<PAGE>
Registration No. 333-5753
================================================================================
SECURITIES AND EXCHANGE COMMISSION
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
EXIGENT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 7373 59-3379927
(State of Incorporation) (Primary Standard (IRS Employer
Industrial Classification Identification
Code Number) Number)
-----------------------------------------------
1225 Evans Road
Melbourne, Florida 32904-2314
(407) 723-3999
(Address and telephone number of
Registrant's principal executive offices)
Jeffrey C. Clift, President
Exigent International, Inc.
1225 Evans Road
Melbourne, Florida 32904-2314
(407) 723-3999
(Name, address and telephone number of agent for service)
Copy to: Lynn H. Wangerin, Esq.
Ogden Newell & Welch
1200 One Riverfront Plaza
Louisville, Kentucky 40202
(502) 582-1601
(502) 581-9564 (facsimile)
-----------------------------------------------
Approximate date of commencement of proposed distribution to public: As
soon as practicable after the registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
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. [_]
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act 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.
<TABLE>
<CAPTION>
===========================================================================================================
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
Title of each class Amount to Proposed maximum Proposed maximum Amount of
of securities to be be registered offering price aggregate offering registration fee
registered per unit price
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares(1) 2,449,975 $0.881 $ 2,158,428 $ 745
Common Shares(2) 1,070,270 $ 3.00 $ 3,210,810 $1,108
Common Stock
Purchase Warrants(3) 1,070,270
(4) $ (4) $ (4)
Total Fee $1,853
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) There is no offering price. These securities include 300,000 shares
issued to Monogenesis Corporation at a price of $0.01 per share.
Monogenesis Corporation will distribute most of such shares to its
shareholders as a dividend at a rate of 125 shares for each share of
Monogenesis Corporation held. The remaining shares are to be offered
for sale at market price from time to time and are currently held
1,704,430 shares by the Software Technology, Inc. Restated Employee
Stock Ownership Plan and Trust and 445,545 shares by other
shareholders of Exigent International, Inc. The fee computation is
based upon book value of Software Technology, Inc., the wholly owned
subsidiary of Exigent International, Inc., as of January 31, 1996.
(2) These are the Common Shares which will be issued in the event that the
Common Stock Purchase Warrants are exercised. The maximum offering
price is based upon the exercise price of the warrants.
(3) The warrants include 425,000 warrants, most of which will be
distributed to shareholders of Monogenesis Corporation as a dividend
of 200 warrants for each share of stock of Monogenesis Corporation
held, and 645,270 warrants to be offered for sale at market prices
from time to time which are held as follows: 229,896 warrants are held
by the Software Technology, Inc. Restated Employee Stock Ownership
Plan and Trust, 240,378 warrants are held by other shareholders of
Exigent International and 174,996 warrants are held by Joseph Walker
and Sons, Inc.
(4) The warrants are registered in the same registration statement as the
Common Shares underlying the warrants and, therefore, no separate
registration fee is required pursuant to Rule 457(g).
<PAGE>
EXIGENT INTERNATIONAL, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Page
ITEM NUMBER - PART I, S-1 Location Number
- ------------------------- -------- ------
<S> <C> <C>
1. Forepart of the Registration Same 1
Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Same 2, 97
Back Cover Pages of Prospectus
3. Summary Information, Risk Summary, Risk Factors 2, 7
Factors and Ratio of Earnings to
Fixed Charges
4. Use of Proceeds Use of Proceeds 14
5. Determination of Offering Price Risk Factors - Absence 12
of Trading Market
6. Dilution Risk Factors - Dilution 11
as a Result of ESOP
7. Selling Security Holders Risk Factors - Shares 12, 35
Available for Resale; Plan
of Distribution, Principal
amd Selling Shareholders and
Security Ownership of
Management
8. Plan of Distribution Plan of Distribution 12
9. Description of Securities to Be Securities 38
Registered
10. Interests of Named Experts and Not applicable
Counsel
11. Information With Respect to the
Registrant
(a) Description of business Business 16
(b) Description of property Business - Property 25
(c) Legal proceedings Legal Proceedings
(d) Market price of and dividends Risk Factors - Absence of 12, 38
on the registrant's common Trading Market; Securities; 42
stock and related stockholder Dividends
matters
(e) Financial statements Financial Statements 46
(f) Selected financial data Summary - Selected Financial 4
Data
(g) Supplementary financial Not applicable
information
(h) Management's discussion and Management's Discussion and 27
analysis of financial Analysis of Financial Condition
condition and results of and Results of Operations
operations
(i) Changes in and disagreements Not applicable
with accountants on accounting
and financial disclosure
(j) Directors and executive Management 31
officers
(k) Executive compensation Management - Executive 34
Compensation
(l) Security ownership of certain Principal and Selling 35
beneficial owners and Shareholders and Security
management Ownership of Management
(m) Certain relationships and Management - Certain 35
related transactions Transactions
12. Disclosure of Commission Liability and Indemnification 42
Position on Indemnification of Directors and Officers
for Securities Act Liabilities
</TABLE>
<PAGE>
PROSPECTUS
- -----------
EXIGENT INTERNATIONAL, INC.
1225 Evans Road
Melbourne, Florida 32904-2314
(407) 723-3999
3,520,245 Common Shares (the "Shares")
(par value, $0.01 per share)
1,070,270 Common Stock Purchase Warrants (the "Warrants")
Exigent International, Inc. (the "Issuer") is registering 300,000 Shares
and 425,000 Warrants in connection with a distribution by Monogenesis
Corporation ("Monogenesis"), a closed-end investment company with approximately
1,200 institutional shareholders. Monogenesis will distribute to its
shareholders 125 Shares and 200 Warrants for each share of stock of Monogenesis
held (the "Distribution") and will be an underwriter as defined in the
Securities Act of 1933, as amended (the "1933 Act"). See "Plan of
Distribution." After the Distribution, Monogenesis will own approximately 1%
of the outstanding Common Shares of the Issuer. The Issuer will not receive
any funds from the Distribution, but will receive funds if any Warrants are
exercised.
Each Warrant entitles the holder to purchase one Common Share at $3.00 per
share for 36 months. There can be no assurance that the price of a Common
Share will equal or exceed the exercise price of the Warrants or that it will
be profitable for a holder to exercise any Warrants. See "Securities." The
Issuer is also registering the Shares which may be issued upon exercise of the
Warrants.
The purpose of the Distribution is to attempt to establish a public
trading market in the Shares: (i) to facilitate acquisitions and access to
equity capital and (ii) to provide liquidity for employee stock incentive
programs and existing shareholders. There is no current public trading market
for the Shares or the Warrants and, although the Issuer believes a market will
develop, there can be no assurance that a market will develop after the
Distribution. See "Risk Factors - Absence of Trading Market."
The Shares and the Warrants offered hereby, other than the Shares issued
to Monogenesis and underlying the Warrants and the Warrants issued to
Monogenesis, are owned by those individuals who are named herein (the "Selling
Shareholders"). See "Principal and Selling Shareholders and Security Ownership
of Management." The Issuer will not receive any proceeds from the sale of
these Shares or Warrants, but will receive proceeds if any of the Warrants are
exercised. The Shares and the Warrants held by the Selling Shareholders may be
sold by them or by permitted transferees from time to time. Such sales may be
made on the exchange on which the Shares and Warrants trade, if any, in the
over-the-counter market, or in negotiated transactions, at market price or at
negotiated prices and terms. Upon any sale of the securities offered hereby
by Selling Shareholders, Selling Shareholders or permitted transferees and
participating agents, brokers or dealers may be deemed to be underwriters as
defined in the 1933 Act and commissions, discounts or any profit realized on
the resale of such securities may be deemed to be underwriting commissions or
discounts. See "Plan of Distribution."
The Issuer will pay the expenses of this registration (approximately
$85,000) other than any brokerage commissions or discounts in connection with
the sale of a shareholder's securities.
Holders of Common Shares of the Issuer may elect only 25% of the board
of directors. Holders of Class A Preferred Shares will elect 75% of the board of
directors and thereby control the Issuer. See "Risk Factors - Control by Holders
of Class A Preferred Shares."
THE SHARES AND WARRANTS INVOLVE A HIGH DEGREE OF RISK, ARE ILLIQUID AND
SHOULD ONLY BE PURCHASED BY INVESTORS THAT CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS" AT PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
A MONOGENESIS INSTITUTIONAL DISTRIBUTION
The date of this Prospectus is ________________, 1996.
<PAGE>
ADDITIONAL INFORMATION
----------------------
The Issuer will furnish annual reports containing audited financial
statements to its shareholders. Additional unaudited reports may be provided to
shareholders at such time as the Issuer may determine or as required by law. The
Issuer is not currently required to file reports under the Securities Exchange
Act of 1934 (the "1934 Act"), but will become subject to reporting requirements
upon effectiveness of the registration statement. See "Plan of Distribution."
