ ] Offeror is an agency or instrumentality of a Federal, state, or local
government;
[ ] Other State basis.
(d) Corporate Status.
[ ] Corporation providing medical and health care services, or engaged in
the billing and collecting of payments for such services;
[X] Other corporate entity
[ ] Not a corporate entity
[ ] Sole proprietorship
[ ] Partnership .
[ ] Hospital or extended care facility described in 26 CFR 501(c)(3) that
is exempt from taxation under 26 CFR 501(a).
(e) Common Parent.
[X] Offeror is not owned or controlled by a common parent as defined in
paragraph (a) of this clause.
[ ] Name and TIN of common patent:
Name____________________________________
TIN_____________________________________
(End of provision)
3.2.2.2.7-7 Certification Regarding Debarment, Suspension, Proposed
Debarment, and Other Responsibility Matters
CERTIFICATION REGARDING DEBARMENT, SUSPENSION, PROPOSED
DEPARTMENT, AND OTHER RESPONSIBILITY MATTERS (APRIL 1996)
<PAGE>
Section K, Page 5
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
(a)(1) The Offeror certifies, to the best of its knowledge and belief,
that--
(I) The Offeror and/or any of its Principals--
(A) Are [ ] are not [X] presently debarred, suspended, proposed for debarment,
or declared ineligible for the award of contracts by any Federal agency;
(B) Have [ ] have not [X] within a three-year period preceding this offer, been
convicted of or had a civil judgment rendered against them for: commission of
fraud or a criminal offense in connection with obtaining. attempting to obtain,
or performing a public (Federal, state, or local) contract or subcontract;
violation of Federal or state antitrust statutes relating to the submission of
offers: or commission of embezzlement, theft, forgery, bribery, falsification or
destruction of records, making false statements, or receiving stolen property;
and (c) Are [X] are not [ ] presently indicted for, or otherwise criminally or
civilly charged by a governmental entity with, commission of any of the offenses
enumerated in subdivision (a)(1)(i)(B) of this provision. [SEE ATTACHMENT A.]
(ii) The Offeror has [ ] has not [X] within a three-year period preceding
this offer, had one or more contracts terminated for default by any Federal
agency.
(2) 'Principals,' for the purposes of this certification, means officers;
directors; owners; partners; and, persons having primary management or
supervisory responsibilities within a business entity (e.g., general manager;
plant manager; head of a subsidiary, division, or business segment, and similar
positions). THIS CERTIFICATION CONCERNS A MATTER WITHIN THE JURISDICTION OF AN
AGENCY OF HE UNITED STATES AND THE MAKING OF A FALSE, FICTITIOUS, OR FRAUDULENT
CERTIFICATION MAY RENDER THE MAKER SUBJECT TO PROSECUTION UNDER SECTION 1001,
TITLE 18, UNITED STATES CODE.
(b) The Offeror shall provide immediate written notice to the Contracting
Officer if, at any time prior to contract award, the Offeror learns that its
certification was erroneous when submitted or has become erroneous by reason of
changed circumstances.
(c) A certification that any of the items in paragraph (a) of this provision
exists will not necessarily result in terminating this contract. However, the
certification will be considered in connection with a determination of the
Offeror's responsibility. Failure of the Offeror to furnish a certification or
provide such additional information as requested by the Contracting Officer may
render the Offeror nonresponsible.
(d) Nothing contained in the foregoing shall be construed to require
establishment of a system of records in order to render, in good faith, the
certification required by paragraph (a) of this provision. The knowledge and
information of an Offeror is not required to exceed that which is normally
possessed by a prudent person in the ordinary course of business dealings.
(e) The certification in paragraph (a) of this provision is a material
representation of fact upon which reliance was placed when making award. If it
is later determined that the Offeror knowingly rendered an erroneous
certification, in addition to other remedies available to the Government, the
Contracting Officer may terminate the contract resulting from this solicitation
for default.
<PAGE>
Section K, Page 6
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
(End of provision)
3.2.3-1 Cost Accounting Standards Notices and Certification
COST ACCOUNTING STANDARDS NOTICES AND CERTIFICATION (APRIL 1996)
Note: This notice does not apply to small businesses or foreign governments.
This notice is in three parts, identified as the following subsections I through
III.
Offerors shall examine each part and provide the requested information in order
to determine Cost Accounting Standards (CAS) requirements applicable to any
resultant contract.
I. DISCLOSURE STATEMENT-COST ACCOUNTING PRACTICES AND CERTIFICATION
(a) Any contract in excess of $500,000 resulting from this solicitation, except
contracts in which the price negotiated is based on (1) established catalog or
market prices of commercial items sold in substantial quantities to the general
public, or (2) prices set by law or regulation, will be subject to the
requirements of CAS rules, except for those contracts which are exempt as
specified CAS rules.
(b) Any offeror submitting a proposal which, if accepted, will result in a
contract subject to the requirements of CAS rules must, as a condition of
contracting, submit a Disclosure Statement as required by CAS rules. The
Disclosure Statement must be submitted as a part of the offeror's proposal
under this solicitation unless the offeror has already submitted a Disclosure
Statement disclosing the practices used in connection with the pricing of
this proposal. If an applicable Disclosure Statement has already been
submitted, the offeror may satisfy the requirement for submission by
providing the information requested in paragraph (c) of Part I of this
provision. Caution: In the absence of specific regulations or agreement, a
practice disclosed in a Disclosure Statement shall not, by virtue of such
disclosure, be deemed to be a proper, approved, or agreed-to practice for
pricing proposals or accumulating and reporting contract performance cost
data.
<PAGE>
Section K, Page 7
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
(c) Check the appropriate box below:
[ ] (1) Certificate of Concurrent Submission of Disclosure Statement. The
offeror hereby certifies that, as a part of the offer, copies of the Disclosure
Statement have been submitted as follows:
(i) Original and one copy to the cognizant Administrative Contracting Officer
(ACO), and (ii) One copy to the cognizant contract auditor. (Disclosure must be
on Form No. CASB DS-I. Forms may be obtained from the cognizant ACO.)
Date of Disclosure Statement___________________________________________________
Name and Address of Cognizant ACO where filed__________________________________
The offeror further certifies that practices used in estimating costs in pricing
this proposal are consistent with the cost accounting practices disclosed in the
Disclosure Statement.
[ ] (2) Certificate of Previously Submitted Disclosure Statement.
The offeror hereby certifies that Disclosure Statement was filed as follows:
Date of Disclosure Statement:__________________________________________________
Name and Address of Cognizant ACO where filed:_________________________________
The offeror further certifies that the practices used in estimating costs in
pricing this proposal are consistent with the cost accounting practices
disclosed in the applicable disclosure statement.
[X] (3) Certificate of Monetary Exemption.
The offeror hereby certifies that the offeror, together with all divisions,
subsidiaries, and affiliates under common control, did not receive net awards of
negotiated prime contracts and subcontracts subject to CAS totaling more than
$25 million (of which at least one award exceeded $1 million) in the cost
accounting period immediately preceding the period in which this proposal was
submitted. The offeror further certifies that if such status changes before an
award resulting from this proposal, the offeror will advise the Contracting
Officer immediately.
[ ] (4) Certificate of Interim Exemption.
The offeror hereby certifies that (i)-the offeror first exceeded the monetary
exemption for disclosure, as defined in (3) of this subsection, in the cost
accounting period immediately preceding the period in which this offer was
submitted and (ii) in accordance with CAS rules, the offeror is not yet required
to submit a Disclosure Statement. The offeror further certifies that if an
award resulting from this proposal has not been made within 90 days after the
end of
<PAGE>
Section K, Page 8
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
that period, the offeror will immediately submit a revised certificate to the
Contracting Officer, in the form specified under subparagraph (c)(1) or (c)(2)
of Part I of this provision, as appropriate, to verify submission of a completed
Disclosure Statement.
Caution: Offerors currently required to disclose because they were awarded a
CAS-covered prime contract or subcontract of $25 million or more in the current
cost accounting period may not claim this exemption (4). Further, the exemption
applies only in connection with proposals submitted before expiration of the
90-day period following the cost accounting period in which the monetary
exemption was exceeded.
II. COST ACCOUNTING STANDARDS-ELIGIBILITY FOR MODIFIED CONTRACT COVERAGE
If the offeror is eligible to use the modified provisions of CAS rules and
elects to do so, the offeror shall indicate by checking the box below. Checking
the box below shall mean that the resultant contract is subject to the
Disclosure and Consistency of Cost Accounting Practices clause in lieu of the
Cost Accounting Standards clause.
N/A
[ ] The offeror hereby claims an exemption from the Cost Accounting Standards
clause under the provisions of CAS rules and certifies that the offeror is
eligible for use of the Disclosure and Consistency of Cost Accounting Practices
clause because during the cost accounting period immediately preceding the
period in which this proposal was submitted, the offeror received less
- than $25 million in awards of CAS-covered prime contracts and subcontracts,
or the offeror did not receive a single CAS-covered award exceeding $1 million.
The offeror further certifies that if such status changes before an award
resulting from this proposal, the offeror will advise the Contracting Officer
immediately.
CAUTION: An offeror may not claim the above eligibility for modified contract
coverage if this proposal is expected to result in the award of a CAS-covered
contract of $25 million or more or if, during its current cost accounting
period, the offeror has been awarded a single CAS-covered prime contract or
subcontract of $25 million or more. -
III. ADDITIONAL COST ACCOUNTING STANDARDS APPLICABLE TO EXISTING CONTRACTS
The offeror shall indicate below whether award of the contemplated contract
would, in accordance with subparagraph (a)(3) of the Cost Accounting Standards
clause, require a change in established cost accounting practices affecting
existing contracts and subcontracts.
Yes X No
- ----- -----
(End of provision)
<PAGE>
Section K, Page 9
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
3.2.5-7 Disclosure Regarding Payments to Influence Certain Federal Transactions
DISCLOSURE REGARDING PAYMENTS TO INFLUENCE CERTAIN FEDERAL
TRANSACTIONS (OCTOBER 3, 1996)
(a) Definitions.
(1) "The Act," as used in this clause, means section 1352, title 31,
United States Code.
(2) "Agency," as used in this clause, means executive agency, within the
meaning of 5 U.S.C. 10l, 102, and 104(I), and any wholly owned Government
corporation within the meaning of 31 U.S.C. 9101..
(3) "Covered Federal action," as used in this clause, means any of the
following Federal actions:
(i) The awarding of any Federal contract.
(ii) The making of any Federal grant.
(iii) The making of any Federal loan.
(iv) The entering into of any cooperative agreement.
(v) The extension, continuation, renewal, amendment, or
modification of any Federal contract, grant, loan, or cooperative agreement.
(4) "Indian tribe" and "tribal organization," as used in this clause, have
the meaning provided in section 4 of the Indian Self-Determination and Education
Assistance Act (25 U.S.C. 450B) and include Alaskan Natives:
(5) "Influencing or attempting to influence," as used in this clause,
means making, with the intent to influence, any communication to or appearance
before an officer or employee of any agency, a Member of Congress, an officer or
employee of Congress, or an employee of a Member of Congress in connection with
any covered Federal action.
(6) "Local government," as used in this clause, means a unit of government
in a State and, if chartered, established, or otherwise recognized by a State
for the performance of a governmental duty, including a local public authority,
a special district, an intrastate district, a
<PAGE>
Section K, Page 10
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
council of governments, a sponsor group representative organization, and any
other instrumentality of a local government.
(7) "Officer or employee of an agency," as used in this clause., includes
the following individuals who are employed by an agency:
(i) An individual who is appointed to a position in the
Government under title 5, United States Code, including a position under a
temporary appointment.
(ii) A member of the uniformed services, as defined in subsection
101(3), title 37, United States Code.
(iii) A special Government employee, as defined in section 202,
title 18, United States Code.
(iv) An individual who is a member of a Federal advisory
committee, as defined by the Federal Advisory Committee Act, title 5, United
States Code, appendix 2.
(8) 'Person,' as used in this clause, means an individual, corporation,
company, association, authority, firm, partnership, society, State, and local
government, regardless of whether such entity is operated for profit, or not for
profit. This term excludes an Indian tribe, tribal organization, or any other
Indian organization with respect to expenditures specifically permitted by other
Federal law.
(9) 'Reasonable compensation,' as used in this clause, means, with respect
to a regularly employed officer or employee of any person, compensation that is
consistent with the normal compensation for such officer or employee for work
that is not furnished to, not funded by, or not furnished in cooperation with
the Federal Government.
(10) 'Reasonable payment,' as used in this clause, means, with respect to
professional and other technical services, a payment in an amount that is
consistent with the amount normally paid for such services in the private
sector.
(11) 'Recipient,' as used in this clause, includes the Contractor and all
subcontractors. This term excludes an Indian tribe, tribal organization, or any
other Indian organization with respect to expenditures specifically permitted by
other Federal law.
(12) 'Regularly employed,' as used in this clause, means, with respect to
an officer or employee of a person requesting or receiving a Federal contract,
an officer or employee who is employed by such person for at least 130 working
days within 1 year immediately preceding
<PAGE>
Section K, Page 11
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
the date of the submission that initiates agency consideration of such person
for receipt of such contract. An officer or employee who is employed by such
person for less than 130 working days within 1 year immediately preceding the
date of the submission that initiates agency consideration of such person shall
be considered to be regularly employed as soon as he or she is employed by such
person for 130 working days.
(13) 'State,' as used in this clause, means a State of the United States,
the District of Columbia, the Commonwealth of Puerto Rico, a territory or
possession of the United States, an agency or instrumentality of a State, and
multi-State, regional, or interstate entity having governmental duties and
powers.
(b) Prohibitions. The offeror, by signing its offer, hereby certifies to the
best of his or her knowledge and belief that:
(1) No Federal appropriated funds have been paid or will be paid to any
person for influencing or attempting to influence an officer or employee of any
agency, a Member of Congress, an officer or employee of Congress, or an employee
of a Member of Congress on his or her behalf in connection with the awarding of
any Federal contract, the making of any Federal grant, the making of any Federal
loan, the entering into of any cooperative agreement, and the extension,
continuation, renewal, amendment or modification of any Federal contract, grant,
loan, or cooperative agreement;
(2) If any funds other than Federal appropriated funds (including profit
or fee received under a covered Federal action) have been paid, or will be paid,
to any person for influencing or attempting to influence an officer or employee
of any agency, a Member of Congress, an officer or employee of Congress, or an
employee of a Member of Congress on his or her behalf in connection with the
screening information request (SIR), the offeror shall complete and submit,
with its offer, OMB Standard Form LLL, Disclosure of Lobbying Activities, to the
Contracting Officer; and
(3) He or she will include the language of this clause in all subcontract
awards at any tier and require that all recipients of subcontract awards in
excess of $100,000 shall disclose accordingly.
<PAGE>
Section K, Page 12
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
(4) This certification and disclosure is a prerequisite for making or
entering into this contract imposed by the Act. Any person who makes a
prohibited expenditure or fails to file or amend a disclosure form, shall be
subject to a civil penalty of not less than $10,000 and not more than $100,000,
for each such failure.
(c) The prohibitions of the Act do not apply under the following conditions:
(1) Agency and legislative liaison by own employees.
(i) The prohibition on the use of appropriated funds, in
subparagraph (b)(1) of this clause, does not apply in the case of a payment of
reasonable compensation made to an officer or employee of a person requesting or
receiving a covered Federal action if the payment is for agency and legislative
liaison activities not directly related to a covered Federal action.
(ii) For purposes of subdivision (c)(1)(i) of this clause, providing
any information specifically requested by an agency or Congress is permitted at
any time.
(iii) The following agency and legislative liaison activities are
permitted at any time where they are not related to a specific solicitation for
any covered Federal action:
(A) Discussing with an agency the qualities and
characteristics (including individual demonstrations) of the person's products
or services, conditions or terms of sale, and service capabilities.
(B) Technical discussions and other activities regarding
the application or adaptation of the person's products or services for an
agency's use.
(iv) The following agency and legislative liaison activities are
permitted where they are prior to Screening Information Request (SIR) of any
covered Federal action:
(A) Providing any information not specifically requested
but necessary for an agency to make an informed decision about initiation of a
covered Federal action;
(B) Technical discussions regarding the preparation of an
unsolicited proposal prior to its official submission; and
(C) Capability presentations by persons seeking awards from
an agency pursuant to the provisions of a law authorizing such actions;
<PAGE>
Section K, Page 13
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
(v) Only those services expressly authorized by subdivision
(c)(1)(i) of this clause are permitted under this clause.
(2) Professional and technical services.
(i) The prohibition on the use of appropriated funds, in
subparagraph (b)(1) of this clause, does not apply in the case of.'
(A) A payment of reasonable compensation made to an officer
or employee of a person requesting or receiving a covered Federal action or an
extension, continuation, renewal, amendment, or modification of a covered
Federal action, if payment is for professional or technical services rendered
directly in the preparation, submission, or negotiation of submittal/offer or
application for that Federal action or for meeting requirements imposed by or
pursuant to law as a condition for receiving that Federal action.
(B) Any reasonable payment to a person, other than an
officer or employee of a person requesting or receiving a covered Federal action
or an extension, continuation, renewal, amendment, or modification of a covered
Federal action if the payment is for professional or technical services rendered
directly in the preparation, submission, or negotiation of any submittal/offer
or application for that Federal action or for meeting requirements imposed by or
pursuant to law as a condition for receiving that Federal action. Persons other
than officers or employees of a person requesting or receiving a covered Federal
action include consultants and trade associations.
(ii) For purposes of subdivision (c)(2)(i) of this clause,
professional and technical services' shall be limited to advice and analysis
directly applying any professional or technical discipline. For example,
drafting of a legal document accompanying a submittal/offer by a lawyer, is
allowable. Similarly, technical advice provided by an engineer on the
performance or operational capability of a piece of equipment rendered directly
in the negotiation of a contract is allowable. However, communications with the
intent to influence made by a professional (such as a licensed lawyer) or a
technical person (such as a licensed accountant) are not allowable under this
section unless they provide advice and analysis directly applying their
professional or technical expertise and unless the advice or analysis is
rendered directly and solely in the preparation, submission or negotiation of a
covered Federal action. Thus, for example, communications with the intent to
influence made by a lawyer that do not provide legal advice or analysis directly
and solely related to the legal aspects of his or her client's submittal/offer,
but generally advocate one proposal over another are not allowable under this
section because the lawyer is not providing professional legal services.
Similarly, communications with the intent to influence made by an engineer
providing an engineering analysis prior to the preparation or submission of a
submittal/offer are not allowable under this
<PAGE>
Section K, Page 14
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
section since the engineer is providing technical services but not directly in
the preparation, submission or negotiation of a covered Federal action.
(iii) Requirements imposed by or pursuant to law as a condition for
receiving a covered Federal award include those required by law or regulation
and any other requirements in the actual award documents.
(iv) Only those services expressly authorized by subdivisions
(c)(2)(i) and (ii) of this clause are permitted under this clause.
(v) The reporting requirements herein shall not apply with respect
to payments of reasonable compensation made to regularly employed officers or
employees of a person.
(e) Disclosure.
(1) The Contractor who requests or receives from an agency a Federal
contract shall file with that agency a disclosure form, OMB Standard Form LLL,
Disclosure of Lobbying Activities, if such person has made or has agreed to make
any payment using nonappropriated funds (to include profits from any covered
Federal action), which would be prohibited under subparagraph (b)(1) of this
clause, if paid for with appropriated funds.
(2) The Contractor shall file a disclosure form at the end of each
calendar quarter in which there occurs any event that materially affects the
accuracy of the information contained in any disclosure form previously filed by
such person under subparagraph (e)(1) of this clause. An event that materially
affects the accuracy of the information reported includes:
(i) A cumulative increase of $25,000 or more in the amount paid or
expected to be paid for influencing or attempting to influence a covered Federal
action; or
(ii) A change in the person(s) or individual(s) influencing or
attempting to influence a covered Federal action; or
(iii) A change in the officer(s), employee(s), or Member(s) contacted
to influence or attempt to influence a covered Federal action.
(3) The Contractor shall require the certification, and if required, a
disclosure form by any person who requests or receives any subcontractor
exceeding $100,000 under the Federal contract.
<PAGE>
Section K, Page 15
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
(4) All subcontractor disclosure forms shall be forwarded from tier to
tier until received by the prime Contractor. The prime Contractor shall submit
all disclosures to the Contracting Officer at the end of the calendar quarter in
which the disclosure form is submitted by the subcontractor.
(f) Agreement. The Contractor agrees not to make any payment prohibited by this
clause.
(g) Penalties.
(1) Any person who makes an expenditure prohibited under paragraph (b) of
this clause or fails to file or amend the disclosure form to be filed or amended
by paragraph (b) shall be subject to civil penalties as provided for by 31
U.S.C. 1352. An imposition of a civil penalty does not prevent the Government
from seeking any other remedy that may be applicable.
(2) Contractors may rely without liability on the representations made by
their subcontractors in the certification and in the disclosure form.
(h) Cost allowability. Nothing in this clause makes allowable or reasonable any
costs which would otherwise be unallowable or unreasonable. Conversely, costs
made specifically unallowable by the requirements in this clause will not be
made allowable under any other provision.
(End of clause)
3.2.5-12 Notice of Employment of Former United States Government Employees
(Service Contracts)
NOTICE OF EMPLOYMENT OF FORMER UNITED STATES GOVERNMENT
EMPLOYEES (SERVICE CONTRACTS) (OCTOBER 1996)
(a) This clause implements the Federal Workforce Restructuring Act of 1994
("Buyout"), P.L. 103-226. The following requirements apply to any contract,
task order, or other arrangement for service contracts entered into after March
30, 1994 and immediately upon knowledge of such arrangements.
(b) The offeror shall provide, along with the submittal, the following notice
and certification of employment of employee(s) who were previously employed by
the United States Government and received the voluntary separation incentive
payment ("buyout"). This notice is required immediately upon the Contractor's
knowledge at any time during the contract period. The Contractor shall provide
notice to employees that in accordance with the buyout legislation, the
<PAGE>
Section K, Page 16
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
buyout employee performing on a personal service contract for the Untied
States Government is required to repay the buyout incentive..
NOTICE OF EMPLOYMENT OF FORMER UNITED STATES GOVERNMENT
EMPLOYEES (SERVICE CONTRACTS)
The following individuals are former United States Government employees who are
presently employed by N/A [company name]. (Use as many lines as necessary.)
<TABLE>
<CAPTION>
Former Agency of Description of Date of Separation
Employee's Name Employment Contract Task Subcontractor from Agency
<S> <C> <C> <C> <C>
N/A
</TABLE>
etc.
X This company has not hired and does not intend to hire any former United
- ----- States Government employees who took the buyout.
CONTRACTOR'S CERTIFICATION
On behalf of INVISION TECHNOLOGY, INC. I certify that the above information is
accurate and complete to the best of my knowledge.
DAVID M. PILLOR
CONTRACTING OFFICER'S CERTIFICATION
I have reviewed the above information and have determined that:
___ The buyout legislation has not been violated
<PAGE>
Section K, Page 17
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
___ The employment is in violation of the buyout legislation and the employee is
required to repay the incentive payment. The Contractor shall remind the
employee of his/her obligation to pay.
_____________________________
[Contracting Officer's Name]
_____________________________
Date
(End of clause)
3.5-6 Royalty Information.
ROYALTY INFORMATION (APRIL. 1996)
(a) Cost or charges for royalties. When the response to this solicitation
contains costs or charges for royalties totaling more than $250, the following
information may be included in the response relating to each separate item of
royalty or license fee:
(1) Name and address of licenser.
(2) Date of license agreement.
(3) Patent numbers, patent application serial numbers, or other basis on which
the royalty is payable.
(4) Brief description, including any part or model numbers of each contract
item or component on which the royalty is payable.
(5) Percentage or dollar rate of royalty per unit.
(6) Unit price of contract item.
(7) Number of units.
(8) Total dollar amount of royalties.
(b) Copies of current licenses. In addition, if specifically requested by the
Contracting Officer before execution of the contract, the offeror shall furnish
a copy of the current license agreement and an identification of applicable
claims of specific patents.
(End of provision)
<PAGE>
Section K, Page 18
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
ALTERNATE I
Substitute the following for the introductory portion of paragraph (a) of the
basic clause:
When the response to this solicitation covers charges for special construction
or special assembly that contain costs or charges for royalties totaling more
than $250, the following information shall be included in the response relating
to each separate item of royalty or license fee:
3.5-7 Patents-Notice of Government Licensee
PATENTS-NOTICE OF GOVERNMENT LICENSEE (APRIL 1996)
The Government is obligated to pay a royalty applicable to the proposed
acquisition because of a license agreement between the Government and the patent
owner. The patent number is
_________________________[Contracting Officer fill in]
_________________________[Contracting Officer fill in]
If the offeror is the owner of, or a licensee under, the patent, indicate below:
(X) Owner ( ) Licensee
If an offeror does not indicate that it is the owner or a licensee of the
patent, its offer will be evaluated by adding thereto an amount equal to the
royalty.
(End of clause)
3.5-14 Representation of Limited Rights Data and Restricted Computer Software
REPRESENTATION OF LIMITED RIGHTS DATA AND
RESTRICTED COMPUTER SOFTWARE (OCTOBER 3, 1996)
(a) This Screening Information Request (SIR) sets forth the work to be performed
if a contract award results, and the Government's known delivery requirements
for data, as defined in the clause "Rights in Data-General." Any resulting
contract may also provide the Government the option to order additional data
under the "Additional Data Requirements" clause, if included in the contract.
Any data delivered under the resulting contract will be subject to the "Rights
in
<PAGE>
Section K, Page 19
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
Data-General" clause that is to be included in this contract. Under the latter
clause, a Contractor may withhold from delivery data that qualify as limited
rights data or restricted computer software, and deliver form, fit, and function
data in lieu thereof. The latter clause also may be used with its Alternates II
and/or III to obtain delivery of limited rights data or restricted computer
software, marked with Limited rights or restricted rights notices, as
appropriate. In addition, use of Alternate V with this latter clause provides
the Government the right to inspect such data at the Contractor's facility.
(b) As an aid in determining the Government's need to include any of the
aforementioned Alternates in the clause "Rights in Data-General," the offeror's
response to this Screening Information Request (SIR) may, to the extent
feasible, complete the representation in paragraph (b) of this provision to
either state that none of the data qualify as limited rights data or restricted
computer software, or identify which of the data qualifies as limited rights
data or restricted computer software. Any identification of limited rights data
or restricted computer software in the offeror's response is not determinative
of the status of such data should a contract be awarded to the offeror.
REPRESENTATION CONCERNING DATA RIGHTS
Offeror has reviewed the requirements for the delivery of data or software and
states (offeror check appropriate block)--
[ ] None of the data proposed for fulfilling such requirements qualifies as
limited rights data or restricted computer software.
[ ] Data proposed for fulfilling such requirements qualify as limited rights
data or restricted computer software and are identified as follows:
N/A - ALL SOFTWARE AND ELECTRONICALLY STORED DATA PROVIDED UNDER THIS
CONTRACT IS SUBJECT TO INVISION'S SOFTWARE LICENSE AT ATTACHMENT B, SECTION J.
Note: "Limited rights data" and "Restricted computer software" are defined in
the contract clause titled "Rights In Data-General."
(End of provision)
3.6.2-3 Walsh-Healey Public Contracts Act Representation
WALSH-HEALEY PUBLIC CONTRACTS ACT REPRESENTATION (APRIL 1996)
<PAGE>
Section K, Page 20
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
The offeror represents as a part of this offer that the offeror is [ ] or is not
[ ] a regular dealer in, or is IX] or is not [ ] a manufacturer of, the supplies
offered.
(End of provision)
3.6.2-5 Certification of Nonsegregated Facilities
CERTIFICATION OF NONSEGREGATED FACILITIES (APRIL 1996)
(a) "Segregated facilities," as used in this provision, means any waiting
rooms, work areas, rest rooms and wash rooms, restaurants and other eating
areas, time clocks, locker rooms and other storage or dressing areas, parking
lots, drinking fountains, recreation or entertainment areas, transportation, and
housing facilities provided for employees, that are segregated by explicit
directive or are in fact segregated on the basis of race, color, religion, or
national origin because of habit, local custom, or otherwise.
(b) By the submission of this offer, the offeror certifies that it does
not and will not maintain or provide for its employees any segregated facilities
at any of its establishments, and that it does not and will not permit its
employees to perform their services at any location under its control where
segregated facilities are maintained. The offer agrees that a breach of this
certification is a violation of the Equal Opportunity clause in the contract.
(c) The offeror further agrees that (except where it has obtained
identical certifications from proposed subcontractors for specific time period)
it will-
(1) Obtain identical certifications from proposed subcontractors
before the award of subcontracts under which the subcontractor will be subject
to the Equal Opportunity clauses;
(2) Retain the certifications in the files; and
(3) Forward the following notice to the proposed subcontractors
(except if the proposed subcontractors have submitted identical certifications
for specific time periods):
<PAGE>
Section K, Page 21
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
NOTICE TO PROSPECTIVE SUBCONTRACTORS
OF REQUIREMENT FOR
CERTIFICATION OF NONSEGREGATED FACILITIES
A Certification of Nonsegregated Facilities must be submitted before the award
of a subcontract under which the subcontractor will be subject to the Equal
Opportunity clause. The certification may be submitted either for each
subcontract or for all subcontractors during a period (i.e., quarterly,
semiannually, or annually).
(End of provision)
3.6.2-6 Previous Contracts and Compliance Reports
PREVIOUS CONTRACTS AND COMPLIANCE REPORTS (APRIL 1996)
The offeror represents that--(a) It [ ] has, [X] has not, participated in a
previous contract or subcontract subject either to the Equal Opportunity clause
of this solicitation, the clause originally contained in Section 310 of
Executive Order No. 10925, or the clause contained in Section 201 of Executive
Order No. 11114; (b) It [ ] has, [X] has not, filed all required compliance
reports; and (c) Representations indicating submission of required compliance
reports, signed by proposed subcontractors, will be obtained before subcontract
awards.
(End of provision)
3.6.2-8 Affirmative Action Compliance
AFFIRMATIVE ACTION COMPLIANCE (APRIL 1996)
The offeror represents that (a) it [ ] has developed and has on file, [ ] has
not developed and does not have on file, at each establishment, affirmative
action programs required by the rules and regulations of the Secretary of Labor
(41 CFR 60-1 and 60-2), or (b) it [X] has not previously had contracts subject
to the written affirmative action programs requirement of the rules and
regulations of the Secretary of Labor.
(End of provision)
<PAGE>
Section K, Page 22
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
3.6.3-1 Clean Air and Water Certification
CLEAN AIR AND WATER (APRIL 1996)
The Offerors signature on this contract constitutes an affirmative attestation
that:
(a) Any facility to be used in the performance of this contract is not listed
on the Environmental Protection Agency (EPA) List of Violating Facilities;
(b) The Offeror will immediately notify the Contracting Officer, of the receipt
of any communication from the Administrator, or a designee, of the EPA,
indicating that any facility that the Offeror uses for the performance of the
contract is under consideration to be listed on the EPA List of Violating
Facilities; and
(c) The Offeror will include a certification substantially the same as this
certification, including this paragraph (c), in every nonexempt subcontract.
(End of clause)
3.6.3-3 Hazardous Material Identification and Material Safety Data..
HAZARDOUS MATERIAL IDENTIFICATION AND MATERIAL SAFETY DATA
(APRIL 1996)
(a) Hazardous material, as used in this clause, includes any material defined
as hazardous under the latest version of Federal Standard No. 313 (including
revisions adopted during the term of the contract).
(b) The offeror must list any hazardous material, as defined in paragraph (a)
of this clause, to be delivered under this contract. The hazardous material
shall be properly identified and include any applicable identification number,
such as National Stock Number or Special Item Number. This information shall
also be included on the Material Safety Data Sheet submitted under this
contract.
Material Identification No.
Lead 7439-92-1
Shell Diala Oil:
Mid. distillate: 64742-46-7
<PAGE>
Section K, Page 23
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
Napthenic distillate: 64742-53-6
Butylated
hydroxy toluene: 128-37-0
(c) The apparently successful offeror, by acceptance of the contract, certifies
that the list in paragraph (b) of this clause is complete. This list must be
updated during performance of the contract whenever the Contractor determines
that any other material to be delivered under this contract is hazardous.
(d) The apparently successful offeror agrees to submit, for each item as
required within 30 calendar days after contract award, a Material Safety Data
Sheet, meeting the requirements of 29 CFR 1910.1200(g) and the latest version of
Federal Standard No. 313, for all hazardous material identified in paragraph (b)
of this clause. Data shall be submitted in accordance with Federal Standard No.
313, whether or not the apparently successful offeror is the actual manufacturer
of these items. Failure to submit the Material Safety Data Sheet prior to award
may result in the apparently successful offeror being considered nonresponsible
and ineligible for award.
(e) If, after award, there is a change in the composition of the item(s) or a
revision to Federal Standard No. 313, which renders incomplete or inaccurate the
data submitted under paragraph (d) of this clause or the certification submitted
under paragraph (c) of this clause, the Contractor shall promptly notify the
Contracting Officer and resubmit the data.
(f) Neither the requirements of this clause nor any act or failure to act by
the Government shall relieve the Contractor of any responsibility or liability
for the safety of Government, Contractor, or subcontractor personnel or
property.
(g) Nothing contained in this clause shall relieve the Contractor frown
complying with applicable Federal, State, and local laws, codes, ordinances, and
regulations (including the obtaining of licenses and permits) in connection with
hazardous material.
(h) The Government's rights in data furnished under this contract with respect
to hazardous material are as follows:
(1) To use, duplicate and disclose any data to which this clause is
applicable. The purposes of this right are to-
<PAGE>
Section K, Page 24
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
(i) Apprise personnel of the hazards to which they may be exposed
in using, handling, packaging, transporting, or disposing of hazardous
materials;
(ii) Obtain medical treatment for those affected by the material;
(iii) Have others use, duplicate, and disclose the data for the
Government for these purposes.
(2) To use, duplicate, and disclose data furnished under this clause, in
accordance with subparagraph (h)(1) of this clause, in precedence over any other
clause of this contract providing for rights in data.
(3) The Government is not precluded from using similar or identical data
acquired from other sources.
(i) Except as provided in paragraph (i)(2) the Contractor shall
prepare and submit a sufficient number of Material Safety Data Sheets (MSDS's),
meeting the requirements of 29 CFR 1910.1200(g) and the latest version of
Federal Standard No. 313, for all hazardous materials identified in paragraph
(b) of this clause.
(1) For items shipped to consignees, the Contractor shall include a copy of the
MSDS with the packing list or other suitable shipping document which accompanies
each shipment. Alternatively, the Contractor is permitted to transmit MSDS's to
consignees in advance of receipt of shipments by consignees, if authorized in
writing by the Contracting Officer.
(2) For items shipped to consignees identified by mailing address as agency
depots, distribution centers or customer supply centers, the Contractor shall
provide one copy of the MSDS's in or on each shipping container. If affixed to
the outside of each container, the MSDS must be placed in a weather resistant
envelope.
(End of clause)
3.6.4-15 Buy American Act Certificate
BUY AMERICAN ACT CERTIFICATE (JULY 1996)
(a) The offeror certifies that each end product, except as listed below, is a
domestic end product (as defined in the clause "Buy American Act-Supplies,") and
components of unknown origin are considered to have been mined, produced, or
manufactured outside the United States.
<PAGE>
Section K, Page 25
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
Excluded End Product Country of Origin
CLIN 0004 - Luggage Positioning Adapter Switzerland
(b) The offeror agrees to furnish any additional information as the Contracting
Officer may request to verify the above information and to evaluate the offer.
Offerors may obtain from the Contracting Officer list of articles, materials,
and supplies excepted from the Buy American Act.
(End of provision)
<PAGE>
Section K, Page 26
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
OF OFFERORS
ATTACHMENT A
ADDITIONAL INFORMATION SUBMITTED IN REGARD TO 3.2.2.7-7
DISCLOSURE RE INDICTMENT (ITALY)
The Offeror is a U.S. public company which is approximately 40% owned by
HARAX Holdings, S.A., a Luxembourg company which is owned in turn by Eugenio
Rendo. Mr. Rendo was a senior executive of the Italimprese group of companies
in Italy, a large, privately-held conglomerate. Mr. Rendo, like a number of
other senior executives of Italian corporations in recent years, has been
charged in Italy with bribery of public officials in connection with obtaining
public sector contracts. Mr. Rendo denies such allegations and is vigorously
defending himself in such matter. In particular, Mr. Rendo asserts that the
payments made by him which have been called into question were lawful
contributions to a political party and he denies that any favor or other
improper benefit was received in exchange. The charges were originally filed in
1993, and no trial date has been set.
Mr. Rendo is not an officer or director of the Offeror, and the charges
referred to above are unrelated to any activities of the Offeror. No
allegations of any kind have ever been made with respect to the Offeror or any
of its activities.
<PAGE>
RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT
This RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT (the "Agreement") is
made and entered into effective as of the12th day of November, 1996 (the
"Effective Date"), by and between INVISION TECHNOLOGIES, INC., a corporation
duly organized and existing under the laws of the State of Delaware, and having
its principal place of business located at 3420 E. Third Avenue, Foster City,
California 94494 ("InVision"), and EG&G ASTROPHYSICS, a corporation duly
organized and existing under the laws of the State of California and having its
principal place of business located at 4031 Via Oro Avenue, Long Beach,
California 90801 ("Astrophysics"). Each of InVision and Astrophysics shall from
time to time herein be referred to as a "Party" and together as the "Parties."
WHEREAS, InVision has developed and commercialized an FAA-certified
explosive detection system (the "Pre-Existing InVision System") using a
combination of computerized tomography and x-ray technologies for the purpose of
inspecting checked luggage on commercial airline flights;
WHEREAS, Astrophysics has developed and commercialized a broad range
of x-ray based inspection systems, with a current stand-alone dual energy model
referred to as the "Z-Scan;"
WHEREAS, EG&G, Astrophysics and InVision have signed a non-binding
Letter of Intent dated October 14, 1996 (the "LOI"), regarding a collaborative
work effort they intend will lead to the commercialization of a high-
performance, FAA-certifiable, explosive detection system or systems referred to
as the "EDS" that will be initially based upon a combination of the Pre-Existing
InVision System and the Z-Scan, and ultimately upon a combination of InVision's
CTX 5000 and the Z-Scan, and which EDS the parties believe will provide enhanced
total capability for reliable detection of explosives at higher rates of
through-put than are currently available.
WHEREAS, the LOI calls for the concurrent negotiation of (i) this
Agreement under which the parties will conduct work in a research and
development phase to scale up and complete the development of an EDS using
certain technology owned or controlled by InVision, certain Z-Scan technology
owned or controlled by Astrophysics, and certain technology that may result from
the collaborative work effort under the Agreement, (ii) a manufacturing and
supply agreement (the "M&S Agreement") to govern the manufacturing and supply of
EDS Products or components developed under the Development Program and pursuant
to which it is intended that Astrophysics will manufacture the Z-Scan component
of any EDS Product, and InVision will manufacture the CTX 5000 component of any
EDS Product, as more fully described
<PAGE>
in Section 2.5.4 below , (iii) a marketing and distribution agreement (the
"Distribution Agreement") to govern the terms under which EDS Products (as such
term is defined below) will be marketed and distributed by InVision on behalf of
the Parties, using any existing Astrophysics' sales and marketing infrastructure
in addition to InVision's, and (iv) a maintenance and support agreement (the
"Maintenance Agreement") to govern the maintenance and support of EDS developed
under the Agreement and manufactured, and sold or licensed under the M&S
Agreement.
WHEREAS, the Parties and EG&G, INC., a corporation duly organized and
existing under the laws of the Commonwealth of Massachusetts and having its
principal place of business located at 45 William Street, Wellesley,
Massachusetts 02181 ("EG&G"), have agreed that, pursuant to a Common Stock
Purchase Agreement between EG&G and InVision of even date herewith, upon the
effective date of which EG&G International, Ltd., a wholly-owned subsidiary of
EG&G organized under the laws of the Cayman Islands and having its principal
place of business located care of Maples and Calder, Ugland House, South Church
Street, Grand Cayman, Cayman Islands, British West Indies ("EG&G International")
will invest Two Million Dollars ($2,000,000) in InVision in exchange for shares
of unregistered common stock of InVision (the "Shares") at a price per Share
equal to the final trading price per share of the Company's publicly traded
Common Stock on the day immediately prior to the effective date of such Common
Stock Purchase Agreement as quoted in the Wall Street Journal, less a per Share
amount equal to ten percent (10%) of such price; and
WHEREAS, the Shares will be issued and sold to EG&G International
pursuant to the terms of a Common Stock Purchase Agreement in substantially the
form attached hereto as Exhibit E (the "Stock Purchase Agreement").
NOW, THEREFORE, in consideration of the above premises and mutual
covenants hereinafter contained, and for other good and valuable consideration
the receipt of which is hereby acknowledged, InVision and Astrophysics hereby
agree as follows:
1. DEFINITIONS.
1.1 "Astrophysics Licensees" means those third parties with whom
Astrophysics has or will have a cross license of its own patents on a broad
basis without the identification of individual patents as of the date of this
Agreement.
1.2 "Astrophysics Firmware" means any and all Firmware licensed to or
developed for or by Astrophysics and embedded in the Z-Scan, including but not
limited to any and all improvements, modifications and variations.
1.3 "Astrophysics Patent Rights" means any and all Patent Rights owned,
controlled, possessed or filed by Astrophysics as of the date hereof in
connection with the
2
<PAGE>
Z-Scan, or which are owned, controlled, possessed or filed by Astrophysics upon
improvements to the EDS Technology or Astrophysics Technology pursuant to
Section 9.4 hereof.
1.4 "Astrophysics Software" means any and all software licensed to or
developed for or by Astrophysics and is used solely to operate or embedded in
the Z-scan as of the Effective Date.
1.5 "Astrophysics Technology" means any and all Technology owned or
controlled by Astrophysics.
1.6 "Confidential Information" means any confidential or proprietary
information, source code, software tools, designs, schematics, plans or any
other information relating to any research project, work in process, future
development, scientific, engineering, manufacturing, marketing or business plan
or financial or personnel matter relating to either party, its present or future
products, sales, suppliers, customers, employees, investors or business,
identified by the disclosing Party as Confidential Information, whether in oral,
written, graphic or electronic form. Without limiting the foregoing, all
InVision Technology and all Astrophysics Technology shall be deemed the
Confidential Information of their respective owner.
1.7 "CTX 5000" means a complete baggage screening device consistent with
the InVision CTX 5000 Specifications attached hereto as Exhibit A (the "CTX 5000
Specifications"), but shall not include the component known as InVision's pre-
scanner (the "InVision Pre-Scanner Device").
1.8 "CTX 5000 Technology" means those portions of the InVision Technology
relating solely to the CTX 5000.
1.9 "Development Program" means the activities to be performed by
InVision and Astrophysics both jointly and separately that are intended to
produce EDS Products, equipment, processes, interfaces or connection protocols
between the CTX 5000 and the Z-Scan and to result in a commercially viable EDS.
The Development Program shall be executed in two or more phases, the first phase
thereof ("Phase One") to encompass the development of an EDS utilizing a
combination and integration of the Z-Scan and the InVision Pre-Existing System,
and the second phase thereof ("Phase Two") to encompass the development of an
EDS utilizing a combination and integration of the Z-Scan with and into the CTX
5000 as such EDS are described in Exhibit B, a draft of which is attached hereto
(the "EDS Specifications"). In each phase, the parties intend that Astrophysics
shall manufacture the Z-Scan component of the EDS and InVision shall manufacture
the CTX 5000 component of the EDS, along with a specialized active luggage
positioner of the CTX 5000 as described in Exhibit B hereto
3
<PAGE>
1.10 "EDS" means the explosive detection system or systems to be jointly
developed hereunder by InVision and Astrophysics as described above, initially
based upon the integration of the InVision Pre-Existing System and the Z-Scan,
and later upon the full integration of the Z-Scan and the CTX 5000.
1.11 "EDS Product" means any product incorporating EDS Technology, and any
new versions, replacement or substitute products created or developed under this
Agreement, as from time to time amended.
1.12 "EDS Technology" means any and all Technology arising out of the
research and development efforts hereunder, including but not limited to any and
all related inventions, improvements, variations or modifications thereof or
thereon which are used in any EDS prototype, and any inventions, improvements,
variations or modifications on or to the EDS Technology or derivative works
thereof.
1.13 "Firmware" means any and all machine readable programs which are
hardwired into non-volatile integrated circuits contained in a Party's
Technology.
1.14 "InVision Firmware" means any and all Firmware licensed to or
developed for or by InVision and embedded in the CTX 5000 or the InVision Pre-
Existing System.
1.15 "InVision Licensees" means those third parties with whom InVision has
or will have a cross license of its own patents on a broad basis without the
identification of individual patents as of the date of this Agreement.
1.16 "InVision Patent Rights" means any and all Patent Rights owned,
controlled, possessed or filed by InVision as of the date hereof in connection
with the CTX 5000 and/or the InVision Pre-Existing System, or which are owned,
controlled, possessed or filed by InVision upon improvements to the InVision
Technology or the EDS Technology pursuant to Section 9.4 hereof.
1.17 "InVision Pre-Scanner Technology" means those portions of the
InVision Technology relating solely to the InVision Pre-Scanner.
1.18 "InVision Software" means any and all Software licensed to or
developed by or for InVision and is used solely to operate or embedded in the
CTX 5000 or the InVision Pre-Scanner as of the Effective Date.
1.19 "InVision Technology" means any and all Technology owned or
controlled by InVision.