The Issuer has filed a registration statement (which term shall include all
amendments, exhibits and schedules) on Form S-1 under the 1933 Act with the
Securities and Exchange Commission (the "Commission") in Washington, D.C. This
Prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement as filed
including the exhibits thereto. The registration statement may be reviewed
without charge at the Commission's principal place of business in Washington,
D.C. Copies of the registration statement may be obtained from the Public
Reference Section of the Commission located at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed prices. In addition, the Issuer is an
electronic filer. The Commission maintains a web site which contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the Commission's
Web site is http://www.sec.gov. Statements made in this Prospectus as to the
contents of any contract or other document are not necessarily complete, and,
where such contract or other document has been filed as an exhibit to the
registration statement, reference is hereby made to such exhibit and each such
statement is qualified in all respects by such reference.
<PAGE>
SUMMARY
-------
The following is a summary of certain information contained elsewhere in
the Prospectus. Reference is made to, and this summary is qualified by, the more
detailed information set forth in the Prospectus, which should be read in its
entirety.
<TABLE>
<CAPTION>
THE DISTRIBUTION
- ----------------
<S> <C>
Distributed Company................... Exigent International, Inc. (the
"Issuer"), a Delaware corporation, was
formed to act as a holding company and
acquired all of the issued and
outstanding stock of Software
Technology, Inc. ("STI") in exchange for
3,486,600 Common Shares and 697,320
Class A Preferred Shares of the Issuer.
The Issuer also issued 645,270 Warrants
to STI shareholders and Joseph Walker &
Sons, Inc. ("JWSI") in exchange for
warrants of STI. See "Business -General"
and "Securities."
Distributing Company.................. Monogenesis Corporation, a Delaware
corporation, pursuant to a resolution
of its board of directors is
distributing Common Shares and
Warrants of the Issuer which it
purchased from the Issuer as a dividend
to its shareholders of record on
___________, 1996. See "Plan of
Distribution" and "Management - Certain
Transactions."
Distribution Ratio.................... Each Monogenesis shareholder will
receive 125 Common Shares, par value
$0.01 per share, and 200 Warrants of
the Issuer for each share of
Monogenesis stock held by it. See
"Plan of Distribution." After the
Distribution, Monogenesis will own
approximately 1% of the outstanding
Common Shares of the Issuer.
Distribution Agent.................... Mid-America Bank of Louisville and
Trust Company, Monogenesis' transfer
agent, will act as distribution agent,
transfer agent and warrant agent for the
Issuer. See "Securities - Transfer Agent
and Registrar."
Shares to be Distributed.............. The Common Shares to be distributed
will constitute approximately 6.6% of
the issued and outstanding Common
Shares, and approximately 5.6% of the
total issued and outstanding stock of
all classes of common stock of the
Issuer. The Issuer will not receive
any proceeds from the distribution of
these shares. However, the Issuer
will receive proceeds if any Warrants
are exercised. See "Plan of
Distribution" and "Securities."
Warrants to be Distributed............ The Warrants to be distributed will
constitute approximately 37.5% of the
issued and outstanding Warrants.
Each Warrant entitles the holder to
purchase one Common Share of the
Issuer at an exercise price of $3.00
per share and may be exercised during
the 36 month period following
issuance of the Warrant. The Common
Shares and the Warrants are separately
transferable. See "Securities."
Distribution Date..................... Certificates representing the Shares
and the Warrants will be mailed to
Monogenesis shareholders as soon as
practical after the date of this
Prospectus. See "Plan of Distribution."
</TABLE>
3
<PAGE>
Sales of Shares and Warrants By 2,149,975 Common Shares and all
Selling Shareholders................. Warrants held by certain shareholders
of the Issuer, by the Software
Technology, Inc. Restated Employee
and Stock Ownership Plan and Trust
(the "ESOP") and by JWSI will be
registered and available for resale
from time to time subject to certain
limitations. See "Principle
Shareholders and Security Ownership
of Management." These shares
constitute approximately 56.8% of the
issued and outstanding Common Shares,
and approximately 47.9% of the total
issued and outstanding stock of all
classes of common stock of the
Issuer. The Issuer will not receive
any proceeds from the sale of these
Shares or Warrants; however, it will
receive proceeds if any Warrants are
exercised. See "Risk Factors - Shares
Available for Resale" and "Plan of
Distribution."
Trading Market....................... There will be no immediate trading
market for the Shares or the Warrants.
See "Risk Factors -Absence of Trading
Market." The Issuer is registering the
Shares and Warrants to attempt to
establish a public trading market in the
Shares. There can be no assurance that a
market will develop.
THE ISSUER
- ----------
Exigent International, Inc. (the "Issuer"), a Delaware corporation, was
formed to acquire and hold all of the issued and outstanding stock of Software
Technology, Inc. ("STI"). The Issuer acquired all of the issued and outstanding
stock and warrants of STI, a Florida corporation, in exchange for stock and
Warrants of the Issuer. See "Business - General." Management of STI and the
Issuer anticipates that at some point in the future it may be advantageous to
acquire additional businesses and that the Issuer's stock, especially if a
trading market in the stock has developed, might be used as some or all of the
consideration for such acquisitions. Currently, the Issuer owns only the STI
stock and has no other operations.
The Issuer's wholly owned subsidiary, STI, is a systems and software
engineering firm which provides technical solutions for government and industry.
STI specializes in command and control applications for ground, flight, test and
process control relating to satellite technology. It also provides systems and
software engineering services and commercial off-the-shelf ("COTS") products for
real-time command, control and data acquisition systems such as OS/COMET/TM/, a
commercially available command and control development and support system. In
addition, STI has developed and markets an airport security and control system,
currently used primarily outside of the United States, and a data switching unit
which provides rapid switching of data received to several devices
simultaneously and is currently used by telecommunications companies and
satellite ground stations. See "Business."
The Issuer was incorporated on March 25, 1996. It's principal office is
located at 1225 Evans Road, Melbourne, Florida 32904-2314. The telephone number
is (407) 723-3999. STI was incorporated on June 13, 1978 and has the same
principal office as the Issuer. See "Business - History."
SELECTED FINANCIAL DATA
- -----------------------
The selected financial data is that of STI. The pro forma figures of net
income per share and stockholders' equity per share reflect the capitalization
of the Issuer.
4
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
Statement of Earnings Data (1):
====================================================================================================
Six Months Ended July 31,
(Amounts in thousands except
per share amounts)
-----------------------------
1996 1995
---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 14,396 $ 11,425
Cost of Sales (11,521) (8,823)
Gross Profit 2,875 2,602
General and Administrative Expenses (2,192) (1,463)
Research and Development Costs (45) (65)
Operating Income 638 1,074
Total Other Income (Expense) 8 (7)
Income before Taxes 646 1,067
Income Tax Expense (273) (456)
Net Income $ 373 $ 611
Net Income per Pro Forma Common Share $ 0.08 $ 0.14
and Common Share Equivalent (2)
Years Ended January 31,
(Amounts in thousands except
per share amounts)
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Revenues $ 25,292 $ 19,761 $ 16,761 $ 14,913 $ 15,233
Cost of Sales (19,408) (16,064) (13,401) (12,234) (12,519)
Gross Profit 5,884 3,697 3,360 2,679 2,714
General and Administrative Expenses (3,841) (2,539) (2,511) (1,805) (1,910)
Research and Development Costs (155) (102) (126) (84) (3)
Operating Income 1,888 1,056 723 790 801
Total Other Income (Expense) (1) 20 (13) 20 35
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Years Ended January 31,
(Amounts in thousands except
per share amounts)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Income before Taxes 1,887 1,076 710 810 836
Income Tax Expense (755) (354) (216) (357) (323)
Net Income $1,132 $ 722 $ 494 $ 453 $ 513
Net Income per Pro Forma Common Share
and Common Share Equivalent (2) $ 0.25 $0.16 $0.11 $0.10 $0.11
</TABLE>
<TABLE>
<CAPTION>
================================================================================================================
Balance Sheet Data (1):
================================================================================================================
Six Months Ended July 31, 1996
(Amounts in thousands except
per share amounts)
---------------------------------------------------
<S> <C>
Total Assets $9,214
Total Long-Term Liabilities (3) $ 452
Total Stockholders' Equity $6,727
Stockholders' Equity Per Pro Forma Common Share $ 1.50
and Common Share Equivalent (2)
</TABLE>
<TABLE>
Years Ended January 31,
(Amounts in thousands except
per share amounts)
------------------------------------------------
1996 1995 1994 1993 1992
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total Assets $8,248 $6,471 $4,631 $4,224 $4,032
Total Long-Term Liabilities (3) $ 10 $ 17 --- $ 4 $ 56
Total Stockholders' Equity $4,893 $3,939 $3,306 $2,901 $2,537
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Years Ended January 31,
(Amounts in thousands except per share amounts)
-----------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Stockholders' Equity Per Pro Forma $ 1.09 $ 0.88 $ 0.86 $ 0.65 $ 0.57
Common Share Equivalent (2)
Dividends Declared Per Pro Forma Common Share $ 0.04 $ 0.02 $ 0.02 $ 0.02 $ 0.02
and Common Share Equivalent (2)
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The statement of earnings data and the balance sheet data for 1996,
1995 and 1994 were derived from the audited financial statements of STI
which are included in their entirety elsewhere in this Prospectus.
Financial information presented for the six months ended July 31, 1996 and
1995 was derived from financial statements prepared by management which
are unaudited and which are included in their entirety elsewhere in this
Prospectus. See "Financial Statements."
(2) Pro forma per share net income, stockholders' equity and dividends
declared reflect the number of shares of the Issuer's common stock and
common stock equivalent (Class A Preferred Shares) which are issued and
outstanding as of the date hereof (4,483,920 shares) for all years rather
than the number of shares of STI actually outstanding on the applicable
dates and have been rounded to the nearest cent. These figures do not
include Common Shares which may be issued upon exercise of the Warrants.
See "Capitalization."
(3) The total long-term liabilities amounts exclude the current portion of
such obligations.
RISK FACTORS
------------
The securities described in this Prospectus involve a high degree of risk.
Prior to investing, prospective investors in the Shares and the Warrants should
consider the following factors inherent in, and affecting the business of, the
Issuer and its subsidiary, STI.
LIMITED NUMBER OF CUSTOMERS. Most of STI's business is developing software
and systems for satellite ground stations. See "Business." There are a limited
number of customers for this technology. In addition, more than 60% of STI's
revenues are derived from two customers. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The expiration of
any of these contracts without replacement with comparable contracts or the loss
of any of any one of these
7
<PAGE>
customers for any reason could materially affect STI's income. STI has
designated diversification as a priority and has made progress in diversifying
over the last three years. See "Business - General" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations." Management also
hopes that additional emphasis on marketing existing products such as satellite
systems or airport security systems or their components will diversify STI's
customer base and thereby reduce the risks associated with reliance on a limited
number of customers. See "Business - Products."
DEPENDENCE ON GOVERNMENT CONTRACTS. More than half of STI's current
revenues come from contracts with various agencies of the U.S. Government with
approximately 24% of such revenues attributable to contracts with the Naval
Research Laboratory. See "Risk Factors - Limited Number of Customers." STI is
working to expand its contracts with commercial entities but expects a large
percentage of its revenues to continue to be derived from contracts with U.S.
government agencies. See "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The loss or termination of any
one of the larger government contracts due to funding cuts or contract
termination contracts without renewal or replacement with contracts of similar
value could significantly affect STI's performance. Most government contracts,
even if they have a longer term, are cancelable by the government agency after
the first or second year.
FIXED PRICE CONTRACTS. STI principally performs under software development
and/or operations and maintenance contracts. Approximately 20% of revenues from
current contracts were derived from contracts under which STI commits to deliver
software that meets specific requirements for a fixed price that is negotiated
prior to development. The proposed price is based on engineering estimates with
suitable margins to accommodate reasonable contingencies. Should the actual cost
to develop the software exceed the fixed price due to miscalculations in the
time needed to develop the program or unexpected programming difficulties, STI
must complete the contract and incur whatever losses result. See "Business -
Products."
DEPENDENCE ON SATELLITE COMMAND AND CONTROL INDUSTRY. Currently, most of
STI's revenues are derived from products and services related to the satellite
command and control industry. Should this industry take a substantial downturn
and the number of satellites deployed be materially reduced, STI's new business
opportunities would be limited significantly. However, management does not
believe that a reduction is likely in the near future. See "Business." In
addition, management is attempting to diversify STI's customer base as well as
the industries in which it operates which, if successful, will minimize the
impact of any decline in the industry.
ONGOING SUPPORT REQUIREMENTS. STI has committed under various contracts
and licenses to provide support and maintenance for certain of its software
products. See "Business." Under these agreements, STI is required to maintain
some number of staff members familiar with that version of the product to
provide customer service.
COMPETITION. STI believes it is one of only three companies in the United
States that derive substantially all of their revenue from development of
tracking, telemetry, command and control software related to satellites and
satellite ground station support and is the largest of the
8
<PAGE>
three. In addition to these companies, at least eight large aerospace/defense
contractors have developed tracking, telemetry, command and control software
either in-house as primary contractors or through outsourcing or subcontractors
(including STI in some cases). Thus, some of STI's competitors are also its
customers. These larger competitors have significantly greater financial
resources than STI, although income from such products represent only a small
portion of their total revenue. See "Business - Competition." There can be no
assurance that STI can continue to compete effectively with these companies or
maintain them as customers while competing with them on other projects.
CHANGING TECHNOLOGY. The computer industry is technology driven and shows
rapid changes in what is state-of-the-art. To be successful in this industry, a
company must be able to produce products, and to continuously update existing
products, so that its products are at all times state-of-the-art. Any of STI's
products could become obsolete at any time due to rapid technological changes
and STI may not be able to update its products quickly enough to remain
competitive. See "Risk Factors - Research and Development" and "Business -
Research and Development."
INTELLECTUAL PROPERTY RIGHTS. Under some government contracts, STI develops
software that it decides to commercialize by investing additional research and
development funds and then marketing the software as a product. In some cases,
the government contracts preclude STI from selling the resulting product to any
government agencies. If the primary market for a potential product is government
agencies, STI may not be able to recover invested funds through sale of the
product. Management of STI is aware of this issue and strives to reach
agreements as to these matters at the inception of the contract to prevent any
problems with limitations on resale.
SECURITY CLEARANCE. Many of STI's contracts with government agencies
require that certain of its employees and procedures meet security clearance
requirements. STI has not had any problems meeting these requirements, but
should one develop, it could lose a significant portion of its contracts.
GENERAL ENVIRONMENTAL. STI is the lessee of several parcels of real estate
on which its operations are located. Accordingly, STI is an "operator" under
applicable state and federal environmental laws. As an operator, STI is
potentially responsible for the clean-up of any hazardous or toxic materials
that may be improperly located in any of its facilities. The development and
manufacturing processes of STI do not generate any significant quantities of
hazardous or toxic materials. See "Business - Manufacturing." The officers of
STI are not aware of any hazardous materials improperly located at any of STI's
facilities.
RELIANCE ON EXISTING MANAGEMENT. STI's success is dependent upon the
capabilities and reputation of its senior management and technical personnel and
on their maintaining or enhancing existing relationships with STI's customers.
See "Management." The loss of key officers, managers or senior technical staff
could have a materially adverse affect on STI's business. In such event, there
can be no assurance that STI could attract qualified replacements.
9
<PAGE>
SHORTAGE OF QUALIFIED EMPLOYEES. As a result of the expansion of the number
of business users of computers and the expansion in demand for computer services
and custom software programming, there is a short supply of computer
professionals. The situation is not expected to improve in the near future. As a
result, many computer programming companies have a year or two year backlog of
high end computer applications awaiting programming. Thus, it is possible that
STI could have problems finding, keeping and replacing employees. However,
defense contractors have laid off many of their computer/engineering employees
and this trend is expected to continue thereby creating a pool of employees who
would likely have at least some of the expertise needed by STI. In addition, STI
has developed and maintains an employee benefit program which management
believes to be superior to that of most of its competitors and will help it
attract and retain qualified employees.
CAPITAL REQUIREMENTS. The Issuer and STI believe that they have sufficient
capital to meet their needs through fiscal year 1997. Should additional capital
be required in the future, however, there can be no assurance that the Issuer or
STI will be able to obtain this funding or that sufficient debt or equity
financing will be available to meet any such capital requirements. All of STI's
accounts receivable and equipment are pledged as collateral on a term loan and
line of credit and STI is prohibited from incurring additional indebtedness
without the prior approval of the lender. In the event of a violation by STI of
the loan documents, the lender could declare the indebtedness to be immediately
due and payable and foreclose on the collateral.
OS/COMET/TM/ WARRANTY AND SUPPORT. During the past year, STI has sold its
primary commercial product, OS/COMET/TM/, to several large satellite programs
and committed to support this product over the lifetime of these programs (ten
years or more). There is no history of the cost to STI supporting this product.
In fiscal year 1997, STI put maintenance contracts in place to cover the
estimated cost of supporting OS/COMET/TM/ during this time frame, but unusual
problems beyond the reasonable expectations of STI could cost more to correct
than the contract price.
PATENTS AND COPYRIGHTS. The management of STI does not know of any
circumstances in which any component of its products infringes on any
intellectual property right of another. However, STI does not routinely do
patent searches on its designs and there is a possibility that its computer
hardware designs or software algorithms infringe on intellectual property rights
of others, which rights may be protected by copyright, patent or other common
law rights. In the event that STI has infringed on any such rights, it could be
required to pay damages. In addition, if STI were unable to change the design of
such product so that it no longer infringed on any intellectual property rights,
it would lose the ability to sell such product as well as the benefits of all
previous marketing efforts and name recognition associated with the product.