1.20 "Know-How" means all designs, drawings, prints, performance
specifications, engineering data, sources of supply information, techniques,
inventions,
4
<PAGE>
practices, methods, knowledge, skill, experience, test data and cost, sales and
manufacturing data of any sort or description and (i) in the case of InVision
relating to the CTX 5000 and/or to InVision's Pre-Scanner and (ii) in the case
of Astrophysics to the Z-Scan, which is owned or controlled by such Party and
which such Party discloses to the other Party under this Agreement. A Party's
Know-How only includes that Know-How of third parties (i) to which such Party
has an unrestricted right to use and disclose, and (ii) which is necessary to
enable the Parties hereunder to modify, manufacture, assemble, test or use the
Z-Scan, the CTX 5000, the InVision Pre-Scanner and/or an EDS.
1.21 "Oversight Board" means a group comprised of two individuals
designated by InVision and one individual from each of EG&G and Astrophysics to
represent it with respect to issues arising out of this Agreement, the M&S
Agreements, the Distribution Agreement and/or the Maintenance Agreement.
Initially, the members of the Oversight Board shall be David Pillor, Dr. Sergio
Magistri, Tom Schorling and Angelo Castellana.
1.22 "Patent Rights" means any and all United States and foreign patent
rights, including patents of importation, improvement patents, patents and
certificates of addition, and utility models, as well as divisions, reissues,
continuations, renewals, and extensions of any of the foregoing, and
applications therefor and any patents issuing thereon and such further patent
rights relating thereto.
1.23 "Software" means any and all human readable source code together with
the applicable programmers' notes, and the machine executable version of the
source code.
1.24 "Specifications" means the overall performance specifications to
which a particular product performs or will perform.
1.25 "Technology" means Firmware, Know-How, Software and Patent Rights,
together.
1.26 "Z-Scan Technology" means Astrophysics Technology relating solely to
the Z-Scan.
2. DEVELOPMENT RESPONSIBILITIES.
2.1 SCOPE OF DESIGN AND DEVELOPMENT. The parties will cooperate and use
their commercially reasonable efforts to develop under the Development Program,
one or more commercial EDS Products, along with commercial scale equipment and
processes for such EDS Product(s), all at a development cost not to exceed Two
Million Dollars ($2,000,000) in the aggregate (the "Development Costs"), unless
the Parties otherwise agree as set forth below. In the event that the
Development Costs exceed $2,000,000, then the parties shall each bear their own
costs for any excess unless they agree otherwise
5
<PAGE>
in writing. InVision and Astrophysics agree to cooperate to design and develop
an EDS in accordance with the EDS Specifications in the attached Exhibit B,
pursuant to the development schedule set forth in the attached Exhibit C (the
"Development Schedule"). The EDS Specifications will be finalized as provided
under Paragraph 2.3.3 below, and the Development Schedule will be finalized as
provided under Section 2.5.2 below, subject thereafter to such modification as
InVision and Astrophysics shall agree upon from time to time, if any. The
Development Costs will be shared equally by the Parties, as described more fully
under Section 4.4 below.
2.2 TECHNICAL ASSISTANCE.
2.2.1 Each of InVision and Astrophysics shall designate a project
manager (each a "Project Manager"). The Project Managers shall be responsible
for communicating on a regular basis regarding the progress of the Development
Program and/or perceived problems the Parties are encountering or may expect to
encounter during the Development Program and testing phase.
2.2.2 Subject to the licenses granted under Section 7 below,
InVision will provide to Astrophysics for Astrophysics' use solely in developing
and producing an EDS consistent with the EDS Specifications, those portions of
InVision's Technology (exclusive of any proprietary InVision source code) as it
exists on the Effective Date that InVision in its sole discretion believes are
necessary for Astrophysics to develop and produce an EDS, along with any
improvements to the InVision Technology occurring after such date which InVision
also believes to be necessary to enable Astrophysics to meet its obligations
hereunder.
2.2.3 Astrophysics will communicate to the InVision Project
Manager its progress in developing the EDS not less frequently than once per
month, and shall document such communications in a written report on a quarterly
basis. In addition, each Party shall communicate promptly to the other Party's
Project Manager any material improvements or modifications of or additions to
the EDS Technology, and/or the other Party's Technology and/or, in the event
that such improvements, variations, modifications, or additions arise out of a
Party's efforts in connection with its obligations hereunder and relate to any
of the EDS Technology, Astrophysics Technology or InVision Technology and
including in any case any improvements to such technology, if, as and when such
additions arise. Each Party shall document such communications as to material
additions in writing on a monthly basis.
2.2.4 Each Party shall allocate its staff and designate its
resources, financial or otherwise, as it deems reasonable and necessary in its
sole discretion in order to meet its obligations hereunder, taking into account
its other obligations and commitments.
6
<PAGE>
2.2.5 Subject to the restrictions of Section 5.3 hereof, InVision
will continue to manufacture or have manufactured and to sell or distribute the
CTX 5000 and the InVision Pre-Scanner and Astrophysics will continue to
manufacture, sell and distribute the Z-Scan.
2.3 INVISION'S DEVELOPMENT RESPONSIBILITIES. Subject to the terms of
this Agreement and the licenses granted hereunder, InVision shall:
2.3.1 Provide Astrophysics access at InVision's facilities located
in Foster City, California to one InVision Pre-Existing System during InVision's
regular business hours as needed by Astrophysics for the purposes of this
Agreement, and shall make available, on an as-needed basis during regular
business hours, and to the extent commercially reasonable, qualified personnel
to consult with Astrophysics in response to Astrophysics' reasonable requests
arising in connection with the design and development hereunder of EDS
prototypes and the related manufacturing processes. In addition, in the event
that InVision refuses a request for consultation or access for any reason, then
Astrophysics may appeal such refusal to the Oversight Board for their
consideration and resolution.
2.3.2 Provide access to such other InVision Technology (exclusive
of any InVision proprietary source code) and such technical expertise and
personnel of InVision's during regular business hours as are reasonably
necessary, solely for the purposes of this Agreement and only to the extent
InVision determines that such access and allocation of resources is commercially
reasonable.
2.3.3 Provide for comment by Astrophysics proposed and detailed
EDS Specifications, a draft copy of which are attached hereto as Exhibit B. The
EDS Specifications will be analyzed, modified and amended by the Parties from
time to time during the term of this Agreement; provided, however, that InVision
shall use its commercially reasonable efforts, and Astrophysics shall use its
commercially reasonable efforts to cooperate with and support InVision's
efforts, to finalize the EDS Specifications within six (6) months from the
Effective Date or at such later date as the parties shall agree in writing.
2.3.4 Provide to Astrophysics proposed specifications for an
acceptance test procedure for each EDS prototype developed pursuant hereto (the
"Acceptance Test"), a copy of which upon finalization by the parties will be
attached hereto as Exhibit D ("Testing System Specifications").
2.3.5 Cooperate with Astrophysics to design, to develop and to
produce an acceptance protocol for EDS Product(s), including any EDS prototypes,
delivered or to be delivered hereunder to InVision.
7
<PAGE>
2.4 ASTROPHYSICS' DEVELOPMENT RESPONSIBILITIES. Subject to the terms of
this Agreement and the licenses granted hereunder, Astrophysics shall use its
commercially reasonable efforts to:
2.4.1 Design, develop and plan the equipment ("EDS Equipment") and
staffing requirements necessary to develop and manufacture one or more EDS
prototypes meeting the EDS Specifications (each a "Prototype"), subject to the
review and approval of InVision. The Parties acknowledge and agree that the
staff and EDS Equipment to be selected and manufactured may also provide the
capacity to replace certain production requirements of each of InVision and
Astrophysics, and agree to cooperate in good faith to fairly allocate between
them such extra capacity to the extent it is available.
2.4.2 Subject to the review and approval of InVision, evaluate and
hire the staff, and make, manufacture or otherwise procure the EDS Equipment
required by the Development Program within the times set forth in the
Development Schedule at prices to be negotiated in good faith and agreed upon by
InVision and Astrophysics.
2.4.3 Design and develop commercially viable EDS Equipment and
manufacturing processes necessary to produce an EDS Prototype and commercially
viable EDS for each of Phases One and Two, respectively, in accordance with the
EDS Specifications and the Development Schedule.
2.4.4 Provide in cooperation with InVision an EDS prototype that
is in substantial conformance with the EDS Specifications and can be evaluated
and tested in accordance with the Acceptance Test as defined in Section 2.3.4
above, within the time provided in the Development Schedule for InVision's use
in testing and evaluating the EDS Product(s).
2.4.5 Undertake and continue product development efforts to
improve and optimize EDS performance, yield and productivity throughout the term
of this Agreement and as further specified in the M&S Agreement and in any
Maintenance Agreements.
2.4.6 Develop, revise, produce and update as needed a well-ordered
and user friendly manual containing, among other things, drawings relative to
EDS Product installation, other applicable outline drawings and illustrations,
schematic diagrams of circuits critical to any EDS Product, a listing of field
replacement parts, and all instructions necessary for the installation,
operation, maintenance and repair of the EDS Product(s).
2.4.7 Produce for delivery and acceptance by InVision pursuant to
the Acceptance Test described in Section 2.3.4 above a pilot production run of
one unit of the EDS Product for each of Phases One and Two.
8
<PAGE>
2.5 SHARED DEVELOPMENT RESPONSIBILITIES. Subject to the terms of this
Agreement and the licenses granted hereunder, InVision and Astrophysics together
shall:
2.5.1 Jointly apply for and use their best efforts to obtain
Federal government funding, as it may come available from time to time, to fund
the research and development efforts provided for herein. Any funding so
received will be added to and treated the same as the Development Funds, as such
term is defined in Section 4 below.
2.5.2 Cooperate in good faith to prepare the Development Schedule
and use their commercially reasonable efforts to finalize the Development
Schedule within sixty (60) calendar days of the Effective Date, or such later
time as they shall mutually agree. The tasks set forth under Paragraphs 2.3 and
2.4 above and under this Paragraph 2.5 shall be incorporated into the
Development Schedule, along with target dates for their completion. Failure by
any party to meet a target date where such party has been using its commercially
reasonable efforts to meet such date shall not be deemed to be a breach
hereunder unless such target date slips by more than ten (10) days without being
met or amended by the Parties; provided, however, that the failing party must
notify the other as soon as it becomes reasonably likely that a target date will
be missed. Such notice must provide a brief description of the target date
expected to be missed, the reasons for the delay, and a new target date by which
the task will be completed. Such revised target dates are proposals only and
are subject to the approval of the other Party, which approval shall not be
unreasonably withheld or delayed.
2.5.3 Cooperate in good faith to improve and optimize EDS
performance, yield and productivity throughout the term of this Agreement and as
further specified in the M&S Agreement and in any Maintenance Agreements.
2.5.4 Concurrent with and prior to completion of the Development
Program and acceptance by InVision of any EDS Product that meets the Testing
System Specifications, and in accordance with the timetable set forth in the
Development Schedule, negotiate in good faith the M&S Agreement (which shall
include the plans for any modification or building of manufacturing
facilities),a manufacturing agreement under which Astrophysics would have the
right to be the sole and exclusive (except as to InVision) manufacturer and
supplier of the InVision Pre-Scanner under competitive terms and at competitive
prices acceptable to InVision, and for a period of exclusivity to be mutually
determined by the Parties hereto but not less than two (2) years (the "InVision
Pre-Scanner Manufacturing Agreement"), the Distribution Agreement, and the form
of Maintenance Agreement, at and during the times for such negotiation provided
in the Development Schedule until either such agreements all have been finalized
and are mutually acceptable or this Agreement has been terminated or expired
pursuant to Section 12 below.
9
<PAGE>
2.6 CHANGE PROPOSALS. Either InVision or Astrophysics may, from time to
time, propose changes to the EDS Specifications, the Development Schedule and/or
the Testing System Specifications ("Change Proposal"). No Change Proposal will
have any contractually binding effect unless and until formally agreed to in
writing by both parties. In the event that a Party undertakes to implement a
Change Proposal prior to receiving formal written consent by the non-proposing
Party, then the Party having proposed the changes shall make such changes at its
own cost and expense unless the other Party shall, upon review of the Change
Proposal, agree to allocate some of the Joint Funding to reimburse such costs
and expenses.
2.7 DELAYS. Notwithstanding anything expressed or implied herein to the
contrary, none of the parties shall have any liability to any other party
whatsoever for any delay or disruption arising out of or in connection with the
failure of any party to comply with the Development Schedule.
2.8 PERFORMANCE BY THIRD PARTIES. No Party hereunder shall subcontract
or permit third parties to perform the services to be rendered under this
Agreement without the prior written consent of the other Party.
3. TESTING PROGRAM.
3.1 TESTING PROGRAM. Upon completion of development and production of an
EDS prototype, the parties agree to conduct at least two field trials of EDS
prototypes in accordance with the Testing System Specifications.
3.2 ACCEPTANCE TESTING PERIOD. InVision shall have twenty (20) business
days from each respective date on which Astrophysics delivers EDS prototypes to
determine that the prototype substantially conforms to the Specifications (the
"Testing Period"). Within the Testing Period for each EDS prototype developed
hereunder, InVision shall provide Astrophysics with either a written acceptance
of such prototype (an "Acceptance Notice") or a written statement of any defects
("Error Statement") in such EDS prototype that cause such prototype not to work
substantially in conformance with the Specifications. An EDS prototype will be
deemed to be accepted by InVision if Astrophysics does not receive either an
Acceptance Notice or Error Statement within the Testing Period for such EDS
prototype.
3.3 ERROR CORRECTION; RETESTING. In the event InVision delivers an Error
Statement to Astrophysics, then Astrophysics will use its commercially
reasonable efforts to correct any defects described in such Error Statement and
redeliver a corrected EDS prototype to InVision within thirty (30) business days
of the date of the Error Statement. InVision shall have twenty (20) business
days from the date such corrected EDS prototype has been delivered to retest
such EDS prototype and determine whether such
10
<PAGE>
corrected prototype substantially conforms with the Specifications (the
"Retesting Period"). Within such Retesting Period, InVision shall provide
Astrophysics with either an Error Statement or an Acceptance Notice as to such
corrected prototype. The corrected EDS prototype will be deemed to have been
accepted and, therefore, will be the final version of such EDS prototype, if
within such Retesting Period Astrophysics does not receive either an Error
Statement or an Acceptance Notice. Subject to Section 12 below ("Term and
Termination"), this process of testing and redelivering corrected versions of
EDS prototypes as set forth above shall continue until InVision accepts a
particular version of the EDS prototype. The date of InVision's acceptance of
such prototype shall be the "Acceptance Date."
3.4 After the Parties have engaged in at least three (3) Testing Periods
for a particular EDS Product which is not then accepted by InVision pursuant to
Section 3.2 hereof, the parties agree that any Party then desiring to terminate
this Agreement pursuant to Section 12 hereof shall first try to resolve or
correct through the Oversight Board any problems serving as a barrier to
Acceptance. In the event that the problem or problems cannot be resolved or
corrected after the good faith efforts of both Parties, then either Party may
terminate the Agreement and will not incur any penalty for termination. In such
case, the Parties shall each bear fifty percent (50%) of all Development Costs
incurred by the Parties to date.
4. PAYMENTS AND TAXES.
4.1 DEVELOPMENT CONTRIBUTIONS. Upon the Effective Date hereof, each of
InVision and Astrophysics will provide for in their respective budgets One
Million United States Dollars (U.S. $1,000,000) (together, the "Development
Funds") to fund the research and development efforts provided for herein and to
advance the EDS Technology and capabilities. Money allocated to the Development
Funds will be spent by each Party in accordance with a development budget to be
developed by the Parties and unanimously approved by the Oversight Board, a
preliminary draft of which budget is attached in summary form hereto as Exhibit
F (the "Budget") The Parties agree to negotiate in good faith a definitive
Budget within thirty (30) days from the Effective Date. Any federal funds
received pursuant to grants sought in accordance with Section 2.5.1 above shall
be added to and treated the same as the Development Funds.
4.2 RIGHT OF AUDIT. Each Party shall maintain and retain complete, clear
and accurate records of the allocation and expenditures of their respective
Development Funds during the term of this Agreement and for a period of one (1)
year thereafter. The form of the records shall be designed and agreed upon by
the Oversight Board. Within ten (10) days after the end of each calendar
quarter during the term of this Agreement, each Party shall prepare for and
deliver to the Oversight Board a report based upon such records for the quarter
most recently completed. To ensure compliance with the terms of
11
<PAGE>
this Agreement, upon reasonable prior written notice to the other Party, each
Party (the "Auditing Party") shall have the right to inspect and to audit the
records of the other Party relating to the allocation and expenditure of the
Development Funds by such Party (the "Audited Party") during reasonable and
normal business hours. In the event that such an inspection and audit uncovers
any irregularities in the allocations or expenditures of Development Funds, then
the reports shall be corrected accordingly.
4.3 TAXES. Each Party agrees to pay and shall be responsible for its own
taxes incurred by or levied upon it in connection with the performance of its
obligations under this Agreement and shall be entitled to claim any applicable
tax credits, deductions or incentives related to the Development Costs expended
by it which are not subject to reimbursement by the other Party; excepting
therefrom sales and use taxes incurred on goods and materials purchase for use
or consumption in the Development Program for the development of the EDS
Products or EDS Technology, the responsibility for which and benefits of shall
be shared equally by the Parties and paid out of the Development Funds.
4.4 EXCESS. It is the intention of the Parties that they share equally
the Development Costs. Each Party shall make commercially reasonable efforts to
control its expenditures of Development Funds in accordance with the Budget. At
the end of each calendar quarter, each Party will calculate the total amount of
the Development Funds expended by such Party during that quarter. If one Party,
staying within the Budget during that quarter, has expended more than the Other
Party, the Party which has spent the lesser amount shall reimburse the other
Party for fifty percent (50%) of the expenditure difference so as to equalize
expenditures by both Parties during the Development Program. All costs or
expenses contained within the Budget and incurred by any Party directly as a
result of its work hereunder in excess of that Party's share of the Development
Funds for which such Party seeks partial reimbursement by the other (not to
exceed fifty percent (50%) of such cost), first shall be authorized by the
Oversight Board upon receipt of itemized statements with any necessary back-up
or explanation attached in writing. In the event that a Party fails to obtain
the required pre-authorization for any of its costs or expenses, such Party may
still provide an itemized statement together with a written explanation and
back-up documentation justifying the expenditure and if and to the extent that,
in the sole discretion of the Oversight Board, the Oversight Board determines
that such expenditure or any portion thereof was reasonable or necessary for the
purposes of this Agreement, then such expense or the approved portion thereof
shall be shared equally by the Parties, and the Party seeking reimbursement
shall be accordingly reimbursed by the other Party. All other costs or expenses
incurred by any Party shall be borne by the Party incurring them.
12
<PAGE>
5. NON-INFRINGEMENT WARRANTY; NOTICE OF INFRINGEMENT.
5.1 CONTRIBUTIONS TO EDS. InVision and Astrophysics each represents and
warrants to the other that to the best of their knowledge, respectively, their
portions and contributions to the EDS Specifications, the EDS prototype, the EDS
Product and the EDS Documentation will be original creations of the contributing
Party and will not infringe any patent, copyright, trade secret or other
proprietary rights of any third party; that such Party has not previously or
otherwise granted any rights to any third party which conflict with the rights
granted herein; and that such Party has the full power and ability to enter into
this Agreement, to carry out its obligations set forth herein and to grant the
rights granted to the other herein.
5.2 NOTICE OF THIRD PARTY INFRINGEMENT. Each Party shall promptly inform
the other Party of each infringement by third parties of the infringed Party's
Technology or of the EDS Technology or EDS Products developed hereunder, which
third party infringement comes to its knowledge or attention during the term of
this Agreement or for a period of one (1) year thereafter. Each Party shall
render reasonable assistance to the other in defending the infringed Party's
Technology against third parties, but control of such defense and the cost
therefore shall be borne solely by the infringed Party. In the case of third
party infringement of EDS Technology or EDS Products, the Parties will mutually
determine how to proceed with an enforcement action and which of the Parties
shall control such action. In such case, the Parties shall share equally the
costs of the enforcement action, including without limitation attorneys' fees
and expenses. If the Parties cannot agree, then an Arbitrator shall be
appointed in accordance with Section 13 hereof to determine the method of
enforcement and which Party shall control such enforcement action, and shall
also determine how the costs of such enforcement action will be split between
the Parties. The recovery from the enforcement action will be split in
proportion to the Parties' contribution to the enforcement action's costs
(including without limitation attorneys' fees and expenses). In the event that
a Party hereto declines to participate in an enforcement action, such Party
agrees, at the participating Party's expense, to join the action as a party
plaintiff and otherwise to cooperate with the enforcement action in any way
reasonably requested by the participating Party.
5.3 ACKNOWLEDGMENT OF INDEPENDENT DEVELOPMENT; COVENANT NOT TO SUE. Each
Party understands and hereby acknowledges that the other develops and acquires
software and hardware, and that existing, planned or future products
independently developed or acquired by a Party may contain ideas similar or
identical to those ideas developed or disclosed hereunder. Therefore, during
the Term of this Agreement, the Parties each agree that neither Party shall
assert nor threaten to assert any claim or cause of action against the other
Party, or against such other Party's customers or end users, based upon the use,
manufacture, sale, distribution or other transfer of an explosive
13
<PAGE>
detection system or device based upon , containing or similar to a Party's
Technology. Notwithstanding the foregoing, however, the Parties expressly agree
as follows:
5.3.1 During the term of this Agreement and for a period of one
(1) year thereafter, InVision will not (a) develop or have developed, license or
acquire, and (b) sell or have sold or otherwise distribute or have distributed,
a stand-alone, dual energy x-ray based explosive detection system for the
airline security market that competes with the Z-Scan.
5.3.2 During the term of this Agreement and for a period of one
(1) year thereafter, Astrophysics will not (a) develop or have developed,
license or acquire, and (b) sell or have sold, or otherwise distribute or have
distributed an explosive detection system or device using computed tomography
for the airline security market.
5.3.3 During the period beginning on the Effective Date and ending
upon its expiration or earlier termination pursuant to Section 12 hereof,
Astrophysics agrees that it will waive any and all claims that it may have
against InVision relating to InVision's use, manufacture, sale, distribution or
other transfer of the InVision Pre-Scanner occurring during such period.
5.4 RIGHTS RETAINED. Notwithstanding anything in this Agreement to the
contrary, any rights to the InVision Technology not expressly granted to
Astrophysics by InVision herein are retained solely by InVision, and any rights
not expressly granted to InVision by Astrophysics herein are retained solely by
Astrophysics.
6. LIMITATION ON LIABILITY; WAIVER OF CONSEQUENTIAL DAMAGES. IN NO EVENT WILL
THE CUMULATIVE LIABILITY OF ANY PARTY FOR LOSSES, CLAIMS OR DAMAGES INCURRED IN
CONNECTION WITH THIS AGREEMENT EXCEED THE AMOUNTS PAID OR CONTRIBUTED BY SUCH
PARTY HEREUNDER. IN NO EVENT WILL ANY PARTY BE LIABLE TO ANY OTHER OR TO ANY
THIRD PARTY FOR ANY LOST PROFITS, LOST SAVINGS, OR OTHER INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES, INCURRED IN CONNECTION WITH THIS AGREEMENT EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
7. LICENSES.
7.1 INVISION TECHNOLOGY LICENSE. Subject to the terms and conditions of
the Agreement, InVision hereby grants to Astrophysics fully-paid and royalty
free, non-transferable, non-exclusive license in the United States, without
right of sublicense, to use internally during the term of this Agreement the
InVision Patents Rights and InVision Know-How incorporated in the InVision Pre-
Scanner Technology and CTX 5000
14
<PAGE>
Technology solely for the purposes of creating an interface between the Z-Scan
and the CTX 5000, and only to the extent InVision reasonably believes it is
necessary to enable Astrophysics to meet its obligations under this Agreement.
7.2 INVISION SOFTWARE AND FIRMWARE LICENSE. Subject to the terms and
conditions of this Agreement, InVision grants to Astrophysics solely during the
term of this Agreement a nonexclusive, non-transferable, fully paid and royalty-
free license in the United States, without right of sublicense, to use and
perform internally the InVision Firmware and the InVision Software solely in
object code form, only to the extent InVision reasonably believes it is
necessary to enable Astrophysics to meet its obligations under this Agreement.
Astrophysics shall not reverse compile, reverse engineer or otherwise
disassemble the InVision Software or Firmware, nor are any rights to prepare
derivative works or to display the InVision Software or Firmware granted to
Astrophysics except as expressly required in connection with this Development
Program.
7.3 ASTROPHYSICS TECHNOLOGY LICENSE. Subject to the terms and conditions
of this Agreement, Astrophysics hereby grants to InVision a fully-paid and
royalty free, non-transferable, non-exclusive license in the United States,
without right of sublicense, to use internally during the term of this Agreement
the Astrophysics Patent Rights and Astrophysics Know-How incorporated in the Z-
Scan Technology and only to the extent Astrophysics believes it is necessary to
enable InVision to meet its obligations under this Agreement.
7.4 ASTROPHYSICS SOFTWARE AND FIRMWARE LICENSE. Subject to the terms and
conditions of this Agreement, Astrophysics hereby grants to InVision solely
during the term of this Agreement a nonexclusive, non-transferable, fully paid
and royalty-free license in the United States, without right of sublicense, to
use and perform internally the Astrophysics Firmware and the Astrophysics
Software solely in object code form, only necessary to the extent Astrophysics
believes it is necessary to enable InVision to meet its obligations under this
Agreement. InVision shall not reverse compile, reverse engineer or otherwise
disassemble the Astrophysics Software or Firmware, nor are any rights to prepare
derivative works or to display the Astrophysics Software or Firmware granted to
InVision except as expressly required in connection with this Development
Program.
8. LICENSE RESTRICTIONS.
8.1 UNAUTHORIZED MODIFICATIONS. Except as otherwise expressly permitted
herein, each Party acknowledges and agrees that it shall not modify, decompile,
or disassemble the object code version of another Party's Software except to the
extent such decompilation or disassembly may occur as a result of such Party's
use of debugging tools for the purpose of debugging the EDS prototype or an EDS
Product.
15
<PAGE>
8.2 COPYRIGHT NOTICES. No Party shall alter, obscure or remove any
copyright notices or any other proprietary rights notices placed on another
Party's Technology. InVision shall be entitled to place its name and trademarks
on the EDS Product(s) to be marketed and distributed by InVision pursuant to the
Distribution Agreement, and shall be entitled to place trademarks or trade names
proprietary to InVision and/or Astrophysics on the documentation for and in
marketing and other promotional materials about such EDS Product(s).
9. OWNERSHIP.
9.1 INVISION TECHNOLOGY. Astrophysics acknowledges and agrees that
InVision will own and retain all right, title and interest in and to the
InVision Technology, including without limitation all copyrights, patents, trade
secrets, trademarks or other intellectual property rights. Inventions,
modifications, improvements, adaptations, derivative works or additions to the
InVision Technology conceived solely by InVision in connection with the
Development Program shall be owned exclusively by InVision, subject to the
licenses granted pursuant to Section 7 hereof. Inventions, modifications,
improvements, adaptations, derivative works or additions to InVision Technology
jointly developed by InVision and Astrophysics and which are not used in the
production of any EDS Product shall be owned by InVision, subject to any
licenses expressly granted herein pursuant to Section 7 above, and Astrophysics
shall cooperate in good faith and take such actions as are reasonably necessary
to effect, correct or make clear matters of title accordingly.
9.2 ASTROPHYSICS TECHNOLOGY. InVision acknowledges and agrees that
Astrophysics will own and retain all right, title and interest in and to the
Astrophysics Technology including without limitation all copyrights, patents,
trade secrets, trademarks or other intellectual property rights. Inventions,
modifications, improvements, adaptations, derivative works or additions to the
Astrophysics Technology conceived solely by Astrophysics in connection with the
Development Program shall be owned exclusively by Astrophysics, subject to the
license granted pursuant to Section 7 hereof. Inventions, modifications,
improvements, adaptations, derivative works or additions to Astrophysics
Technology jointly developed by InVision and Astrophysics and which are not used
in the production of any EDS Product shall be owned by Astrophysics, subject to
any licenses expressly granted herein pursuant to Section 7 above, and InVision
shall cooperate in good faith and shall take such actions as are reasonably
necessary to effect, correct or make clear matters of title accordingly.
9.3 JOINT TECHNOLOGY. Astrophysics and InVision shall jointly own
without any obligation of accounting, any and all inventions, improvements,
modifications, adaptations, derivative works or additions to the InVision
Technology and to the Astrophysics Technology which are used in the production
of the EDS Product, including
16
<PAGE>
but not limited to the EDS Specifications, the EDS prototype, the EDS
Product(s), the Testing System, the Testing System Specifications and the
Documentation created by or on behalf of either party in connection with the
research and development efforts provided for hereunder, and including without
limitation copyright, patent, trade secret, trademark or other intellectual
property rights, but excluding Technology owned by either party as of the
Effective Date or pursuant to Sections 9.1 and 9.2 above. Any data or other
materials furnished by any Party to another in connection with the services
performed hereunder shall remain the sole property of the disclosing Party and
shall be used by the receiving Party solely for the purposes set forth herein.
9.4 INVENTIONS. With respect to inventions or improvements jointly owned
by InVision and Astrophysics pursuant to Paragraph 9.3, the Parties shall
jointly seek to obtain patents in any and all countries and shall share equally
in the related costs. In the event a Party does not wish to participate in
seeking such patent protection in a country, the other Party shall have the
right to seek to obtain patents solely in its name and at its expense in such
country and the declining Party shall cooperate in good faith and take such
actions as are reasonably necessary to effect, correct or make clear matters of
title accordingly. Neither Party shall be required to take action which would
negate novelty under patent laws.
10. DISCLAIMER OF WARRANTY.
10.1 INVISION DISCLAIMER. The InVision Technology is provided to
Astrophysics "AS IS," without any warranty of any kind, including without
limitation warranties of title and non-infringement. Without limiting the
generality of the foregoing, InVision expressly does not warrant (i) the
patentability of any of the inventions, or (ii) the accuracy, safety, or
usefulness for any purpose, of the InVision Technology. Nothing contained in
this Agreement shall be construed as either a warranty or representation by
InVision as to the validity or scope of any InVision Patents. INVISION ASSUMES
NO LIABILITY IN RESPECT OF ANY INFRINGEMENT OF ANY PATENT OR OTHER RIGHT OF
THIRD PARTIES DUE TO THE ACTIVITIES OF ASTROPHYSICS UNDER THIS AGREEMENT.
10.2 ASTROPHYSICS DISCLAIMER. The Astrophysics Technology is provided to
InVision "AS IS," without any warranty of any kind, including without limitation
warranties of title and non-infringement. Without limiting the generality of
the foregoing, Astrophysics expressly does not warrant (i) the patentability of
any of the inventions, or (ii) the accuracy, safety, or usefulness for any
purpose, of the Astrophysics Technology. Nothing contained in this Agreement
shall be construed as either a warranty or representation by Astrophysics as to
the validity or scope of any Astrophysics Patents. ASTROPHYSICS ASSUMES NO
LIABILITY IN RESPECT OF ANY
17
<PAGE>
INFRINGEMENT OF ANY PATENT OR OTHER RIGHT OF THIRD PARTIES DUE TO THE ACTIVITIES
OF INVISION UNDER THIS AGREEMENT.
11. CONFIDENTIAL INFORMATION.
11.1 CONFIDENTIAL DISCLOSURE. For the term of this Agreement and for five
(5) years thereafter, the parties agree to keep in confidence and prevent the
disclosure to any person or persons outside their respective organizations
(including affiliates), all Confidential Information which is received from the
other under this Agreement. All such Confidential Information shall be in
tangible form, or if disclosed orally, within 30 days of the oral disclosure
shall be reduced to tangible form, and shall be marked with a suitable
restrictive legend.
11.2 USE RESTRICTION. Any Confidential Information disclosed by either
Party hereunder shall be used by the receiving Party solely in performance of
this Agreement, unless otherwise agreed to by the disclosing Party in writing.
11.3 EXCLUSIONS. Neither Party shall be liable for disclosure to a third
party or use of any such data that:
11.3.1 Is or becomes in the public domain without breach of this
Confidentiality obligation by the receiving Party;
11.3.2 Was already rightfully known to the Party receiving it at
the time of disclosure;
11.3.3 Is disclosed by the Party receiving the information
hereunder with the written approval of the other Party;
11.3.4 Becomes known to the receiving Party from a source other
than the disclosing Party without breach of this Agreement by the receiving
Party;
11.3.5 Is disclosed by the disclosing Party to a third Party
without restriction;
11.3.6 Is independently developed by a Party without regard to the
Confidential Information of the other Party; or
11.3.7 Is ordered to be disclosed by a court or governmental agency
of competent jurisdiction after the receiving Party shall have afforded the
disclosing Party the opportunity to defend against any motion to disclose.
18
<PAGE>
12. TERM AND TERMINATION.
12.1 TERM. Unless earlier terminated in accordance with this Section 12,
this Agreement shall commence as of the Effective Date and shall continue for
eighteen (18) months thereafter. Astrophysics' obligations under the
Development Program will be satisfied upon the earlier of (i) delivery to and
acceptance by InVision of two production units of EDS Products which comply with
the EDS Specification and which have been tested to the satisfaction of and
approved by InVision (ii) or May 12, 1998.
12.2 TERMINATION WITH CAUSE. Either Party may terminate this Agreement
upon ten (10) days written notice of a material breach of this Agreement by the
other Party if such Party is directly affected by such breach and such breach is
not cured within a ten (10) day period or such longer period as the affected
Parties may agree.
12.3 TERMINATION FOR DISSATISFACTION. During the initial period of this
Agreement beginning upon the Effective Date and ending ninety (90) days
thereafter, any conflict or dissatisfaction of a Party which is referred to the
Oversight Board but which the Oversight Board has been unable to resolve within
a reasonable period of time shall be deemed to be cause for termination. In
such case, either Party may then terminate this Agreement pursuant to Section
12.2.1 hereof without penalty.
12.4 TERMINATION FOR CONVENIENCE. Any Party may terminate this Agreement
without cause (a) upon thirty (30) days prior written notice if the termination
occurs within ninety (90) days of the Effective Date or prior to the expenditure
by the Parties of Development Funds totaling $500,000 in the aggregate, and (b)
upon sixty (60) days notice thereafter. In the case of such a termination
without cause, the terminating Party will be penalized for such termination as
follows: (i) there shall be no penalty if the Development Costs expended by the
Parties as of the Termination Date equal less than $1,000,000 in the aggregate,
(ii) the terminating Party shall bear seventy-five percent (75%) of such
Development Costs if the Development Costs expended by the Parties as of the
Termination Date equal at least $1,000,000 but less than $1,500,000 in the
aggregate, and (iii) the terminating Party shall bear all (100%) of such
Development Costs if the Development Costs then expended by both Parties equal
$1,500,000 or more in the aggregate.
12.5 TERMINATION FOR EXTERNAL EVENTS. The Parties hereto recognize that,
in view of the duration of this Agreement, this Agreement may have to be
changed or terminated by mutual agreement due to external events such as force
majeure, technological developments of third parties, or change in market
conditions. No such mutual change or termination shall result in a penalty to
either Party under Section 12.4 above.
19
<PAGE>
12.6 LIMIT EXPENDITURES UPON TERMINATION. The Parties agree that, in the
event that any Party notifies the other that it is terminating this Agreement
for any reason under this Section 12, both Parties will use their best efforts
to limit or eliminate all further expenditures of Development Funds as much as
is reasonably possible under the circumstances.
12.7 SURVIVAL. Upon expiration or termination of this Agreement
Paragraphs 4 ("Payments and Taxes"), 5 ("Non-Infringement Warranty; Notice of
Infringement"), 6 ("Limitation on Liability; Consequential Damages"), 7
("Licenses"), 8 ("License Restrictions"), 9 ("Ownership"), 11 ("Confidential
Information"), 12.6 ("Survival"), 13 ("Oversight Board; Arbitration") and 14
("General Provisions") shall survive the expiration or earlier termination of
this Agreement.
13. OVERSIGHT BOARD; ARBITRATION.
13.1 OVERSIGHT BOARD. The Parties hereto agree that, in the event of any
dispute arising hereunder or in connection with the research and development
efforts and obligations contained herein, then such matter shall be referred to
the Oversight Board by the complaining Party with written notice to the other
Party stating briefly the matter in dispute.
13.1.1 The Oversight Board shall meet not less frequently than
quarterly on dates to be fixed by agreement of the members thereof, and shall
consider all matters referred to it up to a date not less than five (5) days
prior to the date fixed for the meeting and not previously settled by it,
including but not limited to the review and approval of (a) modifications or
additions to any Exhibits, Schedules or Attachments hereto, and (b) budgets and
cost allocations; determining any remedial action to be taken in the event two
or more successive development milestones or deadlines have been missed by more
than 30 days each, including the use of outside consultants to remedy the
problem and the development of a work statement and firm budget for the work of
any such outside consultants.
13.1.2 Any matter not settled when first considered by the
Oversight Board shall be referred to the next meeting and, if not then settled,
may be referred by any Party affected by such matter to arbitration in
accordance with Paragraph 13.2 below.
13.1.3 The Oversight Board shall determine its own procedures and
may invite such other persons as its members may agree to any meeting.
13.1.4 At each of its meetings, the Oversight Board may receive any
reports from any person as it believes helpful or necessary.
13.2 ARBITRATION.
20
<PAGE>
13.2.1 If a dispute arises between any of the Parties which cannot
be resolved by negotiation or, failing that, by referral to and consideration by
the Oversight Board, then the Parties agree to participate in non-binding
mediation before pursuing any other legal remedies. The mediation shall be
conducted in San Mateo County, California by United States Arbitration &
Mediation Association, Inc., or such other mediation association as the Parties
shall determine within thirty (30) days from the Effective Date, with costs to
be borne equally by the Parties between whom the dispute has arisen.
13.2.2 If any participating Party is unsatisfied with the results
of such mediation, then the dispute shall be finally determined by arbitration
pursuant to the rules of the California Code of Civil Procedure. Each Party
involved in the dispute shall appoint one representative reasonably acceptable
to the other involved Parties, and the representatives shall then appoint one
independent arbitrator (the "Arbitrator") to hear and resolve the dispute, all
within ten (10) business days of receipt by any Party of written notice that the
matter has been referred to arbitration.
13.2.3 The Arbitrator shall, without prejudice to the generality
of his or her powers, have the power to amend this Agreement, together with any
of its Exhibits, Attachments or Schedules, so that it accurately reflects the
true agreement made by the Parties, to direct such measurements, tests and/or
valuations as may in the Arbitrator's opinion be desirable in order to determine
the rights of the Parties and to ascertain and award any sum which ought to have
been the subject of or included in any payment and to open up, review and revise
any account, opinion, decision, requirement, report or notice and to determine
all matters in dispute which shall have been submitted to the Arbitrator in the
same manner as if no such account, opinion, decision, requirement, report or
notice had been given previously.
13.2.4 Subject to subparagraph 13.2.5 below, the award of the
Arbitrator shall be final and binding upon the Parties, and judgment upon the
award rendered may be entered into any court having jurisdiction thereof.
13.2.5 The Parties agree and consent that any Party involved in a
particular dispute for which an Arbitrator has rendered an award:
(a) May appeal to a court of law having jurisdiction
thereover any question of law arising out of an award made in an arbitration
pursuant to this Section 13,
(b) May appeal to a court of law having jurisdiction
thereover to determine any question of law arising in the course of any referral
to arbitration made pursuant to this Section 13; and
The Parties agree that any such court shall have the
authority and jurisdiction to determine any such question or questions of law.
21
<PAGE>
13.2.6 If before making his or her final award, the Arbitrator
dies or otherwise ceases to act as the Arbitrator, the representatives of the
Parties involved in the dispute shall promptly appoint a further Arbitrator. No
such further Arbitrator shall be entitled to disregard any direction of the
previous Arbitrator except (i) to the extent that the previous Arbitrator had
power to do so under the Rules of the American Arbitration Association, (ii)
with the consent of the Parties involved in the dispute, or (iii) by operation
of law.
14. GENERAL PROVISIONS.
14.1 NO AGENCY. InVision will in all matters relating to this Agreement
act with respect to Astrophysics as an independent contractor, and Astrophysics
will in all matters relating to this Agreement act with respect to InVision as
an independent contractor. No Party will by virtue of this Agreement or the
transactions contemplated hereunder have any authority, nor will any Party
represent that it has any authority, to assume or create any obligation, express
or implied, on behalf of any other Party, or to represent any other Party as an
agent, employee or representative of another party or in any other capacity.
Neither the execution nor performance of this Agreement shall be construed to
have established any agency, joint venture or partnership among the Parties
hereto.
14.2 PRESS RELEASES. No Party hereto shall issue any press release, use
any other Parties' products, name or trademarks in any promotional activity, or
otherwise publicly announce or comment on this Agreement except as required by
law without the prior written consent of the other Party, which consents shall
not be unreasonably withheld or delayed.
14.3 EXPORT. Each Party represents and warrants to the other Party that
it has or, prior to any export of the EDS Product(s), will have secured all
government licenses, permits and permissions required for such Party and its
customers to export the EDS Product(s) out of the United States and into any
country in the world and that the distribution of the EDS Product(s) by any
Party hereto or its customers will not violate any laws, restrictions or
regulations of the United States government or any other government. Each Party
agrees to provide the other Party with evidence of compliance with applicable
laws, restrictions and regulations upon reasonable request. Each Party agrees
to pay any fines, fees or damages imposed on the other Party resulting from the
distribution of the EDS Product(s) in accordance with the terms of this
Agreement, and refund any fees paid by such Party, in the event of any breach by
such Party of this Paragraph 14.3. Further, the Parties agree that the
obligations undertaken pursuant to this Paragraph 14.3 shall be incorporated in
their entirety in the DISTRIBUTION Agreement.
14.4 PARTIES ADVISED BY COUNSEL. This Agreement has been negotiated
between InVision on the one hand and Astrophysics and EG&G on the other hand,
22
<PAGE>
unrelated parties who are sophisticated and knowledgeable in the matters
contained in this Agreement and who have acted in their own self interests. In
addition, each Party has been represented by legal counsel. The provisions of
this Agreement shall be interpreted in a reasonable manner to effect the
purpose of the Parties, and this Agreement shall not be interpreted or
construed against any Party hereto because that Party or any attorney or
representative for that Party drafted or participated in the drafting of this
Agreement or any Exhibits, Attachments or Schedules hereto.
14.5 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the United States of America and the State of California excluding
the application of its conflict of laws rules. The parties agree that the
United Nations Convention on Contracts for the International Sale of Goods is
specifically excluded from application to this Agreement.
14.6 NOTICES. All notices or reports permitted or required under this
Agreement shall be in writing and shall be delivered by personal delivery,
telegram, telex, telecopier, facsimile transmission or by certified or
registered mail, return receipt requested, and shall be deemed received upon
personal delivery, five (5) days after deposit in the mail, or upon
acknowledgment of receipt of electronic transmission. Notices shall be sent to
the signatory of this Agreement at the address set forth at the beginning of
this Agreement or such other address as either party may specify in writing.
If the notice is to InVision, a copy shall also be sent to its Corporate
Counsel.
14.7 WAIVER. The failure of any Party to require performance by the other
Party of any provision hereof shall not affect the full right to require such
performance at any time thereafter; nor shall the waiver by any Party of a
breach of any provision hereof be taken or held to be a waiver of the provision
itself.
14.8 SEVERABILITY. In the event that any provision of this Agreement
shall be unenforceable or invalid under any applicable law or be so held by
applicable court decision, such unenforceability or invalidity shall not render
this Agreement unenforceable or invalid as a whole, and, in such event, such
provision shall be changed and interpreted so as to best accomplish the
objectives of such unenforceable or invalid provision within the limits of
applicable law or applicable court decisions.
14.9 HEADINGS. The Section and Paragraph headings appearing in this
Agreement are inserted only as a matter of convenience and in no way define,
limit, construe or describe the scope or extent of such Section or Paragraph, or
in any way affect this Agreement.
14.10 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto constitute
the entire agreement between the Parties with respect to the subject matter
hereof. This
23
<PAGE>
Agreement supersedes, and the terms of this Agreement govern, any prior or
collateral agreements with respect to the subject matter hereof, including any
prior confidentiality agreements between the parties and the LOI. This
Agreement may only be changed by mutual agreement of authorized representatives
of the Parties in writing.
14.11 ASSIGNMENT. No Party hereto shall assign, transfer, sell, pledge or
hypothecate any rights or obligations arising under this Agreement without the
prior written consent of the other Party, and any attempt to do so shall be, at
the option of the remaining Party, null and void. Subject to the above
restriction on assignment, this Agreement shall inure to the benefit of and bind
the successors and assigns of the respective Parties hereto.
14.12 COUNTERPARTS. This Agreement may be signed in counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their respective authorized representatives.
INVISION: ASTROPHYSICS:
InVision Technyologies, Inc. EG&G Astrophysics
- ------------------------------------- -------------------------------------
Dr. Sergio Magistri Thomas R. Schorling
President and Chief Executive Officer President and Chief Operating Officer
24
<PAGE>
INVISION TECHNOLOGIES, INC.