Even if alterations to avoid any intellectual property problems were possible,
the product as changed might not be successful in the marketplace.
TRADEMARKS. Management of STI does not believe that it is infringing on
the trademark of any other entity in the world. STI has recently filed an
application to register the name "OS/COMET/TM/" with the U.S. Patent and
Trademark Office ("PTO"). Based upon the results of a search of the records of
the PTO, management believes that the application will mature to
10
<PAGE>
registration. In addition, the Issuer intends to file an application to register
its name "Exigent International" which application management also believes will
mature to registration based upon a search of the PTO records. If either of
those applications should be denied registration, STI and the Issuer may lose
the benefits of previous marketing and name recognition. In addition, STI has
not applied for or registered its name and may be unable to register it.
Management is aware of at least one other company using the name. Although
management does not believe the other company does business in the aerospace
industry, if STI were prohibited from using the name, it would lose the benefits
of name recognition and its previous marketing.
LACK OF OPERATIONAL HISTORY. The Issuer was incorporated on March 25, 1996
and has not yet engaged in business other than the acquisition of STI as
described in this Prospectus. See "Plan of Distribution." It therefore has no
earnings record. However, the Issuer's wholly owned subsidiary, STI, has been in
business since 1978 and had earnings before payment of taxes of the following
amounts for the fiscal years ended January 31: $1,887,141 for 1996; $1,075,935
for 1995; and $709,510 for 1994. See "Selected Financial Data" and "Financial
Statements."
CURRENT PROSPECTUS AND STATE "BLUE SKY" REGISTRATION OR EXEMPTION REQUIRED
TO EXERCISE THE WARRANTS. Holders of the Warrants will have the right to
exercise the Warrants to purchase Common Shares only if such shares qualify for
sale under state securities laws or are exempt from qualification under
applicable securities or "blue sky" laws of the states in which the various
holders of the Warrants then reside and there is available a current Prospectus
permitting the sale of the Common Shares underlying the Warrants. The Issuer has
undertaken and intends to use reasonable efforts to keep current a prospectus
which will permit the sale of the Common Shares underlying the Warrants, but
there can be no assurance that the Issuer will be able to do so. The Issuer is
not required to qualify for sale the Common Shares in any state. The Warrants
may lose some of all of their value if a prospectus covering the underlying
shares is not kept effective or if the underlying shares are not, or cannot be,
qualified in an applicable state. See "Securities."
CONTROL BY HOLDERS OF CLASS A PREFERRED SHARES. The Issuer has two classes
of voting stock issued and outstanding: Common Shares and Class A Preferred
Shares. Although each holder of Common Shares and Class A Preferred Shares is
entitled to one vote for each share of stock held, the holders of Class A
Preferred Shares are entitled to elect 75% of the members of the board of
directors of the Issuer (presently seven members). Holders of Common Shares
(together with holders of Class B Common Shares and any voting Preferred Shares
other than Class A Preferred Shares) are only entitled to elect 25% of the
members of the board of directors (presently three members). (If the number of
issued and outstanding Common Shares, Class B Common Shares and voting Preferred
Shares, other than Class A Preferred Shares, is less than 10% of the aggregate
number of issued and outstanding shares of all classes, all directors will be
elected by the holders of all shares voting together.) Thus, holders of Class A
Preferred Shares will control the board of directors and therefore, the Issuer.
Except with respect to matters which require voting by class, shareholders of
all classes will vote together on all other matters properly brought before the
shareholders. See "Principal Shareholders and Security Ownership of Management"
and "Securities."
11
<PAGE>
DIVIDENDS. The Issuer is newly formed and has not paid dividends. It's only
significant source of earnings out of which to pay dividends will be dividends
it receives from its subsidiary, STI. STI has historically paid dividends to its
shareholders. It declared $177,955 and $88,977 in dividends in years ended in
1996 and 1995, respectively. See "Financial Statements." In connection with a
loan agreement entered into in 1995, STI is prohibited from taking certain
actions without the prior approval of the lender including (i) declaring or
paying dividends in excess of the lessor of 25% of net income or $100,000, (ii)
merging or consolidating or (iii) selling substantially all of its assets. There
is no guarantee that STI, and therefore the Issuer, will pay dividends in the
future.
AUTHORIZATION OF PREFERRED STOCK. The Issuer's Certificate of Incorporation
authorizes the issuance of Preferred Shares with designations, rights and
preferences as determined from time to time by its Board of Directors.
Accordingly, the Board of Directors is empowered, without shareholder approval,
to issue Preferred Shares with dividends, liquidation, conversion, voting or
other rights that could adversely affect the dividends, liquidation rights,
voting rights or other rights of the holders of Common Shares. Class A Preferred
Shares which are currently authorized have a liquidation preference of $2.50 per
share. The voting rights of any Preferred Shares, other than Class A Preferred
Shares, however, are limited by the Certificate of Incorporation and cannot
exceed the voting rights of any Common Shares. See "Risk Factors -Control by
Holders of Class A Preferred Shares." In the event of issuance, Preferred Shares
could be used, under certain circumstances, as a method of discouraging,
delaying or preventing a change of control of the Issuer. See "Securities."
DILUTION AS A RESULT OF ESOP. STI has adopted an employee stock ownership
plan, Software Technology, Inc. Restated Employee Stock Ownership Plan and Trust
(the "ESOP"). The ESOP currently owns 1,704,430 Common Shares and 340,886 Class
A Preferred Shares of the Issuer. It also owns 229,896 Warrants. Under the
governing instrument of the ESOP, the Board of Directors, in its sole
discretion, may give cash or issue stock, or cause the Issuer to issue stock to
the ESOP, for the benefit of the employees of STI. At such times as stock is
issued to the ESOP, such issuance results in dilution to the shareholders of the
Issuer.
ABSENCE OF TRADING MARKET. There is not an established public trading
market for the Shares or the Warrants. The exercise price of the Warrants was
determined by management of the Issuer and Monogenesis. The Shares and the
Warrants are illiquid and should only be purchased by investors that can afford
to lose their entire investment. There can be no assurance as to the prices at
which the Shares or the Warrants will trade or that such prices will not be
significantly below the book value per share of the Shares. Until the Shares and
the Warrants are fully distributed and an orderly market develops (if at all),
the prices at which the Shares or the Warrants trade may fluctuate
significantly. Prices for the Shares and the Warrants will be determined in
the marketplace and may be influenced by many factors, including the depth and
liquidity of the market, investor perception of the Issuer and the industry in
which the Issuer participates, and general economic and market conditions.
12
<PAGE>
SHARES AVAILABLE FOR RESALE. Approximately 35% of the issued and
outstanding Common Shares of the Issuer (all shares except the Common Shares
described in this Prospectus) are "restricted securities" as such term is
defined in Rule 144 promulgated under the Securities Act of 1933 (the "1933
Act"). (Class A Preferred Shares may be converted to Common Shares.) Sales of
securities by affiliates of the Issuer may also be subject to Rule 144 resale
limitations. Currently, approximately 91% of the restricted securities are held
by Dean W. Boley, Rudiger D. Lichti, Don F. Riordan, Jr. and Daniel J. Stark.
See "Principal Shareholders and Security Ownership of Management." In general,
under Rule 144, if adequate public information is available with respect to the
Issuer, beginning 90 days after the date of this Prospectus a person who has
satisfied a two year holding period may sell, within any three month period, a
number of shares which does not exceed the greater of 1% of the then outstanding
shares of the class of securities in question or the average weekly trading
volume during the four calendar weeks prior to such sale. Sales under Rule 144
are also subject to certain restrictions relating to manner of sale, notice and
the availability of current public information about the issuer. Sales of
restricted securities by a person who is not an affiliate of the issuer (as
defined in the 1933 Act) and who has satisfied a three year holding period may
be made without regard to volume limitations, manner of sale, notice or other
requirements of Rule 144. The Issuer is unable to predict the effect that sales
made pursuant to Rule 144 or other exemptions under the 1933 Act may have on the
prevailing market price of the registered Common Shares, or when such sales may
begin under the holding period requirements of Rule 144.
PLAN OF DISTRIBUTION
--------------------
The Issuer issued 300,000 Common Shares and 425,000 Common Stock Purchase
Warrants to Monogenesis, the majority of which were distributed as of the date
of this Prospectus to shareholders of Monogenesis at a rate of 125 Shares and
200 Warrants for each share of stock of Monogenesis held on ______________,
1996. Monogenesis purchased the Shares and Warrants at a price of $0.01 per
Share or Warrant which is the par value of the Common Shares. In addition,
Monogenesis agreed to distribute Shares and Warrants to its approximately 1,200
primarily institutional shareholders at the rate described above. The price was
determined by Monogenesis and STI. Monogenesis will retain the Shares and
Warrants not distributed and will own approximately 1% of the outstanding Common
Shares of the Issuer after the Distribution. Monogenesis also received
13
<PAGE>
a structuring fee of $25,000 from STI. The Issuer and STI have agreed to pay the
expenses of registering the Shares and Warrants issued to Monogenesis which
expenses include legal, accounting, consulting, transfer agent and filing fees.