--------------
STOCK PURCHASE AGREEMENT
--------------
NOVEMBER 12, 1996
<PAGE>
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . 1
1.1 Shares. . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing Date. . . . . . . . . . . . . . . . . . . . 1
1.3 Delivery. . . . . . . . . . . . . . . . . . . . . . 1
2. REGISTRATION OF SECURITIES.. . . . . . . . . . . . . . . 1
2.1 Definitions . . . . . . . . . . . . . . . . . . . . 1
2.2 Shelf Registration. . . . . . . . . . . . . . . . . 3
2.3 Piggy-Back Registration Rights. . . . . . . . . . . 4
2.4 Holdback Agreements.. . . . . . . . . . . . . . . . 5
2.5 Expenses of Registration. . . . . . . . . . . . . . 5
2.6 Obligations of the Company. . . . . . . . . . . . . 5
2.7 Indemnification . . . . . . . . . . . . . . . . . . 7
2.8 Information by Holder . . . . . . . . . . . . . . . 8
2.9 Transfer of Registration Rights . . . . . . . . . . 8
2.10 Delay of Registration . . . . . . . . . . . . . . . 8
2.11 Rule 144 Reporting. . . . . . . . . . . . . . . . . 9
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . 9
3.1 Organization and Standing; Articles and Bylaws. . . 9
3.2 Authorization . . . . . . . . . . . . . . . . . . . 9
3.3 Validity of Shares. . . . . . . . . . . . . . . . . 10
3.4 Offering. . . . . . . . . . . . . . . . . . . . . . 10
3.5 Full Disclosure . . . . . . . . . . . . . . . . . . 10
3.6 Voting Arrangements.. . . . . . . . . . . . . . . . 10
3.7 No Conflict; No Violation.. . . . . . . . . . . . . 10
3.8 Consents and Approvals. . . . . . . . . . . . . . . 11
3.9 Absence of Certain Developments.. . . . . . . . . . 11
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. . . . . 11
4.1 Legal Power . . . . . . . . . . . . . . . . . . . . 11
4.2 Due Execution . . . . . . . . . . . . . . . . . . . 11
4.3 Investment Representations. . . . . . . . . . . . . 11
5. CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . 12
5.1 Conditions to Obligations of Purchaser. . . . . . . 12
5.2 Conditions to Obligations of the Company. . . . . . 13
6. RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . 14
7. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 14
7.1 Governing Law . . . . . . . . . . . . . . . . . . . 14
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
7.2 Survival. . . . . . . . . . . . . . . . . . . . . . 14
7.3 Successors and Assigns. . . . . . . . . . . . . . . 14
7.4 Entire Agreement. . . . . . . . . . . . . . . . . . 15
7.5 Separability. . . . . . . . . . . . . . . . . . . . 15
7.6 Amendment and Waiver. . . . . . . . . . . . . . . . 15
7.7 Delays or Omissions . . . . . . . . . . . . . . . . 15
7.8 Notices, etc. . . . . . . . . . . . . . . . . . . . 15
7.9 Finder's Fees . . . . . . . . . . . . . . . . . . . 16
7.10 Information Confidential. . . . . . . . . . . . . . 17
7.11 Titles and Subtitles. . . . . . . . . . . . . . . . 17
7.12 Counterparts. . . . . . . . . . . . . . . . . . . . 17
ii
<PAGE>
INVISION TECHNOLOGIES, INC.
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of November 12, 1996, by and among INVISION
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and EG&G
INTERNATIONAL, LTD., a Cayman Islands corporation ("Purchaser").
1. PURCHASE AND SALE
Subject to the terms and conditions hereof, and in reliance upon the
representations, warranties and agreements contained herein, the Company hereby
agrees to issue and sell to Purchaser, and Purchaser hereby agrees to purchase
from the Company, shares of the Company's Common Stock, par value $.001 per
share, (the "Shares") as follows:
1.1 SHARES. On the Closing Date (as hereinafter defined), the
Company shall issue and sell to Purchaser, and Purchaser shall purchase from the
Company 91,875 shares at a purchase price of $21.76875 per share for an
aggregate purchase price of $2,000,003.91 (the "Aggregate Purchase Price").
1.2 CLOSING DATE. The closing of the sale and purchase of the Shares
(the "Closing") shall take place on November 15, 1996 (the "Closing Date").
1.3 DELIVERY. At the Closing, the Company will deliver to the
Purchaser a certificate or certificates, in such denominations and registered in
such names as Purchaser may designate by notice to the Company, representing the
Shares to be purchased by Purchaser from the Company, dated the Closing Date,
against payment of the Aggregate Purchase Price by wire transfer, a check made
payable to the order of the Company, or any combination thereof.
2. REGISTRATION OF SECURITIES.
2.1 DEFINITIONS
The following terms shall have the following meanings for purposes of
this Section 2:
(a) The term "Holder" or "Holders" shall mean (i) the Purchaser
and (ii) any other person holding or having the right to acquire Registrable
Securities to whom these rights have been transferred pursuant to Section 2.9
hereof.
1
<PAGE>
(b) The terms "register," "registered" and "registration" refer
to a registration effected by filing with the Securities and Exchange Commission
("SEC") a registration statement (the "Registration Statement") in compliance
with the Securities Act of 1933 (the "Act") and the declaration or ordering by
the SEC of the effectiveness of such Registration Statement.
(c) PROSPECTUS: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to the
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.
(d) REGISTRATION EXPENSES: All reasonable expenses incurred by
the Company in complying with Sections 2.2 and 2.3 hereof, including all
registration and filing fees, listing fees for the Registrable Securities,
printing expenses, fees and disbursements of counsel for the Company, and blue
sky fees and expenses in all states.
(e) REGISTRABLE SECURITIES: All Shares and any Common Stock
issued or issuable in respect of the Shares pursuant to any stock split, stock
dividend, recapitalization, or similar event; PROVIDED HOWEVER, that Registrable
Securities shall cease to be Registrable Securities when they may be sold
pursuant to Rule 144 under the Act.
(f) REGISTRATION STATEMENT: Any registration statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
(g) RESTRICTED SECURITIES: The Registrable Securities upon
original issuance thereof, and at all times subsequent thereto, until, in the
case of any such security, it is no longer required to bear the legends set
forth on such security pursuant to the terms of the security, this Agreement and
applicable law.
(h) RULE 144: Rule 144 under the Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC (excluding Rule 144A).
2
<PAGE>
2.2 SHELF REGISTRATION
(a) SHELF REGISTRATION. The Company shall, not later than one
year after the Closing Date (the "Filing Date"), prepare and file with the SEC a
Registration Statement pursuant to Rule 415 (or any appropriate similar rule
that may be adopted by the SEC) under the Act covering the Registrable
Securities (the "Shelf Registration"). The Shelf Registration shall be on Form
S-1 or another appropriate form permitting registration of such Registrable
Securities for resale by such Holders from time to time.
(b) EFFECTIVENESS. The Company shall use its best efforts to
cause the Shelf Registration to become effective under the Act as soon as
practicable following the Filing Date. Subject to the requirements of the Act
including, without limitation, requirements relating to updating through
post-effective amendments or otherwise, the Company shall use its best efforts
to keep the Shelf Registration continuously effective until the later of (i) the
third anniversary of the Closing Date or (ii) such time as all of the
Registrable Securities may be traded pursuant to Rule 144 under the Act by such
Purchasers who are not at such time affiliates of the Company within the meaning
set forth in Rule 144 under the Act; PROVIDED, that in the event of a Suspension
Period, as set forth in Section 2.2(c) hereof, the Company shall extend the
period of effectiveness of such Shelf Registration by the number of days of each
such Suspension Period. The Company shall use its best efforts to take such
actions under the laws of various states as may be required to cause the resale
of the Registrable Securities pursuant to the Shelf Registration to be lawful.
(c) Following the effectiveness of a Registration Statement
filed pursuant to this section, the Company may, at any time, suspend the
effectiveness of such Registration Statement for up to 60 days, as appropriate
(a "Suspension Period"), by giving notice to the Purchaser, if the Company shall
have determined that the Company may be required to disclose any material
corporate development which disclosure may have a material adverse effect on the
Company. Notwithstanding the foregoing, no more than two Suspension Periods
(i.e., 120 days) may occur in immediate succession. The period of any such
suspension of the Registration Statement shall be added to the period of time
the Company agrees to keep the Registration Statement effective as provided in
Section 2.2(b). The Company shall use its best efforts to limit the duration
and number of any Suspension Periods. The Purchaser agrees that, upon receipt
of any notice from the Company of a Suspension Period, the Purchaser shall
forthwith discontinue disposition of shares covered by such Registration
Statement or Prospectus until the Purchaser (i) is advised in writing by the
Company that the use of the applicable Prospectus may be resumed, (ii) has
received copies of a supplemental or amended Prospectus, if applicable, and
(iii) has received copies of any additional or supplemental filings which are
incorporated or deemed to be incorporated by reference in such Prospectus.
3
<PAGE>
2.3 PIGGY-BACK REGISTRATION RIGHTS.
(a) REGISTRATION. If at any time or from time to time the
Company shall determine to register any of its securities, either for its own
account or the account of security holders (other than the Holders), other than
a registration relating solely to employee benefit plans or a registration on
Form S-4 relating solely to an SEC Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 20 calendar days after receipt of such written notice
from the Company, by any Holder or Holders, except as set forth in Subsection
2.3(b) below and subject to the limitation set forth in Section 6 below.
(b) (i) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 2.3(a)(i). In such event the right of any Holder to
registration pursuant to this Section 2.3 shall be conditioned upon (i) the
expected proceeds to the Company from the underwritten offering, less expenses
including underwriters' commissions, attorneys' fees and expenses and printers'
costs, among others, of at least $10,000,000; (ii) such Holder's participation
in such underwriting and (iii) the inclusion of such Holder's Registrable
Securities in the underwriting to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall,
together with the Company and the other parties distributing their securities
through such underwriting, enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Subsection 2.3, if the
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the underwriter may limit the number of
Registrable Securities to be included in the registration and underwriting, or
may exclude Registrable Securities entirely from such registration and
underwriting subject to the terms of this paragraph. The Company shall so
advise all holders of the Company's securities that would otherwise be
registered and underwritten pursuant hereto, and the number of shares of such
securities, including Registrable Securities, that may be included in the
registration and underwriting shall be allocated in the following manner:
shares, other than Registrable Securities, other securities carrying
registration rights, and securities beneficially owned by any stockholder of the
Company who beneficially owns more than 20% of the Shares outstanding at the
time of filing the Registration Statement (each a "20% Owner"), requested to be
included in such registration by stockholders shall be excluded, and, if a
limitation on the number of shares is still required, the number of securities
that may be included shall be allocated, first, among the holders of piggyback
registration rights having PARI PASSU registration rights with those set forth
herein (which holders shall be deemed to include any 20% Owner), if any, in
4
<PAGE>
proportion, as nearly as possible, to the respective amounts of such securities
held by each such holder, at the time of filing the Registration Statement. In
the event of any underwriter cutback, any selling stockholder which is a Holder
of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
Holder", and any pro rata reduction with respect to such "selling Holder" shall
be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "selling Holder", as defined in
this sentence. No securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. If
any Holder disapproves of the terms of the underwriting, it may elect to
withdraw therefrom by written notice to the Company and the underwriter. The
Registrable Securities so withdrawn shall also be withdrawn from registration.
2.4 HOLDBACK AGREEMENTS.
(a) RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTRABLE
SECURITIES. Each Holder of Registrable Securities whose Registrable Securities
are covered by a Registration Statement filed pursuant to Section 2.3 hereof
agrees, if requested by the managing underwriters in an underwritten offering,
not to effect any public sale or distribution of securities of the Company of
any class included in such Registration Statement, including a sale pursuant to
Rule 144 (except as part of such underwritten offering), during the 10-day
period prior to, and the 90-day period beginning on, the effective date of any
underwritten offering made pursuant to such Registration Statement, or such
longer periods as may be reasonably requested by the managing underwriters.
The foregoing provisions shall not apply to any Holder of Registrable
Securities if such Holder is prevented by applicable statute or regulation from
entering into any such agreement; PROVIDED, HOWEVER, that any such holder shall
undertake in its request to participate in any such underwritten offering not to
effect any public sale or distribution of the class of Registrable Securities
covered by such Registration Statement (except as part of such underwritten
offering) during such period unless it has provided five business days prior
written notice of such sale or distribution to the managing underwriter or
underwriters.
2.5 EXPENSES OF REGISTRATION. All Registration Expenses shall be
borne by the Company; PROVIDED, HOWEVER, that the term Registration Expenses
shall not include, and in no event will the Company be obligated to pay, stock
transfer taxes or underwriters' discounts or commissions relating to Registrable
Securities. The Company shall bear the cost of reasonable expenses and fees of
one counsel for the holders of securities covered by a Registration Statement
filed pursuant to Section 2.3 hereof.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required under this Section
2 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
5
<PAGE>
(a) Prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities and use its best efforts to cause such
Registration Statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
Registration Statement effective for up to the earlier of 90 days or until the
Holder or Holders have completed the distribution relating thereto; PROVIDED,
HOWEVER, that if such Registration Statement is filed pursuant to Section 2.2
hereof, the Company shall keep such Registration Statement effective for the
period set forth therein.
(b) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such Registration Statement.
(c) Furnish to the Holders such numbers of copies of a
Prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
Registration Statement, at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event as a
result of which the Prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 2, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 2, if such securities
are being sold through underwriters, on the date that the Registration Statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent accountants of the Company, in form and
6
<PAGE>
substance as is customarily given by independent accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
2.7 INDEMNIFICATION.
(a) The Company will, and does hereby undertake to, indemnify
and hold harmless each Holder of Registrable Securities, each of such Holder's
officers, directors, partners and agents, and each person controlling such
Holder, with respect to any registration, qualification, or compliance effected
pursuant to this Section 2, and each underwriter, if any, and each person who
controls any underwriter, of the Registrable Securities held by or issuable to
such Holder, against all claims, losses, damages, and liabilities (or actions in
respect thereto) to which they may become subject under the Act, the Securities
Exchange Act of 1934 (the "Exchange Act"), or other federal or state law arising
out of or based on (i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular, or other similar
document (including any related Registration Statement, notification, or the
like) incident to any such registration, qualification, or compliance, or based
on any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or (ii) any violation or alleged violation by the Company of any federal, state
or common law rule or regulation applicable to the Company in connection with
any such registration, qualification, or compliance, and will reimburse, as
incurred, each such Holder, each such underwriter, and each such director,
officer, partner, agent and controlling person, for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action; provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense, arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by an
instrument duly executed by such Holder or underwriter and stated to be
specifically for use therein.
(b) Each Holder will, if Registrable Securities held by or
issuable to such Holder are included in such registration, qualification, or
compliance, indemnify the Company, each of its directors, and each officer who
signs a Registration Statement in connection therewith, and each person
controlling the Company, each underwriter, if any, and each person who controls
any underwriter, of the Company's securities covered by such a Registration
Statement, and each other Holder, each of such other Holder's officers,
partners, directors and agents and each person controlling such other Holder,
against all claims, losses, damages, and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such Registration Statement,
prospectus, offering circular, or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse, as
incurred, the Company, each such underwriter, each such other Holder, and each
such director, officer, partner, and controlling person, for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability, or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or
7
<PAGE>
alleged omission) was made in such Registration Statement, prospectus, offering
circular, or other document, in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder and stated to be specifically for use therein. In no event will any
Holder be required to enter into any agreement or undertaking in connection with
any registration under this Section 2 providing for any indemnification or
contribution obligations on the part of such Holder greater than such Holder's
obligations under this Section 2.
(c) Each party entitled to indemnification under this Section 2
(the "Indemnified Party") shall give notice to the party required to provide
such indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense at the Indemnifying Party's expense if
representation of such Indemnified Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 2, except
to the extent that such failure to give notice shall materially adversely affect
the Indemnifying Party in the defense of any such claim or any such litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff therein, to such
Indemnified Party, of a release from all liability in respect to such claim or
litigation.
2.8 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may reasonably request in writing and as
shall be required in connection with any registration, qualification, or
compliance referred to in this Section 2.
2.9 TRANSFER OF REGISTRATION RIGHTS. The rights contained in this
Section 2 to cause the Company to register the Registrable Securities, may be
assigned or otherwise conveyed to a transferee or assignee of Registrable
Securities, who shall be considered a "Holder" for purposes of this Section 2,
provided that such transferee or assignee acquires at least 50,000 shares (as
presently constituted) of the Registrable Securities held by the Purchaser; and
provided further, that the Company is given written notice by such Purchaser, at
the time of or within a reasonable time after said transfer, stating the name
and address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned.
2.10 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any
8
<PAGE>
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
2.11 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without registration
or pursuant to a registration on Form S-3, the Company agrees to use its best
efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144, as long as Registrable Securities are
outstanding;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Act and the Exchange Act;
(c) So long as a Holder owns any Registrable Securities, furnish
to such Holder forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 and of the Exchange
Act; a copy of the most recent annual or quarterly report of the Company; and
such other reports and documents as a Holder may reasonably request in availing
itself of any rule or regulation of the SEC allowing it to sell any such
securities without registration or pursuant to a registration on Form S-3, if
otherwise available.
(d) Take all such action (including without limitation the
furnishing of the information described in Rule 144(d)(4)) as may be necessary
or helpful to facilitate a sale of Registrable Securities by a Holder to a
"qualified institutional buyer," as such term is defined in Rule 144A of the
Act.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Purchaser as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has full power and authority to own and operate
its properties and assets and to carry on its business as presently conducted
and as proposed to be conducted. The Company is qualified as a foreign
corporation to do business in each jurisdiction in the United States in which
the ownership of its property or the conduct of its business requires such
qualification, except where any statutory fines or penalties or any corporate
disability imposed for the failure to qualify would not materially or adversely
affect the Company, its assets, financial condition or operations.
3.2 AUTHORIZATION. The Company has all necessary corporate power to
carry out and perform its obligations under the terms of this Agreement. All
corporate action on the part of the Company, its officers, directors and
stockholders necessary for the authorization, execution and delivery of this
Agreement, the performance of all the Company's obligations
9
<PAGE>
hereunder and thereunder, and for the authorization, issuance, sale and delivery
of the Shares has been taken or will be taken prior to the Closing. This
Agreement, when executed and delivered, shall constitute a valid and legally
binding obligation of the Company in accordance with its terms, subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors.
3.3 VALIDITY OF SHARES. The sale of the Shares is not and will not
be subject to any preemptive rights or rights of first refusal that have not
been waived and, when issued, sold and delivered in compliance with the
provisions of this Agreement, the Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; PROVIDED, HOWEVER,
that the Shares are subject to the restrictions on transfer set forth in Section
6 hereof and may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed.
3.4 OFFERING. Assuming the accuracy of the representations and
warranties of Purchaser contained in Section 4.3 hereof on the date hereof and
on the Closing Date, the offer, issue, and sale of the Shares are and will be
exempt from the registration and prospectus delivery requirements of the Act,
and have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit, or qualification requirements of
all applicable state securities laws.
3.5 FULL DISCLOSURE. The Company has furnished to Purchaser the
following documents, and the Company warrants that the information contained in
such documents, as of their respective dates (or if amended, as of the date of
such amendment), did not contain any untrue statement of a material fact, and
did not omit to state any material fact necessary to make any statement, in
light of the circumstances under which such statement was made, not misleading:
(a) The Company's Prospectus dated April 23, 1996 for the
initial public offering of its Shares; and the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, June 30 and September 30, 1996.
(b) All other documents subsequently filed by the Company with
the SEC pursuant to the reporting requirements of the Exchange Act.
3.6 VOTING ARRANGEMENTS. To the best of the Company's knowledge,
there are no outstanding stockholder agreements, voting trusts, proxies or other
arrangements or understandings among the stockholders of the Company relating to
the voting of their respective shares.
3.7 NO CONFLICT; NO VIOLATION. The execution, delivery and
performance of this Agreement and consummation of the transactions contemplated
hereby will not (a) conflict with any provisions of the Amended and Restated
Certificate of Incorporation or Bylaws of the Company; (b) result in any
violation of or default or loss of a benefit under, or permit the
10
<PAGE>
acceleration of any obligation under (in each case, upon the giving of notice,
the passage of time, or both) any mortgage, indenture, lease, agreement or other
instrument, permit, franchise, license, judgment, order, decree, law, ordinance,
rule or regulation applicable to the Company or its properties.
3.8 CONSENTS AND APPROVALS. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any governmental authority, required on the part of the Company
in connection with the valid execution and delivery of this Agreement, the
offer, sale or issuance of the Shares, or the consummation of any other
transaction contemplated hereby have been obtained, or will be effective at the
Closing, except for notices required or permitted to be filed with certain state
and federal securities commissions after the Closing, as the case may be; which
notices will be filed on a timely basis.
3.9 ABSENCE OF CERTAIN DEVELOPMENTS. Since June 30, 1996, the
Company has not (a) incurred or become subject to any material liabilities
(absolute or contingent) except current liabilities incurred, and liabilities
under contracts entered into, in the ordinary course of business, consistent
with past practices; (b) mortgaged, pledged or subjected to lien, charge or any
other encumbrance any of its assets, tangible or intangible; (c) sold, assigned
or transferred any of its assets or canceled any debts or obligations except in
the ordinary course of business, consistent with past practices; (d) suffered
any extraordinary losses, or waived any rights of substantial value; (e) entered
into any material transaction other than in the ordinary course of business,
consistent with past practices; or (f) otherwise had any material change in its
condition, financial or otherwise, except for changes in the ordinary course of
business, consistent with past practices, none of which individually or in the
aggregate has been materially adverse.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Purchaser hereby represents and warrants to the Company as follows:
4.1 LEGAL POWER. It has the requisite legal power and authority to
enter into this Agreement, to purchase the Shares hereunder, and to carry out
and perform its obligations under the terms of this Agreement.
4.2 DUE EXECUTION. This Agreement has been duly authorized, executed
and delivered by it, and, upon due execution and delivery by the Company, this
Agreement will be a valid and binding agreement of it.
4.3 INVESTMENT REPRESENTATIONS.
(a) It is acquiring the Shares for its own account, not as
nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Act.
11
<PAGE>
(b) It understands that (i) the Shares have not been registered
under the Act by reason of a specific exemption therefrom, that they must be
held by it indefinitely, and that it must, therefore, bear the economic risk of
such investment indefinitely, unless a subsequent disposition thereof is
registered under the Act or is exempt from such registration; (ii) each
certificate representing the Shares will be endorsed with the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS
(A) PURSUANT TO SEC RULE 144 OR (B) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT COVERING SUCH
SECURITIES OR (C) THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE 1933 ACT."
and (iii) the Company will instruct any transfer agent not to register the
transfer of any of the Shares unless the conditions specified in the foregoing
legend are satisfied.
Purchaser shall have the right to demand removal of the foregoing
legend with respect to any or all of the Shares if, in the opinion of counsel to
the Company, removal of such legend is permitted by the rules and regulations of
the SEC.
(c) It has been furnished with such materials and has been given
access to such information relating to the Company as it or its qualified
representative has requested and it has been afforded the opportunity to ask
questions regarding the Company and the Shares, all as it has found necessary to
make an informed investment decision.
(d) It is an "accredited investor" within the meaning of
Regulation D under the 1933 Act.
(e) It was not formed for the specific purpose of acquiring the
Shares offered hereunder.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. Purchaser's obligation
to purchase the Shares at the Closing is subject to the fulfillment, at or prior
to the Closing, of all of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section
3 hereof shall be true and correct in all material respects on the date of the
Closing with the same force and effect as if they had been made on and as of
said date; the business and assets of the Company
12
<PAGE>
shall not have been adversely affected in any material way prior to the Closing;
and the Company shall have performed all obligations and conditions herein
required to be performed by it on or prior to the Closing.
(b) OPINION OF THE COMPANY'S COUNSEL. Purchaser shall have
received from Cooley Godward LLP, counsel to the Company, an opinion letter
substantially in the form attached hereto as Exhibit A, addressed to it, dated
the date of the Closing.
(c) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to Purchaser and its special
counsel, and Purchaser and its special counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
(d) QUALIFICATIONS, LEGAL INVESTMENT. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Shares pursuant to this Agreement shall have
been duly obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Shares shall have been issued and
no proceedings for such purpose shall be pending or, to the knowledge of the
Company, threatened by the SEC or any commissioner of corporations or similar
officer of any other state having jurisdiction over this transaction. At the
time of the Closing, the sale and issuance of the Shares shall be legally
permitted by all laws and regulations to which the Company is subject.
(e) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchaser a Certificate, executed by the President of the Company, dated the
date of the Closing, certifying to the fulfillment of the conditions specified
in subparagraphs (a) and (d) of this Subsection 5.1.
(f) R&D AGREEMENT. The Company shall have executed a Research
and Development Agreement between the Company and EG&G Astrophysics,
substantially in the form of the draft dated November 11, 1996.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at the Closing is subject to the
fulfillment to the Company's satisfaction, on or prior to the Closing, of the
following conditions, any of which may be waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by Purchaser in Section 4 hereof shall be true and correct
at the date of the Closing, with the same force and effect as if they had been
made on and as of said date.
13
<PAGE>
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed
and complied with all agreements and conditions herein required to be performed
or complied with by it on or before the Closing.
(c) QUALIFICATIONS, LEGAL INVESTMENT. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful sale and issuance of the Shares pursuant to this Agreement shall have
been duly obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Shares shall have been issued and
no proceedings for such purpose shall be pending or, to the knowledge of the
Company, threatened by the SEC or any commissioner of corporations or similar
officer of any state having jurisdiction over this transaction. At the time of
the Closing, the sale and issuance of the Shares shall be legally permitted by
all laws and regulations to which the Purchaser is subject.
(d) COMPLIANCE CERTIFICATE. The Purchaser shall have delivered
to the Company a Certificate, executed by an authorized representative of the
Company, dated the date of the Closing, certifying the fulfillment of the
condition specified in subparagraphs (a) and (c) of this Subsection 5.2.
6. RESTRICTIONS ON TRANSFER.
During the twelve-month period commencing on the Closing Date, the
Purchaser shall not sell, assign, transfer or hypothecate more than 20% of the
shares purchased on the Closing Date, as such shares may be adjusted from time
to time pursuant to any stock split, stock dividend, recapitalization or similar
event, whether pursuant to an effective Registration Statement filed in
accordance with the terms of Section 2 hereof or pursuant to an exemption from
registration under the Act.
7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents, made and to be performed entirely within the State of
California.
7.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder as of the date of such certificate or instrument.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto.
14
<PAGE>
7.4 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto, and the
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and no party shall be liable or bound to any other party in any manner by any
representations, warranties, covenants, or agreements except as specifically set
forth herein or therein. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto and their
respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
7.5 SEPARABILITY. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
7.6 AMENDMENT AND WAIVER. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance, either retroactively or prospectively, and either
for a specified period of time or indefinitely), with the written consent of the
Company and the holders of not less than a majority-in-interest of the aggregate
of outstanding Shares purchased pursuant to this Agreement. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon
Purchaser, each future holder of the Shares initially purchased hereunder, and
the Company. Upon the effectuation of each such amendment or waiver, the
Company shall promptly give written notice thereof to the record holders of the
Shares initially purchased hereunder who have not previously consented thereto
in writing, if any.
7.7 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power, or remedy accruing to Purchaser or any subsequent holder of any Shares
upon any breach, default or noncompliance of the Company under this Agreement,
shall impair any such right, power, or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent, or approval
of any kind or character on Purchaser's part of any breach, default or
noncompliance under this Agreement or any waiver on Purchaser's part of any
provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing, and that
all remedies, either under this Agreement, by law, or otherwise afforded to
Purchaser, shall be cumulative and not alternative.
7.8 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
(a) upon personal delivery, (b) on report of successful transmission by
facsimile machine that automatically generates a printed diagnostic report,
indicating whether transmission was completed successfully, at the conclusion of
each transmission, (c) on the first business day after receipted delivery to a
courier service which guarantees next business-day delivery, under circumstances
in which such guaranty is applicable, or (d) on the earlier of delivery or five
business days after mailing by United
15
<PAGE>
States certified by mail, postage and fees prepaid, to the appropriate party at
the address set forth below or to such other address as the part so notifies the
other in writing:
(a) if to the Company, to:
INVISION TECHNOLOGIES, INC.
3420 E. Third Avenue
Foster City, CA 94404
Attention: Curtis P. DiSibio
with a copy to:
COOLEY GODWARD LLP
5 Palo Alto Square
Palo Alto, CA 94306-2155
Attention: Deborah Lawson Cleveland, Esq.
(b) if to Purchaser, to:
EG&G INTERNATIONAL, LTD.
c/o Maples and Calder
P.O. Box 309
Ugland House
South Church St.
Grand Cayman, Cayman Islands
British West Indies
Attention: Timothy Ridley, Esq.
with a copy to:
Murray Gross
Senior Vice President, General Counsel
EG&G, Inc.
45 Williams Street
Wellesley, MA 02181
Notwithstanding the foregoing, all notices and other communications to
an address outside of the United States shall be sent by telecopy and confirmed
in writing to be sent by first class mail.
7.9 FINDER'S FEES.
(a) The Company (i) represents and warrants that it has retained
no finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold Purchaser harmless of
and from any liability for any
16
<PAGE>
commission or compensation in the nature of a finder's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its employees
or representatives is responsible.
(b) Purchaser (i) represents and warrants that it has retained
no finder or broker in connection with the transactions contemplated by this
Agreement, and (ii) hereby agrees to indemnify and to hold the Company harmless
of and from any liability for any commission or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which Purchaser
or any of its employees or representatives are responsible.
7.10 INFORMATION CONFIDENTIAL. Purchaser acknowledges that the
information received by it pursuant hereto is confidential and for Purchaser's
use only, and it will refrain from using such information or reproducing,
disclosing, or disseminating such information to any other person (other than
its employees, affiliates, agents, or partners having a need to know the
contents of such information and its attorneys, in each case who agree to be
bound by this Section 7.11), except in connection with the exercise of rights
under this Agreement, unless such information is available to the public
generally or it is required by a governmental body to disclose such information.
7.11 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
The foregoing Agreement is hereby executed as of the date first above
written.
INVISION TECHNOLOGIES, INC. EG&G INTERNATIONAL, LTD.
3420 E. Third Avenue c/o Maples and Calder
Foster City, CA 94404 P.O. Box 309
Ugland House
South Church Street
Grand Cayman, Cayman Islands
British West Indies
By: /s/ Dr. Sergio Magistri By: /s/ T.P. Theodores
---------------------------------- ----------------------------------
Dr. Sergio Magistri Name: T.P. Theodores
President and Chief Executive Officer --------------------------------
Title: VP M & A
-------------------------------
17
<PAGE>
Exhibit A
OPINION OF COMPANY'S COUNSEL
<PAGE>
[LETTERHEAD]
November 15, 1996
EG&G International, Ltd.
c/o Maples and Calder
P.O. Box 309
Ugland House
South Church Street
Grand Cayman
Cayman Islands
British West Indies
RE: SALE AND PURCHASE OF INVISION TECHNOLOGIES, INC. COMMON STOCK
Ladies and Gentlemen:
We have acted as counsel for InVision Technologies, Inc., a Delaware corporation
(the "Company"), in connection with the issuance and sale of 91,885 shares of
common stock of the Company ("the Shares") to EG&G International, Ltd., a
corporation ("Purchaser"), pursuant to the terms of that certain Stock Purchase
Agreement, dated November 12, 1996, by and between the Company and Purchaser
(the "Agreement"). We are rendering this opinion pursuant to Section 5.1(b) of
the Agreement. Except as otherwise defined herein, capitalized terms used but
not defined herein have the respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement by the parties thereto and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness
<PAGE>
EG&G International, Ltd.
November 15, 1996
Page 2
and authenticity of certificates of public officials; and the due authorization,
execution and delivery of all documents where authorization, execution and
delivery are prerequisites to the effectiveness of such documents (except the
due authorization, execution and delivery of the Agreement by the Company). We
have also assumed: that all individuals executing and delivering documents had
the legal capacity to so execute and deliver; that you have received all
documents you were to receive under the Agreement; that the Agreement is an
obligation binding upon you; that you have filed any required California
franchise or income tax returns and have paid any required California franchise
or income taxes; and that there are no extrinsic agreements or understandings
among the parties to the Agreement that would modify or interpret the terms of
the Agreement or the respective rights or obligations of the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California and the General
Corporation Law of the State of Delaware. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent that
the laws of any jurisdiction other than those identified above are applicable to
the subject matter hereof. We are not rendering any opinion as to compliance
with any antifraud law, rule or regulation relating to securities, or to the
sale or issuance thereof.
With regard to our opinion in paragraph 4 below, we have examined and relied
upon a certificate executed by an officer of the Company, to the effect that the
consideration for all outstanding shares of capital stock of the Company was
received by the Company in accordance with the provisions of the applicable
Board of Directors resolutions and any plan or agreement relating to the
issuance of such shares, and we have undertaken no independent verification with
respect thereto.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power to own or lease its
property and assets and to conduct its business as it is currently being
conducted and, to the best of our knowledge, is qualified as a foreign
corporation to do business in each jurisdiction in the United States in which
the ownership of its property or the conduct of its business requires such
qualification and where any statutory fines or penalties or any corporate
disability imposed for
<PAGE>
EG&G International, Ltd.
November 15, 1996
Page 3
the failure to qualify would materially and adversely affect the Company, its
assets, financial condition or operations.
3. The Agreement has been duly and validly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms, except as
rights to indemnity under Section 2.7 of the Agreement may be limited by public
policy and except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
affecting creditors' rights, and subject to general equity principles and to
limitations on availability of equitable relief, including specific performance.
4. The outstanding shares of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. The Shares have been duly
authorized and, upon issuance and delivery in accordance with the terms of the
Agreement, will be validly issued, fully paid and nonassessable.
5. The issuance and sale of the Shares as contemplated by the Agreement
does not violate any provision of the Company's Amended and Restated
Certificate of Incorporation or Bylaws and to the best of our knowledge does
not violate or contravene (a) any governmental statute, rule or regulation
applicable to the Company or (b) any order, writ, judgment, injunction,
decree, determination or award which has been entered against the Company,
the violation or contravention of which would materially and adversely affect
the Company, its assets, financial condition or operations.
6. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or governmental
body in the United States required for the issuance and sale of the Shares as
contemplated by the Agreement, have been made or obtained.
7. The issuance and sale of the Shares as contemplated by the Agreement
is exempt from the registration requirements of the Securities Act of 1933, as
amended.
<PAGE>
EG&G International, Ltd.
November 15, 1996
Page 4
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
COOLEY GODWARD LLP
By
--------------------------
Robert L. Jones
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
between:
INVISION TECHNOLOGIES, INC.,
a Delaware corporation;
and
FREDRICK L. RODER
-------------------------------
Dated December 31, 1996
-------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. SALE AND PURCHASE OF SHARES; RELATED TRANSACTIONS............. 1
1.1 Sale and Purchase of Shares................................... 1
1.2 Purchase Price................................................ 1
1.3 Closing....................................................... 1
SECTION 2. REGISTRATION OF SECURITIES.................................... 2
2.1 Shelf Registration............................................ 2
2.2 Piggy-Back Registration Rights................................ 3
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLING STOCKHOLDER......... 4
3.1 Certificate of Incorporation and Bylaws; Records. ............ 5
3.2 Capitalization, Etc........................................... 5
3.3 Financial Statements.......................................... 6
3.4 Absence of Changes............................................ 7
3.5 Contracts..................................................... 7
3.6 Compliance With Legal Requirements............................ 7
3.7 Non-Contravention; Consents................................... 7
3.8 Full Disclosure............................................... 8
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER................... 9
4.1 Acquisition of Shares......................................... 9
4.2 Authority; Binding Nature of Agreement........................ 9
SECTION 5. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE....... 9
5.1 Accuracy of Representations................................... 9
5.2 Performance of Obligations.................................... 9
5.3 Approval of Purchaser's Board of Directors; Consents.......... 10
5.4 No Adverse Change............................................. 10
5.6 No Proceedings................................................ 10
5.7 No Claim Regarding Stock Ownership or Sale Proceeds........... 10
5.8 No Prohibition................................................ 10
SECTION 6. CONDITIONS PRECEDENT TO SELLING STOCKHOLDER'S OBLIGATION TO
CLOSE......................................................... 11
6.1 Accuracy of Representations................................... 11
6.2 Purchaser's Performance....................................... 11
SECTION 7. TERMINATION................................................... 11
7.1 Termination Events............................................ 11
7.2 Termination Procedures........................................ 11
7.3 Effect of Termination......................................... 12
SECTION 8. INDEMNIFICATION, ETC.......................................... 12
-i-
<PAGE>
TABLE OF CONTENTS
Page
----
8.1 Survival of Representations and Covenants..................... 12
8.2 Indemnification by the Selling Stockholder.................... 12
8.3 Right to Require Cure of Breach............................... 13
8.4 No Contribution............................................... 13
8.5 Interest...................................................... 14
8.6 Nonexclusivity of Indemnification Remedies.................... 14
SECTION 9. MISCELLANEOUS PROVISIONS...................................... 14
9.1 Further Assurances............................................ 14
9.2 Notices....................................................... 14
9.3 Time of the Essence........................................... 15
9.4 Headings...................................................... 15
9.5 Counterparts.................................................. 15
9.6 Governing Law; Venue.......................................... 16
9.7 Waiver........................................................ 16
9.8 Amendments.................................................... 16
9.9 Severability.................................................. 17
9.10 Parties in Interest........................................... 17
9.11 Entire Agreement.............................................. 17
9.12 Construction.................................................. 17
EXHIBITS
Exhibit A: Certain Definitions
Exhibit B: Lock-up Agreement
Exhibit C: Form of General Release
Exhibit D: Disclosure Schedule
-ii-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into on December 31, 1996,
by and between INVISION TECHNOLOGIES, INC., a Delaware corporation (the
"Purchaser") and FREDRICK L. RODER (the "Selling Stockholder"). Certain
capitalized terms used in this Agreement are defined on Exhibit A.
RECITALS
A. The Selling Stockholder owns 20 shares of the common stock of
Imatron Federal Systems, Inc. ("IFS") (the "Shares"), which constitute all of
the outstanding common voting stock of IFS.
B. The Selling Stockholder wishes to sell the Shares to the Purchaser
on the terms set forth in this Agreement, the terms of which were substantially
agreed to on July 2, 1996.
C. The Purchaser desires to retain the services of the Selling
Stockholder, as an employee of the Purchaser.
AGREEMENT
The Purchaser and the Selling Stockholder, intending to be legally
bound, agree as follows:
SECTION 1. SALE AND PURCHASE OF SHARES; RELATED TRANSACTIONS
1.1 SALE AND PURCHASE OF SHARES. At the Closing, the Selling
Stockholder shall sell, assign, transfer and deliver the Shares to the
Purchaser, and the Purchaser shall purchase the Shares from the Selling
Stockholder, on the terms and subject to the conditions set forth in this
Agreement.
1.2 PURCHASE PRICE.
(a) As full payment for the sale, assignment, transfer and
delivery of the Shares by the Selling Stockholder in compliance with Section
1.3(b) of this Agreement, the Purchaser shall deliver to the Selling
Shareholder, or to a mutually satisfactory Escrow Agent on behalf of the Selling
Stockholder, stock certificates representing 16,000 shares of the common stock
of the Purchaser (the "Purchaser Shares").
1.3 CLOSING.
(a) The closing of the sale of the Shares to the Purchaser (the
"Closing") shall take place at the offices of the Cooley Godward LLP at 1:00
p.m. (Pacific time) on December 31, 1996.
<PAGE>
(b) At the Closing:
(i) the Selling Stockholder shall deliver to the Purchaser
the stock certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), and the Purchaser shall deliver
the Purchaser Shares as contemplated by Section 1.2;
(ii) the Selling Stockholder shall execute and deliver to
the Purchaser and IFS a General Release in the form of Exhibit D; and
(iii) the Selling Stockholder shall execute and deliver to
the Purchaser and IFS a certificate (the "Closing Certificate") setting
forth the Selling Stockholder's representations and warranties that
(A) each of the representations and warranties made by IFS and the Selling
Stockholder in this Agreement was accurate, to the best of the Selling
Stockholder's knowledge but without any obligation to independently confirm
the accuracy thereof, in all respects as of the date of this Agreement,
(B) except as expressly set forth in the Disclosure Schedule attached
hereto as Exhibit D, each of the representations and warranties made by IFS
and the Selling Stockholder in this Agreement is accurate, to the best of
the Selling Stockholder's knowledge but without any obligation to
independently confirm the accuracy thereof, in all respects as of the
Closing Date as if made on the Closing Date, (C) each of the covenants and
obligations that IFS and the Selling Stockholder are required to have
complied with or performed, pursuant to this Agreement at or prior to the
Closing has been duly complied with and performed, to the best of the
Selling Stockholder's knowledge but without any obligation to independently
confirm the accuracy thereof, in all respects, and (D) except as expressly
set forth in the Closing Certificate, each of the conditions set forth in
Sections 5.4(b), 5.5, 5.7 and 5.8 has been satisfied, to the best of the
Selling Stockholder's knowledge but without any obligation to independently
confirm the accuracy thereof, in all respects.
(iv) the Selling Stockholder and the Purchaser shall
execute and deliver to each other a Lock-Up Agreement dated December 31, 1996.
SECTION 2. REGISTRATION OF SECURITIES
2.1 SHELF REGISTRATION
(a) SHELF REGISTRATION. The Purchaser shall, not later
than one year after the Closing Date (the "Filing Date"), prepare and file with
the SEC a Registration Statement pursuant to Rule 415 (or any appropriate
similar rule that may be adopted by the SEC) under the Act covering the
Registrable Securities (the "Shelf Registration"). The Shelf Registration shall
be on Form S-1 or another appropriate form permitting registration of the
Registrable Securities for resale by the Selling Stockholder from time to time.
2.
<PAGE>
(b) EFFECTIVENESS. The Purchaser shall use its best
efforts to cause the Shelf Registration to become effective under the Act as
soon as practicable following the Filing Date. Subject to the requirements of
the Act including, without limitation, requirements relating to updating through
post-effective amendments or otherwise, the Purchaser shall use its best efforts
to keep the Shelf Registration continuously effective until the later of (i) the
third anniversary of the Closing Date or (ii) such time as all of the
Registrable Securities may be traded pursuant to Rule 144 under the Act by such
Purchasers who are not at such time affiliates of the Purchaser within the
meaning set forth in Rule 144 under the Act. The Purchaser shall use its best
efforts to take such actions under the laws of various states as may be required
to cause the resale of the Registrable Securities pursuant to the Shelf
Registration to be lawful.
(c) Following the effectiveness of a Registration
Statement filed pursuant to this section, the Purchaser may, at any time,
suspend the effectiveness of such Registration Statement for up to 60 days, as
appropriate (a "Suspension Period"), by giving notice to the Selling
Stockholder, if the Purchaser shall have determined that the Purchaser may be
required to disclose any material corporate development which disclosure may
have a material adverse effect on the Purchaser. Notwithstanding the foregoing,
no more than two Suspension Periods (i.e., 120 days) may occur in immediate
succession. The period of any such suspension of the Registration Statement
shall be added to the period of time the Purchaser agrees to keep the
Registration Statement effective as provided in Section 2.2(b). The Purchaser
shall use its best efforts to limit the duration and number of any Suspension
Periods. The Selling Stockholder agrees that, upon receipt of any notice from
the Purchaser of a Suspension Period, the Selling Stockholder shall forthwith
discontinue disposition of shares covered by such Registration Statement or
Prospectus until the Selling Stockholder (i) is advised in writing by the
Purchaser that the use of the applicable Prospectus may be resumed, (ii) has
received copies of a supplemental or amended Prospectus, if applicable, and
(iii) has received copies of any additional or supplemental filings which are
incorporated or deemed to be incorporated by reference in such Prospectus.
2.2 PIGGY-BACK REGISTRATION RIGHTS.
(a) REGISTRATION. If at any time or from time to time the
Purchaser shall determine to register any of its securities, either for its own
account or the account of security holders (other than the Selling Stockholder),
other than a registration relating solely to employee benefit plans or a
registration on Form S-4 relating solely to an SEC Rule 145 transaction, the
Purchaser will:
(i) promptly give to the Selling Stockholder
written notice thereof (which shall include a list of the jurisdictions in which
the Purchaser intends to attempt to qualify such securities under the applicable
blue sky or other state securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request,
made within 20 calendar days after receipt of such written notice from the
Purchaser, by the Selling Stockholder, except as set forth in Subsection 2.2(b)
below.
3.
<PAGE>
(b) (i) UNDERWRITING. If the registration of which the
Purchaser gives notice is for a registered public offering involving an
underwriting, the Purchaser shall so advise the Selling Stockholder as a part of
the written notice given pursuant to Section 2.2(a)(i). In such event the right
of the Selling Stockholder to registration pursuant to this Section 2.2 shall be
conditioned upon (i) the expected proceeds to the Purchaser from the
underwritten offering, less expenses including underwriters' commissions,
attorneys' fees and expenses and printers' costs, among others, of at least
$10,000,000; (ii) such Selling Stockholder's participation in such underwriting
and (iii) the inclusion of the Selling Stockholder's Registrable Securities in
the underwriting to the extent provided herein. The Selling Stockholder, upon
proposing to distribute its securities through such Underwriting shall, together
with the Purchaser and the other parties distributing their securities through
such underwriting, enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Purchaser.
Notwithstanding any other provision of this Subsection 2.2, if the underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten, the underwriter may limit the number of Registrable
Securities to be included in the registration and underwriting, or may exclude
Registrable Securities entirely from such registration and underwriting subject
to the terms of this paragraph. The Purchaser shall so advise all holders of
the Purchaser's securities that would otherwise be registered and underwritten
pursuant hereto, and the number of shares of such securities, including
Registrable Securities, that may be included in the registration and
underwriting shall be allocated in the following manner: shares, other than
Registrable Securities, other securities carrying registration rights, and
securities beneficially owned by any stockholder of the Purchaser who
beneficially owns more than 20% of the Shares outstanding at the time of filing
the Registration Statement (each a "20% Owner"), requested to be included in
such registration by stockholders shall be excluded, and, if a limitation on the
number of shares is still required, the number of securities that may be
included shall be allocated, first, among the holders of piggyback registration
rights having PARI PASSU registration rights with those set forth herein (which
holders shall be deemed to include any 20% Owner), if any, in proportion, as
nearly as possible, to the respective amounts of such securities held by each
such holder, at the time of filing the Registration Statement. In the event of
any underwriter cutback, any pro rata reduction with respect to the Selling
Stockholder shall be based upon the aggregate amount of shares carrying
registration rights owned by the Selling Stockholder. No securities excluded
from the underwriting by reason of the underwriter's marketing limitation shall
be included in such registration. If the Selling Security Holder disapproves of
the terms of the underwriting, it may elect to withdraw therefrom by written
notice to the Purchaser and the underwriter. The Registrable Securities so
withdrawn shall also be withdrawn from registration.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLING STOCKHOLDER
The Selling Stockholder represents and warrants, to the best of the
Selling Stockholder's knowledge but without any obligation to independently
confirm the accuracy thereof, that except as set forth on the Disclosure
Schedule attached hereto as Exhibit D:
4.
<PAGE>
3.1 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS.
(a) The Selling Stockholder shall caused IFS to deliver to the
Purchaser accurate and complete copies of:
(i) IFS's certificate of incorporation and bylaws,
including all amendments thereto;
(ii) the stock records of IFS; and
(iii) the minutes and other records of the meetings and
other proceedings (including any actions taken by written consent or
otherwise without a meeting) of the stockholders of IFS, the board of
directors of IFS and all committees of the board of directors of IFS.
There have been no meetings or other proceedings of the stockholders of IFS, the
board of directors of IFS or any committee of the board of directors of IFS that
are not fully reflected in such minutes or other records.
(b) There has not been any violation of any of the provisions of
IFS's certificate of incorporation or bylaws or of any resolution adopted by
IFS's stockholders, IFS's board of directors or any committee of IFS's board of
directors; and no event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) constitute or result
directly or indirectly in such a violation.
(c) The books of account, stock records, minute books and other
records of IFS are accurate, up-to-date and complete, and have been maintained
in accordance with sound and prudent business practices. All of the records of
IFS are in the actual possession or under direct control of IFS. IFS has in
place, and IFS has at all times had in place, an adequate and appropriate system
of internal controls which is at least as comprehensive and effective as the
systems of internal controls customarily maintained by Comparable Entities.
3.2 CAPITALIZATION, ETC.
(a) The authorized capital stock of IFS consists of:
(i) 500 shares of common stock having a par value of $0.01
per share, of which 20 shares (constituting all of the Shares) have been
issued and are outstanding; and
(ii) 500 shares of preferred stock having a par value of
$500.00 per share, 150 of which are issued and outstanding.
(b) The Selling Stockholder has, and the Purchaser will acquire
at the Closing, good and valid title to the Shares free and clear of any
Encumbrances. The Selling Stockholder owns, beneficially and of record, 20
Shares of Common Stock.
5.
<PAGE>
(c) All of the Shares (i) have been duly authorized and validly
issued, (ii) are fully paid and non-assessable, and (iii) have been issued in
full compliance with all applicable securities laws and other applicable Legal
Requirements. The Selling Stockholder has delivered to the Purchaser accurate
and complete copies of the stock certificates evidencing the Shares.
(d) There is no:
(i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of IFS;
(ii) outstanding security, instrument or obligation that is
or may become convertible into or exchangeable for any shares of the
capital stock or other securities of IFS;
(iii) Contract under which IFS is or may become obligated to
sell or otherwise issue any shares of its capital stock or any other
securities; or
(iv) condition or circumstance that may directly or
indirectly give rise to or provide a basis for the assertion of a claim by
any Person to the effect that such Person is entitled to acquire or receive
any shares of capital stock or other securities of IFS.
(e) Except as set forth in Part 3.2 of the Disclosure Schedule,
IFS has never repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities. All securities so reacquired by IFS were
reacquired in full compliance with the applicable provisions of the Delaware
General Corporation Law and with all other applicable Legal Requirements.
3.3 FINANCIAL STATEMENTS.
(a) The Selling Stockholder shall have caused IFS to deliver to
the Purchaser the following financial statements and notes (collectively, the
"IFS Financial Statements"):
(i) the unaudited balance sheets of IFS as of December 31,
1993, 1994 and 1995 and the related unaudited statements of operations; and
(ii) the unaudited balance sheet of IFS as of September 30,
1996 (the "Unaudited Interim Balance Sheet"), and the related unaudited
statements of operations.
(b) To the best of the Selling Stockholder's knowledge, all of
the IFS Financial Statements are accurate and complete in all respects, and the
dollar amount of each line item included in the IFS Financial Statements is
accurate in all respects. The financial statements and notes referred to in
Section 3.3(a)(i) present fairly the financial position of IFS as of December
31, 1993, 1994 and 1995 and the consolidated results of operations of IFS for
the year then ended. The financial statements and notes referred to in
Sections 3.3(a)(ii)
6.
<PAGE>
presents fairly the financial position of IFS as of the respective dates thereof
and the results of operations for the periods covered thereby. The IFS
Financial Statements have been prepared in accordance with generally accepted
accounting principles, applied on a consistent basis throughout the periods
covered.
3.4 ABSENCE OF CHANGES. To the best of the Selling Stockholder's
knowledge, except as set forth in Part 3.4 of the Disclosure Schedule, since
September 30, 1996, there has not been any adverse change in IFS's business,
condition, assets, liabilities, operations, financial performance, net income or
prospects (or in any aspect or portion thereof), and no event has occurred that
might have an adverse effect on IFS's business, condition, assets, liabilities,
operations, financial performance, net income or prospects (or on any aspect or
portion thereof);
3.5 CONTRACTS.
(a) Part 3.5 of the Disclosure Schedule identifies and provides
an accurate and complete description of each material IFS Contract. The only
material contracts to which IFS is a party are contracts with Federal or State
governments (the "Government Contracts"). IFS has delivered to the Purchaser
accurate and complete copies of all Government Contracts identified in Part 3.5
of the Disclosure Schedule, including all amendments thereto.
(b) Each Government Contract is valid and in full force and
effect, and is enforceable by IFS in accordance with its terms.
3.6 COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) To the best of the Selling Stockholder's knowledge, except as
set forth in Part 3.6 of the Disclosure Schedule, IFS has not received, at any
time, any notice or other communication (in writing or otherwise) from any
Governmental Body or any other Person regarding (i) any actual, alleged,
possible or potential violation of, or failure to comply with, any Legal
Requirement, or (ii) any actual, alleged, possible or potential obligation on
the part of IFS to undertake, or to bear all or any portion of the cost of, any
cleanup or any remedial, corrective or response action of any nature.
(b) The Selling Stockholder has caused IFS to deliver to the
Purchaser an accurate and complete copy of each report, study, survey or other
document to which IFS has access that addresses or otherwise relates to the
compliance of IFS with, or the applicability to any of the Companies of, any
Legal Requirement.
3.7 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 3.7 of the
Disclosure Schedule, neither the execution and delivery of any of the
Transactional Agreements, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of (i) any
of the provisions of IFS's certificate of incorporation or bylaws, or
(ii) any resolution adopted
7.
<PAGE>
by IFS's stockholders, IFS's board of directors or any committee of IFS's
board of directors;
(b) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Government Contract;
(c) give any Person the right to (i) declare a default or
exercise any remedy under any Government Contract, (ii) accelerate the
maturity or performance of any Government Contract, or (iii) cancel,
terminate or modify any Government Contract;
(d) contravene, conflict with or result in a violation or breach
of or a default under any provision of, or give any Person the right to
declare a default under, any Contract to which IFS is a party or by which
IFS is bound; or
(e) result in the imposition or creation of any Encumbrance upon
or with respect to any asset owned or used by IFS.
Except as set forth in Part 3.7 of the Disclosure Schedule, neither IFS nor the
Selling Stockholder was, is or will be required to make any filing with or give
any notice to, or to obtain any Consent from, any Person in connection with the
execution and delivery of any of the Transactional Agreements or the
consummation or performance of any of the Transactions.
3.8 FULL DISCLOSURE.
(a) None of the Transactional Agreements contains or will contain
any untrue statement of fact; and none of the Transactional Agreements omits or
will omit to state any fact necessary to make any of the representations,
warranties or other statements or information contained therein not misleading.
(b) Except as set forth in Part 3.8 of the Disclosure Schedule,
there is no fact within the Knowledge of the Selling Stockholder (other than
publicly known facts relating exclusively to political or economic matters of
general applicability that will adversely affect all Comparable Entities) that
may have an adverse effect on IFS's business, condition, assets, liabilities,
operations, financial performance, net income or prospects (or on any aspect or
portion thereof).
(c) All of the information set forth in the Disclosure Schedule,
and all other information regarding IFS and its business, condition, assets,
liabilities, operations, financial performance, net income and prospects that
has been furnished to the Purchaser or any of its Representatives by IFS, is
accurate and complete in all respects.
(d) The Selling Stockholder has caused IFS to provide the
Purchaser and the Purchaser's Representatives with full and complete access to
all of IFS's records and other documents and data.
8.
<PAGE>
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants, to and for the benefit of the
Selling Stockholder, as follows:
4.1 ACQUISITION OF SHARES. The Purchaser is not acquiring the Shares
with the current intention of making a public distribution thereof.
4.2 AUTHORITY; BINDING NATURE OF AGREEMENT.
(a) The Purchaser will have the absolute and unrestricted right,
power and authority to enter into and perform its obligations under this
Agreement;
(b) This Agreement will constitute the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms.
SECTION 5. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
The Purchaser's obligation to purchase the Shares and to take the
other actions required to be taken by the Purchaser at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by the Purchaser, in whole or in part, in
accordance with Section 9.7):
5.1 ACCURACY OF REPRESENTATIONS.
(a) Each of the Specified Representations shall have been
accurate in all respects as of the date of this Agreement, and shall be accurate
in all respects as of the Scheduled Closing Time as if made at the Scheduled
Closing Time.
(b) All of the other representations and warranties made by the
Selling Stockholder in this Agreement (considered collectively), and each of
said representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement, and shall be
accurate in all material respects as of the Scheduled Closing Time as if made at
the Scheduled Closing Time.
5.2 PERFORMANCE OF OBLIGATIONS.
(a) The Selling Stockholder shall have executed and delivered
each of the agreements required to be executed and delivered by IFS pursuant to
Section 1.3(b).
(b) The Selling Stockholder shall have delivered to the Purchaser
the certificates representing the Shares as required by Section 1.3(b)(i), and
shall have executed and delivered each of the other documents required to be
executed and delivered by such Selling Stockholder pursuant to Section 1.3(b).
9.
<PAGE>
(c) All of the other covenants and obligations that the Selling
Stockholder is required to comply with or to perform at or prior to the Closing
(considered collectively), and each of said covenants and obligations
(considered individually), shall have been duly complied with and performed in
all material respects.
5.3 APPROVAL OF PURCHASER'S BOARD OF DIRECTORS; CONSENTS.
(a) The Purchaser's board of directors shall have ratified the
execution of this Agreement by the Purchaser and shall have approved the
consummation of the Transactions.
(b) Each of the Consents identified in Part 3.7 of the Disclosure
Schedule shall have been obtained and shall be in full force and effect.
5.4 NO ADVERSE CHANGE. There shall have been no adverse change in IFS's
business, condition, assets, liabilities, operations, financial performance, net
income or prospects (or in any aspect or portion thereof) since the date of this
Agreement.
5.5 ADDITIONAL DOCUMENTS. Purchaser shall have received such other
documents as the Purchaser may request in good faith for the purpose of
(i) evidencing the accuracy of any representation or warranty made by IFS or the
Selling Stockholder, (ii) evidencing the compliance by IFS or the Selling
Stockholder with, or the performance by IFS or the Selling Stockholder of, any
covenant or obligation set forth in this Agreement, (iii) evidencing the
satisfaction of any condition set forth in this Section 5, or (iv) otherwise
facilitating the consummation or performance of any of the Transactions.
5.6 NO PROCEEDINGS. Since the date of this Agreement, there shall not
have been commenced or threatened against the Purchaser, or against any Person
affiliated with the Purchaser, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Transactions, or
(b) that may have the effect of preventing, delaying, making illegal or
otherwise interfering with any of the Transactions.
5.7 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. No Person
shall have made or threatened any claim asserting that such Person (a) may be
the holder or the beneficial owner of, or may have the right to acquire or to
obtain beneficial ownership of, any capital stock or other securities of IFS, or
(b) may be entitled to all or any portion of the Purchase Price.
5.8 NO PROHIBITION. Neither the consummation nor the performance of any
the Transactions will, directly or indirectly (with or without notice or lapse
of time), contravene or conflict with or result in a violation of, or cause the
Purchaser or any Person affiliated with the Purchaser to suffer any adverse
consequence under, (a) any applicable Legal Requirement or Order, or (b) any
Legal Requirement or Order that has been proposed by or before any Governmental
Body.
10.
<PAGE>
SECTION 6. CONDITIONS PRECEDENT TO SELLING STOCKHOLDER'S OBLIGATION TO CLOSE
The Selling Stockholder's obligation to sell the Shares and to take
the other actions required to be taken by the Selling Stockholder at the Closing
is subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by the Agent, in whole or in
part, in accordance with Section 9.7):
6.1 ACCURACY OF REPRESENTATIONS. All of the representations and
warranties made by the Purchaser in this Agreement (considered collectively),
and each of said representations and warranties (considered individually), shall
have been accurate in all material respects as of the date of this Agreement and
shall be accurate in all material respects as of the Scheduled Closing Time as
if made at the Scheduled Closing Time.
6.2 PURCHASER'S PERFORMANCE. All of the covenants and obligations that
the Purchaser is required to comply with or to perform pursuant to this
Agreement at or prior to the Closing (considered collectively), and each of said
covenants and obligations (considered individually), shall have been complied
with and performed in all material respects.
SECTION 7. TERMINATION
7.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by the Purchaser if (i) there is a material Breach of any
covenant or obligation of IFS or the Selling Stockholder, or (ii) the
Purchaser reasonably determines that the timely satisfaction of any
condition set forth in Section 5 has become impossible or impractical
(other than as a result of any failure on the part of the Purchaser comply
with or perform its covenants and obligations under this Agreement);
(b) by the Purchaser at or after the Scheduled Closing Time if
any condition set forth in Section 5 has not been satisfied by the
Scheduled Closing Time;
(c) by the Purchaser if the Closing has not taken place on or
before December 31, 1996 (other than as a result of any failure on the part
of the Purchaser to comply with or perform its covenants and obligations
under this Agreement);
(d) by the Selling Stockholder if the Closing has not taken place
on or before January 31, 1997, (other than as a result of the failure on
the part of IFS or the Selling Stockholder to comply with or perform any
covenant or obligation set forth in this Agreement); or
(e) by the consent of the Purchaser and the Selling Stockholder.
7.2 TERMINATION PROCEDURES. If the Purchaser wishes to terminate this
Agreement pursuant to Section 7.1(a), Section 7.1(c) or Section 7.1(e), the
Purchaser shall deliver to the Selling Stockholder a written notice stating that
the Purchaser is terminating this Agreement and
11.
<PAGE>
setting forth a brief description of the basis on which the Purchaser is
terminating this Agreement. If the Selling Stockholder wishes to terminate this
Agreement pursuant to Section 7.1(b), Section 7.1(d) or Section 7.1(f), the
Selling Stockholder shall deliver to the Purchaser a written notice stating that
the Selling Stockholder is terminating this Agreement and setting forth a brief
description of the basis on which the Selling Stockholder is terminating this
Agreement.
7.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 7.1, all further obligations of the parties under this Agreement shall
terminate.
SECTION 8. INDEMNIFICATION, ETC.
8.1 SURVIVAL OF REPRESENTATIONS AND COVENANTS.
(a) The representations, warranties, covenants and obligations of
each party shall survive (without limitation):
(i) the Closing and the sale of the Shares to the
Purchaser;
(ii) any sale or other disposition of any or all of the
Shares by the Purchaser; and
(iii) any Acquisition Transaction effected by or otherwise
involving the Purchaser.
All of said representations, warranties, covenants and obligations shall remain
in full force and effect and shall survive for an unlimited period of time.
(b) The representations, warranties, covenants and obligations of
the Selling Stockholder, and the rights and remedies that may be exercised by
the Indemnitees, shall not be limited or otherwise affected by or as a result of
any information furnished to, or any investigation made by or Knowledge of, any
of the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item
of information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Selling Stockholder in this Agreement.
8.2 INDEMNIFICATION BY THE SELLING STOCKHOLDER.
(a) The Selling Stockholder shall hold harmless and indemnify
each of the Indemnitees from and against, and shall compensate and reimburse
each of the Indemnitees for, any Damages which are directly or indirectly
suffered or incurred by any of the Indemnitees or to which any of the
Indemnitees may otherwise become subject at any time (regardless of
12.
<PAGE>
whether or not such Damages relate to any third-party claim) and which arise
directly or indirectly from or as a direct or indirect result of, or are
directly or indirectly connected with:
(i) any Breach, resulting from the Selling Stockholder's
intentional misrepresentation, fraud or gross negligence, of any
representation or warranty made by the Selling Stockholder in this
Agreement or in the Closing Certificate;
(ii) any Breach, resulting from the Selling Stockholder's
intentional misrepresentation, fraud or gross negligence, of any
representation, warranty, statement, information or provision contained in
the Disclosure Schedule or in any other document delivered or otherwise
made available to the Purchaser or any of its Representatives on behalf of
IFS or any of IFS's Representatives;
(iii) any Breach, resulting from the Selling Stockholder's
intentional misrepresentation, fraud or gross negligence, of any covenant
or obligation of the Selling Stockholder;
(iv) any matter identified or referred to in Part 3.6 of
the Disclosure Schedule, Damages resulting from which are due to the
Selling Stockholder's intentional misrepresentation, fraud and gross
negligence; or
(v) any Proceeding relating directly or indirectly to any
Breach, alleged Breach, Liability or matter of the type referred to in
clause "(i)," "(ii)," "(iii)," or "(iv)," above (including any Proceeding
commenced by any Indemnitee for the purpose of enforcing any of its rights
under this Section 8).
(b) The Selling Stockholder acknowledges and agrees that, if
there is any Breach, resulting from the Selling Stockholder's intentional
misrepresentation, fraud or gross negligence, of any representation, warranty or
other provision relating to IFS or IFS's business, condition, assets,
liabilities, operations, financial performance, net income or prospects (or any
aspect or portion thereof), then the Purchaser itself shall be deemed, by virtue
of its ownership of common stock of IFS, to have incurred Damages as a result of
such Breach or Liability. Nothing contained in this Section 8.2(b) shall have
the effect of (i) limiting the circumstances under which the Purchaser may
otherwise be deemed to have incurred Damages for purposes of this Agreement,
(ii) limiting the other types of Damages that the Purchaser may be deemed to
have incurred (whether in connection with any such Breach or Liability or
otherwise).
8.3 RIGHT TO REQUIRE CURE OF BREACH. Without limiting the generality of
anything contained in Section 8.2, if there is any Breach, resulting from the
Selling Stockholder's intentional misrepresentation, fraud or gross negligence,
of any representation or warranty made by IFS or the Selling Stockholder, then
the Selling Stockholder shall be obligated to take such actions as the Purchaser
may in good faith request for the purpose of causing such Breach to be
corrected, cured and eliminated in all respects (at no cost to the Purchaser).
8.4 NO CONTRIBUTION. The Selling Stockholder waives, and acknowledges
and agrees that he shall not have and shall not exercise or assert or attempt to
exercise or assert, any right
13.
<PAGE>
of contribution or right of indemnity or any other right or remedy against IFS
in connection with any indemnification obligation or any other Liability to
which the Selling Stockholder may become subject under any of the Transactional
Agreements or otherwise in connection with any of the Transactions.
8.5 INTEREST. Any party that is required to indemnify any other Person
pursuant to this Section 8 with respect to any Damages shall also be required to
pay such other Person interest on the amount of such Damages (for the period
commencing as of the date on which such other Person first incurred or otherwise
became subject to such Damages and ending on the date on which the applicable
indemnification payment is made by such party) at a floating rate two percentage
points above the rate of interest publicly announced by Bank of America from
time to time as its prime rate.
8.6 NONEXCLUSIVITY OF INDEMNIFICATION REMEDIES. The indemnification
remedies and other remedies provided in this Section 8 shall not be deemed to be
exclusive. Accordingly, the exercise by any Person of any of its rights under
this Section 8 shall not be deemed to be an election of remedies and shall not
be deemed to prejudice, or to constitute or operate as a waiver of, any other
right or remedy that such Person may be entitled to exercise (whether under this
Agreement, under any other Contract, under any statute, rule or other Legal
Requirement, at common law, in equity or otherwise).
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 FURTHER ASSURANCES. Each party hereto shall execute and/or cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the Transactions.
9.2 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by telecopier) to the
address or telecopier number set forth beneath the name of such party below (or
to such other address or telecopier number as such party shall have specified in
a written notice given to the other parties hereto):
14.
<PAGE>
if to IFS:
Imatron Federal Systems, Inc.
9680 Brittford Drive
Burke, VA 22015
Attention: Fredrick L. Roder
Telecopier: (703) 451-2804
if to the Selling Stockholder:
9680 Brittford Drive
Burke, VA 22015
Attention: Fredrick L. Roder
Telecopier: (703) 451-2804
if to the Purchaser:
InVision Technologies, Inc.
3420 E. Third Avenue
Foster City, CA 94404
Attention: Curtis P. DiSibio
Telecopier: (415) 578-0930
WITH A COPY TO:
Robert L. Jones, Esq.
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94036
9.3 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
9.4 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
9.5 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
15.
<PAGE>
9.6 GOVERNING LAW; VENUE.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
(b) Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be brought
or otherwise commenced in any state or federal court located in the County of
San Mateo, California. Each party to this Agreement:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the County of San
Mateo, California (and each appellate court located in the State of
California) in connection with any such legal proceeding;
(ii) agrees that each state and federal court located in
the County of San Mateo, California shall be deemed to be a convenient
forum; and
(iii) agrees not to assert (by way of motion, as a defense
or otherwise), in any such legal proceeding commenced in any state or
federal court located in the County of San Mateo, California, any claim
that such party is not subject personally to the jurisdiction of such
court, that such legal proceeding has been brought in an inconvenient
forum, that the venue of such proceeding is improper or that this Agreement
or the subject matter of this Agreement may not be enforced in or by such
court.
9.7 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
9.8 AMENDMENTS. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of the Purchaser.
16.
<PAGE>
9.9 SEVERABILITY. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
9.10 PARTIES IN INTEREST. None of the provisions of this Agreement is
intended to provide any rights or remedies to any Person other than the parties
hereto and their respective successors and assigns (if any).
9.11 ENTIRE AGREEMENT. The Transactional Agreements set forth the entire
understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof.
9.12 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
17.
<PAGE>
THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE EXECUTED AND DELIVERED
AS OF DECEMBER 31, 1996.
"Purchaser": INVISION TECHNOLOGIES, INC.
a Delaware corporation
By: _________________________________________
Curtis P. DiSibio, Vice President,
Finance and Administration and Chief
Financial Officer
"Selling Stockholder":
______________________________________________
Fredrick L. Roder
18.
<PAGE>
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale or other disposition of all or any portion of IFS's
business or assets (other than in the Ordinary Course of Business);
(b) the issuance, sale or other disposition of (i) any capital
stock of IFS, (ii) any option, call, warrant or right (whether or not
immediately exercisable) to acquire any capital stock of IFS, or (iii) any
security, instrument or obligation that is or may become convertible into
or exchangeable for any capital stock of IFS; or
(c) any merger, consolidation, business combination, share
exchange, reorganization or similar transaction involving IFS.
IFS. "IFS" shall mean Imatron Federal Systems, Inc., a Delaware
corporation.
IFS CONTRACT. "IFS Contract" shall mean any Contract:
(a) to which IFS is a party;
(b) by which IFS or any of its assets is or may become bound or
under which IFS has, or may become subject to, any obligation; or
(c) under which IFS has or may acquire any right or interest.
IFS FINANCIAL STATEMENTS. "IFS Financial Statements" shall have the
meaning specified in Section 3.3(a) of the Agreement.
AGREEMENT. "Agreement" shall mean the Stock Purchase Agreement to which
this Exhibit A is attached (including the Disclosure Schedule), as it may be
amended from time to time.
BREACH. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been
(a) any material inaccuracy in or material breach of, or any material failure to
comply with or perform, such representation, warranty, covenant, obligation or
other provision, or (b) any material claim (by any Person) or other circumstance
that is materially inconsistent with such representation, warranty, covenant,
obligation or other provision; and the term "Breach" shall be deemed to refer to
any such material inaccuracy, breach, failure, claim or circumstance.
A-1
<PAGE>
CLOSING. "Closing" shall have the meaning specified in Section 1.3(a) of
the Agreement.
CLOSING CERTIFICATE. "Closing Certificate" shall have the meaning
specified in Section 1.3(b)(iii) of the Agreement.
CLOSING DATE. "Closing Date" shall have the meaning specified in
Section 1.3(a) of the Agreement.
COMPARABLE ENTITIES. "Comparable Entities" shall mean Entities (other than
IFS) that are engaged in businesses similar to IFS's business.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization.
CONTRACT. "Contract" shall mean any written, oral, implied or other
agreement, contract, understanding, arrangement, instrument, note, guaranty,
indemnity, representation, warranty, deed, assignment, power of attorney,
certificate, purchase order, work order, insurance policy, benefit plan,
commitment, covenant, assurance or undertaking of any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, Liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including any legal fee, expert fee, accounting fee or
advisory fee), charge, cost (including any cost of investigation) or expense of
any nature.
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule (dated
as of the date of the Agreement) delivered to the Purchaser on behalf of IFS and
the Selling Stockholder, a copy of which is attached to the Agreement and
incorporated in the Agreement by reference.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust, equitable
interest, claim, preference, right of possession, lease, tenancy, license,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
GOVERNMENT CONTRACT. "Government Contract" shall mean all contracts between
IFS and any federal or state government entity.
A-2
<PAGE>
GOVERNMENTAL BODY. "Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any
nature;
(b) federal, state, local, municipal, foreign or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency,
bureau, branch, office, commission, council, board, instrumentality,
officer, official, representative, organization, unit, body or Entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) individual, Entity or body exercising, or entitled to
exercise, any executive, legislative, judicial, administrative, regulatory,
police, military or taxing authority or power of any nature.
INDEMNITEES. "Indemnitees" shall mean the following Persons:
(a) the Purchaser;
(b) the Purchaser's current and future affiliates (including
IFS);
(c) the respective Representatives of the Persons referred to in
clauses "(a)" and "(b)" above; and
(d) the respective successors and assigns of the Persons referred
to in clauses "(a)", "(b)" and "(c)" above;
PROVIDED, HOWEVER, that (i) IFS shall not be entitled to exercise any rights as
an Indemnitee prior to the Closing, and (ii) the Selling Stockholders shall not
be deemed to be "Indemnitees."
KNOWLEDGE. An individual shall be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter.
IFS shall be deemed to have "Knowledge" of a particular fact or other matter if
the Selling Stockholder has Knowledge of such fact or other matter.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, ruling, directive,
pronouncement, requirement, specification, determination, decision, opinion or
interpretation that is, has been or may in the future be issued, enacted,
adopted, passed, approved, promulgated, made, implemented or otherwise put into
effect by or under the authority of any Governmental Body.
A-3
<PAGE>
LIABILITY. "Liability" shall mean any debt, obligation, duty or liability
of any nature (including any unknown, undisclosed, unmatured, unaccrued,
unasserted, contingent, indirect, conditional, implied, vicarious, derivative,
joint, several or secondary liability), regardless of whether such debt,
obligation, duty or liability would be required to be disclosed on a balance
sheet prepared in accordance with generally accepted accounting principles and
regardless of whether such debt, obligation, duty or liability is immediately
due and payable.
ORDER. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence,
subpoena, writ or award that is, has been or may in the future be issued,
made, entered, rendered or otherwise put into effect by or under the
authority of any court, administrative agency or other Governmental Body or
any arbitrator or arbitration panel; or
(b) Contract with any Governmental Body that is, has been or may
in the future be entered into in connection with any Proceeding.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROCEEDING. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation that is,
has been or may in the future be commenced, brought, conducted or heard by or
before, or that otherwise has involved or may involve, any Governmental Body or
any arbitrator or arbitration panel.
PROSPECTUS. "Prospectus" shall mean the prospectus included in any
Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to the
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.
PURCHASE PRICE. "Purchase Price" shall have the meaning specified in
Section 1.2 of the Agreement.
REGISTER, REGISTERED AND REGISTRATION. The terms "register," "registered"
and "registration" refer to a registration effected by filing with the
Securities and Exchange Commission ("SEC") a registration statement (the
"Registration Statement") in compliance with the Securities Act of 1933 (the
"Act") and the declaration or ordering by the SEC of the effectiveness of such
Registration Statement.
REGISTRABLE SECURITIES. "Registrable Securities" shall mean all Shares and
any Common Stock issued or issuable in respect of the Purchaser Shares pursuant
to any stock split, stock
A-4
<PAGE>
dividend, recapitalization, or similar event; PROVIDED HOWEVER, that Registrable
Securities shall cease to be Registrable Securities when they may be sold
pursuant to Rule 144 under the Act.
REGISTRATION STATEMENT. "Registration Statement" shall mean any
registration statement of the Company which covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives. The
Selling Stockholder and all other Related Parties shall be deemed to be
"Representatives" of IFS.
RULE 144. "Rule 144" shall mean Rule 144 under the Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC (excluding Rule 144A).
SCHEDULED CLOSING TIME. "Scheduled Closing Time" shall have the meaning
specified in Section 1.3(a) of the Agreement.
SELLING STOCKHOLDER. "Selling Stockholder" shall have the meaning
specified in the introductory paragraph of the Agreement.
SHARES. "Shares" shall have the meaning specified in Recital "A" to the
Agreement.
SPECIFIED REPRESENTATIONS. "Specified Representations" shall mean the
representations and warranties set forth in Section 3.2 and 3.3 of the
Agreement.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value-added tax, surtax,
excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), that is, has been or
may in the future be (a) imposed, assessed or collected by or under the
authority of any Governmental Body, or (b) payable pursuant to any tax-sharing
agreement or similar Contract.
TRANSACTIONAL AGREEMENTS. "Transactional Agreements" shall mean:
(a) the Agreement;
(b) the General Release referred to in Section 1.3(b)(ii) of the
Agreement;
(c) the Closing Certificate;
and (d) the Lock-Up Agreement referred in Section 1.3(b)(iv) of the
Agreement.
A-5
<PAGE>
TRANSACTIONS. "Transactions" shall mean (a) the execution and delivery of
the respective Transactional Agreements, and (b) all of the transactions
contemplated by the respective Transactional Agreements, including:
(i) the sale of the Shares by the Selling Stockholder to
the Purchaser in accordance with the Agreement; and
(ii) the performance by the Selling Stockholder and the
Purchaser of their respective obligations under the Transactional
Agreements and the exercise by IFS, the Selling Stockholder and the
Purchaser of their respective rights under the Transactional Agreements.
UNAUDITED INTERIM BALANCE SHEET. "Unaudited Interim Balance Sheet" shall
have the meaning specified in Section 3.3(a)(ii) of the Agreement.
A-6
<PAGE>
EXHIBIT B
LOCK-UP AGREEMENT
December 30, 1996
InVision Technologies, Inc.
3420 E. Third Avenue
Foster City, CA 94404
Ladies and Gentlemen:
In order to induce InVision Technologies, Inc., a Delaware corporation
("Parent"), to enter into the Stock Purchase Agreement (the "Agreement"), dated
as of the date hereof between InVision Technologies, Inc. and Fredrick L. Roder
(the "Selling Stockholder"), the Selling Stockholder has agreed to enter into
this Lock-Up Agreement. Capitalized terms used but not otherwise defined in
this Lock-Up Agreement have the meanings assigned to such terms in the
Agreement.
The Selling Stockholder agrees that he will not at any time until December 31,
1997 either directly or indirectly, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise dispose or transfer (or
announce any offer, sale, offer to sale, contract of sale or grant of any option
to purchase or other disposition or transfer of) shares of InVision common stock
to be acquired by the Selling Stockholder pursuant to the terms of the Agreement
(the "Purchaser Shares") except as such restrictions shall have lapsed under
the following schedule:
Shares as to Which Restrictions Have Lapsed
-------------------------------------------
December 31, 1996 13,333
March 31, 1997 667
June 30, 1997 667
September 30, 1997 667
December 31, 1997 666
------
16,000
This agreement shall be binding on the Selling Stockholder and his successors,
heirs, personal representatives and assigns.
Very truly yours,
___________________________________________
Fredrick L. Roder
The foregoing is accepted and agreed to as of the date first above written:
InVision Technologies, Inc.
By:_____________________________________
Curtis P. DiSibio
Vice President, Finance and Administration
and Chief Financial Officer
<PAGE>
EXHIBIT C
GENERAL RELEASE
THIS GENERAL RELEASE ("General Release") is being executed and delivered as
of December 31, 1996, on behalf of Fredrick L. Roder ("Releasor") to and in
favor of, and for the benefit of, INVISION TECHNOLOGIES, INC., a Delaware
corporation ("Purchaser"), and the other Releasees (as defined in Section 2).
RECITALS
A. Contemporaneously with the execution and delivery of this General
Release, the Releasor is selling his shares of the common voting stock of
Imatron Federal Systems, Inc. ("IFS") to Purchaser pursuant to a Stock Purchase
Agreement dated as of December 31, 1996 (the "Agreement").
B. Purchaser has required, as a condition to consummating the
transactions contemplated by the Agreement, that the Releasor executes and
delivers this General Release.
AGREEMENT
In order to induce Purchaser to consummate the transactions contemplated by
the Agreement, and for other valuable consideration (the receipt and sufficiency
of which are hereby acknowledged by the Releasor), the Releasor hereby covenants
and agrees as follows:
1. RELEASE. The Releasor, for himself and for each of the
Releasor's Associated Parties (as defined in Section 2), hereby generally,
irrevocably, unconditionally and completely releases and forever discharges each
of the Releasees (as defined in Section 2) from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, each of the Released
Claims (as defined in Section 2).
2. DEFINITIONS.
(a) The term "Associated Parties," when used herein with respect
to the Releasor, shall mean and include: (i) the Releasor's predecessors,
successors, executors, administrators, heirs and estate; (ii) the Releasor's
past, present and future assigns, agents and representatives; (iii) each entity
that the Releasor has the power to bind (by the Releasor's acts or signature) or
over which the Releasor directly or indirectly exercises control; and (iv) each
entity of which the Releasor owns, directly or indirectly, at least 50% of the
outstanding equity, beneficial, proprietary, ownership or voting interests.
A-1
<PAGE>
(b) The term "Releasees" shall mean and include: (i) Purchaser;
and (ii) the successors and past, present and future assigns, directors,
officers, employees, agents, attorneys and representatives of the Purchaser
other than the Releasor.
(c) The term "Claims" shall mean and include all past, present
and future disputes, claims, controversies, demands, rights, obligations,
liabilities, actions and causes of action of every kind and nature, including:
(i) any unknown, unsuspected or undisclosed claim; (ii) any claim or right that
may be asserted or exercised by the Releasor in his capacity as a stockholder,
director, officer or employee of IFS or in any other capacity; and (iii) any
claim, right or cause of action based upon any breach of any express, implied,
oral or written contract or agreement.
(d) The term "Released Claims" shall mean and include each and
every Claim that (i) the Releasor or any Associated Party of the Releasor may
have had in the past, may now have or may have in the future against any of the
Releasees, and (ii) has arisen or arises directly or indirectly out of, or
relates directly or indirectly to, any circumstance, agreement, activity,
action, omission, event or matter occurring or existing on or prior to the date
of this General Release (excluding only the Releasor's rights, if any, under the
Purchase Agreement).
3. CIVIL CODE Section 1542. The Releasor (a) represents, warrants and
acknowledges that he has been fully advised by his attorney of the contents of
Section 1542 of the Civil Code of the State of California, and (b) hereby
expressly waives the benefits thereof and any rights may have thereunder.
Section 1542 of the Civil Code of the State of California provides as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his settlement
with the debtor."
The Releasor also hereby waives the benefits of, and any rights he may have
under, any statute or common law principle of similar effect in any
jurisdiction.
4. REPRESENTATIONS AND WARRANTIES. The Releasor represents and
warrants that:
(a) the Releasor has not assigned, transferred, conveyed or
otherwise disposed of any Claim against any of the Releasees, or any direct or
indirect interest in any such Claim, in whole or in part;
(b) to the best of the Releasor's knowledge, no other person or
entity has any interest in any of the Released Claims;
(c) no Associated Party of the Releasor has or had any Claim
against any of the Releasees;
A-2
<PAGE>
(d) no Associated Party of the Releasor will in the future have
any Claim against any Releasee that arises directly or indirectly from or
relates directly or indirectly to any circumstance, agreement, activity, action,
omission, event or matter occurring or existing on or before the date of this
General Release;
(e) this General Release has been duly and validly executed and
delivered by the Releasor;
(f) this General Release is a valid and binding obligation of the
Releasor and the Releasor's Associated Parties, and is enforceable against the
Releasor and each of the Releasor's Associated Parties in accordance with its
terms;
(g) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal, governmental
body, governmental agency or arbitrator pending or, to the best of the knowledge
of the Releasor, threatened against the Releasor or any of the Releasor's
Associated Parties that challenges or would challenge the execution and delivery
of this General Release or the taking of any of the actions required to be taken
by the Releasor under this General Release;
(h) neither the execution and delivery of this General Release
nor the performance hereof will (i) result in any violation or breach of any
agreement or other instrument to which the Releasor or any of the Releasor's
Associated Parties is a party or by which the Releasor or any of the Releasor's
Associated Parties is bound, or (ii) result in a violation or any law, rule,
regulation, treaty, ruling, directive, order, arbitration award, judgment or
decree to which the Releasor or any of the Releasor's Associated Parties is
subject; and
(i) no authorization, instruction, consent or approval of any
person or entity is required to be obtained by the Releasor or any of the
Releasor's Associated Parties in connection with the execution and delivery of
this General Release or the performance hereof.
5. INDEMNIFICATION. Without in any way limiting any of the rights or
remedies otherwise available to any Releasee, the Releasor shall indemnify and
hold harmless each Releasee against and from any loss, damage, injury, harm,
detriment, lost opportunity, liability, exposure, claim, demand, settlement,
judgment, award, fine, penalty, tax, fee, charge or expense (including
attorneys' fees) that is directly or indirectly suffered or incurred at any time
by the Releasee, or to which the Releasee otherwise becomes subject at any time,
and that arises directly or indirectly out of or by virtue of, or relates
directly or indirectly to, (a) any failure on the part of the Releasor to
observe, perform or abide by, or any other breach of, any restriction, covenant,
obligation, representation, warranty or other provision contained herein, or (b)
the assertion or purported assertion of any of the Released Claims by the
Releasor or any of the Releasor's Associated Parties.
A-3
<PAGE>
6. MISCELLANEOUS.
(a) This General Release sets forth the entire understanding of
the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings among or between the Releasor and the Releasees
relating to the subject matter hereof.
(b) If any provision of this General Release or any part of any
such provision is held under any circumstances to be invalid or unenforceable in
any jurisdiction, then (i) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (ii) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect the
validity or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (iii) such invalidity or
enforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this General Release. Each provision
of this General Release is separable from every other provision of this General
Release, and each part of each provision of this General Release is separable
from every other part of such provision.
(c) This General Release shall be construed in accordance with,
and governed in all respects by, the laws of the State of California (without
giving effect to principles of conflicts of laws).
(d) Any legal action or other legal proceeding relating to this
General Release or the enforcement of any provision of this General Release may
be brought or otherwise commenced by any Releasee in any state or federal court
located in the State of California.
The Releasor:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the State of
California in connection with any such legal proceeding;
(ii) agrees that each state and federal court located in
the State of California shall be deemed to be a convenient forum;
and
(iii) agrees not to assert (by way of motion, as a defense
or otherwise), in any such legal proceeding commenced in any state
or federal court located in the State of California, any claim that
the Releasor is not subject personally to the jurisdiction of such
court, that such legal proceeding has been brought in an
inconvenient forum, that the venue of such proceeding is improper or
that this General Release or the subject matter of this General
Release may not be enforced in or by such court.
Nothing contained in this General Release shall be deemed to limit or otherwise
affect the right of any Releasee (1) to commence any legal proceeding or to
otherwise proceed against the
A-4
<PAGE>
Releasor or any other person or entity in any other forum or jurisdiction, or
(2) to raise this Release as a defense in any legal proceeding in any other
forum or jurisdiction.
(e) The Releasor shall execute and/or cause to be delivered to
each Releasee such instruments and other documents, and shall take such other
actions, as such Releasee may reasonably request for the purpose of carrying out
or evidencing any of the actions contemplated by this General Release.
(f) If any legal action or other legal proceeding relating to
this General Release or the enforcement of any provision hereof is brought by
the Releasor or any Releasee, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements to the extent actually
incurred (in addition to any other relief to which the prevailing party may be
entitled).
(g) Whenever required by the context, the singular number shall
include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders.
(h) Any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not be applied in the
construction or interpretation of this General Release.
(i) As used in this General Release, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words "without
limitation."
IN WITNESS WHEREOF, the Releasor has caused this General Release to be
executed as of the date first above written.
RELEASOR:
_____________________________
Fredrick L. Roder
A-5
<PAGE>
EXHIBIT D
DISCLOSURE SCHEDULE
NONE
<PAGE>
- -------------------------------------------------------------------------------
INVISION TECHNOLOGIES, INC.
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . . . 1.
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1.
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . .10.
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . .10.
2.1 Advances.. . . . . . . . . . . . . . . . . . . . . . . . . . .10.
2.2 Overadvances.. . . . . . . . . . . . . . . . . . . . . . . . .13.
2.3 Interest Rates, Payments, and Calculations.. . . . . . . . . .13.
2.4 Crediting Payments.. . . . . . . . . . . . . . . . . . . . . .13.
2.5 Fees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14.
2.6 Additional Costs.. . . . . . . . . . . . . . . . . . . . . . .14.
2.7 Term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15.
3. CONDITIONS OF LOANS . . . . . . . . . . . . . . . . . . . . . . . .15.
3.1 Conditions Precedent to Initial Advance. . . . . . . . . . . .15.
3.2 Conditions Precedent to all Advances . . . . . . . . . . . . .15.
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . .16.
4.1 Grant of Security Interest.. . . . . . . . . . . . . . . . . .16.
4.2 Delivery of Additional Documentation Required. . . . . . . . .16.
4.3 Right to Inspect . . . . . . . . . . . . . . . . . . . . . . .16.
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . .16.
5.1 Due Organization and Qualification.. . . . . . . . . . . . . .16.
5.2 Due Authorization; No Conflict.. . . . . . . . . . . . . . . .16.
5.3 No Prior Encumbrances. . . . . . . . . . . . . . . . . . . . .17.
5.4 Bona Fide Eligible Accounts. . . . . . . . . . . . . . . . . .17.
5.5 Merchantable Inventory.. . . . . . . . . . . . . . . . . . . .17.
5.6 Intellectual Property. . . . . . . . . . . . . . . . . . . . .17.
5.7 Name; Location of Chief Executive Office.. . . . . . . . . . .17.
5.8 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . .17.
5.9 No Material Adverse Change in Financial Statements.. . . . . .18.
5.10 Solvency.. . . . . . . . . . . . . . . . . . . . . . . . . . .18.
5.11 Regulatory Compliance. . . . . . . . . . . . . . . . . . . . .18.
5.12 Environmental Condition. . . . . . . . . . . . . . . . . . . .18.
5.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .18.
5.14 Subsidiaries.. . . . . . . . . . . . . . . . . . . . . . . . .19.
5.15 Government Consents. . . . . . . . . . . . . . . . . . . . . .19.
5.16 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . .19.
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . .19.
6.1 Good Standing. . . . . . . . . . . . . . . . . . . . . . . . .19.
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.2 Government Compliance. . . . . . . . . . . . . . . . . . . . .19.
6.3 Financial Statements, Reports, Certificates. . . . . . . . . .19.
6.4 Inventory; Returns.. . . . . . . . . . . . . . . . . . . . . .20.
6.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .20.
6.6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . .21.
6.7 Principal Depository.. . . . . . . . . . . . . . . . . . . . .21.
6.8 Adjusted Quick Ratio.. . . . . . . . . . . . . . . . . . . . .21.
6.9 Debt-Net Worth Ratio.. . . . . . . . . . . . . . . . . . . . .21.
6.10 Tangible Net Worth.. . . . . . . . . . . . . . . . . . . . . .21.
6.11 Profitability. . . . . . . . . . . . . . . . . . . . . . . . .21.
6.12 Registration of Intellectual Property Rights.. . . . . . . . .21.
6.13 Further Assurances.. . . . . . . . . . . . . . . . . . . . . .22.
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . .22.
7.1 Dispositions.. . . . . . . . . . . . . . . . . . . . . . . . .22.
7.2 Change in Business.. . . . . . . . . . . . . . . . . . . . . .23.
7.3 Mergers or Acquisitions. . . . . . . . . . . . . . . . . . . .23.
7.4 Indebtedness.. . . . . . . . . . . . . . . . . . . . . . . . .23.
7.5 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . .23.