Through the distribution of the Shares and the Warrants by Monogenesis (and the
sale of Shares by the Selling Shareholders from time to time), the Issuer hopes
to create a public trading market in its Common Shares to facilitate future
acquisitions and access to equity capital and to provide liquidity for employee
stock incentive programs and existing shareholders. See "Risk Factors - Absence
of Trading Market."
Since Monogenesis is purchasing Shares and Warrants with the intent to
distribute, it is a statutory underwriter under the 1933 Act. Monogenesis is not
a broker-dealer and has not participated in any traditional underwritings. It is
a registered closed-end investment company under the Investment Company Act of
1940 and was formed to provide a mechanism for companies to become reporting
companies under the 1934 Act in transactions similar to the Distribution.
Monogenesis completed one such distribution in 1992. STI and the Selling
Shareholders have agreed to indemnify Monogenesis against any liability arising
out of a breach of any representation, warranty or covenant contained in the
agreement with Monogenesis.
Shareholders of Monogenesis that receive Shares and Warrants will receive
such securities as a dividend. No holder of Monogenesis stock will be required
to pay any cash or other consideration for the Shares or the Warrants received
in the Distribution or surrender or exchange Monogenesis stock in order to
receive Shares or Warrants. Holders of the Warrants will be required to pay the
exercise price to exercise the Warrants. See "Securities."
Shareholders, including the recipients of Common Shares distributed by
Monogenesis, will be able to sell their Shares and Warrants which are
registered, at any time, although the sale of securities by affiliates is
limited under Rule 144. It is expected that, at such time as registered Shares
or Warrants are sold, such securities will be sold through the selling efforts
of brokers or dealers. There is no agreement with any specific brokers or
dealers relating to the Shares or the Warrants nor has any plan of distribution
or sale of the Shares or Warrants been developed, other than the dividend
distribution to Monogenesis shareholders described above.
The Shares and Warrants held by Selling Shareholders and registered
hereunder may be disposed of from time to time by the Selling Shareholders, or
by permitted transferees, in one or more transactions through any one or more of
the following: (i) to purchasers directly; (ii) in ordinary brokerage
transactions and transactions in which the broker solicits purchasers; (iii)
through underwriters or dealers who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Shareholders
or permitted transferees or from the purchasers of the securities for whom they
may act as agent; (iv) by the pledge of the Shares or Warrants as security for
any loan or obligation, including pledges to brokers or dealers who may, from
time to time, effect distribution of the Shares or Warrants or interests
therein; (v) to purchasers by a broker or dealer as principal and resale by such
broker or dealer for its own account
14
<PAGE>
pursuant to this Prospectus; (vi) in a block trade in which the broker or dealer
so engaged will attempt to sell the securities as agent but may position and
resell a portion of the block as principal to facilitate the transaction; and
(vii) through an exchange distribution in accordance with the rules of the
exchange or in transactions in the over-the-counter market. Such sales may be
made at then prevailing prices and terms which may be related to the then
current market price or at negotiated prices and terms. In effecting sales
brokers or dealers may arrange for other brokers or dealers to participate.
The Selling Shareholders or their successors in interest, and any
underwriters, brokers, dealers or agents that participate in the distribution of
the Shares and Warrants held by the Selling Shareholders, may be deemed to be
"underwriters" within the meaning of the 1933 Act, and any profit on the sale of
securities by them and any discounts, concessions or commissions received by any
such underwriters, brokers, dealers or agents may be deemed to be underwriting
commissions or discounts under the 1933 Act. The Issuer and STI will pay all
expenses incident to the registration of the Selling Shareholders' Shares and
Warrants other than underwriting discounts or commissions, brokerage fees and
the fees and expenses of counsel to the Selling Shareholders, if any. The Issuer
will not receive any proceeds from the sale of Shares or Warrants by the Selling
Shareholders, but will receive proceeds upon the exercise of any Warrants.
In the event of a material change in the plan of distribution disclosed in
this Prospectus, the Selling Shareholders will not be able to effect
transactions in the Shares and Warrants pursuant to this Prospectus until such
time as a post-effective amendment to the registration statement is filed with,
and declared effective by, the Commission. Prior to or on the effective date of
the registration statement, the Issuer will file a registration statement under
the 1934 Act registering the Shares and the Warrants thereunder. Such filing
together with the filing of the registration statement under the 1933 Act will
subject the Issuer to the reporting requirements of the 1934 Act and the Issuer
will be a public company. The Issuer intends to apply for a listing of the
Shares and the Warrants on a national exchange which reports transactions on a
real time basis; however, there can be no assurance that the Shares and the
Warrants will be so listed.
USE OF PROCEEDS
---------------
The minimal proceeds derived from the sale of the Shares and Warrants to
Monogenesis and any proceeds derived upon the exercise of any Warrants will be
used as working capital. The Issuer will derive no proceeds from the sale of
Shares or Warrants by the Selling Shareholders. See "Plan of Distribution."
CAPITALIZATION
--------------
The capitalization of STI (prior to its acquisition by the Issuer) and the
pro forma capitalization of the Issuer (giving effect to the acquisition of STI)
as of July 31, 1996 are as follows:
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<PAGE>
================================================================================
Capitalization of STI Prior to Acquisition:
================================================================================
<TABLE>
<CAPTION>
<S> <C>
Stockholders' Equity:
Common stock
par value - $0.01 per share;
800,000 shares authorized; 768,400 shares
issued and 593,182 outstanding $ 7,684
Paid-in capital 1,047,500
Retained earnings 5,973,862
Treasury stock, common 175,218 shares at cost (302,177)
----------
Total Stockholders' Equity $6,726,869
==========
================================================================================
Pro Forma Capitalization of the Issuer Assuming Acquisition of STI:
================================================================================
Stockholders' Equity
Common Shares
par value - $0.01 per share;
30,000,000 authorized
3,786,600 shares issued and outstanding(1) $ 3,787
Class B Common Shares
par value - $0.01 per share;
600,000 shares authorized;
no shares issued and outstanding -0-
----------
Total Common Shares $ 3,787
----------
Class A Preferred Shares
par value - $0.01 per share; stated value $2.50
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
per share; 5,000,000 shares authorized;
697,320 shares issued and outstanding 697
Preferred Shares
par value - $0.01 per share;
10,000,000 shares authorized;
no shares issued and outstanding -0-
----------
Total Preferred Shares $ 697
----------
Paid-in-capital 748,523
Retained earnings 5,973,862
Total Stockholders' Equity (2) $6,726,869
==========
</TABLE>
(1) In addition to the Common Shares of the Issuer held by former shareholders
of STI, the issued and outstanding Common Shares of the Issuer include the
300,000 Common Shares issued to Monogenesis for $3,000. This number does
not include the 1,070,270 Common Shares which my be issued upon the
exercise of the Warrants. See "Securities."
(2) Treasury stock was retired prior to reorganization.
In August, 1995, STI entered into a loan agreement with Sun Bank, National
Association, located in Melbourne, Florida. Under the agreement, the bank loaned
STI $800,000 for the purpose of purchasing new equipment. The agreement also
allows STI to borrow up to $1,800,000 under a revolving line of credit. The term
loan bears interest at a rate equal to the prime rate set by the bank from time
to time plus 0.375%. Interest is payable monthly and principal is payable in 36
monthly installments of $22,222.22 beginning April 1, 1996; provided that, all
principal and interest is due and payable on or before February 28, 1999. The
line of credit bears interest at a rate equal to the prime rate set by the bank
from time to time plus 0.25%. Interest only is due and payable monthly; the
principal balance is due and payable upon demand and must be paid in full for a
period of at least 45 days during the first period ending June 28, 1996 and
during each additional 12 month period in which the credit is available
thereafter. As of July 31, 1996, STI had no outstanding balance under the line
of credit.
BUSINESS
--------
GENERAL
- -------
The Issuer was formed on March 25, 1996 by STI to acquire and hold all of
the issued and outstanding stock of STI. Management of STI and the Issuer
anticipates that it may be advantageous to form a holding company to use its
stock to acquire additional businesses, especially if a trading market in
17
<PAGE>
the stock has developed. The Issuer acquired all of the issued and outstanding
STI stock in exchange for 3,486,600 Common Shares and 697,320 Class A Preferred
Shares. The Issuer also issued 645,270 Warrants in exchange for warrants of STI
held by STI shareholders and JWSI. Upon the completion of the exchange, STI
became a wholly owned subsidiary of the Issuer. All of the Issuer's current
business operations are conducted through STI.