7.6 Distributions. . . . . . . . . . . . . . . . . . . . . . . . .23.
7.7 Investments. . . . . . . . . . . . . . . . . . . . . . . . . .23.
7.8 Transactions with Affiliates.. . . . . . . . . . . . . . . . .23.
7.9 Intellectual Property Agreements.. . . . . . . . . . . . . . .23.
7.10 Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . .24.
7.11 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . .24.
7.12 Compliance.. . . . . . . . . . . . . . . . . . . . . . . . . .24.
8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . .24.
8.1 Payment Default. . . . . . . . . . . . . . . . . . . . . . . .24.
8.2 Covenant Default.. . . . . . . . . . . . . . . . . . . . . . .24.
8.3 Material Adverse Change. . . . . . . . . . . . . . . . . . . .25.
8.4 Attachment . . . . . . . . . . . . . . . . . . . . . . . . . .25.
8.5 Insolvency.. . . . . . . . . . . . . . . . . . . . . . . . . .25.
8.6 Other Agreements.. . . . . . . . . . . . . . . . . . . . . . .25.
8.7 Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . .25.
8.8 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . .25.
8.9 Misrepresentations.. . . . . . . . . . . . . . . . . . . . . .25.
9. BANK'S RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . .26.
9.1 Rights and Remedies. . . . . . . . . . . . . . . . . . . . . .26.
ii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
9.2 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . .27.
9.3 Accounts Collection. . . . . . . . . . . . . . . . . . . . . .28.
9.4 Bank Expenses. . . . . . . . . . . . . . . . . . . . . . . . .28.
9.5 Bank's Liability for Collateral. . . . . . . . . . . . . . . .28.
9.6 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . .28.
9.7 Demand; Protest. . . . . . . . . . . . . . . . . . . . . . . .28.
10. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. . . . . . . . . . . . .29.
12. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . .29.
12.1 Successors and Assigns.. . . . . . . . . . . . . . . . . . . .29.
12.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . .30.
12.3 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . .30.
12.4 Severability of Provisions.. . . . . . . . . . . . . . . . . .30.
12.5 Amendments in Writing, Integration.. . . . . . . . . . . . . .30.
12.6 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . .30.
12.7 Survival.. . . . . . . . . . . . . . . . . . . . . . . . . . .30.
12.8 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . .30.
iii.
<PAGE>
This LOAN AND SECURITY AGREEMENT is entered into as of February 20, 1997,
by and between SILICON VALLEY BANK ("Bank") and INVISION TECHNOLOGIES, INC.
("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following definitions:
"ACCOUNTS" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"ADVANCE" or "ADVANCES" means an Advance under the Revolving
Facility.
"AFFILIATE" means, with respect to any Person, any Person
that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, and partners.
"BANK EXPENSES" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation,administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents (including fees and expenses
of appeal), whether or not suit is brought.
"BORROWER'S BOOKS" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"BORROWING BASE" has the meaning set forth in Section 2.1
hereof.
1.
<PAGE>
"BUSINESS DAY" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California are authorized or
required to close.
"CLOSING DATE" means the date of this Agreement.
"CODE" means the California Uniform Commercial Code.
"COLLATERAL" means the property described on EXHIBIT A
attached hereto.
"COMMITTED LINE" means Four Million Five Hundred Thousand
Dollars ($4,500,000).
"CONTINGENT OBLIGATION" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"COPYRIGHTS" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"CURRENT ASSETS" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current assets on
the consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"CURRENT LIABILITIES" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
2.
<PAGE>
Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"DAILY BALANCE" means the amount of the Obligations owed at
the end of a given day.
"ELIGIBLE ACCOUNTS" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; PROVIDED that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon notification thereof to Borrower in
accordance with the provisions hereof. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
1.1.1 Accounts that the account debtor has failed to pay
within ninety (90) days of invoice date;
1.1.2 Accounts with respect to an account debtor, fifty
percent (50%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
1.1.3 Accounts with respect to which the account debtor is
an officer, employee, or agent of Borrower;
1.1.4 Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
1.1.5 Accounts with respect to which the account debtor is
an Affiliate of Borrower;
1.1.6 Accounts with respect to which the account debtor
does not have its principal place of business in the United States;
1.1.7 Accounts with respect to which the account debtor is
the United States or any department, agency, or instrumentality of the United
States, except for those Accounts of the United States or any department, agency
or instrumentality thereof as to which the payee has assigned its rights to
payment thereof to Bank and the assignment has been acknowledged, pursuant to
the Assignment of Claim Section Act of 1940, as amended (31 U.S.C. Section
3727);
1.1.8 Accounts with respect to which Borrower is liable to
the account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
1.1.9 Accounts with respect to an account debtor,
including Subsidiaries and Affiliates, whose total obligations to Borrower
exceed twenty-five percent (25%) of all
3.
<PAGE>
Accounts, to the extent such obligations exceed the aforementioned percentage,
except with respect to the United States Federal Aviation Administration, as to
which the percentage shall be one hundred percent (100%) subject to subsection
(g) hereof, and except as approved in writing by Bank;
1.1.10 Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto as to which Bank
believes, in its reasonable discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
1.1.11 Accounts the collection of which Bank reasonably
determines to be doubtful.
"EQUIPMENT" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act
of 1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"INDEBTEDNESS" means (a) all indebtedness for borrowed money
or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"INTELLECTUAL PROPERTY COLLATERAL" means
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
4.
<PAGE>
(c) Any and all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past,
present and future infringement of any of the rights included above, with the
right, but not the obligation, to sue for and collect such damages for said use
or infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights, Patents or
Trademarks, and all license fees and royalties arising, from such use to the
extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of
the Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing,
including without limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
"INVENTORY" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"INVESTMENT" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"LIEN" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"LOAN DOCUMENTS" means, collectively, this Agreement, any
note or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(i) the business. operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken
5.
<PAGE>
as a whole or (ii) the ability of Borrower to repay the Obligations or otherwise
perform its obligations under the Loan Documents.
"NEGOTIABLE COLLATERAL" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"OBLIGATIONS" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"PATENTS means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
"PERIODIC PAYMENTS" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay
to Bank pursuant to the terms and provisions of any instrument, ore, agreement
now or hereafter in existence between Borrower and Bank.
"PERMITTED INDEBTEDNESS" means:
(a) Indebtedness of Borrower in favor of Bank arising
under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and
disclosed in the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the
ordinary course of business;
(e) Leases of Equipment pursuant to sale - leaseback
transactions, provided that sales of such leased-back equipment shall not
exceed, in the aggregate, Two Million Dollars ($2,000,000) in any fiscal year;
(f) Capital leases or indebtedness incurred solely to
purchase equipment which is secured in accordance with clause (c) of "Permitted
Liens" below and is not in excess of the lesser of the purchase price of such
equipment or the fair market value of such equipment on the date of acquisition;
6.
<PAGE>
(g) Indebtedness secured by Permitted Liens; and
(h) Extensions, refinancings, modifications, amendments and
restatements of any of items of Permitted Indebtedness (a) through (g) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"PERMITTED INVESTMENT" means:
(a) Investments existing on the Closing Date disclosed in
the Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., and
(iii) certificates of deposit maturing no more than one (1) year from the date
of investment therein issued by Bank.
(c) Investments consisting of notes receivable of, or
prepaid royalties and other credit extensions to, customers and suppliers who
are not Affiliates, in the ordinary course of business; provided that this
paragraph (c) shall not apply to Investments by Borrower in any Subsidiary;
(d) Investments consisting of the endorsement of
negotiable instruments for deposit or collection or similar transaction in the
ordinary course of business;
(e) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of business; and
(f) Investments consisting of (i) compensation of
employees, officers and directors of Borrower or its Subsidiaries so long as the
Board of Directors of Borrower determines that such compensation is in the best
interests of Borrower, (ii) travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of business, (iii) loans to
employees, officers or directors relating to the purchase of equity securities
of Borrower or its Subsidiaries pursuant to employee stock purchase plans or
agreements approved by Borrower's Board of Directors in an aggregate amount not
in excess of Two Hundred Fifty Thousand Dollars ($250,000) outstanding at any
time; (iv) other loans to officers and employees approved by the Board of
Directors in an aggregate amount not in excess of Two Hundred Fifty Thousand
Dollars ($250,000) outstanding at any time; and
(g) Other Investments (including the creation of any
Subsidiary) aggregating not in excess of Two Hundred Fifty Thousand Dollars
($250,000) at any time.
7.
<PAGE>
"PERMITTED LIENS" means the following:
(a) Any Liens existing on the Closing Date and disclosed
in the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, PROVIDED the same have no priority over any of
Bank's security interests;
(c) Liens (i) upon or in any equipment acquired or held
by Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, PROVIDED that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens on Equipment leased by Borrower or any
Subsidiary pursuant to an operating or capital lease in the ordinary course of
business (including proceeds thereof and accessions thereto) incurred solely
for the purpose of financing the lease of such Equipment (including Liens
pursuant to leases permitted pursuant to Section 7.1 and Liens arising from UCC
financing statements regarding leases permitted by this Agreement);
(e) Liens arising from judgments, decrees or attachments
in circumstances not constituting an Event of Default under Section 8.8;
(f) Easements, reservations, rights-of-way,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances affecting real property not constituting a Material Adverse
Effect;
(g) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payments of customs duties in connection
with the importation of goods;
(h) Liens that are not prior to the Lien of Bank which
constitute rights of set-off of a customary nature or banker's Liens with
respect to amounts on deposit, whether arising by operation of law or by
contract, in connection with arrangement entered in to with banks in the
ordinary course of business; and
(i) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (c) above, PROVIDED that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended,renewed or
refinanced does not increase.
"PERSON" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation,
8.
<PAGE>
institution, public benefit corporation, firm, joint stock company, estate,
entity or governmental agency.
"PRIME RATE" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"QUICK ASSETS" means, at any date as of which the amount
thereof shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
"RESPONSIBLE OFFICER" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" means the date immediately
preceding the first anniversary of the Closing Date.
"REVOLVING FACILITY" means the facility under which Borrower
may request Bank to issue cash advances, as specified in Section 2.l hereof.
"SCHEDULE" means the schedule of exceptions attached hereto.
"SUBORDINATED DEBT" means any debt incurred by Borrower that
is subordinated to the debt owing by Borrower to Bank on terms acceptable to
Bank (and identified as being such by Borrower and Bank).
"SUBSIDIARY" means any corporation or partnership in which
(i) any general partnership interest or (ii) more than 50% of the stock of which
by the terms thereof ordinary voting' power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"TANGIBLE NET WORTH" means at any date as of which the
amount thereof shall be determined, the consolidated total assets of Borrower
and its Subsidiaries MINUS, without duplication, (i) the sum of any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights and
research and development expenses except prepaid expenses, and (c) all reserves
not already deducted from assets, AND (ii) Total Liabilities.
"TOTAL LIABILITIES" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness, but specifically excluding Subordinated
Debt.
9.
<PAGE>
"TRADEMARKS" means any trademark and servicemark rights,
whether registered or not, applications to register and registrations of the
same and like protections, and the entire goodwill of the business of Borrower
connected with and symbolized by such trademarks.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 ADVANCES.
(a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an aggregate amount not
to exceed the lesser of (i) the Committed Line minus the face amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) minus the Foreign Exchange Reserve (defined in Section 2.1.3) or (ii)
the Borrowing Base minus the face amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit) minus the Foreign Exchange
Reserve. For purposes of this Agreement, "Borrowing Base" shall mean an amount
equal to (i) eighty percent (80%) of Eligible Accounts. Subject to the terms and
conditions of this Agreement, amounts borrowed pursuant to this Section 2.1 may
be repaid and reborrowed at anytime prior to the Revolving Maturity Date.
(b) Whenever Borrower desires an Advance, Borrower will
notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
California time, on the Business Day that the Advance is to be made. Each such
notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of EXHIBIT B hereto. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer, or without instructions if in Bank's discretion such Advances are
necessary to meet Obligations which have become due and remain unpaid. Bank
shall be entitled to rely on any telephonic notice given by a person who Bank
reasonably believes to be a Responsible Officer, and Borrower shall indemnify
and hold Bank harmless for any damages or loss suffered by Bank as a result of
such reliance. Bank will credit the amount of Advances made under this Section
2.1 to Borrower's deposit account.
(c) The Revolving Facility shall terminate on the
Revolving Maturity Date, at which time all Advances under this Section 2.1 and
other amounts due under this Agreement shall be immediately due and payable.
2.1.1 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued letters of credit for the
account of Borrower in an aggregate face
10.
<PAGE>
amount not to exceed (i) the lesser of the Committed Line or the Borrowing Base
minus (ii) the then outstanding principal balance of the Advances provided that
the face amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) shall not in any case exceed One Million Dollars
($1,000,000). Each such letter of credit shall have an expiry date no later
than the Revolving Maturity Date. All such letters of credit shall be, in form
and substance, acceptable to Bank in its sole discretion and shall be subject to
the terms and conditions of Bank's form of application and letter of credit
agreement. All amounts actually paid by Bank in respect of a letter of credit
shall, when paid, constitute an Advance under this Agreement.
(b) The Obligation of Borrower to immediately reimburse
Bank for drawings made under Letters of Credit shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend and hold Bank harmless from any loss, cost,
expense or liability, including, without limitation, reasonable attorneys' fees,
arising out of or in connection with any letters of credit issued for the
account of Borrower.
2.1.2 LETTER OF CREDIT REIMBURSEMENT; RESERVE.
(a) Borrower may request that Bank issue a letter of
credit payable in a currency other than United States Dollars. If a demand for
payment is made under any such letter of credit, Bank shall treat such demand as
an advance to Borrower of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for cable transfer
to the country of which it is the currency.
(b) Upon the issuance of any letter of credit payable in
a currency other than United States Dollars, Bank shall create a reserve under
the Committed Line for letters of credit against fluctuations in currency
exchange rates, in an amount equal to twenty percent (20%) of the face amount of
such letter of credit. The amount of such reserve may be amended by Bank from
time to time to account for fluctuations in the exchange rate. The availability
of funds under the Committed Line shall be reduced by the amount of such reserve
for so long as such letter of credit remains outstanding.
2.1.3 FOREIGN EXCHANGE CONTRACT; FOREIGN EXCHANGE SETTLEMENTS.
(a) Subject to the terms of this Agreement, Borrower may
enter into foreign exchange contracts (the "Exchange Contracts") not to exceed
an aggregate amount of $1,000,000 (the "Contract Limit"), pursuant to which Bank
shall sell to or purchase from Borrower foreign currency on a spot or future
basis. Borrower shall not request any Exchange Contracts at any time it is out
of compliance with any of the provisions of this Agreement. All Exchange
Contracts must provide for delivery of settlement on or before the Revolving
Maturity Date. The amount available under the Committed Line at any time shall
be reduced by the following amounts (the "Foreign Exchange Reserve") on any
given day (the "Determination
11.
<PAGE>
Date"): (i) on all outstanding Exchange Contracts on which delivery is to be
effected or settlement allowed more than two business days after the
Determination Date, 10% of the gross amount of the Exchange Contracts; plus (ii)
on all outstanding Exchange Contracts on which delivery is to be effected or
settlement allowed within two business days after the Determination Date, 100%
of the gross amount of the Exchange Contracts.
(b) Bank may, in its discretion, terminate the Exchange
Contracts at any time (a) that an Event of Default occurs or (b) that there is
no sufficient availability under the Committed Line and Borrower does not have
available funds in its bank account to satisfy the Foreign Exchange Reserve. If
Bank terminates the Exchange Contracts, and without limitation of any applicable
indemnities, Borrower agrees to reimburse Bank for any and all reasonable fees,
costs and expenses relating thereto or arising in connection therewith.
(c) Borrower shall not permit the total gross amount of
all Exchange Contracts On which delivery is to be effected and settlement
allowed in any two business day period to be more than $500,000 (the "Settlement
Limit"), nor shall Borrower permit the total gross amount of all Exchange
Contracts to which Borrower is a party, outstanding at any one time, to exceed
the Contract Limit. Notwithstanding the above, however, the amount which may be
settled in any two (2) business. day period may be increased above the
Settlement Limit up to, but in no event to exceed, the amount of the Contract
Limit under either of the following circumstances:
(i) if there is sufficient availability under the
Committed Line in the amount Of the Foreign Exchange Reserve as of each
Determination Date, provided that Bank in advance shall reserve the full amount
of the Foreign Exchange Reserve against the Committed Line; or
(ii) if there is insufficient availability under
the Committed Line,as to settlements within any two (2) business day period,
provided that Bank, in its sole discretion, may: (A) verify good funds overseas
prior to crediting Borrower's deposit account with Bank (in the case of
Borrower's sale of foreign currency); or (B) debit Borrower's deposit account
with Bank prior to delivering foreign currency overseas (in the case of
Borrower's purchase of foreign currency).
(d) In the case of Borrower's purchase of foreign
currency, Borrower in advance shall instruct Bank upon settlement either to
treat the settlement amount as an .advance under the Committed Line, or to debit
Borrower's account for the amount settled.
(e) Borrower shall execute all standard form
applications and agreements of Bank in connection with the Exchange Contracts
and, without limiting any of the terms of such applications and agreements,
Borrower will pay all standard fees and charges of Bank in connection with the
Exchange Contracts.
(f) Without limiting any of the other terms of this
Agreement or any such standard form applications and agreements of Bank,
Borrower agrees to indemnify Bank
12.
<PAGE>
and hold it harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, costs and expenses (including, without
limitation, reasonable attorneys' fees of counsel of Bank's choice), of
every nature and description which it may sustain or incur, based upon, arising
out of, or in any way relating to any of the Exchange Contracts or any
transactions relating thereto or contemplated thereby.
2.2 OVERADVANCES. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Bank pursuant to Section 2.1 of this
Agreement is greater than the lesser of (i) the Committed Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess.
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. Except as set forth in Section
2.3(b), any Advances shall bear interest, on the average Daily Balance, at a
rate equal to one (1.0) percentage point above the Prime Rate.
(b) DEFAULT RATE. All Obligations shall bear interest,
from and after the occurrence and during the continuance of an Event of Default,
at a rate equal to five (5) percentage points above the interest rate applicable
immediately prior to the occurrence of the Event of Default.
(c) PAYMENTS. Interest hereunder shall be due and
payable in arrears on the nineteenth calendar day of each month during the term
hereof. Bank shall, at its option, charge such interest, all Batik Expenses, and
all Periodic Payments against any of Borrower's deposit accounts or against the
Committed Line, in which case those amounts shall thereafter accrue interest at
the rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) COMPUTATION. In the event the Prime Rate is changed
from time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
2.4 CREDITING PAYMENTS. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence and during the continuance of an Event of Default, the receipt by
Bank of any wire transfer of funds, check, or other item of payment shall be
immediately applied to conditionally reduce Obligations, but shall not be
considered a payment on account unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is
honored. when presented for payment. Notwithstanding anything to the contrary
contained herein, any wire transfer or payment received by Bank after 12:00 noon
California time shall be deemed to have been
13.
<PAGE>
received by Bank as of the opening of business on the immediately following
Business Day. Whenever any payment to Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a
Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.
2.5 FEES. Borrower shall pay to Bank the following:
(a) FACILITY FEE. A Facility Fee equal to one quarter of
one percent (0.25%) per annum of the Committed Line (of which Bank acknowledges
receipt of $11,500), which fee shall be due on the Closing Date and shall be
fully earned and nonrefundable;
(b) FINANCIAL EXAMINATION AND APPRAISAL FEES. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
(c) BANK EXPENSES. Upon the date hereof, all Bank
Expenses incurred through the Closing Date, including reasonable attorneys' fees
and expenses, and, after the date hereof, all Bank Expenses, including
reasonable attorneys' fees and expenses, as and when they become due.
2.6 ADDITIONAL COSTS. In case any change in any law,
regulation, treaty or official directive or the interpretation or application
thereof by any court or any governmental authority charged with the
administration thereof or the compliance with any guideline or request of any
central bank or other governmental authority (whether or not having the force of
law), in each case after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments of
principal or interest or any others amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect
to its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is recurred or determined, upon
presentation by Bank of a statement :of the amount and setting
14.
<PAGE>
forth Bank's calculation thereof, all in reasonable detail, which statement
shall be deemed true and correct absent manifest error; provided, however, that
Borrower shall not be liable for any such amount attributable to any period
prior to the date of hundred eighty (180) days prior to the date of such
statement.
2.7 TERM. This Agreement shall become effective on the Closing
Date, and subject to Section 12.7, shall continue in full force and effect for a
term ending on the Revolving Maturity Date. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Advances under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of
Bank to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(c) an intellectual property security agreement;
(d) financing statement (Form UCC-1);
(e) insurance certificate;
(f) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof; and
(g) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of
Bank to make each Advance, including the initial Advance, is further subject to
the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section
5 shall be true and correct in all material respects on and as of the date of
such Payment/Advance Form and on the effective date of each Advance as though
made at and as of each such date, and no
15.
<PAGE>
Event of Default shall have occurred and be continuing, or would result from
such Advance. The making of each Advance shall be deemed to be a representation
and warranty by Borrower on the date of such Advance as to the accuracy of the
facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each
of its covenants and duties under the Loan Documents. Except as set forth in
the Schedule, such security interest constitutes a valid, first priority
security interest in the presently existing Collateral, and will constitute a
valid, first priority security interest in Collateral acquired after the date
hereof. As long as an Event of Default has not occurred and is continuing,
upon (i) Borrower's achievement of three (3) consecutive quarters of minimum
net profit of at least $1, and (ii) Borrower's receipt of cash proceeds of at
least $16,000,000 from the issuance of its equity securities after the date
hereof, Bank shall release its security interest in Intellectual Property
Collateral, and from and after such release, the Intellectual Property
Collateral shall not constitute "Collateral" for purposes of the Loan
Documents.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower
shall from time to time execute and deliver to Bank, at the request of Bank,
all Negotiable Collateral, all financing statements and other documents that
Bank may reasonably request, in form satisfactory to Bank, to perfect and
continue perfected Bank's security interests in the Collateral and in order
to fully consummate all of the transactions contemplated under the Loan
Documents.
4.3 RIGHT TO INSPECT. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's
Books and to make copies thereof and to check, test, and appraise the
Collateral in order to verify Borrower's financial condition or the amount,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws
of its state of incorporation and qualified and licensed to do business in,
and is in good standing in, any state in which the conduct of its business or
its ownership of property requires that it be so qualified, except for states
as to which any failure to so qualify would not have a Material Adverse
Effect.
5.2 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery,
and performance of the Loan Documents are within Borrower's powers, have been
duly authorized, and are not in conflict with nor constitute :a breach of any
provision contained in Borrower's
16.
<PAGE>
Certificate of Incorporation or Bylaws, nor will they constitute an event of
default under any material agreement to which Borrower is a party or by which
Borrower is bound. Borrower is not in default under any material agreement to
which it is a party Or by which it is bound, which default could have a Material
Adverse Effect.
5.3 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 BONA FIDE ELIGIBLE ACCOUNTS. The Eligible Accounts are bona
fide existing obligations. The property giving rise to such Eligible Accounts
has been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.
5.5 MERCHANTABLE INVENTORY. All Inventory is in all material
respects of good and marketable quality, free from all material defects.
5.6 INTELLECTUAL PROPERTY. Borrower is the sole owner of the
presently registered Intellectual Property Collateral, except for non-exclusive
licenses granted by Borrower to its customers in the ordinary course of
business. Each of the registered Patents is valid and enforceable, and no part
of the Intellectual Property Collateral has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property Collateral violates the rights of any third party.
Except for and upon the filing with the United States Patent and Trademark
Office with respect to the Patents and Trademarks and the Register of Copyrights
with respect to the Copyrights necessary to perfect the security interests
created hereunder, and except as has been already made or obtained, no
authorization, approval or other action by, and no notice to or filing with, any
United States governmental authority or United States regulatory body is
required either (i) for the grant by Borrower of the security interest granted
hereby or for the execution, delivery or performance of Loan Documents by
Borrower in the United States or (ii) for the perfection in the United States or
the exercise by Bank of its rights and remedies hereunder.
5.7 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. Except as
disclosed in the Schedule, Borrower has not done business under any name other
than that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
5.8 LITIGATION. Except as set forth in the Schedule, there are
no actions or proceedings pending by or against Borrower or any Subsidiary
before any court or administrative agency in which an adverse decision could
have a Material Adverse Effect or a material adverse effect on Borrower's
interest or Bank's security interest in the Collateral. Borrower does not
have knowledge of any such pending or threatened actions or proceedings.
17.
<PAGE>
5.9 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.10 SOLVENCY. The fair saleable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement; and Borrower is able to pay its
debts (including trade debts) as they mature.
5.11 REGULATORY COMPLIANCE. Borrower and each Subsidiary has met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's.incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.12 ENVIRONMENTAL CONDITION. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.13 TAXES. Borrower and each Subsidiary has filed or caused to
be filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
18.
<PAGE>
5.14 SUBSIDIARIES. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.15 GOVERNMENT CONSENTS. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted.
5.16 FULL DISCLOSURE. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or Statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 GOOD STANDING. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could reasonably be expected to have a Material Adverse
Effect. Borrower shall maintain, and shall cause each of its Subsidiaries to
maintain, to the extent consistent with prudent management of Borrower's
business, in force all licenses, approvals and agreements, the loss of which
could have a Material Adverse Effect.
6.2 GOVERNMENT COMPLIANCE. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could reasonably be expected to have a Material Adverse Effect or a
material adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each fiscal quarter, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during such period, certified by a Responsible Officer; (b)as soon as available,
but in any event within ninety' (90) days after the end of Borrower's fiscal
year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified opinion
on such financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (c) within five (5) days upon becoming available,
copies of all statements, reports, and notices sent or made available generally
by Borrower to its security holders or to any holders of Subordinated Debt
19.
<PAGE>
and all reports on Form 10-K and 10-Q filed with the Securities and Exchange
Commission; (d) promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against Borrower or any Subsidiary that could
result in damages or costs to Borrower or any Subsidiary of One Hundred Thousand
Dollars ($100,000) or more; (e) prompt notice of any material change in the
composition of the Intellectual Property Collateral, including, but not limited
to, any subsequent ownership right of the Borrower in or to any Copyright,
Patent or Trademark not specified in any intellectual property security
agreement between Borrower and Bank or knowledge of an event that materially
adversely effects the value of the Intellectual Property Collateral; and (f)
such budgets, sales projections, operating plans or other financial information
as Bank may reasonably request from time to time.
Within twenty (20) days after the last day of each month in which an
Advance is outstanding (and as a condition to Borrower requesting an Advance),
Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of EXHIBIT C hereto, together with
aged listings of accounts receivable and accounts payable.
Borrower shall deliver to Bank with the quarterly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of EXHIBIT D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every six (6) months unless an Event of Default has occurred and
is continuing.
6.4 INVENTORY; RETURNS. Borrower shall keep all Inventory in
good and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on
the same basis and in accordance with the usual customary practices of
Borrower, as they exist at the time of the execution and delivery of this
Agreement. Borrower shall promptly notify Bank of all returns and recoveries
and of all disputes and claims, where the return, recovery, dispute or claim
involves more than Fifty Thousand Dollars ($50,000).
6.5 TAXES. Borrower shall make, and shall cause each Subsidiary
to make, due and timely payment or, deposit of all material federal, state,
and local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments
and withholding taxes required of it by applicable laws, including, but not
limited to, those laws concerning F.I.C.A., F.U.T.A., state disability, and
local, state, and federal income taxes, and will, upon request, furnish Bank
with proof satisfactory to Bank indicating that Borrower or a Subsidiary has
made such payments or deposits; provided that Borrower or a Subsidiary, need
not make any payment if the amount or validity of such payment is contested
in good faith by appropriate proceedings and is reserved against (to the
extent required by GAAP) by Borrower.
20.
<PAGE>
6.6 INSURANCE.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against
by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. Borrower shall also
maintain insurance relating to Borrower's ownership and use of the Collateral
in amounts and of a type that are customary to businesses similar to
Borrower's.
(b) All such policies of insurance shall be in such form,
with such companies, and in such amounts as reasonably satisfactory to Bank.
All such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank,showing Bank as an additional
loss payee thereof and all liability insurance policies shall show the Bank
as an additional insured, and shall specify that the insurer must give at
least twenty (20) days notice to Bank before canceling its policy for any
reason. Upon Bank's request, Borrower shall deliver to Bank certified copies
of such policies of insurance and evidence of the payments of all premiums
therefor. All proceeds payable under any such policy shall, at the option of
Bank, be payable to Bank to be applied on account of the Obligations.
6.7 PRINCIPAL DEPOSITORY. Borrower shall maintain its principal
depository and operating accounts with Bank.
6.8 ADJUSTED QUICK RATIO. Borrower shall maintain, as of the last
day of each fiscal quarter, a ratio of Quick Assets to Current Liabilities,
excluding deferred revenue and customer deposits, of at least 1.25 to 1.0.
For purposes of this Section, Quick Assets shall be deemed to include cash,
cash-equivalents, and investments with maturities not exceeding 90 days held
in deposit accounts in which Bank has a Lien prior to any other Lien.
6.9 DEBT-NET WORTH RATIO. Borrower shall maintain, as of the
last day of each fiscal quarter, a ratio of Total Liabilities, excluding
deferred revenue and customer deposits, less Subordinated Debt to Tangible Net
Worth plus Subordinated Debt of not more than 1.0 to 1.0.
6.10 TANGIBLE NET WORTH. Borrower shall maintain, as of the last
day of each fiscal quarter, a Tangible Net Worth of not less than Eight Million
Dollars ($8,000,000) plus seventy-five percent of the net proceeds from the sale
of Borrower's equity securities after the Closing Date.
6.11 PROFITABILITY. Borrower shall be profitable for each fiscal
quarter, except Borrower may suffer a loss not to exceed $600,000 for one fiscal
quarter in any fiscal year.
6.12 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
(a) Borrower shall register or cause to be registered
(to the extent not already registered) with the United States Patent and
Trademark Office or the United States
21.
<PAGE>
Copyright Office, as applicable, those intellectual property rights listed on
Exhibits A, B and C to the Intellectual Property Security Agreement delivered to
Bank by Borrower in connection with this Agreement within thirty (30) days of
the date of this Agreement. Borrower shall have no duty to register or cause to
be registered with the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, those additional intellectual property
rights developed or acquired by Borrower from time to time in connection with
any product prior to the sale or licensing of such product to any third party,
including without limitation revisions or additions to the intellectual property
rights listed on such Exhibits A, B and C.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents and Copyrights, (ii) use
its best efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Bank in writing of material infringements
detected and (iii) not allow any Trademarks, Patents or Copyrights to be
abandoned, forfeited or dedicated to the public without the written consent of
Bank, which shall not be unreasonably withheld, unless Bank determines that
reasonable business practices suggest that abandonment is appropriate.
(d) Bank shall have the right, but not the obligation,
to take, at Borrower's sole expense, any actions that Borrower is required under
this Section 6.12 to take but which Borrower fails to take, after fifteen (15)
days' notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.12.
6.13 FURTHER ASSURANCES. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until payment in full of the outstanding Obligations or for so
long as Bank may have any commitment to make any Advances, Borrower will not do
any of the following:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (i) Transfers
of Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; (iii) Transfers of worn-out or obsolete Equipment; or (iv)
sale-leaseback transactions of Equipment as described in clause (e) of the
defined term "Permitted Indebtedness."
22.
<PAGE>
7.2 CHANGE IN BUSINESS. Engage in any business, or permit any
of its Subsidiaries to engage in any business, other than the businesses
currently engaged in by Borrower and any business substantially similar or
related thereto (or incidental thereto), or suffer a material change in
Borrower's ownership of greater than forty percent (40%). Borrower will not,
without thirty (30) days prior written notification to Bank, relocate its chief
executive office.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit
any of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, except
such transactions that do not result in a change of more than 25% of Borrower's
Net Worth PROVIDED that immediately after giving effect to such merger or
consolidation, no Event of Default, or event which with the lapse of time or
giving of notice or both, would result in an Event of Default shall have
occurred and be continuing.
7.4 INDEBTEDNESS. Create, incur, assume or be or remain liable
with respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 ENCUMBRANCES. Create, incur, assume or suffer to exist any
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.6 DISTRIBUTIONS. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock. Notwithstanding the foregoing, Borrower may redeem or
repurchase its common stock and pay dividends on its preferred stock, provided
the sum of (i) the purchase price of any stock sore deemed or repurchased and
(ii) any such dividends paid on preferred stock does not exceed, in the
aggregate, $250,000 in any fiscal year.
7.7 INVESTMENTS. Directly or indirectly acquire or own, or make
any Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 INTELLECTUAL PROPERTY AGREEMENTS. Borrower shall not permit
the inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way prevent the creation of a security
interest in Borrower's rights and interests in any property included within the
definition of the Intellectual Property Collateral acquired under such
contracts.
23.
<PAGE>
7.10 SUBORDINATED DEBT. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.11 INVENTORY. Store the Inventory with a bailee, warehouseman,
or similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.12 COMPLIANCE. Become an "investment company" controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay the principal of,
or any interest on, any Advances when due and payable; or fails to pay any
portion of any other Obligations not constituting such principal or interest,
including without limitation Bank Expenses, within thirty (30) days of receipt
by Borrower of an invoice for such other Obligations;
8.2 COVENANT DEFAULT. If Borrower fails to perform any
obligation under Sections 6.7, 6.8, 6.9, 6.10, or 6.11 or violates any of the
covenants contained in Article 7 of this Agreement, or fails or neglects to
perform, keep, or observe any other material term, provision, condition,
covenant, or agreement contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and Bank
and as to any default under such other term, provision, condition, covenant or
agreement that can be cured, has failed to cure such default within ten (10)
days after Borrower receives notice thereof or any officer of Borrower becomes
aware thereof; provided, however, that if the default cannot by its nature be
cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in
24.
<PAGE>
any case exceed thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Advances will be required to be
made during such cure period);
8.3 MATERIAL ADVERSE CHANGE. If there occurs a material adverse
change in Borrower's business or financial condition or a material impairment of
the value or priority of Bank's security interests in the Collateral;
8.4 ATTACHMENT. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within thirty (30) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within thirty,
(30) days after Borrower receives notice thereof, provided that none of the
foregoing shall constitute an Event of Default where such action or event is
stayed or an adequate bond has been posted pending a good faith contest by
Borrower (provided that no Advances will be required to be made during such cure
period);
8.5 INSOLVENCY. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within thirty (30)
days (provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 OTHER AGREEMENTS. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in the
exercise of a right by such third party or parties to accelerate the maturity of
any Indebtedness in an amount in excess of Two Hundred Fifty Thousand Dollars
($250,000) or that could have a Material Adverse Effect;
8.7 SUBORDINATED DEBT. If Borrower makes any payment on account
of Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 JUDGMENTS. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least One Hundred
Fifty Thousand Dollars($150,000) shall be rendered against Borrower and shall
remain unsatisfied and unstayed for a period of thirty (30) days (provided that
no Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 MISREPRESENTATIONS. If any material misrepresentation or
material misstatement exists now or as of any date made or deemed made or
hereafter in any warranty
25.
<PAGE>
or representation set forth herein or in any certificate delivered to Bank by
any Responsible Officer pursuant to this Agreement or to induce Bank to enter
into this Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);
(b) Cease advancing money or extending credit to or for
the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank in
an amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
(d) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(e) Without notice to or demand upon Borrower, make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(f) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is
26.
<PAGE>
hereby granted a license or other right, solely pursuant to the provisions of
this Section 9.1, to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature, as
it pertains to the Collateral, in completing production of, advertising for
sale, and selling any Collateral and, in connection with Bank's exercise of its
rights under this Section 9.1, Borrower's rights under all licenses and all
franchise agreements shall inure to Bank's benefit;
(h) Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(i) Bank may credit bid and purchase at any public sale;
and
(j) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 POWER OF ATTORNEY. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; (f) to modify, in its
sole discretion, any intellectual property security agreement entered into
between Borrower and Bank without first obtaining Borrower's approval of or
signature to such modification by amending Exhibit A, Exhibit B and Exhibit C,
thereof, as appropriate, to include reference to any right, title or interest in
any Copyrights, Patents or Trademarks acquired by Borrower after the execution
hereof or to delete any reference to any right, title or interest in any
Copyrights, Patents or Trademarks in which Borrower no longer has or claims any
right, title or interest; (g) to file, in its sole discretion, one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of Borrower where permitted by law; and (h)
to transfer the Intellectual Property Collateral into the name of Bank or a
third party to the extent permitted under the California Uniform Commercial Code
provided Bank may exercise such power of attorney to sign the name of Borrower
on any of the documents described in Section 4.2 regardless of whether an Event
of Default has occurred. The appointment of Bank as Borrower's attorney in fact,
and each and every one of Bank's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid and
performed and Bank's obligation to provide advances hereunder is terminated.
27.
<PAGE>
9.3 ACCOUNTS COLLECTION. At any time from the date of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Upon the
occurrence and during the continuance of an Event of Default, Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Revolving Facility as Bank deems necessary to protect Bank
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in Section 6.6 of this Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due
and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement. Bank shall
have a non-exclusive, royalty-free license to use the Intellectual Property
Collateral to the extent reasonably necessary to permit Bank to exercise its
rights and remedies upon the occurrence of an Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as Bank complies
with reasonable banking practices, Bank shall not in any way or manner be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause; (c)
any diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk
of loss, damage or destruction of the Collateral shall be borne by Borrower,
except for any loss, damage or destruction caused by Bank's gross negligence or
wilful misconduct.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one
right or remedy shall be deemed an election, and no waiver by Bank of any
Event of Default on Borrower s part shall be deemed a continuing waiver. No
delay by Bank shall constitute a waiver, election, or acquiescence by it. No
waiver by Bank shall be effective unless made in a written document signed on
behalf of Bank and then shall be effective only in the specific instance and
for the specific purpose for which it was given.
9.7 DEMAND; PROTEST. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
28.
<PAGE>
10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: InVision Technologies, Inc.
3420 E. Third Avenue
Foster City, CA 94404
Attn: Curt DiSibio, CFO
FAX: (415) 578-0930
If to Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attn: Patrick McCarthy
FAX: (408)748-9478
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
The Loan Documents shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the respective successors and permitted assigns of each of the
parties; PROVIDED,
29.
<PAGE>
HOWEVER, that neither this Agreement nor any rights hereunder may be assigned by
Borrower without Bank's prior written consent, which consent may be granted or
withheld in Bank's sole discretion. Bank shall have the right without the
consent of or notice to Borrower to sell, transfer, negotiate, or grant
participation in all or any part of, or any interest in, Bank's obligations,
rights and benefits hereunder.
12.2 INDEMNIFICATION. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted ,by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE. Time is of the essence for the performance
of all obligations set forth in this Agreement.
12.4 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION. This Agreement cannot
be amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Agreement.
12.7 SURVIVAL. All covenants, representations and warranties
made in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY. In handling any confidential information
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor
30.
<PAGE>
of Borrower and have delivered a copy to Borrower, (iii) as required by law,
regulations, rule or order, subpoena, judicial order or similar order, (iv) as
may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may determine in connection with the
enforcement of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
INVISION TECHNOLOGIES, INC.
By:
--------------------------------------
Title:
---------------------------------
SILICON VALLEY BANK
By:
--------------------------------------
Title:
-----------------------------------
31.
<PAGE>
EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, design rights,
income tax refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
32.
<PAGE>
EXHIBIT C
BORROWING BASE CERTIFICATE
- --------------------------------------------------------------------------------
Borrower: InVision Technologies, Inc. Lender: Silicon Valley Bank
Commitment Amount: $4,500,000
- -------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ______ $ _____________________
2. Additions (please explain on reverse) $ _____________________
3. TOTAL ACCOUNTS RECEIVABLE $ _____________________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication) $ _____________________
4. Amounts over 90 days due $ _____________________
5. Balance of 50% over 90 day accounts$
6. Concentration Limits $ _____________________
7. Foreign Accounts $ _____________________
8. Ineligible Governmental Accounts $ _____________________
9. Contra Accounts $ _____________________
10. Promotion or Demo Accounts $ _____________________
11. Intercompany/Employee Accounts $ _____________________
12. Other (please explain on reverse) $ _____________________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $ _____________________
14. Eligible Accounts (#3 minus #13) $ _____________________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $ _____________________
BALANCES
16. Maximum Loan Amount $ ____________________
17. Total Funds Available [Lesser of #16 or #15 $ _____________________
18. Present balance owing on Line of Credit $ _____________________
19. Outstanding:under Sublimits ( ) $ _____________________
20. RESERVE POSITION (#17 minus #18 and #19) $ _____________________
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE AND
CORRECT, AND THAT THE INFORMATION REFLECTED IN THIS BORROWING BASE CERTIFICATE
COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE LOAN AND
SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS:
InVision Technologies, Inc.
By: BANK USE ONLY
--------------------- Rec'd By:
--------------------
Auth. Signer
Date:
--------------------
Verified:
-------------------
Auth. Signer
Date:
----------------------
----------------------
33.
<PAGE>
DISCLOSURE SCHEDULE TO LOAN AND SECURITY AGREEMENT BETWEEN
INVISION TECHNOLOGIES, INC. AND SILICON VALLEY BANK
<TABLE>
<CAPTION>
Liens
------
Secured Party UCC File No. Date
- ------------- ----------- ------
<S> <C> <C>
Telogy, Inc. 9434560289 Dec. 2, 1994
Yale-Northern California, Inc.
Citicorp Dealer Finance 9504860580 Feb. 10, 1995
Instituto Bancario San Paolo di
Torino, SpA
(To be terminated on or prior to Closing Date) 9600260210 Dec. 28, 1995
Anaconda Partners, L.P.
(To be terminated on or prior to Closing Date) 9600260218 Dec. 28, 1995
Leasing Technologies International, Inc. 9613560835 May 13, 1996
Leasing Technologies International, Inc. 9633160900 Nov. 25, 1996
European American Bank 9626960074 Sep. 20, 1996
</TABLE>
INVESTMENTS
-----------
Investments in subsidiaries: Imatron Federal Systems, Inc. and Invision
International, Inc.
INDEBTEDNESS
------------
Lender
- -----
Telogy, Inc.
Yale-Northern California, Inc.
Citicorp Dealer Finance
Leasing Technologies
International, Inc.
Equipment purchased from Hyster to be financed.
OTHER
-----
Invision's Intellectual Property rights are subject to FAA contracts.
34.
<PAGE>
EXHIBIT A
INVISION CTX 5000 SP TECHNICAL SPECIFICATIONS
THE CTX 5000 SP SCREENS PASSENGER LUGGAGE, PACKAGES AND LIGHT CARGO FOR
EXPLOSIVES OR NARCOTICS. CTX IS THE ONLY SYSTEM TO USE COMPUTERIZED TOMOGRAPHY
AND IS THE ONLY FAA CERTIFIED EXPLOSIVES DETECTION SYSTEM. CTX CAN BE USED
STAND-ALONE OR INTEGRATED INTO AN AIRPORT BAGGAGE HANDLING SYSTEM. IT CAN
OPERATE AT 3 DIFFERENT LEVELS OF DETECTION FOR SCREENING UNDER LOW, MEDIUM OR
HIGH THREAT CONDITIONS.
[illustration of CTX 5000 SP]
<TABLE>
<CAPTION>
SCANNER WORKSTATION
<S> <C> <C> <C> <C>
Weight 9320 lbs. 4208 kg Dimensions 42" L x 53" W x 54" H
1069 x 1336 x 1350 mm
Length 174 in. 4421 mm
Footprint 56 sq.ft. 5.2 sq. m Monitors (VDL) 2 x 17"
Conveyor Height (+ 1") 29.25 in. 740 mm Monitor resolution 800 x 600.028 mm
Loading Velocity 1.8 ft./sec 0.45 m/sec. Image depth 128 grey level + colors
Unload Velocity LESS THAN- LESS THAN 2.5m/sec SP image resolution 576 x 410 pixels
9.8 ft./ sec CT image resolution 512 x 512 pixels
LUGGAGE Threat coloring red
Detonator coloring green
Maximum dimension 46 in. L x 26 in. W x Metal coloring blue
22 in. H Controls (images, hard-soft keys, trackball
119 cm L x 66 cm W x system)
56 cm H
Maximum weight 110 lbs. 50 kg Cable length 16.5 ft. 5 m
(Standard)
ENVIRONMENT SAFETY
Voltage 350-480V 3 phase
3 W & PE Exceeds FDA 21 CFR 1020.40
Frequency 30 - 60 Hz X-ray shielded cabinet with safety
interlocks
Power 12 kVA Emergency stop
Tolerance =5% Uninterrupted power supply for
computer (20 min)
Temperature 10 - 40 DEG C
Humidity LESS THAN-80%
X-RAY SYSTEM
SP Operating range 140 kV. 0.8 mA
</TABLE>
35.
<PAGE>
SP sensitivity 12 bit
Sp detectors 768
CT Operating range 80-200 kV. 1-20 mA
CT sensitivity 18 bit
CT detectors 480
Cooling system Continuous oil filled
36.
<PAGE>
EXHIBIT B
DRAFT
EDS SPECIFICATIONS
[Illustration of EDS System]
Definition of the components:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
COMPONENT: DEFINITION: RESPONSIBILITY:
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q Queuing conveyor belt: One or more queuing Joint
conveyor belts that feed the luggage to the system or forward
inspected luggage to the bags movement system. Their
number defines the input and output queue length, their
functionality is controlled by the CTX.
- ------------------------------------------------------------------------------------------------------------
LPA Active Luggage Positioner: Positions the luggage at the InVision
center of the conveyor belt with the long dimension of the
luggage in direction of the movement. May stop oversize
luggage.