STI is primarily a professional services company which provides systems and
software engineering services and develops computer solutions and systems under
contract to both government and industry. Its research and development efforts
primarily relate to command, control and data acquisitions systems for
spacecraft development and operations. See "Risk Factors - Dependence on
Satellite Command and Control Industry." STI provides operational systems that
support space based applications including ground station support, test and
integration systems, mission tasking systems, operational simulators, launch
support systems and data analysis centers supporting space based systems. STI
also develops operational space based systems and systems which integrally
support them such as flight systems, flight simulators and space communications.
In addition to developing and providing systems, STI also provides related
services such as data center operation, software engineering, training and MIS
applications.
Generally, the government contracts specify goals to be reached and
estimate the number of hours of work of various levels of employees required to
reach the goals. The contract price is based on pre-approved, hourly rates for
employees' time with certain pre-approved overhead costs figured in. If the
goals are met in fewer hours, the contract rate is lowered. If it takes more
hours than estimated to meet goals, fees are reduced on a pro rata basis based
on actual hours delivered versus the number of hours estimated in the contract.
Longer term government contracts are also generally subject to revisions to the
terms and reductions in fees after one or two base years. See "Risk Factors -
Fixed Price Contracts."
Most of STI's commercial contracts are "firm fixed price" or cost plus
fixed fee agreements. These agreements generally call for a specified set of
requirements to be delivered at a negotiated price. With respect to fixed price
agreements, if STI's development costs yield a result that is less than fixed
price, STI will make a profit on that contract. If STI's development costs
exceed the fixed price, STI will have a loss on that contract. These types of
contracts are typically broken down into a set of milestones with progress
payments made at each milestone. These are generally called earned value
milestones and help STI and the customer track the program status and provide
STI with cash flow. See "Risk Factors - Fixed Price Contracts."
Typical customers for products and services of STI are:
. Various agencies of the U.S. government (some classified) using
satellites for communication or defense.
. Telecommunication companies, particularly those focused on low-
earth-orbit satellite systems for use for cellular phone services.
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<PAGE>
. Aerospace and defense contractors developing computerized weaponry and
defense systems employing satellite technology.
. Engineering firms.
. Foreign agencies controlling airports and airport security.
For the six month period ending July 31, 1996, approximately 61% of STI's
revenues were derived from contracts with three different government agencies.
For fiscal year 1996, approximately 51% of STI's revenues were derived from
government contracts. STI obtained additional government contracts in fiscal
year 1997 accounting for the increase in percentage of revenues derived from
government contracts. See "Risk Factors - Dependence on Government Contracts"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operation." The largest government contracts, representing approximately one-
third of the revenues from the government, are with the Naval Research
Laboratory ("NRL") Space Systems Division. In addition, Loral Federal Systems
(which has been acquired by Lockheed-Martin Corporation) and STI, as
subcontractor, were awarded a five year contract to use commercial off the shelf
workstations and software to upgrade the Global Positioning Systems ("GPS")
ground command and control functions. STI is providing its OS/COMET/TM/ command
and control software and engineering services as part of the Loral contract.
GPS's 24 satellites provide worldwide navigation data for military and civilian
aircraft, spacecraft and land and marine applications. The new system will
replace a slower mainframe-based system and legacy software which were costly to
maintain.
STI has several contracts with NRL. Its largest contract with NRL relates
to spaces systems applications and operations and was renewed in January of
1995. It provides for initial services to be performed over two years with
estimated costs of $9,235,195 and a fixed fee of $699,992. As of July 31, 1996,
STI had received costs and fees of $8,139,981 under the contract. The contract
also includes three additional options, each to be performed within one year of
exercise of the option and each providing for payments of approximately
$4,700,000 in costs and $359,000 in fees. The Loral contract relates to an air
force project and began in August of 1995 and continues through September 30,
2000 unless modified by Loral. STI had received $1,281,428 under the contract as
of July 31, 1996 which had a backlog at that time of approximately $2,388,000.
The bulk of STI's remaining revenues come from two commercial customers
with most of such revenues, approximately 36% of STI's total revenues, coming
from its contract with Motorola/1/, Inc. to provide the ground software for the
IRIDIUM/(R)//2/ program (currently believed to be the largest commercial space
program) which will control interconnected low earth orbit satellites to provide
communication worldwide using hand-held wireless telephones. See "Risk Factors -
Limited Number of Customers."
- --------------------------
/1/ Motorola is a registered trademark of Motorola, Inc.
/2/ IRIDIUM/(R)/ is a registered trademark and service mark of Iridium, Inc.
19
<PAGE>
STI has various contracts with Motorola, some of which are fixed price
contracts and some of which are time and materials contracts. Most of the
revenues from Motorola in the past two and one half years were received under an
agreement executed in February of 1994 under which STI agreed to provide
Motorola with satellite and ground control software for the system control
segment of the IRIDIUM/(R)/ communications system. STI expects to receive
payments under the contract through the early part of 1999; however, warranty
and other obligations continue through December 2002. As of July 31, 1996, STI
has received approximately $19,800,000 from Motorola under this and other
contracts some of which have been completed with a backlog of $3,200,000 from
Motorola remaining.
STI also receives a significant amount of its revenues from Allied Signal
Technical Services Corporation ("Allied") under various purchase orders. It has
received approximately $940,000 from Allied during this fiscal year and
approximately $2,215,000 in backlog remains under existing purchase orders.
In 1992, STI was largely dependent on NRL for its source of revenues with
approximately 80% of its revenues originating from that customer. At that time,
management made a concerted effort to begin diversifying STI's customer base
using its OS/COMET product. Recent contracts with Motorola and Loral for the
IRIDIUM/(R)/ and GPS satellite systems are evidence of its success in
diversifying and reducing the percentage of total STI revenues attributable to
NRL contracts to 31%. Management is working on developing international business
in the satellite and airport security industries which should increase
diversification at a more rapid rate. Management also believes that the ability
to make acquisitions using publicly traded stock will allow it to enhance its
technical capabilities through acquisitions and pursue customers requiring
solutions beyond STI's existing capabilities. Acquisitions would also bring an
immediate benefit of additional customers and market share resulting in further
diversification.
STI has expertise in the following areas:
. Real-time Space Systems
. Satellite Ground Stations
. Command and Control
. Satellite Simulators
. Process Automation
. Test and Data Systems
. Networks and Systems Integration
. Professional Training
STI has played a prominent role in Navy, NASA, Air Force and BMDO space
programs since 1978. STI has also provided systems solutions to major
corporations including Lockheed-Martin Corporation, Loral, Motorola, Rockwell,
GE Astro Space, Allied Field Engineering, Harris and Perot Systems.
20
<PAGE>
STI's experience includes providing ground, flight and test support to the
NRL Space System Division on advanced research and development and mission
critical systems, including the advanced control system software, for NRL's
state-of-the-art ground stations; the OSSE experiment software for NASA's
Compton Gamma Ray Observatory; software engineering systems, management and
analysis to develop a nationwide network for Perot Systems; X Window graphical
user interfaces for the AT&T Telstar 4 and NASA Mars Observer SSTI satellite
checkout stations for GE Astro Space; and data acquisition and control software
used worldwide in the power control centers of electric utility, transportation
and oil companies for Harris Controls Division.
In addition to developing, marketing and supporting certain products, STI
provides engineering and training services such as: system engineering to assist
in defining and specifying quantifiable, testable system requirements; software
engineering to improve software quality and productivity supported by formal
review, configuration control and audits by the STI quality assurance and
configuration management staff; integration and testing services for black box
level through system integration and final acceptance test according to
Department of Defense and industry standards; systems management in distributed
computing systems and information networks; and professional training services
including hands-on and interactive multi-media, computer-based training.
STI is a charter member of the Software Engineering Institute's Industry
Affiliates Program and applies the SEI's software quality program.
PRODUCTS
- --------
The high technology business today requires a product oriented emphasis to
market custom systems. Satellite software systems and airport security systems
are both large applications that require customization to suit particular
customer requirements. These systems can only be produced cost effectively,
quickly and reliably if they are based on proven designs that reuse components
or products. Software intensive applications benefit from economics of scale,
not only through cost reduction (by amortizing development costs), but by
reusing components that have proven themselves to be reliable through previous
developments. Cycle times (speed to market) is also critical, and applications
that use 80% to 90% commercial-off-the-shelf (COTS) solutions will arrive on the
scene faster and at a lower cost. Management believes that by leveraging
OS/COMET/TM/ based satellite systems and Integrated Management System (ISMS)
based airport security systems STI will realize further diversification.
In addition to providing software engineering, systems engineering,
integration and management and professional training services, STI has designed
and developed and manufactures and markets certain commercial products. STI owns
all of the rights in some of its products while other products were developed by
STI under contracts with customers to which products the customer retains
certain rights. See "Business - Research and Development." Descriptions of STI's
main commercial products follow.