- ------------------------------------------------------------------------------------------------------------
Z The Z-scanner made by EG&G Astrophysics Astrophysics
- ------------------------------------------------------------------------------------------------------------
D Diverter: Optional luggage diverter that may be required Joint
for some non certified application of the EDS System
- ------------------------------------------------------------------------------------------------------------
CTX The CTX 5000 without the pre-scanner InVision
- ------------------------------------------------------------------------------------------------------------
CONSOLE The CTX 5000 operator console InVision
- ------------------------------------------------------------------------------------------------------------
I/O BOX The common and only interface between the EDS Joint
SYSTEM and the airport bags movement system
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Overall performance:
- FAA certification at 500 bph or better
- Maximum throughput in non FAA certified mode of 1200 bph with the
diverter
- Detection mode changeable from bag to bag
The Prototypes will be jointly manufactured by the two parties at a
location to be agreed upon
37.
<PAGE>
- --------------------------------------------------------------------------------
INVISION TECHNOLOGIES, INC.
EXPORT-IMPORT BANK
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
<PAGE>
THIS EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT (the "Exim
Agreement") is entered into as of February 20, 1997, by and between SILICON
VALLEY BANK ("Bank") and INVISION TECHNOLOGIES, INC. ("Borrower").
RECITALS
A. Borrower wishes to obtain credit from Bank, and Bank wishes to
extend credit to Borrower.
B. Borrower and Bank desire in this Exim Agreement to set forth their
agreement with respect to a working capital facility to be guaranteed by
Export-Import Bank of the United States.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Exim Agreement, the following
terms shall have the following definitions:
"ACCOUNTS" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering
of services by Borrower, whether or not earned by performance, and any and
all credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing.
"ADVANCE" or "ADVANCES" means a cash advance under this Exim
Agreement.
"AFFILIATE" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls
or is controlled by or is under common control with such Person, and each of
such Person's senior executive officers, directors, and partners.
"BORROWER AGREEMENT" means the Export-Import Bank of the
United States Working Capital Guarantee Program Borrower Agreement between
Borrower and Bank.
"BORROWER'S BOOKS" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"BORROWING BASE" has the meaning set forth in Section 2.1 hereof.
1.
<PAGE>
"BUSINESS DAY" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California are authorized or
required to close.
"CLOSING DATE" means the date of this Agreement.
"CODE" means the California Uniform Commercial Code.
"COLLATERAL" means the property described on Exhibit A
attached hereto.
"CONTINGENT OBLIGATION" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold
with recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term "Contingent Obligation" shall not include
endorsements for collection or deposit in the ordinary course of business.
The amount of any Contingent Obligation shall be deemed to be an amount equal
to the stated or determined amount of the primary obligation in respect of
which such Contingent Obligation is made or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof as determined
by such Person in good faith; provided, however, that such amount shall not
in any event exceed the maximum amount of the obligations under the guarantee
or other support arrangement.
"COPYRIGHTS" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"CURRENT LIABILITIES" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its
Subsidiaries, as at such date, plus, to the extent not already included
therein, all outstanding Advances made under this Agreement, including all
Indebtedness that is payable upon demand or within one year from the date of
determination thereof unless such Indebtedness is renewable or extendable at
the option of Borrower or any Subsidiary to a date more than one year from
the date of determination.
"DAILY BALANCE" means the amount of the Obligations owed at
the end of a given day.
"DOMESTIC AGREEMENT" means that certain Loan and Security
Agreement by and between Borrower and Bank dated as of even date herewith.
2.
<PAGE>
"DOMESTIC LOAN DOCUMENTS" means the Domestic Agreement and the
instruments and documents executed in connection with that Agreement.
"ELIGIBLE FOREIGN INVENTORY" means Inventory purchased or
manufactured by Borrower for resale located in the United States, other than
Inventory that is excluded under the Borrower Agreement and this Exim
Agreement. Eligible Foreign Inventory shall not include the following:
(a) any Inventory which is not located in the United States;
(b) any demonstration Inventory or Inventory sold on
consignment;
(c) any Inventory consisting of proprietary software;
(d) any Inventory which is damaged, obsolete, returned,
defective, recalled or unfit for further processing;
(e) any Inventory which has been previously exported from the
United States;
(f) any Inventory which constitutes defense articles or
defense services;
(g) any Inventory which is to be incorporated into items
destined for shipment to a country in which Exim Bank is legally prohibited
from doing business;
(h) any Inventory which is to be incorporated into items
destined for shipment to a country in which Exim Bank coverage is not
available for commercial reasons, except to the extent such items are sold to
such country on terms of a letter of credit confirmed by a bank acceptable to
Exim Bank; and
(i) any Inventory which is to be incorporated into items
whose sale would result in an Account that is not an Exim Eligible Foreign
Account.
"EQUIPMENT" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of
1974,
as amended, and the regulations thereunder.
"EXIM BANK" means Export-Import Bank of the United States.
"EXIM BANK EXPENSES" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection
with the preparation, negotiation, administration, and enforcement of the
Loan Documents, including any costs incurred in relation
3.
<PAGE>
to opposing or seeking' to obtain relief from any stay or restructuring order
prohibiting Bank from exercising its rights as a secured creditor,
foreclosing upon or disposing of Collateral, or such related matters; fees
that Bank pays to Exim Bank in consideration Of the issuance of the Exim
Guarantee; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, whether or not suit is
brought.
"EXIM COMMITTED LINE" means Four Million Five Hundred Thousand
Dollars ($4,500,000).
"EXIM ELIGIBLE FOREIGN ACCOUNTS" means those Accounts payable
in United States Dollars that arise in the ordinary course of Borrower's
business from Borrower's sale of Eligible Foreign Inventory (i) with respect
to which the account debtor is not a resident of the United States; (ii) that
have been validly assigned and comply with all of Borrower's representations
and warranties to Bank; and (iii) (A) that are supported by one or more
letters of credit issued by a financial institution acceptable to Bank on
terms acceptable to Bank and Exim Bank or (B) are Accounts on open account
terms approved by Bank in its sole discretion on a case by case basis;
provided, that standards of eligibility may be fixed and revised from time to
time by Bank in Bank's reasonable judgment and upon notification thereof to
the Borrower in accordance with the provisions hereof. Exim Eligible Foreign
Accounts shall not include the following:
(a) Accounts with a term in excess of ninety (90) days;
(b) Unless pre-approved by Bank in its sole discretion,
Accounts that the account debtor has failed to pay within sixty (60) calendar
days of the original due date of the invoice unless such Accounts are insured
through Exim Bank export credit insurance for comprehensive commercial and
political risk, or through Exim Bank approved private insurers for comparable
coverage, in which case ninety, (90) calendar days shall apply;
(c) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety
(90) days of the original date of invoice;
(d) Accounts evidenced by a letter of credit until the date
of shipment of the items covered by the subject letter of credit;
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;
(f) Accounts with respect to which the account debtor is
located in a country in which Exim Bank is legally prohibited from doing
business;
(g) Accounts with respect to which the account debtor is
located in a country in which Exim Bank coverage is not available for
commercial reasons;
4.
<PAGE>
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of Borrower's liability to such account
debtor;
(i) Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(j) Accounts generated by the sale of products purchased for
military purposes;
(k) Accounts generated by sales of Inventory which
constitutes defense articles or defense services;
(i) Accounts payable in currency other than Dollars;
(m) Accounts which are due and owing and the collection of
which must be made outside the United States;
(n) Accounts generated by the rendering of maintenance
services;
(o) Advance deposits or payments made by account debtors;
(p) Accounts the collection of which Bank or Exim Bank
determines in its reasonable judgment to be doubtful; and
(p) Accounts that are excluded from the Borrowing Base under
the Borrower Agreement.
"EXIM GUARANTEE" means that certain Master Guarantee Agreement
or other agreement, as amended from time to time, the terms of which are
incorporated by reference into this Exim Agreement, pursuant to which Exim
Bank guarantees Borrower's obligations under this Exim Agreement.
"EXIM LOAN DOCUMENTS" means, collectively, this Exim
Agreement, the Borrower Agreement, any note or notes executed by Borrower,
and any other agreement entered into between Borrower and Bank in connection
with this Exim Agreement, all as amended or extended from time to time.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"INDEBTEDNESS" means (a) all indebtedness for borrowed money
or the deferred purchase price of property or services, including without
limitation reimbursement and
5.
<PAGE>
other obligations with respect to surety bonds and letters of credit, (b) all
obligations evidenced by notes, bonds, debentures or similar instruments, (c)
all capital lease obligations and (d) all Contingent Obligations.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.
"INTELLECTUAL PROPERTY COLLATERAL" means
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present
and future infringement of any of the rights included above, with the right,
but not the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the
Copyrights, Patents or Trademarks, and all license fees and royalties arising
from such use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"INVENTORY" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished
products intended for sale or lease or to be furnished under a contract of
service, of every kind and description now or at any time hereafter owned by
or in the custody or possession, actual or constructive, of Borrower,
including such inventory as is temporarily out of its custody or possession
or in transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or
6.
<PAGE>
disposition of any of the foregoing and any documents of title representing
any of the above, and Borrower's Books relating to any of the foregoing,.
"INVESTMENT" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"LETTERS OF CREDIT" means letters of credit issued pursuant to
Section 2.1.1.
"LIEN" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"LOAN DOCUMENTS" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or
extended from time to time.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to
repay the Obligations or otherwise perform its obligations under the Loan
Documents.
"MATURITY DATE" means the day before the first anniversary of
the Closing Date.
"NEGOTIABLE COLLATERAL" means all of Borrower's present and
future letters of credit of which it is 'a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and
Borrower's Books relating to any of the foregoing.
"OBLIGATIONS" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this
Agreement or any other agreement, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may
have obtained by assignment or otherwise.
"PATENTS" means all patents, patent applications and like
protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of
the same.
"PERIODIC PAYMENTS" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay
to Bank pursuant to the terms and
7.
<PAGE>
provisions of any instrument, or agreement now or hereafter in existence
between Borrower and Bank.
"PERMITTED INDEBTEDNESS" MEANS:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed
in the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) Leases of Equipment pursuant to sale-leaseback
transactions, provided that sales of such leased-back equipment shall not
exceed, in the aggregate, Two Million Dollars ($2,000,000)in any fiscal year;
(f) Indebtedness secured by Permitted Liens;
(g) Capital leases or indebtedness incurred solely to
purchase equipment which is secured in accordance with clause (c) of
"Permitted Liens" below and is not in excess of the lesser of the purchase
price of such equipment or the fair market value of such equipment on the
date of acquisition;
(h) Extensions, refinancings, modifications, amendments and
restatements of any of items of Permitted Indebtedness (a) through (g) above,
provided that the principal amount thereof is not increased or the terms
thereof are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"PERMITTED INVESTMENT" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or
any State thereof maturing within one (1) year from tile date of acquisition
thereof, (ii) commercial paper maturing no more than one (1) year from the
date of creation thereof and currently having the highest rating obtainable
from either Standard & Poor's Corporation or Moody's Investors Service, Inc.,
and (iii) certificates of deposit maturing no more than one (1) year from the
date of investment therein issued by Bank;
8.
<PAGE>
(c) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions to, customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this paragraph
(c) shall not apply to Investments by Borrower in any Subsidiary;
(d) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transaction in the ordinary
course of business;
(e) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers
and in settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of business; and
(f) Investments consisting of (i) compensation of employees,
officers and directors of Borrower or its Subsidiaries so long as the Board
of Directors of Borrower determines that such compensation is in the best
interests of Borrower, (ii) travel advances, employee relocation loans and
other employee loans and advances in the ordinary course of business, (iii)
loans to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower's Board of Directors in an
aggregate amount not in excess of Two Hundred Fifty Thousand Dollars
($250,000) outstanding at any time; (iv) other loans to officers and
employees approved by the Board of Directors in an aggregate amount not in
excess of Two Hundred Fifty Thor, sand Dollars ($250,000) outstanding at any
time; and
(g) Other Investments (including the creation of any
Subsidiary) aggregating not in excess of Two Hundred Fifty Thousand Dollars
($250,000) at any time.
"PERMITTED LIENS" means the following:
(a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, PROVIDED the same have no priority over any of
Bank's security interests;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time
of its acquisition, PROVIDED that the Lien is confined solely to the property
so acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens on Equipment leased by Borrower or any Subsidiary
pursuant to an operating or capital lease in the ordinary course of business
(including proceeds thereof and accessions thereto) incurred solely for the
purpose of financing the lease of such Equipment
9.
<PAGE>
(including Liens pursuant to leases permitted pursuant to Section 7.1 and
Liens arising from UCC financing statements regarding leases permitted by
this Agreement);
(e) Leases or subleases and licenses or sublicenses granted
to others in the ordinary course of Borrower's business not interfering in
any material respect with the business of Borrower and its Subsidiaries taken
as a whole, and any interest or title of a lessor, licensor or under any
lease or license provided that such leases, subleases, licenses and
sublicenses do not prohibit the grant of the security interest granted
hereunder;
(f) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.8;
(g) Easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances affecting real property not constituting a Material Adverse
Effect;
(h) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payments of customs duties in connection with
the importation of goods;
(i) Liens that are not prior to the Lien of Bank which
constitute rights of set-off of a customary nature or banker's Liens with
respect to amounts on deposit, whether arising by operation of law or by
contract, in connection with arrangement entered in to with banks in the
ordinary course of business; and
(j) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, PROVIDED that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"PERSON" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation, firm, joint stock company, estate, entity or governmental agency.
"PRIME RATE" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"QUICK ASSETS" means, at any date as of which the amount
thereof shall be determined, the consolidated cash, cash-equivalents,
accounts receivable and investments, with maturities not to exceed 90 days,
of Borrower determined in accordance with GAAP.
"RESPONSIBLE OFFICER" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
10.
<PAGE>
"REVOLVING FACILITY" means the facility under which Borrower
may request Bank to issue cash advances and letters of credit, as specified
in Sections 2.1 and 2.1.1 hereof.
"SCHEDULE" means the schedule of exceptions attached hereto,
if any.
"SUBORDINATED DEBT" means any debt incurred by Borrower that
is subordinated to the debt owing by Borrower to Bank on terms acceptable to
Bank (and identified as being such by Borrower and Bank).
"SUBSIDIARY" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which
by the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through
an Affiliate.
"TANGIBLE NET WORTH" means at any date as of which the amount
thereof shall be determined, the consolidated total assets of Borrower and
its Subsidiaries MINUS, without duplication, (i) the sum of any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights
and research and development expenses except prepaid expenses, and (c) all
reserves not already deducted from assets, and (ii) Total Liabilities.
"TOTAL LIABILITIES" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of
Borrower, including in any event all Indebtedness, but specifically excluding
Subordinated Debt.
"TRADEMARKS" means any trademark and servicemark rights,
whether registered or not, applications to register and registrations of the
same and like protections, and the entire goodwill of the business of
Assignor connected with and symbolized by such trademarks.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all
calculations made hereunder shall be made in accordance with GAAP. When used
herein, the terms "financial statements" shall include the notes and
schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 REVOLVING ADVANCES. Subject to the terms and conditions o f
this Exim Agreement, Bank agrees to make Advances to Borrower in an amount
not to exceed the lowest of (i) the Exim Committed Line minus the face amount
of any issued and outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), (ii) the Borrowing Base minus the face
amount of any issued and outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) or (iii) Three Million Dollars ($3,000,000).
For purposes of
11.
<PAGE>
this Exim Agreement "Borrowing Base" shall mean an amount equal to (i) ninety
percent (90%) of the Exim Eligible Foreign Accounts and (ii) seventy percent
(70%) of Eligible Foreign Inventory, minus the amount of any advance payments
or deposits made by Borrower's account debtors.
To evidence the Advances, Borrower shall execute and deliver to Bank on
the date hereof a promissory note (the "Note") in substantially the form
attached hereto as Exhibit B.
Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. California time,
on the Business Day that the Advance is to be made. Each such notification
shall be promptly confirmed by a Payment/Advance Form in substantially the
form of Exhibit C hereto. In addition to the procedure set forth in the
preceding sentence, Bank is authorized to make Advances under this Exim
Agreement, based upon written instructions received from a Responsible
Officer or without instructions if in Bank's discretion such Advances are
necessary to meet Obligations which have become due and remain unpaid. Bank
will credit the amount of Advances made under this Section 2.1 to Borrower's
deposit account. Amounts borrowed pursuant to this Section 2.1 may be repaid
and re-borrowed at any time during the term of this Exim Agreement so long as
no Event of Default has occurred and is continuing.
2.1.1 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Exim
Agreement, Bank agrees to issue or cause to be issued standby Letters of
Credit for the account of Borrower in an aggregate face amount not to exceed
(i) the lesser of the Exim Committed Line or the Borrowing Base minus (ii)
the then outstanding principal balance of the Advances. Each Letter of
Credit shall have an expiry date no later than the Maturity Date. All
Letters of Credit shall be, in form and substance, acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of Bank's
form of application:and letter of credit agreement. All amounts actually
paid by Bank in respect of a Letter of Credit shall, when paid, constitute an
Advance under this Exim Agreement.
(b) The obligation of Borrower to immediately reimburse
Bank for drawings made under Letters of Credit shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Exim Agreement and such Letters of Credit, under all
circumstances whatsoever. Borrower shall indemnify, defend and hold Bank
harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with
any letters of credit issued for the account of Borrower.
2.1.2 LETTER OF CREDIT REIMBURSEMENT; RESERVE.
(a) Borrower may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars. If a demand
for payment is made under any such letter of credit, Bank shall treat such
demand as an advance to Borrower of the
12.
<PAGE>
equivalent of the amount thereof (plus cable charges) in United States
currency at the then prevailing rate of exchange in San Francisco,
California, for sales of that other currency for cable transfer to the
country of which it is the currency.
(b) Upon the issuance of any Letter of Credit payable in
a currency other than United States Dollars, Bank shall create a reserve
under the Exim Committed Line for Letters of Credit against fluctuations in
currency exchange rates, in an amount equal to twenty percent (20%)of the
face amount of such Letter of Credit. The amount of such reserve may be
amended by Bank from time to time to account for fluctuations in the exchange
rate. The availability of funds under the Exim Committed Line shall be
reduced by the amount of such reserve for so long as such Letter of Credit
remains outstanding.
2.2 OVERADVANCES. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Bank pursuant to Section 2.1 of this Exim
Agreement is greater than the lesser of (i) the Exim Committed Line, or (ii)
the Borrowing Base, Borrower shall immediately pay to Bank, in cash, the
amount of such excess.
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(A) INTEREST RATE. Except as provided in Section 2.3(b), any
Advances under this Exim Agreement shall bear interest, on the average Daily
Balance, at a rate equal to three quarters of a percentage point (0.75%)
above the Prime Rate.
(B) DEFAULT RATE. All Obligations shall bear interest, from
and after the occurrence and during the continuance of an Event of Default,
at a rate equal to five (5) percentage points above the rate that applied
immediately prior to the occurrence of the Event of Default.
(C) PAYMENTS. Interest hereunder shall be due and payable in
arrears on the nineteenth calendar day of each month during the term hereof.
Bank shall, at its option, charge such interest, all Exim Bank Expenses, and
all Periodic Payments against Borrower's deposit account or against the Exim
Committed Line, in which case those amounts shall thereafter accrue interest
at the rate then applicable hereunder. Any interest not paid when due shall
be compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(D) COMPUTATION. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased contemporaneously with such change by an amount equal
to such change in the Prime Rate. All interest chargeable under the Exim
Loan Documents shall be computed on the basis of a three hundred sixty (360)
day year for the actual number of days elapsed.
2.4 CREDITING PAYMENTS. The receipt by Bank of any wire transfer
of funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such wire transfer is of
13.
<PAGE>
immediately available federal funds and is made to the appropriate deposit
account of Bank or unless and until such check or other item of payment is
honored when presented for payment. Notwithstanding anything to the contrary
contained herein, any payment (other than a wire transfer of immediately
available funds) received by Bank after 12:00 noon California time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day.
2.5 FEES. Borrower shall pay to bank the following fees:
(A) FINANCIAL EXAMINATION AND APPRAISAL FEES. Bank's
customary fees and out-of-pocket expenses for Bank's initial audit of
Borrower's Accounts and Inventory, and for each subsequent appraisal of
Collateral and financial analysis and examination of Borrower performed from
time to time by Bank or its agents;
(B) EXIM FEE. A facility fee equal to one and one-half
percent (1.5%) per annum of the Exim Committed Line, which fee shall be due
and fully earned upon Bank's receipt of the Exim Guarantee.
(C) EXIM BANK EXPENSES. On the Closing Date, Exim Bank
Expenses incurred through the Closing Date and, after the Closing Date, all
Exim Bank Expenses as they become due.
2.6 INCREASED COSTS. In case any law, regulation, treaty or
official directive or the interpretation or application thereof by any court
or any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for
taxes on the overall net income of Bank imposed by the United States of
America or any political subdivision thereof); or
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets
held by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to
their performance under this Exim Agreement,
and the result of any of the foregoing is to increase the cost to Bank,
reduce the income receivable by Bank or impose any expense upon Bank with
respect to any loans, Bank shall notify Borrower thereof. Borrower agrees to
pay to Bank the amount of such increase in cost, reduction in income or
additional expense as and when such cost, reduction or expense is incurred or
determined, upon presentation all in reasonable detail by Bank of a statement
in the amount and setting forth Bank's calculation thereof, which statement
shall be deemed true and
14.
<PAGE>
correct absent manifest error; provided, however, that Borrower shall not be
liable for any such amount attributable to any period prior to the date of
hundred eighty (180) days prior to the date of such statement.
2.7 TERM. Subject to Section 13.6, this Exim Agreement shall
become effective once duly executed and authorized by Borrower and Bank and
shall continue in full force and effect for a term ending on the Maturity
Date, on which date all Obligations shall become immediately due and payable.
Notwithstanding the foregoing, Bank shall have the right to terminate this
Exim Agreement immediately and without notice upon the occurrence of an Event
of Default and Borrower shall have the right to terminate this Exim Agreement
immediately upon payment in full of its Obligations then outstanding
hereunder. Notwithstanding any termination of this Exim Agreement, all of
Bank's security interest in all of the Collateral and all of the terms and
provisions of this Exim Agreement shall continue in full force and effect
until all Obligations have been paid and performed in full, and no
termination shall impair any right or remedy of Bank, nor shall any such
termination relieve Borrower of any Obligation to Bank until all of the
Obligations have been paid and performed in full.
2.8 USE OF PROCEEDS. Borrower will use the proceeds of Advances
only for the purposes specified in the Borrower Agreement. Borrower shall
not use the proceeds of the Advances for any purpose prohibited by the
Borrower Agreement.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of
Bank to make the initial Advance or issue the initial Letter of Credit is
subject to the condition precedent that Bank shall have received, in form and
substance satisfactory to Bank, the following:
(a) this Exim Agreement, the Borrower Agreement and the Note,
each duly executed by Borrower;
(b) a certificate of the secretary of Borrower with respect
to incumbency and resolutions authorizing the execution and delivery of this
Exim Agreement;
(c) an Intellectual Property Security Agreement;
(d) the Exim Guarantee;
(e) a financing statement;
(f) payment of the fees and Exim Bank Expenses then due and
specified in Section 2.5 hereof;
(g) insurance certificate;
15.
<PAGE>
(h) documents and agreements as specified in Section 3.1 of
the Domestic Agreement; and
(i) such other documents, and completion of such other
matters, as Bank may deem reasonably necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of Bank
to make each Advance, including the initial Advance, and to issue each Letter
of Credit is further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1;
(b) timely receipt by Bank of a copy of the executed firm
written export purchase order relating to the requested Advance, the payment
terms of which shall be acceptable to Bank;
(c) timely receipt by Bank of an Export Order as defined in
the Borrower Agreement and Borrowing Base Certificate current within five (5)
Business Days;
(d) the Exim Guarantee shall be in full force and effect; and
(e) the representations and warranties contained in Section 5
hereof shall be true and accurate in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Advance
as though made at and as of each such date (except to the extent they relate
specifically to an earlier date, in which case such representations and
warranties shall continue to have been true and accurate as of such date),
and no Event of Default shall have occurred and be continuing, or would
result from such Advance.
The making of each Advance and issuance of each Letter of Credit shall
be deemed to be a representation and warranty by Borrower on the date of such
Advance as to the accuracy of the facts referred to in subsection (e) of this
Section 3.2.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Bank a
continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Exim Loan Documents. As long as an Event
of Default has not occurred and is continuing, upon (i) Borrower's
achievement of three (3) consecutive quarters of minimum net profit of at
least $1, and (ii) Borrower's receipt of cash proceeds of at least
$16,000,000 from the issuance of its equity securities after the date hereof,
Bank shall release its security interest in Intellectual Property Collateral,
and from and after such release, the Intellectual Property Collateral shall
not constitute "Collateral" for purposes of the Exim Loan Documents.
16.
<PAGE>
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
financing statements and other documents that Bank may reasonably request, in
form satisfactory to Bank, to perfect and continue perfected Bank's security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Exim Loan Documents.
4.3 RIGHT TO INSPECT. Each of Bank and Exim Bank (through any of
their respective officers, employees, or agents) shall have the right, upon
reasonable prior notice, from time to time during Borrower's usual business
hours, to inspect Borrower's Books, facilities and activities, and to check,
test, and appraise the Collateral in order to verify Borrower's financial
condition or the amount, condition of, or any other matter relating to, the
Collateral. Bank shall conduct semi-annual accounts receivable audits and
physical inspections of the Inventory, the results of which audits shall be
satisfactory to Bank. Borrower will cause its officers and employees to give
their full cooperation and assistance in connection therewith.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents, warrants and covenants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws
of its state of incorporation and qualified and licensed to do business in,
and is in good standing in, any state in which the conduct of its business or
its ownership of property requires that it be so qualified, except for states
as to which any failure to so qualify would not have a Material Adverse
Effect.
5.2 DUE AUTHORIZATION: NO CONFLICT. The execution, delivery, and
performance of the Exim Loan Documents are within Borrower's powers, have
been duly authorized, and are not in conflict with nor constitute a breach of
any provision contained in Borrower's Articles of Incorporation or Bylaws,
nor will .they constitute an event of default under any material agreement to
which Borrower is a party or by which Borrower is bound. Borrower is not in
default under any material agreement to which it is a party or by which it is
bound, which default could have a Material Adverse Effect.
5.3 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 BONA FIDE ELIGIBLE-ACCOUNTS. The Exim Eligible Foreign
Accounts are bona fide existing obligations. The property giving rise to
such accounts has been delivered to the account debtor or to the account
debtor's agent for immediate shipment to and unconditional acceptance by the
account debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any account debtor that is included in any Borrowing
Base Certificate as an Exim Eligible Foreign Account.
5.5 MERCHANTABLE INVENTORY. All Inventory is in all material
respects of good and marketable quality, free from all material defects.
17.
<PAGE>
5.6 INTELLECTUAL PROPERTY. Borrower is the sole owner of the
presently registered Intellectual Property Collateral, except for
non-exclusive licenses granted by Borrower to its customers in the ordinary
course of business. Each of the registered Patents is valid and enforceable,
and no part of the Intellectual Property Collateral has been judged invalid
or unenforceable, in whole or in part, and no claim has been made that any
part of the intellectual Property Collateral violates the rights of any third
party. Except for and upon the filing with the United States Patent and
Trademark Office with respect to the Patents and Trademarks and the Register
of Copyrights with respect to the Copyrights necessary to perfect the
security interests created hereunder, and except as has been already made or
obtained, no authorization, approval or other action by, and no notice to or
filing with, any United States governmental authority or United States
regulatory body is required either (i) for the grant by Borrower of the
security interest granted hereby or for the execution, delivery or
performance of Loan Documents by Borrower in the United States or (ii) for
the perfection in the United States or the exercise by Bank of its rights and
remedies hereunder.
5.7 NAME: LOCATION OF CHIEF EXECUTIVE OFFICE. Except as disclosed
in the Schedule, Borrower has not done business under any name other than
that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 11 hereof.
5.8 LITIGATION. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary
before any court or administrative agency in which an adverse decision could
have a Material Adverse Effect or a material adverse effect on Borrower's
interest or Bank's security interest in the Collateral. Borrower does not
have knowledge of any such pending or threatened actions or proceedings.
5.9 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material
respects Borrower's consolidated financial condition as of the date thereof
and Borrower's consolidated results of operations for the period then ended.
There has not been a material adverse change in the consolidated financial
condition of Borrower since the date of the most recent of such financial
statements submitted to Bank.
5.10 SOLVENCY. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.11 REGULATORY COMPLIANCE. Borrower and each Subsidiary has met
the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from
Borrower's failure to comply with ERISA that is reasonably likely to result
in Borrower's incurring any liability that could have a Material Adverse
Effect. Borrower is not an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940. Borrower is not engaged principally, or as one of the important
activities, in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulations G, T and U of the
Board of Governors of the Federal Borrower has complied with all the
18.
<PAGE>
provisions of the Federal Fair Labor Standards Reserve System). Borrower has
complied with all the provisions of the Federal Fair Labor Borrower has not
violated any statutes, laws, ordinances or rules applicable to it, violation
of which could have a Material Adverse Effect.
5.12 ENVIRONMENTAL CONDITION. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release,
or transport, any hazardous waste or hazardous substance other than in
accordance with applicable law; to the best of Borrower's knowledge, none of
Borrower's properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a hazardous waste
or hazardous substance disposal site, or a candidate for closure pursuant to
any environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous
waste or hazardous substances into the environment.
5.13 TAXES. Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.14 SUBSIDIARIES. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.15 GOVERNMENT CONSENTS. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all governmental authorities that
are necessary for the continued operation of Borrower's business as currently
conducted.
5.16 FRILL DISCLOSURE. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished
to Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of the
Obligations, Borrower shall do all of the following:
6.1 GOOD STANDING. Borrower shall maintain its and each of its
Subsidiaries' corporate existence 'and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could reasonably be expected to have a Material Adverse
Effect. Borrower shall maintain, and shall cause each of its
19.
<PAGE>
Subsidiaries to maintain, to the extent consistent with prudent management of
Borrower's business, in force all licenses, approvals and agreements, the
loss of which could have a Material Adverse Effect.
6.2 GOVERNMENT COMPLIANCE. Borrower shall meet, and shall cause
each Subsidiary to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. Borrower shall
comply, and shall cause each Subsidiary to comply, with all statutes, laws,
ordinances and government rules and regulations to which it is subject,
noncompliance with which could reasonably be expected to have a Material
Adverse Effect or a material adverse effect on the Collateral or the priority
of Bank's Lien on the Collateral.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall
deliver to Bank: (a) as soon as avail.able, but in any event within thirty
(30) days after the end of each fiscal quarter, a company prepared
consolidated balance sheet and income statement covering Borrower's
consolidated operations during such period, certified by a Responsible
Officer; (b) as soon as available, but in any event within ninety (90) days
after the end of Borrower's fiscal year, audited consolidated financial
statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial statements of
an independent certified public accounting firm reasonably acceptable to Bank
and any accompanying management reports; (c) prompt notice of any material
change in the composition of the Intellectual Property Collateral, including,
but not limited to, any subsequent ownership right of the Borrower in or to
any Copyright, Patent or Trademark not specified in any intellectual property
security agreement between Borrower and Bank or knowledge of an event that
materially adversely effects the value of the Intellectual Property
Collateral; (d) within five (5) days upon becoming available, copies of all
statements, reports and notices sent or made available generally by Borrower
to its security holders or to any holders of Subordinated Debt and all
reports on Form 10-K and 10-Q filed with the Securities and Exchange
Commission; (e) promptly upon receipt of notice thereof, a report of any
legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of One Hundred
Thousand Dollars ($100,000) or more; and (f) such budgets, sales projections,
operating plans or other financial information as Bank may reasonably request
from time to time.
Within twenty (20) days after the last day of each month in which an
Advance is outstanding (and as a condition to Borrower requesting an
Advance), Borrower shall deliver to Bank Borrowing Base Certificates signed
by a Responsible Officer in substantially the form of Exhibit D hereto,
together with aged listings of accounts receivable and accounts payable and a
schedule of Inventory.
Borrower shall deliver to Bank with the quarterly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the
form of Exhibit E hereto.
20.
<PAGE>
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted
no more often than every six (6) months unless an Event of Default has
occurred and is continuing.
6.4 INVENTORY; RETURNS. Borrower shall keep all Inventory in good
and marketable condition, free from. all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on
the same basis and in accordance with the usual customary practices of
Borrower, as they exist at the time of the execution and delivery of this
Agreement. Borrower shall promptly notify Bank of all returns and recoveries
and of all disputes and claims, where the return, recovery, dispute or claim
involves more than Fifty Thousand Dollars ($50,000).
6.5 TAXES. Borrower shall make, and shall cause each Subsidiary
to make, due and timely payment or deposit of all material federal, state,
and local taxes, assessments, or contributions required of it by law, and
will execute and deliver to Bank, on demand, appropriate certificates
attesting to the payment or deposit thereof; and Borrower will make, and will
cause each Subsidiary to make, timely payment or deposit of all material tax
payments and withholding taxes required of it by applicable laws, including,
but not limited to, those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon
request, furnish Bank with proof satisfactory to Bank. indicating that
Borrower or a Subsidiary has made such payments or deposits; provided that
Borrower or a Subsidiary need not make any payment if the amount or validity
of such payment is contested in good faith by appropriate proceedings and is
reserved against (to the extent required by GAAP) by Borrower.
6.6 INSURANCE.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against
by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. Borrower shall also
maintain insurance relating to Borrower's ownership and use of the Collateral
in amounts and of a type that are customary to businesses similar to
Borrower's.
(b) All such policies of insurance shall be in such form,
with such companies, and in such amounts as reasonably satisfactory to Bank.
All such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional
loss payee thereof and all liability insurance policies shall show the Bank
as an additional insured, and shall specify that the insurer must give at
least twenty (20) days notice to Bank before canceling its policy for any
reason. Upon Bank's request, Borrower shall deliver to Bank certified copies
of such policies of insurance and evidence of the payments of all premiums
therefor. All proceeds payable under any such policy shall, at the option of
Bank, be payable to Bank to be applied on account of the Obligations.
6.7 PRINCIPAL DEPOSITORY. Borrower shall maintain its principal
depository and operating accounts with Bank.
21.
<PAGE>
6.8 ADJUSTED QUICK RATIO. Borrower shall maintain, as of the last
day of each fiscal quarter, a ratio of Quick Assets to Current Liabilities,
excluding deferred revenue and customer deposits, of at least 1.25 to 1.0.
For purposes of this Section, Quick Assets shall be deemed to include cash,
cash-equivalents, and investments with maturities not exceeding 90 days held
in deposit accounts in which Bank has a Lien prior to any other Lien.
6.9 DEBT-NET WORTH RATIO. Borrower shall maintain, as of the last
day of each fiscal quarter, a ratio of Total Liabilities, excluding deferred
revenue and customer deposits, less Subordinated Debt to Tangible Net Worth
plus Subordinated Debt of not more than 1.0 to 1.0.
6.10 TANGIBLE NET WORTH. Borrower shall maintain, as of the last
day of each fiscal quarter, a Tangible Net Worth of not less than Eight
Million Dollars ($8,000,000) plus seventy-five percent of the net proceeds
from the sale of Borrower's equity securities after the Closing Date.
6.11 PROFITABILITY. Borrower shall be profitable for each fiscal
quarter, except Borrower may suffer a loss not to exceed $600,000 for one
fiscal quarter in any fiscal year.
6.12 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
(a) Borrower shall register or cause to be registered (to the
extent not already registered) with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, those
intellectual property rights listed on Exhibits A, B and C to the
Intellectual Property Security Agreement delivered to Bank by Borrower in
connection with this Agreement within thirty (30) days of the date of this
Agreement. Borrower shall have no duty to register or cause to be registered
with the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, those additional intellectual property
rights developed or acquired by Borrower from time to time in connection with
any product prior to the sale or licensing of such product to any third
party, including without limitation revisions or additions to the
intellectual property rights listed on such Exhibits A, B and C.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request
to perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents and Copyrights, (ii)
use its best efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Bank in writing of material infringements
detected and (iii) not allow any Trademarks, Patents or Copyrights to be
abandoned, forfeited or dedicated to the public without the written consent
of Bank, which shall not be unreasonably withheld, unless Bank determines
that reasonable business practices suggest that abandonment is appropriate.
22.
<PAGE>
(d) Bank shall have the right, but not the obligation, to
take, at Borrower's sole expense, any actions that Borrower is required under
this Section 6.12 to take but which Borrower fails to take, after fifteen
(15) days' notice to Borrower. Borrower shall reimburse and indemnify Bank
for all reasonable costs and reasonable expenses incurred in the reasonable
exercise of its rights under this Section 6.12.
6.13 TERMS OF SALE. Borrower shall cause all sales of products
upon which Advances are based either to be (i) supported by one or more
irrevocable letters of credit in an amount and of a tenor, naming a
beneficiary and issued by a financial institution acceptable to Bank or (ii)
on open account to creditworthy buyers that have been preapproved in writing
by Bank and Exim Bank.
6.14 BORROWER AGREEMENT. Borrower shall comply with all of the
terms of the Borrower Agreement. In the event of any conflict or
inconsistency between any provision contained in the Borrower Agreement with
any provision contained in this Exim Agreement, the more strict provision,
with respect to Borrower, shall control.
6.15 NOTICE IN EVENT OF FILING OF ACTION FOR DEBTOR'S RELIEF.
Borrower shall notify Bank in writing within five (5) days of the occurrence
of any of the following: (1) Borrower begins or consents in any manner to any
proceeding or arrangement for its liquidation in whole or in part or to any
other proceeding or arrangement whereby any of its assets are subject
generally to the payment of its liabilities or whereby any receiver, trustee,
liquidator or the like is appointed for it or any substantial part of its
assets (including without limitation the filing by Borrower of a petition for
appointment as a debtor-in-possession under Title 11 of the U.S. Code); (2)
Borrower fails to obtain the dismissal or stay on appeal within thirty (30)
calendar days of the commencement of any proceeding arrangement referred to
in (1) above; (3) Borrower begins any other procedure for the relief of
financially distressed or insolvent debtors, or such procedure has been
commenced against it, whether voluntarily or involuntarily, and such
procedure has not been effectively terminated, dismissed or stayed within
.thirty (30) calendar days after the commencement thereof, or (4) Borrower
begins any procedure for its dissolution, or a procedure therefor has been
commenced against it.
6.16 PAYMENT IN DOLLARS. Borrower shall require payment in United
States Dollars for the products, unless Exim Bank otherwise agrees in writing.
6.17 FURTHER ASSURANCES. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes
of this Exim Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any credit hereunder
shall be available and until payment in full of the Obligations, Borrower
will not do any of the following, or enter into any agreement to do any of
the following:
23.
<PAGE>
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (i)
Transfers of Inventory in the ordinary course of business; (ii) Transfers of
non-exclusive licenses and similar arrangements for the use of the property
of Borrower or its Subsidiaries; (iii) Transfers of worn-out or obsolete
Equipment; or (iv) sale-leaseback transactions of Equipment as described in
clause; (e) of the defined term-"Permitted Indebtedness."
7.2 CHANGE IN BUSINESS. Engage in any business, or permit any of
its Subsidiaries to engage in any business, other than the businesses
currently engaged in by Borrower and any business substantially similar or
related thereto (or incidental thereto), or suffer a material change in
Borrower's ownership of greater than forty percent (40%). Borrower will not,
without thirty (30) days prior written notification to Bank, relocate its
chief executive office.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any
of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all
or substantially all of the capital stock or property of another Person,
except such transactions that do not result in a change of more than 25% of
Borrower's Net Worth PROVIDED that immediately after giving effect to such
merger or consolidation, no Event of Default, or event which with the lapse
of time or giving of notice or both, would result in an Event of Default
shall have occurred and be continuing.
7.4 INDEBTEDNESS. Create, incur, assume or be or remain liable
with respect to any Indebtedness, or permit any Subsidiary so to do, other
than Permitted Indebtedness.
7.5 ENCUMBRANCES. Create, incur, assume or suffer to exist any
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.6 DISTRIBUTIONS. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or
purchase of any capital stock. Notwithstanding the foregoing, Borrower may
redeem or repurchase its common stock and pay dividends on its preferred
stock, provided the sum of (i) the purchase price of any stock so redeemed or
repurchased and (ii) any such dividends paid on preferred stock does not
exceed, in the aggregate, $250,000 in any fiscal year.
7.7 INVESTMENTS. Directly or indirectly acquire or own, or make
any Investment in or to any Person, or permit any of its Subsidiaries so to
do, other than Permitted Investments.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of
Borrower except for transactions that are in the ordinary course of
Borrower':s business, upon fair and reasonable terms that are no less
24.
<PAGE>
favorable to Borrower than would be obtained in an arm's length transaction
with a nonaffiliated Person.
7.9 INTELLECTUAL PROPERTY AGREEMENTS. Borrower shall not permit
the inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way prevent the creation of a security
interest in Borrower's rights and interests in any property included within
the definition of the Intellectual Property Collateral acquired under such
contracts.
7.10 SUBORDINATED DEBT. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such
payment, except in compliance with the terms of such Subordinated Debt, or
amend any provision contained in any documentation relating to the
Subordinated Debt without Bank's prior written consent.
7.11 INVENTORY. Store the Inventory with a bailee, warehouseman,
or similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section
11 hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.12 COMPLIANCE. Become an "investment company" controlled by an
"investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds' of any Advance for such purpose.
Fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur, fail to
comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect or a
material adverse effect on the Collateral or the priority of Bank's Lien on
the Collateral, or permit any of its Subsidiaries to do any of the foregoing.
7.13 LOANS TO SHAREHOLDERS OR AFFILIATES. Without Exim Bank's
prior written consent, make any loans to any shareholder or entity affiliated
with Borrower. As used in this Section, the term "loan" does' not include
salary, rent paid to an affiliated entity owned by the shareholders, or to
other expenses incurred in the ordinary course of Borrower's business.
7.14 BORROWER AGREEMENT. Violate or otherwise fail to comply with
any provision of the Borrower Agreement.
7.15 EXIM GUARANTEE. Take any action, or permit any action to be
taken, that causes or, with the passage of time, could reasonably be expected
to cause, the Exim Guarantee to cease to be in full force and effect.
25.
<PAGE>
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event
of Default by Borrower under this Exim Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay the principal of,
or any interest on, any Advances when due and payable; or fails to pay any
portion of any other Obligations not constituting such principal or interest,
including without limitation Bank Expenses, within thirty (30) days of
receipt by Borrower of an invoice for such other Obligations;
8.2 COVENANT DEFAULT; CROSS DEFAULT. If Borrower fails or
neglects to perform, keep, or observe any material term, provision,
condition, covenant, or agreement contained in this Agreement, in any of the
Exim Loan Documents, the Domestic Loan Documents, the Borrower Agreement or
in any other present or future agreement between Borrower and Bank, or an
Event of Default occurs under any of the Domestic Loan Documents or the
Borrower Agreement;
8.3 MATERIAL ADVERSE CHANGE. If there occurs a material adverse
change in Borrower's business or financial condition or a material impairment
of the value or priority of Bank's security interests in the Collateral;
8.4 ATTACHMENT. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any trustee, receiver or person acting in a
similar capacity and such attachment, seizure, writ or distress warrant or
levy has not been removed, discharged or rescinded within thirty (30) days,
or if Borrower is enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs, or if a judgment or other claim becomes a lien or encumbrance upon
any material portion of Borrower's assets, or if a notice of lien, levy, or
assessment is filed of record with respect to any of Borrower's assets by the
United States Government, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental agency, and the
same is not paid within thirty (30) days after Borrower receives notice
thereof, provided that none of the foregoing shall constitute an Event of
Default where such action or event is stayed or an adequate bond has been
posted pending a good faith contest by Borrower (provided that no Advances
will be required to be made during such cure period);
8.5 INSOLVENCY. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency
Proceeding is commenced against Borrower and is not dismissed or stayed'
within thirty (30) days (provided that no Advances will be made prior to the
dismissal of such Insolvency Proceeding);
8.6 OTHER AGREEMENTS. If there is a default in any agreement to
which Borrower is a party with a third party, or parties resulting in the
exercise of a right by such third party or parties to accelerate the maturity
of any Indebtedness in an amount in excess of Two Hundred Fifty Thousand
Dollars ($250,000) or that could have a Material Adverse Effect.
26.
<PAGE>
8.7 SUBORDINATED DEBT. If Borrower makes any payment on account
of Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 JUDGMENTS. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least One Hundred
Fifty Thousand Dollars ($150,000) shall be rendered against Borrower and
shall remain unsatisfied and unstayed for a period of thirty (30) days
(provided that no Advances will be made prior to the satisfaction or stay of
such judgment);
8.9 MISREPRESENTATIONS. If any material misrepresentation or
material misstatement exists now or as of any date made or deemed made or
hereafter in any warranty or representation set forth herein or in any
certificate delivered to Bank by any Responsible Officer pursuant to this
Agreement or to induce Bank to enter into this Agreement or any other Loan
Document; or
8.10 EXIM GUARANTEE. If the Exim Guarantee ceases for any reason
to be in full force and effect, or if the Exim Bank declares the Exim
Guarantee void or revokes or purports to revoke any obligations under the
Exim Guarantee.
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence of an Event of
Default, Bank may, at is election, without notice and without demand, do any
one or more of the following:
(a) Declare all Obligations, whether evidenced by this Exim
Agreement, by any of the other Exim Loan Documents, or otherwise, immediately
due and payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Exim Agreement or under any other agreement
between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(d) Demand that Borrower (i) deposit cash with Bank in an
amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings; under such
Letters of Credit, and Borrower shall forthwith deposit and pay such amounts,
and (ii) pay in advance all Letters of Credit fees scheduled to be paid or
payable over the remaining term of the Letters of Credit;
(e) Notify customers of Borrower or other third parties to
pay any amounts owing to Borrower directly to Bank;
27.