21
<PAGE>
OS/COMET/TM/. OS/COMET/TM/ is a general-purpose, integrated tool set and
run-time environment for the development of sophisticated command-and-control
software. STI receives approximately 3% of its revenues from the license of, and
maintenance agreements relating to, OS/COMET/TM/. STI originally developed the
OS/COMET/TM/ family of software products for the support of satellite ground
stations and for spacecraft integration and testing environments. Due to
flexibility of design and robust architecture, OS/COMET/TM/ software is readily
adaptable to virtually any feedback control requirement, such as factory
automation or supervisory process control. Currently, STI is developing
OS/COMET/TM/ prototype applications for the pipeline industry and factory
automation. The OS/COMET/TM/ systems can be run on any of several inexpensive,
POSIX-compliant UNIX/TM/ workstations and make extensive use of the X Window
System/TM/ and the OSF/Motif/TM/ graphical user environment standards.
The OS/COMET/TM/ environment, together with user-developed applications and
data bases, can be configured to satisfy most requirements for command, control
and data monitoring systems. Part of OS/COMET/TM/'s efficiency and popularity is
attributable to the elimination of redundancy. When any part of millions of
lines of custom software codes or attendant hardware designs developed during
past engineering projects may be applicable to new programs, these tested codes
and/or designs (also known as objects) may be identified by the user and
temporarily integrated into the new program. Using OS/COMET/TM/, the objects may
be tested by simulation to see if the integration will achieve the desired
result. Then the lines of code are appropriately utilized or not. Along the same
lines, OS/COMET/TM/ enables migration and consolidation of such object and
attendant hardware designs as may be useful from any of the predominant
engineering platforms to the task at hand. Use of OS/COMET/TM/ results in
reduction of software development and systems design and integration costs.
The development of the initial version of the COMET/TM/ software was funded
by the NRL under contract and the NRL retains certain rights to distribute that
version of COMET/TM/ within the government. STI retains the exclusive rights to
OS/COMET/TM/, the derivative version of COMET/TM/ which is UNIX based, although
STI has agreed to license to the NRL the derivative version, OS/COMET/TM/, for
their applications at no cost. Other governmental entities which want to use the
newer version will be required to pay license fees.
TOTAL AIRPORT SECURITY AND CONTROL SYSTEM. STI has developed an airport
security and control system designed to mitigate terrorist threats and enhance
airport security. STI receives approximately 0.5% of its revenues from the
license of this product. The system works basically as follows: Baggage,
including all carry-on items are bar coded at check-in. Passenger's faces are
recorded in the computer and correlated with the luggage. Airport security can
track passengers and baggage from check-in to boarding. Baggage handlers, check-
in counters, customs, immigration, boarding gates and security checkpoints are
able to share data and video images via a high speed network of personal
computers. As passengers approach the boarding gate, the ticket taker scans the
bar code affixed to carry-on luggage with a hand-held scanner. If a passenger
attempts to board with carry-on luggage that was not in that passenger's
possession at check-in, the system alerts security personnel. Likewise, if
checked luggage is loaded on the aircraft and the corresponding
22
<PAGE>
passenger does not board, the system alerts security personnel. Most of the
current customers of this product are outside of the United States.
MODEL 2032 DATA SWITCHING UNIT. This STI hardware product was developed for
use by satellite ground stations. However, the largest market for the product is
the telecommunications industry. The data switching unit allows data received to
be switched to several devices simultaneously. It is six times faster than
existing conventional products. STI receives approximately 0.5% of its revenues
from the sale of the data switching unit.
VALUE ADDED REMARKETER LICENSE. STI has entered in a remarketer license
with SL Corporation pursuant to which STI is entitled to incorporate SL software
into derivative products and distribute such products so long as they add
functionality to STI's products, are not a commercially acceptable substitute
for SL's products, are not competitive as a general purpose tool and do not
provide access to programmable libraries. End users must license the copies of
the SL software embedded in the derivative products. SL's software is a dynamic
graphics engine. STI derives approximately 1% of its revenues from these
derivative products.
RESEARCH AND DEVELOPMENT
- ------------------------
STI is primarily a professional services company providing research and
development ("R&D") for specific projects or tasks under contract to both
government and industry. Much of its R&D activities are funded under contracts
with government or industry. STI does however fund R&D for development or
enhancement of certain products which management believes are commercially
marketable. Generally, most of its contract funded R&D relates to satellite
command and control, developing systems for the ground and space segments of the
aerospace/defense industry and phone systems providers in the telecommunications
industry. Often through these projects, STI identifies potential software
product offerings for commonly used functions. These concepts are evaluated and,
based on estimated costs and commercial sale potential, funded and developed by
STI as separate products. The emphasis placed on low cost solutions by STI
customers mandates the need for reusable software components and products.
STI spent $154,856 in the fiscal year ended January 31, 1996, and $102,533
and $126,478 respectively for the years ended in 1995 and 1994 on company
sponsored R&D. With respect to the commercial development and enhancement of
OS/COMET/TM/, STI has spent $2,000,000 over four years. See "Business -
Products." This product was initially developed over the course of ten years
through contract funded R&D. The cost of developing the high speed data
switching unit was approximately $100,000 and of developing the airport security
system, approximately $50,000. The latter uses mostly off-the-shelf
software.
Presently, STI's R&D efforts, in addition to contract funded R&D, are
focused on enhancing the OS/COMET/TM/ product, developing an object oriented
data base system to complement OS/COMET/TM/ and attempting to penetrate new
markets. The proposed OS/COMET/TM/ enhancements include improved tools relying
heavily on graphics for increased utility and ease of operation. Proposed future
R&D projects include continued development of OS/COMET/TM/
23
<PAGE>
focusing on applications which target specific opportunities and further
development of the airport security system adding additional image recognition
capabilities and laser scanning. See "Risk Factors - Changing Technology."
All four of STI's facilities are available for R&D activity. See
"Business - Property." Each facility has extensive computer resources and is
networked to all other facilities. The following equipment owned by STI is fully
engaged for design development tasks:
. 40 Sun workstations
. 1 HP 9000 workstation
. 50 McIntosh computers
. 30 PC compatible computers
. 4 Vax computers
. 20 terminals
. Corporate network (Internet)
MARKETING
- ---------
According to the Aerospace Industries Association of Washington annual
review as reported in Space News (December 18, 1995), space related sales within
the aerospace/defense industry (including satellite and launch vehicles) for
1995 were $27.0 billion, an increase of 1.4% over 1994 and are expected to be
$28.1 billion for 1996. See "Risk Factors -Dependence on Satellite Command and
Control Industry." Based upon an informal survey of some of its customers, STI's
management believes that approximately 10% of project funds are spent for
software development costs. Although the military and civil space agency sectors
are shrinking, the commercial sector of the aerospace industry, particularly
satellite communications, has been expanding. According to industry studies,
there are in excess of 900 satellite missions pending through 2004.
Communications satellites make up at least two-thirds of the pending launches of
which more than two-thirds of those are proposed commercial launches, by such
companies as Hughes, Lockheed-Martin Corporation, Loral, Motorola and TRW.
Most of STI's opportunities to bid on contracts for systems development,
software engineering or support are derived through solicitation of, or by
initiation from, STI's existing customers. STI's solicitation efforts are made
through four in-house sales personnel.
Prospects for STI's commercial products such as OS/COMET/TM/ and the data
switching unit are generated through direct mail solicitation handled by an
advertising firm. STI has also recently entered into a joint marketing agreement
to market OS/COMET/TM/ with a division of Harris Computer Systems Corp. located
in Fort Lauderdale, Florida in connection with its sale of Harris Nighthawk
computer systems. Approximately one-third of the Nighthawk systems are used by
customers for various engineering applications involving telemetry to which
OS/COMET/TM/ is applicable. In addition, STI advertises in Space News Magazine
and participates in various trade shows.
24
<PAGE>
Prospects for sale of the airport security system are generated in
cooperation with World Wide Security Systems, Inc., an independent airport
security consulting firm that markets the system as an affiliate of STI.
BACKLOG
- -------
STI estimates that its backlog orders believed to be firm as of January 31,
1996 and 1995 were $43,956,259 and $35,528,657. Approximately $24,074,029 of the
1996 backlog relates to the unfunded portion of government contracts. STI
estimates that 45% of its backlog on January 31, 1996 will be completed during
the fiscal year which will end on January 31, 1997. See "Risk Factors - Shortage
of Qualified Employees."
COMPETITION
- -----------
STI is best known for its development of command and control technology for
low earth orbit communication satellite systems. See "Risk Factors - Dependence
on Satellite Command and Control Industry." In general, aerospace/defense
contractors must obtain or produce this type of software in connection with the
manufacture and sale of satellites, but place little emphasis on this relatively
small area and often contract with other companies, such as STI, to provide the
software. Thus, many of STI's customers are also its competitors and provide, in
some circumstances, similar products as STI as well as engaging STI to provide
products. See "Risk Factors - Competition." In addition, there are not many
"independent" competitors because of the expertise involved and the cost of
failure. Satellite systems and command and control software are considered
"mission critical." Without software that is able to control the satellite, a
multi-billion dollar satellite or constellation of satellites could be placed in
orbit and be unable to perform to mission specifications.