<PAGE>
(f) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble
the Collateral if Bank so requires, and to make the Collateral available to
Bank as Bank may designate. Borrower authorizes Bank to enter the premises
where the Collateral is located,, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or lien which in Bank's determination appears to be
prior or superior to its security interest and to pay all expenses incurred
in connection therewith. With respect to any of Borrower's owned premises,
Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by Bank, or (ii) indebtedness at any
time owing to or for the credit or the account of Borrower held by Bank;
(h) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right,
solely pursuant to the provisions of this section 9.1, to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling
any Collateral and, in connection with Bank's exercise of its rights under
this section 9.1, Borrower's rights under all licenses and all franchise
agreements shall inure to Bank's benefit;
(i) Sell the Collateral at either a public or private sale,
or both, by way of one or more contra**s or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Bank determines is commercially reasonable;
(j) Bank may credit bid and purchase at any public sale; and
(k) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 EXIM DIRECTION. Upon the occurrence of an Event of Default,
Exim Bank shall have a right to: (i).direct Bank to exercise the remedies
specified in section 9.1 and (ii) request that Bank accelerate the maturity
of any other loans to Borrower as to which Bank has a right to accelerate.
9.3 EXIM NOTIFICATION. Bank shall have the right to immediately
notify Exim Bank in writing if it has knowledge of the occurrence of any of
the following events: (1) any failure to pay any amount due under this Loan
Exim Agreement or the Note; (2) the Borrowing Base is less than the sum of
outstanding Advances hereunder; (3) any failure to pay when due any amount
payable to Bank by the Borrower under any loan(s) extended by Bank to
Borrower;
28.
<PAGE>
(4) the filing of an action for debtor's relief by, against, or on behalf of
Borrower; or (5) any threatened or pending material litigation against
Borrower, or any material dispute involving Borrower.
In the event that it sends such a notification to Exim Bank, Bank
shall have the right thereafter to send Exim Bank a written report on the
status of the events covered by said notification on each Business Day which
occurs every thirty (30) calendar days after the date of said notification,
until such time as Bank files a claim with Exim Bank or said default or other
events have been cured. Bank shall not have any obligation to make any
Advances or to issue any Letters of Credit following said notification to
Exim Bank, unless Exim Bank gives its written approval thereto. If directed
to do so by Exim Bank, Bank shall have a right promptly to exercise any
rights it may have against Borrower to demand the immediate repayment of all
amounts outstanding under the Exim Loan Documents.
9.4 POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill
of lading relating to any Account, drafts against account debtors, schedules
and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; (e) settle and adjust
disputes and claims respecting the accounts directly with account debtors,
for amounts and upon terms which Bank determines to be reasonable; (f) to
modify, in its sole discretion, any intellectual property security agreement
entered into between Borrower and Bank without first obtaining Borrower's
approval of or signature to such modification by amending Exhibit A, Exhibit
B and Exhibit C, thereof, as appropriate, to include reference to any right,
title or interest in any Copyrights, Patents or Trademarks acquired by
Borrower after the execution hereof or to delete any reference to any right,
title or interest in any Copyrights, Patents or Trademarks in which Borrower
no longer has or claims any right, title or interest; (g) to file, in its
sole discretion, one or more financing or continuation statements and
amendments thereto, relative to any of the Collateral without the signature
of Borrower where permitted by law; and (h) to transfer the Intellectual
Property Collateral into the name of Bank or a third party to the extent
permitted under the California Uniform Commercial Code provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default
has occurred. The appointment of Bank as Borrower's attorney in fact, and
each and every one of Bank's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid
and performed and Bank's obligation to provide advances hereunder is
terminated.
9.5 ACCOUNTS COLLECTION. At any time from the date of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's
security interest in such funds and verify the amount of such Account. Upon
the occurrence and during the continuance of an Event of Default, Borrower
shall collect all amounts owing to Borrower for Bank, receive in
29
<PAGE>
trust all payments as Bank's trustee, and immediately deliver such payments
to Bank in their original form as received from the account debtor, with
proper endorsements for deposit.
9.6 BANK EXPENSES. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any of all of
the following: (a) make payment of the same or any part thereof; (b) set up
such reserves under the Revolving Facility as Bank deems necessary to protect
Bank from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type discussed in Section 6.6 of this Agreement,
and take any action with respect to such policies as Bank deems prudent. Any
amounts so paid or deposited by Bank shall constitute Bank Expenses, shall be
immediately due and payable, and shall bear interest at the then applicable
rate hereinabove provided, ' and shall be secured by the Collateral. Any
payments made by Bank shall not constitute an agreement by Bank to make
similar payments in the future or a waiver by Bank of any Event of Default
under this Agreement. Bank shall have a non-exclusive, royalty-free license
to use the Intellectual Property Collateral to the extent reasonably
necessary to permit Bank to exercise its rights and remedies upon the
occurrence of an Event of Default.
9.7 BANK'S LIABILITY FOR COLLATERAL. So long as Bank complies
with reasonable banking practices, Bank shall not in any way or manner be
liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage thereto occurring or arising in any manner or fashion from any
ca.use; (c) any diminution in the value thereof; or (d) any act or default of
any carrier, warehouseman, bailee, forwarding agency, or other person
whomsoever. All risk of loss, damage or destruction of the Collateral shall
be borne by Borrower, except for any loss, damage or destruction caused by
Bank's gross negligence or wilful misconduct.
9.8 REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one
right or remedy shall be deemed an election, and no waiver by Bank of any
Event of Default on Borrower's part shall be deemed a continuing waiver. No
delay by Bank shall constitute a waiver, election, or acquiescence by it. No
waiver by Bank shall be effective unless made in a written document signed on
behalf of Bank and then shall be effective only in the specific instance and
for the specific purpose for which it was given.
9.9 DEMAND; PROTEST. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments,
chattel paper, and guarantees at any time held by Bank on which Borrower may
in any way be liable.
10. WAIVERS: INDEMNIFICATION
10.1 DEMAND: PROTEST. Borrower waives demand, protest, notice of
protest, notice of dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at
30
<PAGE>
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees at any time held by
Bank on which Borrower may in any way be liable.
10.2 BANK'S LIABILITY FOR COLLATERAL. Bank shall not in any way or
manner be liable or responsible for: (a) the safekeeping of tile Collateral;
(b) any loss or damage thereto occurring or arising in any manner or fashion
from any cause; (c) any diminution in the value thereof; or (d) any act or
default of any carrier, warehouseman, bailee, forwarding agency, or other
person whomsoever. All risk of loss, damage or destruction of the Collateral
shall be borne by Borrower.
10.3 INDEMNIFICATION. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any
other party in connection with the transactions contemplated by this Exim
Agreement, and (b) all losses or Exim Bank Expenses in any way suffered,
incurred, or paid by. Bank as a result of or in any way arising out of,
following, or consequential to transactions between Bank and Borrower whether
under this Exim Agreement, or otherwise (including without limitation
reasonable attorneys fees and expenses), except for losses caused by Bank's
gross negligence or willful misconduct.
11. NOTICES
Unless otherwise provided in this Exim Agreement, al notices or
demands by any party relating to this Exim Agreement or any other agreement
entered into in connection herewith shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
certified mail, postage prepaid, return receipt requested, or by
telefacsimile to Borrower or to Bank, as tile case may be, at the address set
forth below:
If to Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attn: Patrick McCarthy
FAX: (408) 748-9478
If to Borrower: InVision Technologies, Inc.
3420 E. Third Ave.
Foster City, CA 94404
Attn: Curt DiSibio
FAX: (415) 578-1931
The parties hereto may change tile address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to tile
other.
31.
<PAGE>
12. CHOICE OF LAW AND VENUE: JURY TRIAL WAIVER
This Exim Agreement shall be government by, and construed in accordance
with, the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower and Bank.hereby submits to
tile exclusive jurisdiction of the state and Federal courts located in the
County of Santa Clara, State of California. BORROWER AND BANK HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF ANY OF THE EXIM LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
13. GENERAL PROVISIONS
13.1 SUCCESSORS AND ASSIGNS. This Exim Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of
each of the parties; provided, however, that neither this Exim Agreement nor
any rights hereunder may be assigned by Borrower without Bank's prior written
consent, which consent may be granted or withheld in Bank's sole discretion.
Bank shall have the right without the consent of or notice to Borrower to
sell, transfer, negotiate, or grant participation in all or any part of, or
any interest in Bank's rights and benefits hereunder.
13.2 INDEMNIFICATION. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any
other party in connection with the transactions contemplated by the Loan
Documents; and (b) all losses or Bank Expenses in any way suffered, incurred,
or paid by Bank as a result of or in any way arising out of, following, or
consequential to transactions between Bank and Borrower whether under the
Loan Documents, or otherwise (including without limitation reasonable
attorneys fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.
13.3 TIME OF ESSENCE. Time is of the essence for the performance
of all obligations set forth in this Exim Agreement.
13.4 SEVERABILITY OF PROVISIONS. Each provision of this Exim
Agreement shall be severable from every other provision of this Exim
Agreement for the purpose of determining the legal enforceability, of any
specific provision.
13.5 AMENDMENTS IN WRITING. This Exim Agreement cannot be changed
or terminated orally. Without the prior written consent of Exim Bank, no
material amendment of or deviation from the terms of this Exim Agreement or
the Note shall be made that would adversely affect the interests of Exim
Bank under the Exim Guarantee, including without limitation the rescheduling
of any payment terms provided for in this Exim Agreement. All prior
agreements, understandings, representations, warranties, and negotiations
between the
32.
<PAGE>
parties hereto with respect to the subject matter of this Exim Agreement, if
any, are merged into this Exim Agreement.
13.6 COUNTERPARTS. This Exim Agreement may be executed in any
number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an
original, and all of which, when taken together, shall constitute but one and
the same Exim Agreement.
13.7 SURVIVAL. All covenants, representations and warranties made
in this Exim Agreement shall continue in full force and effect so long as any
Obligations (excluding Obligations under Sections 2.6 and 10.3 to the extent
they remain inchoate at the time that outstanding payment Obligations are
paid in full) remain outstanding. The obligations of Borrower to indemnify
Bank with respect to the expenses, damages, losses, costs and liabilities
described in Section 10.3 shall survive until all applicable statute of
limitations periods with respect to actions that may be brought against Bank
have run.
13.8 CONFIDENTIALITY. In handling any confidential information
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they
have entered into a Comparable confidentiality agreement in favor of Borrower
and have delivered a copy to Borrower, (iii) as required by law, regulations,
rule or order, subpoena, judicial order or similar order, (iv) as'. may be
required in connection with the examination, audit or similar investigation
of Bank and (v) as Bank may determine in connection with the enforcement of
any remedies hereunder. Confidential information hereunder shall not include
information that either: (a) is in the public domain or in the knowledge or
possession of Bank when disclosed to Bank, or becomes part of the public
domain after disclosure to Bank through no fault of Bank; or (b) is disclosed
to Bank by a third party, provided Bank does not have actual knowledge that
such third party is prohibited from disclosing such information.
33.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Exim Agreement
to be executed as of the date first above written.
INVISION TECHNOLOGIES, INC.
By:
-------------------------------------
Title:
----------------------------------
SILICON VALLEY BANK
By:
-------------------------------------
Title:
----------------------------------
34
<PAGE>
EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor
vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any
of the foregoing and any documents of title representing any of he above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, design rights,
income tax refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods, the licensing of
technology or the rendering of services by Borrower, whether or not earned by
performance, and any and all credit insurance, guaranties, and other security
therefor, as well as all "merchandise returned to or reclaimed by Borrower
and Borrower's Books relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities (other than
securities of foreign Subsidiaries), letters of credit, certificates of
deposit, instruments and chattel paper now owned or hereafter acquired and
Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter
acquired; all trade secret rights, including all rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; all mask work or
similar rights available for the protection of semiconductor chips, now owned
or hereafter acquired; all claims for damages by way of any past, present and
future infringement of any of the foregoing; and
35
<PAGE>
(g) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
36.
<PAGE>
EXHIBIT B
REVOLVING PROMISSORY NOTE
(EXPORT-IMPORT LINE)
4,500,000 Santa Clara, California
February 20, 1997
FOR VALUE RECEIVED, the undersigned, InVision Technologies, Inc. (the
"Borrower"), promises to pay to the order of Silicon Valley Bank ("Bank"), at
such place as the holder hereof may designate, in lawful money of the United
States of America, the aggregate unpaid principal amount of all advances
("Advances") made by Bank to Borrower under the terms of this Note, up to a
maximum principal amount of Four Million Five Hundred Thousand Dollars
($4,500,000). Borrower shall also pay interest on the aggregate unpaid
principal amount of such Advances at the rates and in accordance with the
terms of the Export-Import Bank Loan and Security Agreement between Borrower
and Bank of even date herewith, as amended from time to time (the "Loan
Agreement") on the nineteenth day of each month after an Advance has been
made. The entire principal amount and all accrued interest shall be due and
payable on February 19, 1998, or on such earlier date, as provided for in the
Loan Agreement.
Borrower irrevocably waives the right to direct the application of any
and all payments at any time hereafter received by Bank from or on behalf of
Borrower, and Borrower irrevocably agrees that Bank shall have the
continuing exclusive right to apply any and all such payments against the
then due and owing obligations of Borrower as Bank may deem advisable. In the
absence of a specific determination by Bank with respect thereto, all
payments shall be applied in the following order: (a) then due and payable
fees and expenses; (b) then due and payable interest payments and mandatory
prepayments; and (c) then due and payable principal payments and optional
prepayments.
Bank is hereby authorized by borrower to endorse on Bank's books and
records each Advance made by Bank under this Note and the amount of each
payment or prepayment of principal of each such Advance received by Bank; it
being understood, however, that failure to make any such endorsement (or any
errors in notation) shall not affect the obligations of Borrower with respect
to Advances made hereunder, and payments of principal by Borrower shall be
credited to Borrower notwithstanding the; failure to make a notation (or any
errors in notation) thereof on such books and records.
Borrower promises to pay Bank all reasonable costs and reasonable
expenses of collection of this Note and to pay all reasonable attorneys' fees
incurred in such collection or in any suit or action to collect this Note or
in any appeal thereof. Borrower waives presentment, demand, protest, notice
of protest, notice of dishonor, notice of nonpayment, and any and all other
notices and demands in connection with the delivery, acceptance, performance,
default or enforcement of this Note, as well as any applicable statute of
limitations. No delay by Bank in exercising any power or right hereunder
shall operate as a waiver of any power or right. Time is of the essence as to
all obligations hereunder.
37.
<PAGE>
This Note is issued pursuant to the Loan Agreement, which shall govern
the rights and obligations of Borrower with respect to all obligations
hereunder.
This Note shall be deemed to be made under, and shall be construed in
accordance with and governed by, the laws of the State of California,
excluding conflicts of laws principles.
38.
<PAGE>
EXHIBIT C
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., CALIFORNIA TIME
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
-----------------------------------
FAX#: (408) 432-3249] TIME:
-----------------------------------
- --------------------------------------------------------------------------------
FROM:
---------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
-------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
-----------------------------------------------------------
PHONE NUMBER:
-------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
-------------------- ---------------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $
--------------------------------------------
PRINCIPAL PAYMENT (ONLY) $
-----------------------------------
INTEREST PAYMENT (ONLY) $
--------------------------------------------
PRINCIPAL AND INTEREST (PAYMENT) $
--------------------------------------------
OTHER INSTRUCTIONS:
-------------------------------------------------------------
- --------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the
date of the telephone request for and Advance confirmed by this Borrowing
certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in
all material respects as of such date.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is
know to me.
- ----------------------------------- ----------------------------------------
Authorized Requester Phone #
- ----------------------------------- ----------------------------------------
Received By (Bank) Phone #
----------------------------------
Authorized Signature (Bank)
- --------------------------------------------------------------------------------
39.
<PAGE>
EXHIBIT D
BORROWING BASE CERTIFICATE
- --------------------------------------------------------------------------------
Borrower: InVision Technologies, Inc. Lender: Silicon Valley Bank
Commitment Amount: $4,500,000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN ACCOUNTS RECEIVABLE FROM EXPORT ACTIVITIES
<S> <C> <C>
1. Foreign Accounts Receivable Book Value as of_____ $
------------------------
2. Additions (please explain on reverse) $
------------------------
3. TOTAL FOREIGN ACCOUNTS RECEIVABLE $
------------------------
ACCOUNTS RECEIVABLE DEDUCTIONS
4. Term in excess of 90 days $
------------------------
5. Amounts over 90 days (unless insured, then 90 days) $
------------------------
6. Balance of 50% over 90 day accounts $
------------------------
7. Credit Balances over 120 days
8. Accounts not payable in the U.S. Dollars or
payable in other than U.S. Dollars $
------------------------
9. Non-approved Government and Military Accounts $
------------------------
10. Contra Accounts $
------------------------
11. Promotion, Demo or Consignment Accounts $
------------------------
12. Intercompany/Employee and Affiliate Accounts $
------------------------
13. Accounts in the form of L/Cs, if subject items
have not yet been shipped by Borrower $
------------------------
14. Accounts arising from Inventory not originally
located in and shipped from the U.S. $
------------------------
15. Accounts arising from the sale of defense articles or items $
------------------------
16. Accounts of buyers located in or from countries
in which shipment is prohibited or no coverage available $
------------------------
17. Amounts due and collectable outside U.S. $
------------------------
18. Other exclusions $
------------------------
19. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
------------------------
20. Eligible Accounts (No. 3 minus No. 19)
21. Loan Value of Accounts (90% of No. 20) $
------------------------
FOREIGN INVENTORY
22. Foreign Inventory Value as of ________ $
------------------------
23. Additions (please explain on reverse) $
------------------------
24. TOTAL FOREIGN INVENTORY $
------------------------
40.
<PAGE>
FOREIGN INVENTORY DEDUCTIONS
25. Outside U.S. $
------------------------
26. Consignment $
------------------------
27. Proprietary Software $
------------------------
28. Damaged/Defective $
------------------------
29. Previously Exported $
------------------------
30. Defense Articles/Services $
------------------------
31. Prohibited County $
------------------------
32. No Coverage County $
------------------------
33. Ineligible A/R $
------------------------
34. Advance Payments/Deposits $
------------------------
35. TOTAL DEDUCTIONS $
------------------------
36. Eligible Inventory (No. 23 minus No. 35) $
------------------------
37. Loan Value of Inventory (70% of No. 36) $
------------------------
BALANCES
38. Maximum Loan Amount $
------------------------
39. Total Available [Lesser of (No. 21 plus No. 37) or No. 38] $
------------------------
40. Present balance owing on Line of Credit $
------------------------
41. Outstanding under Sublimits $
------------------------
42. RESERVE POSITION (No. 39 - (No. 40 + No. 41)) $
------------------------
</TABLE>
The undersigned represents, and warrants that the foregoing is true, complete
and correct, and that the information reflected in this Schedule complies
with the representations and warranties set forth in the Borrower Agreement,
executed by Borrower and acknowledged by Lender, and the Export-Import Bank
Loan and Security Agreement, executed by Borrower and acknowledged by Lender
dated February 20, 1997, as may be amended from time to time, as if all
representations and warranties were made as of the date hereof, and that
Borrower is, and shall remain, in full compliance with its agreements,
covenants, and obligations under such agreement. Such representations and
warranties include, without limitation, the following: Borrower is using
disbursements only for the purpose of enabling Borrower to finance the cost
of manufacturing, producing, purchasing or selling items intended for export.
Borrower is not using disbursements for the purpose of: (a) servicing any of
Borrower's unrelated pre-existing or future indebtedness; (b) acquiring fixed
assets or capital goods for the use of Borrower's business; (c) acquiring,
equipping, equipping or renting commercial space outside the United States;
(d) supporting research and development, (e) paying salaries of non-U.S.
citizens or non-U.S. permanent residents who are located in the offices of
the United States, or (f)serving as a retainage or warranty bond.
Additionally, disbursements are not being used to finance the manufacture,
purchase or sale of any of the following: (a) Items to be sold to a buyer
located in a country in which the Export Import Bank of the United States is
legally prohibited from doing business; (b) that part of the cost of the
items which is not U.S. Content unless such
41.
<PAGE>
part is not greater than fifty percent (50%) of the cost of the items and is
incorporated into the items in the United States; (c) defense articles or
defense services or items directly or indirectly destined for use by military
organizations designed primarily for military use (regardless of the nature
or actual use of the items); or (d) any items to be used in the construction,
alteration, operation or maintenance of nuclear power, enrichment,
reprocessing, research or heavy water production facilities.
Sincerely,
InVision Technologies, Inc.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Date:
----------------------------
BANK USE ONLY
Received by:
----------------------------
Date:
-----------------------------------
Verified By:
----------------------------
42.
<PAGE>
EXHIBIT E
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: INVISION TECHNOLOGIES, INC.
The undersigned authorized officer of InVision Technologies, Inc. hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower
is in complete compliance for the period ending with all required covenants
except as noted below and (ii) all representations and warranties of Borrower
stated in the Agreement are true and correct in all material respects as of
the date hereof. Attached herewith are the required documents supporting the
above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
<S> <C> <C> <C>
Quarterly financial statements Quarterly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 20 days Yes No
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
Maintain on a Quarterly Basis:
Minimum Adj. Quick Ratio 1.25:1.0 _______:1.0(1) Yes No
Minimum Tangible Net Worth $8,000,000 $ (2) Yes No
Maximum Debt/Tangible Net Worth 1.0:1.0 _______:1.0(1) Yes No
Profitability: Quarterly(3) $1 $ Yes No
</TABLE>
1 excluding deferred revenue and customer deposits
2 plus 75% of new equity proceeds
3 May incur one quarterly loss per year not to exceed
$600,000
Comments Regarding Exceptions: See Attached.
BANK USE ONLY
Sincerely, Received by:
-------------------------
Authorized Signer
- --------------------------------
Signature Date:
--------------------------------
- --------------------------------
Title Verified:
----------------------------
- -------------------------------- Authorized Signer
Date
Date:
--------------------------------
Compliance Status: Yes No
43.
<PAGE>
DISCLOSURE SCHEDULE TO LOAN AND SECURITY AGREEMENT BETWEEN
INVISION TECHNOLOGIES, INC. AND SILICON VALLEY BANK
LIENS
-----
Secured Party UCC File No. Date
- ------------- ----------- -----
Telogy, Inc. 9435460289 Dec. 2, 1994
Yale-Northern California, Inc. 9504860580 Feb. 10, 1995
Citicorp Dealer Finance
Instituto Bancario San Paolo di
Torino, SpA 9600260210 Dec. 28, 1995
(To be terminated on or prior to Closing Date)
Anaconda Partners, L.P. 9600260218 Dec. 28, 1995
(To be terminated on or prior to Closing Date)
Leasing Technologies
International, Inc. 9613560835 May 13, 1996
Leasing Technologies
International, Inc. 9633160900 Nov. 25, 1996
European American Bank 9626960074 Sep. 20, 1996
INVESTMENTS
-----------
Investments in subsidiaries: Imatron Federal Systems, Inc. and Invision
International, Inc.
INDEBTEDNESS
------------
Lender
- -------
Telogy, Inc.
Yale-Northern California, Inc.
Citicorp Dealer Finance
Leasing Technologies
International, Inc.
Equipment purchased from Hyster to be financed.
OTHER
-----
Invision's Intellectual Property rights are subject to FAA contracts.
1.
<PAGE>
Revolving Promissory Note
(Export-Import Line)
$4,500,000 Santa Clara, California
February 20, 1997
FOR VALUE RECEIVED, the undersigned, InVision Technologies, Inc. (the
"Borrower"), promises to pay to the order of Silicon Valley Bank ("Bank"), at
such place as the holder hereof may designate, in lawful! money of the United
States of America, the aggregate unpaid principal amount of all advances
("Advances") made by Bank to Borrower under the terms of this Note, up to a
maximum principal amount of Four Million Five Hundred Thousand Dollars
($4,500,000). Borrower shall also pay interest on the aggregate unpaid
principal amount of such Advances at the rates and in accordance with the
terms of the Export-Import Bank Loan and Security Agreement between Borrower
and Bank of even date herewith, as amended from time to time (the "Loan
Agreement") on the nineteenth day of each month after an Advance has been
made. The entire principal amount and all accrued interest shall be due and
payable on February 19, 1998, or on such earlier date, as provided for in the
Loan Agreement.
Borrower irrevocably waives the right to direct the application of any and
all payments at any time hereafter received by Bank from or on behalf of
Borrower, and Borrower irrevocably agrees that Bank shall have the continuing
exclusive right to apply any and all such payments against the then due and
owing obligations of Borrower as Bank may deem advisable. In the absence of
a specific determination by Bank with respect thereto, all payments shall be
applied in the following order: (a) then due and payable fees and expenses;
(b) then due and payable interest payments and mandatory prepayments; and (c)
then due and payable principal payments and optional prepayments.
Bank is hereby authorized by Borrower to endorse on Bank's books and
records each Advance made by Bank under this Note and the amount of each
payment or prepayment of principal of each such Advance received by Bank; it
being understood, however, that failure to make any such endorsement (or any
errors in notation) shall not affect the obligations of Borrower with respect
to Advances made hereunder, and payments of principal by Borrower shall be
credited to Borrower notwithstanding the failure to make a notation (or any
errors in notation) thereof on such books and records.
Borrower promises to pay Bank all reasonable costs and reasonable expenses
of collection of this Note and to pay all reasonable attorneys' fees incurred
in such collection or in any suit or action to collect this Note or in any
appeal thereof. Borrower waives presentment, demand, protest, notice of
protest, notice of dishonor, notice of nonpayment, and any and all other
notices and demands in connection with the, delivery, acceptance,
performance, default or enforcement of this Note, as well as any applicable
statute of limitations. No delay by Bank in exercising any power or right
hereunder shall operate as a waiver of any power or right. Time is of the
essence as to all obligations hereunder.
This Note is issued pursuant to the .Loan Agreement, which shall govern the
rights and obligations of Borrower with respect to all obligations hereunder.
This Note shall be deemed to be made under, and shall be construed in
accordance with and governed by, the laws of the State of California,
excluding conflicts of laws principles.
INVISION TECHNOLOGIES, INC.
By: /s/
----------------------------------
Title:
----------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . 11
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . 11
2.1 Revolving Advances . . . . . . . . . . . . . . . . . . . 11
2.2 Overadvances . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Interest Rates, Payments, and Calculations . . . . . . . 13
2.4 Crediting Payments . . . . . . . . . . . . . . . . . . . 13
2.5 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6 Increased Costs. . . . . . . . . . . . . . . . . . . . . 14
2.7 Term . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.8 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . 15
3. CONDITIONS OF LOANS . . . . . . . . . . . . . . . . . . . . . . 15
3.1 Conditions Precedent to Initial Advance. . . . . . . . . 15
3.2 Conditions Precedent to all Advances . . . . . . . . . . 16
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . 16
4.1 Grant of Security Interest . . . . . . . . . . . . . . . 16
4.2 Delivery of Additional Documentation Required. . . . . . 17
4.3 Right to Inspect . . . . . . . . . . . . . . . . . . . . 17
5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 17
5.1 Due Organization and Qualification . . . . . . . . . . . 17
5.2 Due Authorization: No Conflict . . . . . . . . . . . . . 17
5.3 No Prior Encumbrances. . . . . . . . . . . . . . . . . . 17
5.4 Bona Fide Eligible-Accounts. . . . . . . . . . . . . . . 17
5.5 Merchantable Inventory . . . . . . . . . . . . . . . . . 17
5.6 Intellectual Property. . . . . . . . . . . . . . . . . . 18
5.7 Name: Location of Chief Executive Office . . . . . . . . 18
5.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . 18
5.9 No Material Adverse Change in Financial Statements . . . 18
5.10 Solvency . . . . . . . . . . . . . . . . . . . . . . . . 18
5.11 Regulatory Compliance. . . . . . . . . . . . . . . . . . 18
5.12 Environmental Condition. . . . . . . . . . . . . . . . . 19
5.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 19
5.15 Government Consents. . . . . . . . . . . . . . . . . . . 19
5.16 Frill Disclosure . . . . . . . . . . . . . . . . . . . . 19
6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . 19
6.1 Good Standing. . . . . . . . . . . . . . . . . . . . . . 19
6.2 Government Compliance. . . . . . . . . . . . . . . . . . 20
6.3 Financial Statements, Reports, Certificates. . . . . . . 20
6.4 Inventory; Returns . . . . . . . . . . . . . . . . . . . 21
6.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 Principal Depository . . . . . . . . . . . . . . . . . . 21
6.8 Adjusted Quick Ratio . . . . . . . . . . . . . . . . . . 22
6.9 Debt-Net Worth Ratio . . . . . . . . . . . . . . . . . . 22
6.10 Tangible Net Worth . . . . . . . . . . . . . . . . . . . 22
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.11 Profitability. . . . . . . . . . . . . . . . . . . . . . 22
6.12 Registration of Intellectual Property Rights . . . . . . 22
6.13 Terms of Sale. . . . . . . . . . . . . . . . . . . . . . 23
6.14 Borrower Agreement . . . . . . . . . . . . . . . . . . . 23
6.15 Notice in Event of Filing of Action for Debtor's Relief. 23
6.16 Payment in Dollars . . . . . . . . . . . . . . . . . . . 23
6.17 Further Assurances . . . . . . . . . . . . . . . . . . . 23
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Dispositions . . . . . . . . . . . . . . . . . . . . . . 24
7.2 Change in Business . . . . . . . . . . . . . . . . . . . 24
7.3 Mergers or Acquisitions. . . . . . . . . . . . . . . . . 24
7.4 Indebtedness . . . . . . . . . . . . . . . . . . . . . . 24
7.5 Encumbrances . . . . . . . . . . . . . . . . . . . . . . 24
7.6 Distributions. . . . . . . . . . . . . . . . . . . . . . 24
7.7 Investments. . . . . . . . . . . . . . . . . . . . . . . 24
7.8 Transactions with Affiliates . . . . . . . . . . . . . . 24
7.9 Intellectual Property Agreements . . . . . . . . . . . . 25
7.10 Subordinated Debt. . . . . . . . . . . . . . . . . . . . 25
7.11 Inventory. . . . . . . . . . . . . . . . . . . . . . . . 25
7.12 Compliance . . . . . . . . . . . . . . . . . . . . . . . 25
7.13 Loans to Shareholders or Affiliates. . . . . . . . . . . 25
7.14 Borrower Agreement . . . . . . . . . . . . . . . . . . . 25
7.15 Exim Guarantee . . . . . . . . . . . . . . . . . . . . . 25
8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 26
8.1 Payment Default. . . . . . . . . . . . . . . . . . . . . 26
8.2 Covenant Default; Cross Default. . . . . . . . . . . . . 26
8.3 Material Adverse Change. . . . . . . . . . . . . . . . . 26
8.4 Attachment . . . . . . . . . . . . . . . . . . . . . . . 26
8.5 Insolvency . . . . . . . . . . . . . . . . . . . . . . . 26
8.6 Other Agreements . . . . . . . . . . . . . . . . . . . . 26
8.7 Subordinated Debt. . . . . . . . . . . . . . . . . . . . 27
8.8 Judgments. . . . . . . . . . . . . . . . . . . . . . . . 27
8.9 Misrepresentations . . . . . . . . . . . . . . . . . . . 27
8.10 Exim Guarantee . . . . . . . . . . . . . . . . . . . . . 27
9. BANK'S RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . 27
9.1 Rights and Remedies. . . . . . . . . . . . . . . . . . . 27
9.2 Exim Direction . . . . . . . . . . . . . . . . . . . . . 28
9.3 Exim Notification. . . . . . . . . . . . . . . . . . . . 28
9.4 Power of Attorney. . . . . . . . . . . . . . . . . . . . 29
9.5 Accounts Collection. . . . . . . . . . . . . . . . . . . 29
9.6 Bank Expenses. . . . . . . . . . . . . . . . . . . . . . 30
9.7 Bank's Liability for Collateral. . . . . . . . . . . . . 30
9.8 Remedies Cumulative. . . . . . . . . . . . . . . . . . . 30
9.9 Demand; Protest. . . . . . . . . . . . . . . . . . . . . 30
10. WAIVERS: INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 30
10.1 Demand: Protest. . . . . . . . . . . . . . . . . . . . . 30
ii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
10.2 Bank's Liability for Collateral. . . . . . . . . . . . . 31
10.3 Indemnification. . . . . . . . . . . . . . . . . . . . . 31
11. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12. CHOICE OF LAW AND VENUE: JURY TRIAL WAIVER . . . . . . . . . . . 32
13. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 32
13.1 Successors and Assigns . . . . . . . . . . . . . . . . . 32
13.2 Indemnification. . . . . . . . . . . . . . . . . . . . . 32
13.3 Time of Essence. . . . . . . . . . . . . . . . . . . . . 32
13.4 Severability of Provisions . . . . . . . . . . . . . . . 32
13.5 Amendments in Writing. . . . . . . . . . . . . . . . . . 32
13.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . 33
13.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . 33
13.8 Confidentiality. . . . . . . . . . . . . . . . . . . . . 33
<PAGE>
INTELLECTUAL PROPERTY SECURITY AGREEMENT
THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT is entered into as of
February 20, 1997, by and between SILICON VALLEY BANK ("Bank") and INVISION
TECHNOLOGIES, INC. ("Grantor").
RECITALS
A. Bank has agreed to make certain advances of money and to extend
certain financial accommodation to Grantor (the "Loans") in the amounts and
manner set forth in that certain Loan and Security Agreement by and between
Bank and Grantor dated as even date herewith (as the same may be amended,
modified or supplemented from time to time, the "Loan Agreement"; capitalized
terms used herein are used as defined in the Loan Agreement). Bank is willing
to make the Loans to Grantor, but only upon the condition, among others, that
Grantor shall grant to Bank a security interest in certain Copyrights,
Trademarks and Patents to secure the obligations of Grantor under the Loan
Agreement.
B. Pursuant to the terms of the Loan Agreement, Grantor has granted to
Bank a security interest in all of Grantor's right, title and interest,
whether presently existing or hereafter acquired, in, to and under all of the
Collateral.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound, as collateral security
for the prompt and complete payment when due of its obligations under the Loan
Agreement, Grantor hereby represents, warrants, covenants and agrees as
follows:
AGREEMENT
To secure its obligations under the Loan Agreement, Grantor grants and
pledges to Bank a security interest in all of Grantor's right, title and
interest in, to and under its Intellectual Property Collateral (including
without limitation those Copyrights, Patents and Trademarks listed on
Schedules A, B, and C hereto), and including without limitation all proceeds
thereof (such as, by way of example but not by way of limitation, license
royalties and proceeds of infringement suits), the right to sue for past,
present and future infringements, all rights corresponding thereto throughout
the world and all re-issues, divisions continuations, renewals, extensions and
continuations-in-part thereof.
This security interest is granted in conjunction with the security
interest granted to Bank under the Loan Agreement. The rights and remedies of
Bank with respect to the security interest granted hereby are in addition to
those set forth in the Loan Agreement and the other Loan Documents, and those
which are now or hereafter available to Bank as a matter of law or equity.
Each right, power and remedy of Bank provided for herein or in the Loan
Agreement or any of the Loan Documents, or now or hereafter existing at law or
in equity shall be
1.
<PAGE>
cumulative and concurrent and shall be in addition to every right, power or
remedy provided for herein and the exercise by Bank of any one or more of the
rights, powers or remedies provided for in this Intellectual Property Security
Agreement, the Loan Agreement or any of the other Loan Documents, or now or
hereafter existing at law or in equity, shall not preclude the simultaneous
or later exercise by any person, including Bank, of any or all other rights,
powers or remedies.
This Intellectual Property Security Agreement shall terminate upon
Borrower's satisfaction of the conditions set forth in Section 4.1 of the Loan
Agreement.
IN WITNESS WHEREOF, the parties have caused this Intellectual Property
Security Agreement to be duly executed by its officers thereunto duly
authorized as of the first date written above.
Grantor:
Address of Grantor: INVISION TECHNOLOGIES, INC.
34320 E. Third Avenue
Foster City, CA 94404 By:
-----------------------------------
Title:
--------------------------------
Attn: Curt DiSibio
Bank
Address of Bank: SILICON VALLEY BANK
3003 Tasman Drive By:
Santa Clara, CA 95054 -----------------------------------
Title:
--------------------------------
Attn: Patrick McCarthy
2.
<PAGE>
EXHIBIT A
COPYRIGHTS
None
<PAGE>
EXHIBIT B
PATENTS
DESCRIPTION REGISTRATION REGISTRATION
NUMBER DATE
Automatic concealed object detection system having a 5,367,552 11/22/94
pre-scan stage
Automatic concealed object detection system having a 5,182,764 01/26/93
pre-scan stage
<PAGE>
EXHIBIT C
TRADEMARKS
DESCRIPTION REGISTRATION REGISTRATION
NUMBER DATE
InVision 2,030,463 01/14/97
<PAGE>
INVISION TECHNOLOGIES, INC.
KEY EMPLOYEE AGREEMENT
FOR
CURTIS P. DISIBIO
AGREEMENT made this 21st day of April, 1994, by and between INVISION
TECHNOLOGIES, INC. (hereinafter the "Company") and you Curtis P. DiSibio
(hereinafter also referred to as the "Employee").
WHEREAS, the Employee is currently serving as Chief Financial Officer of
the Company, and has served since April 1, 1991; and
WHEREAS, the Company desires to retain Employee's services, to formalize
its employment agreement with him, and to demonstrate its appreciation for his
efforts; and
WHEREAS, the Company and the Employee wish to clarify their respective
rights concerning the Employee's employment relationship with the Company;
NOW, THEREFORE, in consideration for the mutual promises contained
herein, and for such other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. POSITION AND RESPONSIBILITIES
1.1 The Company will continue to employ you and you shall serve in
a management capacity (without commitment for a title) and perform the duties
customarily associated with such capacity from time to time and at such place
or places as the Company shall reasonably designate or as shall be reasonably
appropriate and necessary in connection with such employment.
1.2 To the best of your ability, you will devote your full time and
best efforts to the performance of your duties hereunder and to the business
and affairs of the Company. You agree to serve as an employee of the Company
and to perform such duties as may be assigned to you by the Company's Chief
Executive Officer from time to time.
1.3 You will duly, punctually and faithfully perform and observe
any and all rules and regulations which the Company may now or shall hereafter
establish governing the conduct of its business.
2. COMPENSATION. The Company currently pays you for the services
rendered hereunder a basic salary of $ 109,000.00 per year effective April 1,
1996. Such compensation
1.
<PAGE>
is subject to change in accordance with the policies of the Company, as
determined by its Board of Directors, in force from time to time, and payable
in installments in accordance with Company policy. You shall also be entitled
to all rights and benefits for which you shall be eligible under bonus,
vacation, sick days, pension, group insurance, disability, life insurance,
profit-sharing or other Company benefits which may be in force from time to
time and provided to you or for the Company's employees generally.
3. OTHER ACTIVITIES DURING EMPLOYMENT
3.1 Except with the prior written consent of the Company, you will
not during the term of this Agreement undertake or engage in any other
employment, occupation or business enterprise, other than ones in which you
are a passive investor. You may engage in civic and not-for-profit activities
so long as such activities do not materially interfere with the performance of
your duties hereunder.
3.2 Except as permitted by Section 3.3, you will not acquire,
assume or participate in, directly or indirectly, any position, investment or
interest known by you to be adverse or antagonistic to the Company, its
business or prospects, financial or otherwise.
3.3 During the term of your employment by the Company, you will not
directly or indirectly, except on behalf of the Company, whether as an
officer, director, stockholder, partner, proprietor, associate,
representative, consultant, or in any capacity whatsoever engage in, become
financially interested in, be employed by or have any business connection with
any other person, corporation, firm, partnership or other entity whatsoever
which are known by you to directly compete with the Company, throughout the
world, in any of the business engaged in (or planned to be engaged in) by the
Company; provided, however, that anything above to the contrary
notwithstanding, you may own, as a passive investor, securities of any
competitor corporation, so long as your direct holdings in any one such
corporation shall not in the aggregate constitute more than 1% of the voting
stock of such corporation.
4. FORMER EMPLOYMENT. You represent and warrant that your employment
by the Company will not conflict with and will not be constrained by any prior
employment or consulting agreement or relationship. You represent and warrant
that you do not possess confidential information arising out of prior
employment which, in your best judgment, would be utilized in connection with
your employment by the Company, except in accordance with agreements between
your former employer and the Company.
5. PROPRIETARY INFORMATION AND INVENTIONS. You agree that you are
bound by the provisions of the Proprietary Information Agreement between you
and the Company, a form of which is attached hereto as Exhibit 1.
6. TERM OF EMPLOYMENT; TERMINATION
2.
<PAGE>
6.1 Your employment will be terminable at the will of either party,
at any time, with or without cause or prior notice.
6.2 If terminated for cause, or if Employee resigns voluntarily,
Employee shall receive no severance pay or other benefits. Termination for
cause shall be effected by a decision of the Company's Chief Executive Officer
or by resolution of the Company's Board of Directors only for the following
reasons:
(a) The Employee's breach of his duty of undivided loyalty in
the execution of his fiduciary duties to the Company, including, but not
limited to, the use of his position of trust to further his private interests,
or depriving the Company of any opportunity to which it is entitled;
(b) Dishonesty of the Employee with respect to the Company or
any of its subsidiaries;
(c) Willful misfeasance or nonfeasance of duty intended to
injure or having the effect of injuring the reputation, business, or business
relationship of the Company or of any of its subsidiaries or any of their
respective officers, directors or employees;
(d) Conviction of the Employee upon a charge of any crime
which involves moral turpitude or which could reflect unfavorably upon the
Company or any of its subsidiaries;
(e) Willful or prolonged absence from work by the Employee
(other than by reason of disability due to physical or mental illness) or
failure, neglect or refusal by the Employee to perform his duties and
responsibilities without the same being corrected upon ten days prior written
notice; or
(f) Material breach by the Employee of any of the covenants
contained on this Agreement.
6.3 If terminated without cause, Employee shall continue to receive
his then-current salary for a period of six (6) months or until new employment
begins, whichever occurs first. Employee agrees to notify the Company upon
acceptance of new employment.
6.4 In the event Employee desires to resign, Employee shall give
the Company not less than thirty (30) days written notice.
7. REMEDIES. Your duties under the Proprietary Information Agreement
shall survive termination of your employment with the Company. You acknowledge
that a remedy at law for any breach or threatened breach by you of the
provisions of the Proprietary Information Agreement would be inadequate and
you therefore agree that the Company shall be entitled to injunctive relief in
case of any such breach or threatened breach.
3.
<PAGE>
8. ASSIGNMENT. Neither this Agreement nor any rights or obligations
hereunder may be assigned by the Company or by you.
9. SEVERABILITY. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively
broad as to duration, scope, activity or subject, it shall be construed by
limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.
10. NOTICES. Any notice which the Company is required or may desire to
give you shall be given by personal delivery or registered or certified mail,
return receipt requested, addressed to you at the address of record with the
Company, or at such other place as you may from time to time designate in
writing. Any notice which you are required or may desire to give to the
Company hereunder shall be given by personal delivery or by registered or
certified mail, return receipt requested, addressed to the Company at its
principal office, or at such other office as the Company may from time to time
designate in writing. The date of personal delivery or the date of mailing any
such notice shall be deemed to be the date of delivery thereof.
11. WAIVER. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
12. COMPLETE AGREEMENT; AMENDMENTS. This Agreement, together with
Exhibit I sets forth the entire agreement and understandings between the
parties hereto and constitutes the complete, final and exclusive embodiment of
their agreement with respect to the subject matter hereof. This Agreement
merges. all previous discussions and negotiations between the parties and
supersedes and replaces any and every other agreement which may have existed
between the parties with respect to the subject matter hereof. It may not be
amended, supplemented, canceled or discharged except by written instrument
executed by both parties hereto.
13. HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
14. LAW GOVERNING AGREEMENT. The validity of this Agreement and the
rights, obligations, and relations of the parties hereunder shall be construed
and determined under and in accordance with the substantive laws of the State
of California without regard to its principles of conflicts of law.
15. FORUM. Any legal action, suit or proceeding arising from or
relating to this Agreement shall be brought and maintained in the United
States District Court for the Northern District of California and the parties
hereby submit to the jurisdiction thereof.
4.
<PAGE>
16. ATTORNEY FEES. If either party brings any action to enforce its
rights hereunder, the prevailing party in any such action shall be entitled to
recover his or its reasonable attorneys' fees and costs in connection with
such action.
INVISION TECHNOLOGIES, INC.
By:
---------------------------------------------
Sergio Magistri
Title:
------------------------------------------
Date:
-------------------------------------------
Accepted and agreed this
day of , 1994.
- --- -----
- ---------------------------
Curtis P. DiSibio
5.
<PAGE>
INVISION TECHNOLOGIES, INC.
KEY EMPLOYEE AGREEMENT
FOR
SERGIO MAGISTRI
AGREEMENT made this 22nd day of April 1994, by and between INVISION
TECHNOLOGIES, INC. (hereinafter the "Company") and you, SERGIO MAGISTRI
(hereinafter also referred to as the "Employee").
WHEREAS, the Employee has been employed by the Company since December 9,
1992; and
WHEREAS, the Employee is currently serving as President and Chief
Executive Officer of the Company, and has so served since December 9, 1992; and
WHEREAS, the Company desires to retain Employee's services, to formalize
its employment agreement with him, and to demonstrate its appreciation for his
efforts as an President and Chief Executive Officer of the Company; and
WHEREAS, the Company and the Employee wish to clarify their respective
rights concerning the Employee's employment relationship with the Company;
NOW, THEREFORE, in consideration for the mutual promises contained
herein, and for such other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. POSITION AND RESPONSIBILITIES.
1.1 The Company will continue to employ you and you shall serve in
an executive capacity as President and Chief Executive Officer and perform the
duties customarily associated with such capacity from time to time and at such
place or places as the Company shall reasonably designate or as shall be
reasonably appropriate and necessary in connection with such employment.
1.2 To the best of your ability, you will devote your full time and
best efforts to the performance of your duties hereunder and to the business
and affairs of the Company. You agree to serve as a director and/or officer
of the Company if elected by the stockholders and the Board, as the case may
be, and to perform such executive duties as may be assigned to you by the
Company's Board of Directors from time to time. You will report to the
Company's Board of Directors.
1.
<PAGE>
1.3 You will duly, punctually and faithfully perform and observe
any and all rules and regulations which the Company may now or shall hereafter
establish governing the conduct of its business, except to the extent that
such rules and regulations may be inconsistent with your executive position.
2. COMPENSATION.
2.1 The Company currently pays you for the services rendered
hereunder a basic salary of $11,083.33 per month. Such compensation is
subject to change in accordance with the policies of the Company, as
determined by its Board of Directors, in force from time to time, and payable
in installments in accordance with Company policy. You shall also be entitled
to all rights and benefits for which you shall be eligible under bonus,
vacation, sick days, pension, group insurance, disability, life insurance,
profit-sharing or other Company benefits which may be in force from time to
time and provided to you or for the Company's employees generally.
2.2 The Company will reimburse the reasonable and documented
expenses you previously incurred in moving your family and household goods
from Switzerland to the Bay Area, up to a maximum of $10,000.00.
2.3 Subject to approval by the Company's Board of Directors, you
will be granted options to purchase shares of common stock in the Company,
according to the following terms and conditions.
(a) Options to purchase 400,000 shares will be subject to a
four-year vesting period beginning December 9, 1992, and will vest according
to the Company's standard vesting schedule, so that options to purchase
100,000 shares (25% of the total) will vest at the end of the first year and
25,000 shares (6.25% of the total) will vest at the end of each subsequent
three-month period of your active employment with the Company. You recognize
that the option covering the first 200,000 of these shares (for vesting
through December 9, 1994) is being issued at the present time, pursuant to
action taken by the Board of Directors of the Company at its meeting of March
18, 1994, and that the options for the balance of the shares will be issued in
the future.
(b) Options to purchase 100,000 additional shares will be
subject to two vesting conditions. The first condition will be met by your
active employment during a four-year vesting period, beginning December 9,
1992, during which options will vest according to the Company's standard
vesting schedule of 25% after the first year and 6.25% after each subsequent
three-month period of your employment. The second and separate condition for
vesting is that the Company must be profitable for two consecutive quarters
before any of these shares will vest, even though the passage of time required
in the first condition has been met.
2.
<PAGE>
(c) Options to purchase 100,000 additional shares will be
issued immediately, but shall become exercisable only upon the closing of (i)
the Company's initial public offering of stock, or (ii) an acquisition of the
Company, in either case for a purchase price equal to no less than $5.00 per
share of the Company's Common Stock, as presently constituted.
3. OTHER ACTIVITIES DURING EMPLOYMENT.
3.1 Except with the prior written consent of the Company's Board of
Directors, you will not during the term of this Agreement undertake or engage
in any other employment, occupation or business enterprise, other than ones in
which you are a passive investor. You may engage in civic and not-for-profit
activities so long as such activities do not materially interfere with the
performance of your duties hereunder.
3.2 Except as permitted by Section 3.3, you will not acquire,
assume or participate in, directly or indirectly, any position, investment or
interest known by you to be adverse or antagonistic to the Company, its
business or prospects, financial or otherwise.
3.3 During the term of your employment by the Company you will not
directly or indirectly, except on behalf of the Company, whether as an
officer, director, stockholder, partner, proprietor, associate,
representative, consultant, or in any capacity whatsoever engage in, become
financially interested in, be employed by or have any business connection with
any other person, corporation, firm, partnership or other entity whatsoever
which are known by you to directly compete with the Company, throughout the
world, in any line of business engaged in (or planned to be engaged in) by the
Company; provided, however, that anything above to the contrary
notwithstanding, you may own, as a passive investor, securities of any
competitor corporation, so long as your direct holdings in any one such
corporation shall not in the aggregate constitute more than 1% of the voting
stock of such corporation.
4. FORMER EMPLOYMENT. You represent and warrant that your employment
by the Company will not conflict with and will not be constrained by any prior
employment or consulting agreement or relationship. You represent and warrant
that you do not possess confidential information arising out of prior
employment which, in your best judgment, would be utilized in connection with
your employment by the Company, except in accordance with agreements between
your former employer and the Company. The Company has been made aware by you
of the existence of a consulting contract between you and Italimprese and does
not object to such relationship so long as it does not conflict with your
responsibilities with the Company.
5. PROPRIETARY INFORMATION AND INVENTIONS. You agree that you are
bound by the provisions of the Proprietary Information Agreement between you
and the Company, a form of which is attached hereto as Exhibit 1.
3.
<PAGE>
6. TERM OF EMPLOYMENT; TERMINATION.
6.1 Your employment will be terminable at the will of either party,
at any time, with or without cause or prior notice.
6.2 If terminated for cause, or if Employee resigns voluntarily,
Employee shall receive no severance pay or other benefits. Termination for
cause shall be effected by a majority of the Board of Directors only for the
following reasons:
(a) The Employee's breach of his duty of undivided loyalty in
the execution of his fiduciary duties to the Company,
including, but not limited to, the use of his position of
trust to further his private interests, or depriving the
Company of any opportunity to which it is entitled;
(b) Dishonesty of the Employee with respect to the Company or
any of its subsidiaries;
(c) Wilful misfeasance or nonfeasance of duty intended to injure
or having the effect of injuring the reputation, business,
or business relationships of the Company or of any of its
subsidiaries or any of their respective officers, directors
or employees;
(d) Conviction of the Employee upon a charge of any crime
involving moral turpitude or which could reflect unfavorably
upon the Company or any of its subsidiaries;
(e) Wilful or prolonged absence from work by the Employee (other
than by reason of disability due to physical or mental
illness) or failure, neglect or refusal by the Employee to
perform his duties and responsibilities without the same
being corrected upon ten days prior written notice; or
(f) Material breach by the Employee of any of the covenants
contained in this Agreement.
6.3 If terminated without cause, Employee shall continue to receive
his then-current salary for a period of six (6) months or until new employment
begins, whichever occurs first. Employee agrees to notify the Company upon
acceptance of new employment.
4.
<PAGE>
6.4 The Company will reimburse Employee for reasonable and
documented expenses you incur, within six months of your termination without
cause, in moving your family and household goods back to Switzerland from the
Bay Area, up to a maximum of $10,000.
6.5 In the event Employee desires to resign, Employee shall give
the Company not less than ninety (90) days written notice.
7. REMEDIES. Your duties under the Proprietary Information Agreement
shall survive termination of your employment with the Company. You
acknowledge that a remedy at law for any breach or threatened breach by you of
the provisions of the Proprietary Information Agreement would be inadequate
and you therefore agree that the Company shall be entitled to injunctive
relief in case of any such breach or threatened breach.
8. ASSIGNMENT. Neither this Agreement nor any rights or obligations
hereunder may be assigned by the Company or by you.
9. SEVERABILITY. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively
broad as to duration, scope, activity or subject, it shall be construed by
limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.
10. NOTICES. Any notice which the Company is required or may desire to
give you shall be given by personal delivery or registered or certified mail,
return receipt requested, addressed to you at the address of record with the
Company, or at such other place as you may from time to time designate in
writing. Any notice which you are required or may desire to give to the
Company hereunder shall be given by personal delivery or by registered or
certified mail, return receipt requested, addressed to the Company at its
principal office, or at such other office as the Company may from time to time
designate in writing. The date of personal delivery or the date of mailing
any such notice shall be deemed to be the date of delivery thereof.
11. WAIVER. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
5.
<PAGE>
12. COMPLETE AGREEMENT; AMENDMENTS. This Agreement together with
Exhibit 1 sets forth the entire agreement and understandings between the
parties hereto and constitutes the complete, final and exclusive embodiment of
their agreement with respect to the subject matter hereof. This Agreement
merges all previous discussions and negotiations between the parties and
supersedes and replaces any and every other agreement which may have existed
between the parties with respect to the subject matter hereof. It may not be
amended, supplemented, canceled or discharged except by written instrument
executed by both parties hereto.
13. HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
14. LAW GOVERNING AGREEMENT. The validity of this Agreement and the
rights, obligations and relations of the parties hereunder shall be construed
and determined under and in accordance with the substantive laws of the State
of California without regard to its principles of conflicts of law.
15. FORUM. Any legal action, suit or proceeding arising from or
relating to this Agreement shall be brought and maintained in either the
courts of the State of California, or the United States District Court for the
Northern District of California and the parties hereby submit to the
jurisdiction thereof.
16. ATTORNEY FEES. If either party hereto brings any action to enforce
its rights hereunder, the prevailing party in any such action shall be
entitled to recover his or its reasonable attorneys' fees and costs incurred
in connection with such action.
InVision Technologies, Inc.
By:
---------------------------------------------
Title:
------------------------------------------
Date:
------------------------------------------
Accepted and agreed this
22nd day of April 1994.
- ----------------------------
Sergio Magistri
6.
<PAGE>
EXHIBIT 1
INVISION TECHNOLOGIES, INC.
PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
IN CONSIDERATION OF MY EMPLOYMENT OR CONTINUED EMPLOYMENT BY INVISION
TECHNOLOGIES, INC. (THE "COMPANY"), AND THE COMPENSATION NOW AND HEREAFTER
PAID TO ME, I HEREBY AGREE AS FOLLOWS:
1. RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE. AT ALL TIMES DURING
THE TERM OF MY EMPLOYMENT AND THEREAFTER, I WILL HOLD IN STRICTEST CONFIDENCE
AND WILL NOT DISCLOSE, USE, LECTURE UPON OR PUBLISH ANY OF THE COMPANY'S
PROPRIETARY INFORMATION (DEFINED BELOW), EXCEPT AS SUCH DISCLOSURE, USE OR
PUBLICATION MAY BE REQUIRED IN CONNECTION WITH MY WORK FOR THE COMPANY, OR
UNLESS AN OFFICER OF THE COMPANY EXPRESSLY AUTHORIZES SUCH IN WRITING. I
HEREBY ASSIGN TO THE COMPANY ANY RIGHTS I MAY HAVE OR ACQUIRE IN SUCH
PROPRIETARY INFORMATION AND RECOGNIZE THAT ALL PROPRIETARY INFORMATION SHALL
BE THE SOLE PROPERTY OF THE COMPANY AND ITS ASSIGNS AND THE COMPANY AND ITS
ASSIGNS SHALL BE THE SOLE OWNER OF ALL TRADE SECRET RIGHTS, PATENT RIGHTS,
COPYRIGHTS, MASK WORK RIGHTS AND ALL OTHER RIGHTS THROUGHOUT THE WORLD
(COLLECTIVELY, "PROPRIETARY RIGHTS") IN CONNECTION THEREWITH.
THE TERM "PROPRIETARY INFORMATION" SHALL MEAN TRADE SECRETS, CONFIDENTIAL
KNOWLEDGE, DATA OR ANY OTHER PROPRIETARY INFORMATION OF THE COMPANY. BY WAY
OF ILLUSTRATION BUT NOT LIMITATION, "PROPRIETARY INFORMATION" INCLUDES (A)
ALGORITHMS, TRADE SECRETS, INVENTIONS, MASK WORKS, IDEAS, PROCESSES, FORMULAS,
SOURCE AND OBJECT CODES, DATA, PROGRAMS, OTHER WORKS OF AUTHORSHIP, KNOW-HOW,
IMPROVEMENTS, DISCOVERIES, DEVELOPMENTS, DESIGNS AND TECHNIQUES (HEREINAFTER
COLLECTIVELY REFERRED TO AS "INVENTIONS"); AND (B) INFORMATION REGARDING PLANS
FOR RESEARCH, DEVELOPMENT, NEW PRODUCTS, MARKETING AND SELLING, BUSINESS
PLANS, BUDGETS AND UNPUBLISHED FINANCIAL STATEMENTS, LICENSES, PRICES AND
COSTS, SUPPLIERS AND CUSTOMERS; AND INFORMATION REGARDING THE SKILLS AND
COMPENSATION OF OTHER EMPLOYEES OF THE COMPANY.
2. THIRD PARTY INFORMATION. I UNDERSTAND, IN ADDITION, THAT THE
COMPANY HAS RECEIVED AND IN THE FUTURE WILL RECEIVE FROM THIRD PARTIES
CONFIDENTIAL OR PROPRIETARY INFORMATION ("THIRD PARTY INFORMATION") SUBJECT TO
A DUTY ON THE COMPANY'S PART TO MAINTAIN THE CONFIDENTIALITY OF SUCH
INFORMATION AND TO USE IT ONLY FOR CERTAIN LIMITED PURPOSES. DURING THE TERM
OF MY EMPLOYMENT AND THEREAFTER, I WILL HOLD THIRD PARTY INFORMATION IN THE
7.
<PAGE>
STRICTEST CONFIDENCE AND WILL NOT DISCLOSE (TO ANYONE OTHER THAN COMPANY
PERSONNEL WHO NEED TO KNOW SUCH INFORMATION IN CONNECTION WITH THEIR WORK FOR
THE COMPANY) OR USE, EXCEPT IN CONNECTION WITH MY WORK FOR THE COMPANY, THIRD
PARTY INFORMATION UNLESS EXPRESSLY AUTHORIZED BY AN OFFICER OF THE COMPANY IN
WRITING.
3. ASSIGNMENT OF INVENTIONS.
3.1 ASSIGNMENT. I hereby assign to the Company all my right, title
and interest in and to any and all Inventions (and all Proprietary Rights with
respect thereto) whether or not patentable or registrable under copyright or
similar statutes, made or conceived or reduced to practice or learned by me,
either alone or jointly with others, during the period of my employment with
the Company. Inventions assigned to or as directed by the Company by this
paragraph 3 are hereinafter referred to as "Company Inventions." I recognize
that this Agreement does not require assignment of any invention which
qualifies fully for protection under Section 2870 of the California Labor Code
(hereinafter "Section 2870"), which provides as follows:
(i) Any provision in an employment agreement which provides
that an employee shall assign, or offer to assign, any of his or her rights in
an invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the
employer's equipment, supplies, facilities, or trade secret information except
for those inventions that either:
(1) Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual or
demonstrably anticipated research or development of the employer.
(2) Result from any work performed by the employee for
the employer.
(ii) To the extent a provision in an employment agreement
purports to require an employee to assign an invention otherwise excluded from
being required to be assigned under subdivision (i), the provision is against
the public policy of this state and is unenforceable.
3.2 GOVERNMENT. I also assign to or as directed by the Company all
my right, title and interest in and to any and all Inventions, full title to
which is required to be in the United States by a contract between the Company
and the United States or any of its agencies.
4. ENFORCEMENT OF PROPRIETARY RIGHTS. I will assist the Company in
every proper way to obtain and from time to time enforce United States and
foreign Proprietary Rights relating to Company Inventions in any and all
countries. To that end I will execute, verify and deliver such documents and
perform such other acts (including
8.
<PAGE>
appearances as a witness) as the Company may reasonably request for use in
applying for, obtaining, perfecting, evidencing, sustaining and enforcing such
Proprietary Rights and the assignment thereof. In addition, I will execute,
verify and deliver assignments of such Proprietary Rights to the Company or
its designee. My obligation to assist the Company with respect to Proprietary
Rights relating to such Company Inventions in any and all countries shall
continue beyond the termination of my employment, but the Company shall
compensate me at a reasonable rate after my termination for the time actually
spent by me at the Company's request on such assistance.
In the event the Company is unable for any reason, after reasonable
effort, to secure my signature on any document needed in connection with the
actions specified in the preceding paragraph, I hereby irrevocably designate
and appoint the Company and its duly authorized officers and agents as my
agent and attorney in fact, which appointment is coupled with an interest, to
act for and in my behalf to execute, verify and file any such documents and to
do all other lawfully permitted acts to further the purposes of the preceding
paragraph with the same legal force and effect as if executed by me. I hereby
waive and quitclaim to the Company any and all claims, of any nature
whatsoever, which I now or may hereafter have for infringement of any
Proprietary Rights assigned hereunder to the Company.
5. OBLIGATION TO KEEP COMPANY INFORMED. During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after
termination of employment. At the time of each such disclosure, I will advise
the Company in writing of any Inventions that I believe fully qualify for
protection under Section 2870; and I will at that time provide to the Company
in writing all evidence necessary to substantiate that belief. The Company
will keep in confidence and will not disclose to third parties without my
consent any proprietary information disclosed in writing to the Company
pursuant to this Agreement relating to Inventions that qualify fully for
protection under the provisions of Section 2870. I will preserve the
confidentiality of any Invention that does not fully qualify for protection
under Section 2870.
I agree to keep and maintain adequate and current records (in the form of
notes, sketches, drawings and in any other form that may be required by the
Company) of all Proprietary Information developed by me and all Inventions
made by me during the period of my employment at the Company, which records
shall be available to and remain the sole property of the Company at all times.
6. PRIOR INVENTIONS. Inventions, if any, patented or unpatented, which
I made prior to the commencement of my employment with the Company are
excluded from the scope of this Agreement. To preclude any possible
uncertainty, I have set forth on Exhibit A attached hereto a complete list of
all Inventions that I have, alone or jointly with others,
9.
<PAGE>
conceived, developed or reduced to practice or caused to be conceived,
developed or reduced to practice prior to the commencement of my employment
with the Company, that I consider to be my property or the property of third
parties and that I wish to have excluded from the scope of this Agreement. If
disclosure of any such Invention on Exhibit A would cause me to violate any
prior confidentiality agreement, I understand that I am not to list such
Inventions in Exhibit A but am to inform the Company that for that reason not
all such Inventions have been listed.
7. ADDITIONAL ACTIVITIES. I agree that during the period of my
employment by the Company I will not, without the Company's express written
consent, engage in any employment or business activity other than the Company.
I agree further that for the period of my employment by the company and for
one (1) year after the date of termination of my employment by the Company I
will not (i) induce any employee of the company to leave the employ of the
Company to leave the employ of the Company or (ii) solicit the business of any
client or customer of the Company (other than on behalf of the company).
8. NO IMPROPER USE OF MATERIALS. During my employment by the Company I
will not improperly use or disclose any confidential information or trade
secrets, if any, of any former employer or any other person to whom I have an
obligation of confidentiality, and I will not bring onto the premises of the
Company any unpublished documents or any property belonging to any former
employer or any other person to whom I have an obligation of confidentiality
unless consented to in writing by that former employer or person.
I will use in the performance of my duties only information which is
generally known and used by persons with training and experience comparable to
my own, which is common knowledge in the industry or otherwise legally in the
public domain, or which is otherwise provided or developed by the Company.
9. NO CONFLICTING OBLIGATION. I represent that my performance of all
the terms of this Agreement and as an employee of the Company does not and
will not breach any agreement to keep in confidence information acquired by me
in confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any agreement either written
or oral in conflict herewith.
10. RETURN OF COMPANY DOCUMENTS. When I leave the employ of the
Company, I will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together with all copies
thereof, and any other material containing or disclosing any Company
Inventions, Third Party Information or Proprietary Information of the Company.
I further agree that any property situated on the Company's premises and
owned by the Company, including disks and other storage media, filing cabinets
or other work areas, is subject to inspection by Company personnel at any time
with or without notice. Prior to leaving, I will cooperate with the Company
10.
<PAGE>
in completing and signing the Company's termination statement for technical
and management personnel.
11. LEGAL AND EQUITABLE REMEDIES. Because my services are personal and
unique and because I may have access to and become acquainted with the
Proprietary Information of the Company, the Company shall have the right to
enforce this Agreement and any of its provisions by injunction, specific
performance or other equitable relief, without bond and without prejudice to
any other rights and remedies that the Company may have for a breach of this
Agreement.
12. NOTICES. Any notices required or permitted hereunder shall be given
to the appropriate party at the address specified below or at such other
address as the party shall specify in writing. Such notice shall be deemed
given upon personal delivery to the appropriate address or if sent by
certified or registered mail, three days after the date of mailing.
13. GENERAL PROVISIONS.
13.1 GOVERNING LAW. This Agreement will be governed by and
construed according to the laws of the State of California.
13.2 ENTIRE AGREEMENT. This Agreement and the attached addendum is
the final, complete and exclusive agreement of the parties with respect to the
subject matter hereof and superacids and merges all prior discussions between
us. No modification of or amendment to this Agreement, nor any waiver of any
rights under this Agreement, will be effective unless in writing and signed by
the party to be charged. Any subsequent change or changes in my duties,
salary or compensation will not affect the validity or scope of this
Agreement. As used in this Agreement, the period of my employment includes
any time during which I may be retained by the Company as a consultant.
13.3 SEVERABILITY. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then such provision will be deemed
stricken from this Agreement and the remaining provisions will continue in
full force and effect.
13.4 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be
for the benefit of the Company, its successors, and its assigns.
13.5 SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee.
13.6 EMPLOYMENT. I agree and understand that nothing in this
Agreement shall confer any right with respect to continuation of employment by
the Company, nor
11.
<PAGE>
shall it interfere in any way with my right or the Company's right to
terminate my employment at any time, with or without cause.
13.7 WAIVER. No waiver by the Company of any breach of this
Agreement shall be a waiver of any preceding or succeeding breach. No waiver
by the Company of any right under this Agreement shall be construed as a
waiver of any other right. The Company shall not be required to give notice
to enforce strict adherence to all terms of this Agreement.
I HAVE READ THIS AGREEMENT CAREFULLY AND TERMS.
Dated:
---------------------------
- ---------------------------------
Employee Name
ACCEPTED AND AGREED TO:
INVISION TECHNOLOGIES, INC.
- ---------------------------------
12.
<PAGE>
EXHIBIT A
InVision Technologies, Inc.
3420 E. Third Avenue
Foster City, CA 94404
Gentlemen:
1. The following is a complete list of all inventions or improvements relevant
to the subject matter of my employment by InVision Technologies, Inc. (the
"Company") that have been made or conceived or first reduced to practice by
me alone or jointly with others prior to my engagement by the Company:
[ ] No inventions or improvements.
[ ] See below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] Due to confidentiality agreements with prior employer, I cannot
disclose certain inventions that would otherwise be included on the
above-described list.
[ ] Additional sheets attached.
2. I propose to bring to my employment the following devices, materials and
documents of a former employer (other than Imatron, Inc.) or other person
to whom I have an obligation of confidentiality that are not generally
available to the public, which materials and documents may be used in my
employment pursuant to the express written authorization of my former
employer or such other person (a copy of which is attached hereto):
[ ] No material.
13.
<PAGE>
[ ] See below:
[ ] Additional sheets attached.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Date:
-----------
Very truly yours,
- ----------------------------------------
Employee Name
14.
<PAGE>
INVISION TECHNOLOGIES, INC.
AMENDMENT TO
KEY EMPLOYEE AGREEMENT
for
Sergio Magistri
This Amendment to Key Employee Agreement (the "Amendment") is made on
October __, 1995, by and between InVision Technologies, Inc., a Delaware
corporation (the "Company"), and Sergio Magistri. Reference is made to that
certain Key Employee Agreement dated April 22, 1994 by and between the
Company and Sergio Magistri (the "Agreement").
Whereas, by resolution adopted by the Board of Directors of the Company
on October 21, 1994, the Board authorized the amendment as set forth herein
of the option granted to the Employee pursuant to Section 2.3(c) of the
Agreement;
Whereas, in the interests of clarity the parties desire also to reflect
the issuance of additional options since the date of the Agreement, pursuant
to employee anti-dilution programs adopted by the Board of Directors
Now, Therefore, in consideration of the mutual promises and covenants as
set forth herein, the parties hereby agree as follows:
1. The parties confirm that the options for 400,000 shares originally
provided for in Section 2.3(a) of the Agreement were canceled as part of a
repricing program effected in 1994. In place of such original option
commitment, Employee now holds an option covering 580,000 shares at an
exercise price of $0.10 per share, vesting on a quarterly basis through March
9, 1997 (the "First Replacement Option"). In addition, in respect of such
grant, the Company has since granted Employee an additional option covering
152,000 shares at a purchase price of $0.10 per share, vesting on a quarterly
basis through December 9, 1996.
2. The parties confirm that the 100,000 share option originally
provided for in Section 2.3(b) of the Agreement was canceled as part of a
repricing program effected in 1994. In place of such original option,
Employee now holds an option covering 145,000 shares at an exercise price of
$0.10 per share, with vesting continuing to be subject to the two conditions
referred to in the original Section 2.3(b), provided, however, that the
original quarterly vesting schedule has been revised to provide for quarterly
vesting through March 9, 1997 (the "Second Replacement Option"). In
addition, in respect of such grant, the Company has since granted Employee an
additional option covering 38,000 shares at a purchase price of $0.10 per
share, subject to the same vesting conditions as the Second Replacement
Option.
3. The parties confirm that the 100,000 share option originally
provided for in
<PAGE>
Section 2.3(c) of the Agreement was canceled as part of a repricing program
effected in 1994. In place of such option, Employee now holds an option
covering 145,000 shares at an exercise price of $0.10 per share, with vesting
subject to the original conditions (the "Third Replacement Option"). In
addition, in respect of such grant, the Company has since granted Employee an
option covering 38,000 shares at a purchase price of $0.10 per share, subject
to the same vesting conditions as the Third Replacement Option.
4. The parties agree that the vesting condition for the options
referred to in Section 3 of this Amendment shall be as follows, in place of
the vesting language provided for originally in Section 2.3(c) of the
Agreement:
"This option shall become exercisable only upon (i) the closing of
the Company's initial public offering of stock with a post-offering
Company valuation of at least $60,000,000 (to be measured inclusive
of all options and warrants outstanding as of the closing of such
public offering), (ii) the closing of an acquisition of the Company
with a Company valuation of at least $60,000,000 or (iii) the public
trading of the Company's common stock during any two month period
following the closing of the Company's initial public offering at an
average price for such period yielding a Company valuation of at
least $60,000,000. For purposes of measuring the average trading
price, the parties shall disregard any days on which the Company's
stock does not trade, whether or not the exchanges were open for
trading on those days. This option shall expire if Employee's
employment terminates prior to the satisfaction of such condition."
5. Except as expressly amended by this Amendment, the Agreement shall
remain in full force and effect. This Amendment shall be governed by, and
construed and enforced in accordance with, the substantive laws of the State
of California, without regard to its principles of conflicts of laws. This
Amendment may be executed in several counterparts, which taken together shall
constitute a single document.
<PAGE>
In Witness Whereof, the parties hereto have caused this Amendment to be
executed as of the date first above written.
INVISION TECHNOLOGIES, INC.
By:
---------------------------------
Sergio Magistri
<PAGE>
INVISION TECHNOLOGIES, INC.
KEY EMPLOYEE AGREEMENT
FOR
DAVID M. PILLOR
AGREEMENT made this 1st day of March, 1996, by and between INVISION
TECHNOLOGIES, INC. (hereinafter the "Company") and you DAVID M. PILLOR
(hereinafter also referred to as the "Employee").
WHEREAS, the Employee is currently serving as Senior Vice President,
Sales and Marketing of the Company, and has so served since July 18, 1994; and
WHEREAS, the Company desires to retain Employee's services, to formalize
its employment agreement with him, and to demonstrate its appreciation for his
efforts; and
WHEREAS, the Company and the Employee wish to clarify their respective
rights concerning the Employee's employment relationship with the Company;
NOW, THEREFORE, in consideration for the mutual promises contained
herein, and for such other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. POSITION AND RESPONSIBILITIES
1.1 The Company will continue to employ you and you shall serve in
a management capacity (without commitment for a title) and perform the duties
customarily associated with such capacity from time to time and at such place
or places as the Company shall reasonably designate or as shall be reasonably
appropriate and necessary in connection with such employment.
1.2 To the best of your ability, you will devote your full time and
best efforts to the performance of your duties hereunder and to the business
and affairs of the Company. You agree to serve as an employee of the Company
and to perform such duties as may be assigned to you by the Company's Chief
Executive Officer from time to time.
1.3 You will duly, punctually and faithfully perform and observe
any and all rules and regulations which the Company may now or shall hereafter
establish governing the conduct of its business.
2. COMPENSATION. The Company currently pays you for the services
rendered hereunder a basic salary of $9166.66 per month. Such compensation is
subject to change in
1.
<PAGE>
accordance with the policies of the Company, as determined by its Board of
Directors, in force from time to time, and payable in installments in
accordance with Company policy. You shall also be entitled to all rights and
benefits for which you shall be eligible under bonus, vacation, sick days,
pension, group insurance, disability, life insurance, profit-sharing or other
Company benefits which may be in force from time to time and provided to you
or for the Company's employees generally.
3. OTHER ACTIVITIES DURING EMPLOYMENT
3.1 Except with the prior written consent of the Company, you will
not during the term of this Agreement undertake or engage in any other
employment, occupation or business enterprise, other than ones in which you
are a passive investor. You may engage in civic and not-for-profit activities
so long as such activities do not materially interfere with the performance of
your duties hereunder.
3.2 Except as permitted by Section 3.3, you will not acquire,
assume or participate in, directly or indirectly, any position, investment or
interest known by you to be adverse or antagonistic to the Company, its
business or prospects, financial or otherwise.
3.3 During the term of your employment by the Company, you will not
directly or indirectly, except on behalf of the Company, whether as an
officer, director, stockholder, partner, proprietor, associate,
representative, consultant, or in any capacity whatsoever engage in, become
financially interested in, be employed by or have any business connection with
any other person, corporation, firm, partnership or other entity whatsoever
which are known by you to directly compete with the Company, throughout the
world, in any of the business engaged in (or planned to be engaged in) by the
Company; provided, however, that anything above to the contrary
notwithstanding, you may own, as a passive investor, securities of any
competitor corporation, so long as your direct holdings in any one such
corporation shall not in the aggregate constitute more than 1% of the voting
stock of such corporation.
4. FORMER EMPLOYMENT. You represent and warrant that your employment
by the Company will not conflict with and will not be constrained by any prior
employment or consulting agreement or relationship. You represent and warrant
that you do not possess confidential information arising out of prior
employment which, in your best judgment, would be utilized in connection with
your employment by the Company, except in accordance with agreements between
your former employer and the Company.
5. PROPRIETARY INFORMATION AND INVENTIONS. You agree that you are
bound by the provisions of the Proprietary Information Agreement between you
and the Company, a form of which is attached hereto as Exhibit 1.
2.
<PAGE>
6. TERM OF EMPLOYMENT; TERMINATION
6.1 Your employment will be terminable at the will of either party,
at any time, with or without cause or prior notice.
6.2 If terminated for cause, or if Employee resigns voluntarily,
Employee shall receive no severance pay or other benefits. Termination for
cause shall be effected by a decision of the Company's Chief Executive Officer
or by resolution of the Company's Board of Directors only for the following
reasons:
(a) The Employee's breach of his duty of undivided loyalty in
the execution of his fiduciary duties to the Company, including, but not
limited to, the use of his position of trust to further his private interests,
or depriving the Company of any opportunity to which it is entitled;
(b) Dishonesty of the Employee with respect to the Company or
any of its subsidiaries;
(c) Willful misfeasance or nonfeasance of duty intended to
injure or having the effect of injuring the reputation, business, or business
relationship of the Company or of any of its subsidiaries or any of their
respective officers, directors or employees;
(d) Conviction of the Employee upon a charge of any crime
which involves moral turpitude or which could reflect unfavorably upon the
Company or any of its subsidiaries;
(e) Willful or prolonged absence from work by the Employee
(other than by reason of disability due to physical or mental illness) or
failure, neglect or refusal by the Employee to perform his duties and
responsibilities without the same being corrected upon ten days prior written
notice; or
(f) Material breach by the Employee of any of the covenants
contained on this Agreement.
6.3 If terminated without cause, Employee shall continue to receive
his then-current salary for a period of six (6) months or until new employment
begins, whichever occurs first. Employee agrees to notify the Company upon
acceptance of new employment.
6.4 In the event Employee desires to resign, Employee shall give
the Company not less than thirty (60) days written notice.
7. REMEDIES. Your duties under the Proprietary Information Agreement
shall survive termination of your employment with the Company. You
acknowledge that a remedy at law for any breach or threatened breach by you of
the provisions of the Proprietary
3.
<PAGE>
Information Agreement would be inadequate and you therefore agree that the
Company shall be entitled to injunctive relief in case of any such breach or
threatened breach.
8. ASSIGNMENT. Neither this Agreement nor any rights or obligations
hereunder may be assigned by the Company or by you.
9. SEVERABILITY. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively
broad as to duration, scope, activity or subject, it shall be construed by
limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.
10. NOTICES. Any notice which the Company is required or may desire to
give you shall be given by personal delivery or registered or certified mail,
return receipt requested, addressed to you at the address of record with the
Company, or at such other place as you may from time to time designate in
writing. Any notice which you are required or may desire to give to the
Company hereunder shall be given by personal delivery or by registered or
certified mail, return receipt requested, addressed to the Company at its
principal office, or at such other office as the Company may from time to time
designate in writing. The date of personal delivery or the date of mailing any
such notice shall be deemed to be the date of delivery thereof.
11. WAIVER. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
12. COMPLETE AGREEMENT; AMENDMENTS. This Agreement, together with
Exhibit I sets forth the entire agreement and understandings between the
parties hereto and constitutes the complete, final and exclusive embodiment of
their agreement with respect to the subject matter hereof. This Agreement
merges all previous discussions and negotiations between the parties and
supersedes and replaces any and every other agreement which may have existed
between the parties with respect to the subject matter hereof. It may not be
amended, supplemented, canceled or discharged except by written instrument
executed by both parties hereto.
13. HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
14. LAW GOVERNING AGREEMENT. The validity of this Agreement and the
rights, obligations, and relations of the parties hereunder shall be construed
and determined under and in accordance with the substantive laws of the State
of California without regard to its principles of conflicts of law.
4.
<PAGE>
15. FORUM. Any legal action, suit or proceeding arising from or
relating to this Agreement shall be brought and maintained in the United
States District Court for the Northern District of California and the parties
hereby submit to the jurisdiction thereof.
16. ATTORNEY FEES. If either party brings any action to enforce its
rights hereunder, the prevailing party in any such action shall be entitled to
recover his or its reasonable attorneys' fees and costs in connection with
such action.
INVISION TECHNOLOGIES, INC.
By:
---------------------------------------------
Sergio Magistri
Title:
------------------------------------------
Date:
-------------------------------------------
Accepted and agreed this
day of , 1994.
- --- -----
- -----------------------------
David M. Pillor
5.
<PAGE>
INVISION TECHNOLOGIES, INC.
KEY EMPLOYEE AGREEMENT
FOR
BENNO STEBLER
AGREEMENT made this 21st day of April, 1994, by and between INVISION
TECHNOLOGIES, INC. (hereinafter the "Company") and you Benno Stebler
(hereinafter also referred to as the "Employee").
WHEREAS, the Employee is currently serving as V.P., Engineering and V.P.,
Manufacturing, Acting, of the Company, and has served as V.P., Engineering since
April 29, 1991; and
WHEREAS, the Company desires to retain Employee's services, to formalize
its employment agreement with him, and to demonstrate its appreciation for his
efforts; and
WHEREAS, the Company and the Employee wish to clarify their respective
rights concerning the Employee's employment relationship with the Company;
NOW, THEREFORE, in consideration for the mutual promises contained herein,
and for such other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. POSITION AND RESPONSIBILITIES
1.1 The Company will continue to employ you and you shall serve in a
management capacity (without commitment for a title) and perform the duties
customarily associated with such capacity from time to time and at such place or
places as the Company shall reasonably designate or as shall be reasonably
appropriate and necessary in connection with such employment.
1.2 To the best of your ability, you will devote your full time and
best efforts to the performance of your duties hereunder and to the business and
affairs of the Company. You agree to serve as an employee of the Company and to
perform such duties as may be assigned to you by the Company's Chief Executive
Officer from time to time.
1.3 You will duly, punctually and faithfully perform and observe any
and all rules and regulations which the Company may now or shall hereafter
establish governing the conduct of its business.
1
<PAGE>
2. COMPENSATION. The Company currently pays you for the services
rendered hereunder a basic salary of $114,000.00 per year effective May 1, 1994.
Such compensation is subject to change in accordance with the policies of the
Company, as determined by its Board of Directors, in force from time to time,
and payable in installments in accordance with Company policy. You shall also be
entitled to all rights and benefits for which you shall be eligible under bonus,
vacation, sick days, pension, group insurance, disability, life insurance,
profit-sharing or other Company benefits which may be in force from time to time
and provided to you or for the Company's employees generally.
3. OTHER ACTIVITIES DURING EMPLOYMENT
3.1 Except with the prior written consent of the Company, you will
not during the term of this Agreement undertake or engage in any other
employment, occupation or business enterprise, other than ones in which you are
a passive investor. You may engage in civic and not-for-profit activities so
long as such activities do not materially interfere with the performance of your
duties hereunder.
3.2 Except as permitted by Section 3.3, you will not acquire, assume
or participate in, directly or indirectly, any position, investment or interest
known by you to be adverse or antagonistic to the Company, its business or
prospects, financial or otherwise.
3.3 During the term of your employment by the Company, you will not
directly or indirectly, except on behalf of the Company, whether as an officer,
director, stockholder, partner, proprietor, associate, representative,
consultant, or in any capacity whatsoever engage in, become financially
interested in, be employed by or have any business connection with any other
person, corporation, firm, partnership or other entity whatsoever which are
known by you to directly compete with the Company, throughout the world, in any
of the business engaged in (or planned to be engaged in) by the Company;
provided, however, that anything above to the contrary notwithstanding, you may
own, as a passive investor, securities of any competitor corporation, so long as
your direct holdings in any one such corporation shall not in the aggregate
constitute more than 1% of the voting stock of such corporation.
4. FORMER EMPLOYMENT. You represent and warrant that your employment by
the Company will not conflict with and will not be constrained by any prior
employment or consulting agreement or relationship. You represent and warrant
that you do not possess confidential information arising out of prior employment
which, in your best judgment, would be utilized in connection with your
employment by the Company, except in accordance with agreements between your
former employer and the Company.
5. PROPRIETARY INFORMATION AND INVENTIONS. You agree that you are bound
by the provisions of the Proprietary Information Agreement between you and the
Company, a form of
2
<PAGE>
which is attached hereto as Exhibit 1.
6. TERM OF EMPLOYMENT; TERMINATION
6.1 Your employment will be terminable at the will of either party,
at any time, with or without cause or prior notice.
6.2 If terminated for cause, or if Employee resigns voluntarily,
Employee shall receive no severance pay or other benefits. Termination for cause
shall be effected by a decision of the Company's Chief Executive Officer or by
resolution of the Company's Board of Directors only for the following reasons:
(a) The Employee's breach of his duty of undivided loyalty in
the execution of his fiduciary duties to the Company, including, but not limited
to, the use of his position of trust to further his private interests, or
depriving the Company of any opportunity to which it is entitled;
(b) Dishonesty of the Employee with respect to the Company or
any of its subsidiaries;
(c) Willful misfeasance or nonfeasance of duty intended to
injure or having the effect of injuring the reputation, business, or business
relationship of the Company or of any of its subsidiaries or any of their
respective officers, directors or employees;
(d) Conviction of the Employee upon a charge of any crime which
involves moral turpitude or which could reflect unfavorably upon the Company or
any of its subsidiaries;
(e) Willful or prolonged absence from work by the Employee
(other than by reason of disability due to physical or mental illness) or
failure, neglect or refusal by the Employee to perform his duties and
responsibilities without the same being corrected upon ten days prior written
notice; or
(f) Material breach by the Employee of any of the covenants
contained on this Agreement.
6.3 If terminated without cause, Employee shall continue to receive
his then- current salary for a period of six (6) months or until new employment
begins, whichever occurs first. Employee agrees to notify the Company upon
acceptance of new employment.
6.4 In the event Employee desires to resign, Employee shall give the
Company not less than thirty (30) days written notice.
3
<PAGE>
7. REMEDIES. Your duties under the Proprietary Information Agreement
shall survive termination of your employment with the Company. You acknowledge
that a remedy at law for any breach or threatened breach by you of the
provisions of the Proprietary Information Agreement would be inadequate and you
therefore agree that the Company shall be entitled to injunctive relief in case
of any such breach or threatened breach.
8. ASSIGNMENT. Neither this Agreement nor any rights or obligations
hereunder may be assigned by the Company or by you.
9. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, scope, activity or subject, it shall be construed by limiting
and reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.
10. NOTICES. Any notice which the Company is required or may desire to
give you shall be given by personal delivery or registered or certified mail,
return receipt requested, addressed to you at the address of record with the
Company, or at such other place as you may from time to time designate in
writing. Any notice which you are required or may desire to give to the Company
hereunder shall be given by personal delivery or by registered or certified
mail, return receipt requested, addressed to the Company at its principal
office, or at such other office as the Company may from time to time designate
in writing. The date of personal delivery or the date of mailing any such notice
shall be deemed to be the date of delivery thereof.
11. WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
12. COMPLETE AGREEMENT; AMENDMENTS. This Agreement, together with Exhibit
I sets forth the entire agreement and understandings between the parties hereto
and constitutes the complete, final and exclusive embodiment of their agreement
with respect to the subject matter hereof. This Agreement merges all previous
discussions and negotiations between the parties and supersedes and replaces any
and every other agreement which may have existed between the parties with
respect to the subject matter hereof. It may not be amended, supplemented,
canceled or discharged except by written instrument executed by both parties
hereto.
13. HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
14. LAW GOVERNING AGREEMENT. The validity of this Agreement and the
rights,
4
<PAGE>
obligations, and relations of the parties hereunder shall be construed and
determined under and in accordance with the substantive laws of the State of
California without regard to its principles of conflicts of law.
15. FORUM. Any legal action, suit or proceeding arising from or relating
to this Agreement shall be brought and maintained in the United States District
Court for the Northern District of California and the parties hereby submit to
the jurisdiction thereof.
16. ATTORNEY FEES. If either party brings any action to enforce its
rights hereunder, the prevailing party in any such action shall be entitled to
recover his or its reasonable attorneys' fees and costs in connection with such
action.
INVISION TECHNOLOGIES, INC.
By:
--------------------------------
Sergio Magistri
Title:
-----------------------------
Date:
------------------------------
Accepted and agreed this
___ day of _____, 1994.
- ---------------------
Benno Stebler
5
<PAGE>
EXHIBIT 11.1
STATEMENT REGARDING CALCULATION OF NET LOSS PER SHARE (1)(2)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Net loss.................................................................................... $ (3,292) $ (3,572)
--------- ---------
--------- ---------
Weighted average shares outstanding:
Common Stock.............................................................................. 90 5,820
Common Stock issuable upon exercise of options granted through January 16,
1995 (3)................................................................................ -- --
Common Stock issuable upon exercise of options and warrants granted from January 17, 1995
to April 23, 1996 (4)................................................................... 838 280
Common Stock issuable upon exercise of options granted subsequent to April 23, 1996 (3)... -- --
Convertible Preferred Stock issued before January 16, 1995 (5)............................ 3,894 1,304
Convertible Preferred Stock issued after January 16, 1995 (6)............................. 1,820 738
--------- ---------
Weighted average shares outstanding......................................................... 6,642 8,142
--------- ---------
--------- ---------
Net loss per share.......................................................................... $ (0.50) $ (0.44)
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) This exhibit should be read in conjunction with Note 2 of Notes to
Consolidated Financial Statements.
(2) Share and per share data adjusted to reflect the 1-for-11 reverse stock
split which occurred in March 1996 and the 2-for-1 stock split which
occurred February 7, 1997.
(3) Stock options granted prior to January 16, 1995, or subsequent to April 23,
1996 are excluded as their effect is anti-dilutive.
(4) Stock options and warrants granted from January 17, 1995 through April 23,
1996 (using the treasury stock method and the Company's initial offering
price of $11 per share) have been included for all periods presented through
the effective date of the Company's initial public offering.
(5) Convertible preferred stock (using the if converted method) issued prior to
January 16, 1995 is included from date of issuance through its conversion on
April 23, 1996.
(6) Convertible preferred stock (using the if converted method for periods after
issuance and the treasury stock method for periods before issuance) issued
after January 16, 1995 has been included for all periods presented, through
its conversion on April 23, 1996.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 20, 1997,
relating to the consolidated financial statements of InVision Technologies,
Inc., which appears in such Prospectus. We also consent to the reference to us
under the headings "Selected Consolidated Financial Data" and "Experts" in such
Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Consolidated Financial Data".
PRICE WATERHOUSE LLP
San Jose, California
March 14, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,363
<SECURITIES> 0
<RECEIVABLES> 5,987
<ALLOWANCES> 0
<INVENTORY> 4,810
<CURRENT-ASSETS> 13,452
<PP&E> 2,845
<DEPRECIATION> 1,041
<TOTAL-ASSETS> 15,256
<CURRENT-LIABILITIES> 6,072
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 9,065
<TOTAL-LIABILITY-AND-EQUITY> 15,256
<SALES> 15,841
<TOTAL-REVENUES> 15,841
<CGS> 9,736
<TOTAL-COSTS> 9,736
<OTHER-EXPENSES> 8,338
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,511
<INCOME-PRETAX> (3,572)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,572)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,572)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
</TABLE>