STI believes it is one of only three, and the largest of these three,
"independent" companies nationwide that derive substantially all of their
revenues from development of tracking, telemetry and command and control
software related to satellites and satellite ground station support. In addition
to its two direct competitors, STI competes with many of the large
aerospace/defense contractors which are also often its customers. See "Risk
Factors - Competition." Companies within the professional services sector of the
computer industry are also potential competitors of STI. However, with the
exception of IBM through a subsidiary, Federal Systems Company which was sold to
Loral Corporation and then to Lockheed-Martin Corporation, STI is not aware of
any contracts for development of satellite tracking, telemetry or command and
control software awarded to these types of companies. Many computer professional
services companies, such as Computer Sciences Corporation, service satellite
ground stations with information technologies, such as systems to organize,
archive, interpret and analyze telemetered data. These and other computer
companies also may compete with some of STI's COTS products.
STI's two direct competitors which also derive substantially all of their
revenue from the development of satellite related software are Integral Systems,
Inc. and Talarian Corporation. Integral Systems, Inc. is a 13 year old public
company with gross revenues in the $9 million range
25
<PAGE>
which has approximately 80 employees. Talarian Corporation is a seven year old
privately held company with approximately 16 employees that derives most of its
income from contracts with Lockheed-Martin Corporation. Its gross revenues are
in the $4 million range.
There are eight leading aerospace/defense contractors in the United States
that derive revenues from space related sales, most of which have developed
tracking, telemetry and command and control software in-house as primary
contractors, through sub-contractors and through outsourcing. However, revenues
derived from development of such software represent only a minuscule portion of
their total revenue. The software is nevertheless essential to their contracts
to manufacture satellites. These aerospace/defense contractors are all
significantly larger than STI with significantly greater resources. See "Risk
Factors - Competition." They are GRC International, Harris Corporation, Hughes
Electronics Corporation, Lockheed-Martin Corporation, Loral Corporation,
Northrop Grumman Corporation, Rockwell International Corporation and TRW,
Inc.
MANUFACTURING
- -------------
In addition to providing software and system development and professional
services, STI produces certain computer software and hardware products.
Basically, software kits consist of the software license, registration card,
documentation and diskettes. A vinyl insert holds the diskettes and a binder
organizes the documentation which may include 1,000 or more pages. Each kit is
labeled and shrink-wrapped. With the exception of documentation, materials are
obtained on an as-needed basis. Two employees can easily produce several kits
per day. All of STI's products are high price/low volume; therefore, very little
inventory needs to be maintained.
In order to provide its high speed switch matrix (hardware), STI contracts
out the production of the circuit board, purchases components and assembles and
tests the product in-house just prior to shipment. This is a high margin very
low volume item sold primarily for use in satellite ground stations. STI
generally has a 120 day lead-time to deliver the product and, therefore, does
not need to keep it in inventory.
All of the materials used in producing the software kits and the high speed
switch matrix are available from a variety of vendors. Thus, STI has not had,
and does not expect to have, any problems obtaining competitive prices from
suppliers or in effecting quick deliveries.
PROPERTY
- --------
STI's and the Issuer's corporate headquarters are located in Melbourne,
Florida near the "Space Coast." STI is currently leasing a 29,000 square foot
building pursuant to a ten year lease which will expire on December 1, 2005. STI
has the right to renew the lease for two additional five year terms and has an
option to purchase the property which may be exercised during certain periods
prior to the expiration of the fifth year and of the tenth year of the lease.
The purchase price is the
26
<PAGE>
fair market value of the property determined by appraisal, but in no event less
than the outstanding balance on the mortgage.
In addition to the corporate headquarters, STI leases 15,296 square feet of
space in Alexandria, Virginia which lease will expire August 31, 1998 (subject
to STI's right to renew for up to two additional one year terms), approximately
2,300 square feet of space in Denver, Colorado which lease will expire on
December 30 of this year, and 1,046 square feet of space in LaPlata, Maryland
which will expire October 14, 1997 (subject to STI's right to renew for up to
three additional one year terms).
STI believes that, with the new addition to its headquarters, its space
needs will be met until 1998. To meet anticipated growth requirements after
1998, STI will lease additional office space as necessary. Due to the nature of
its business, there are no special facility issues to consider since software
development can be conducted in standard office space and its manufacturing
requirements are minuscule and most often handled through sub-contractors.
EMPLOYEES
- ---------
STI had 247 employees, of which 224 were salaried engineers, on January 31,
1996. Of these employees, approximately 50% work at corporate headquarters in
Florida, 35% in the Virginia and Maryland offices in the Washington, D.C. area,
and 5% at the Colorado office with the remaining 15% working at customer
locations or their homes. Approximately 90% work in software development with
the remaining 10% in administrative positions. See "Risk Factors - Shortage of
Qualified Employees."
HISTORY
- -------
The Issuer was formed as a Delaware corporation in 1996 to acquire all of
the issued and outstanding stock of STI. See "Business - General." STI, a
Florida corporation, was formed in 1978 to take advantage of a subcontract with
the NRL obtained by four aerospace engineers. The contract was to support an NRL
ground station, the software for which the four has written as employees of
various large aerospace/defense contractors. This contract established STI's
working relationship with the NRL which continues to be one of its two largest
customers. The expertise and technology acquired through its efforts for the NLR
enabled STI to pursue related work with other customers including NASA, the Air
Force and commercial space companies. The intensive software engineering
discipline developed by STI in support of mission critical space systems also
enabled STI to diversify into other software related fields such as process
control and information systems.
Out of its experiences over the years and in furtherance of its
diversification efforts, STI has been able to identify and develop software
products based on commonly occurring requirements in programming for the
satellite industry and now offers these as "commercial off-the-shelf" products
that complement its aerospace engineering expertise.
27
<PAGE>
In 1993, Motorola awarded STI a long-term contract to develop most of the
software required for its IRIDIUM project which STI believes is the leading
technological model for low-earth orbit satellite systems for point-to-point
cellular phone communications in the world. It will consist of a constellation
of 66 satellites. More recently, in 1995, STI was awarded a $4,000,000 contract
to provide satellite systems software for the GPS Group System being developed
by Loral Federal Systems. With these contracts, STI has further diversified its
business and reduced its reliance on contracts with NRL.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The following is management's discussion and analysis of (i) STI's
financial condition as of January 31, 1996 compared with the fiscal years ended
January 31, 1995 and 1994; (ii) STI's financial condition as of July 31, 1996
compared with year end January 31, 1996; and (iii) STI's financial condition and
results of operations for the six month period ended July 31, 1996 and 1995 and
for the fiscal years ended January 31, 1996, 1995 and 1994.
LIQUIDITY
- ---------
January 31, 1996 Compared to January 31, 1995
- ---------------------------------------------
As of January 31, 1996, STI's ratio of current assets to current
liabilities was 2.1 down from 2.3 for the year ended January 31, 1995. This
decrease is due to the large accounts receivable balances accumulating over this
period as a result of the Motorola contract. The average collection period was
86 days for the fiscal year 1996, down from 99 days for the year ended January
31, 1995. Again, this fluctuation is due to the Motorola contract which is paid
based on milestones. The protracted collection period for the Motorola account
was due to delays in milestone events resulting from Motorola's delay in
providing technical interdependent information required by the contract. STI did
not seek any remedies from Motorola because of the delay. STI did assist
Motorola in expediting the collection of the necessary information under a
separate time and materials contract. No milestones were missed and subsequently
all outstanding payments for the period were collected. The quick liquidity
ratios were 2.0 and 2.2 for the fiscal years ended January 31, 1996 and 1995,
respectively.
STI's cash portfolio (cash and cash equivalents) increased $261,444 at
January 31, 1996. The increase is due to: cash provided by operating activities
of $2,582,895, cash used in investing activities of $(1,247,133) and cash used
in financing activities of $(1,084,318). The cash provided by operating
activities increased primarily due to an increase in cash received from
customers. STI's cash portfolio decreased $(959,367) at January 31, 1995. The
decrease is due to: cash used in operating activities of $(1,036,133), cash used
in investing activities of $(689,295) and cash provided by financing activities
of $766,061. The decrease in cash used in operating activities is primarily due
to an increase in payments made to suppliers and employees.
28
<PAGE>
In fiscal years 1996 and 1995 STI acquired $1,122,226 and $526,512,
respectively, of capital assets compared with $198,883 in 1994.This was due
primarily to the increase in the number of STI's commercial contracts (as
opposed to government contracts) in fiscal years 1996 and 1995. These
contracts required the purchase of substantial additional computing resources.
Capital for equipment purchases is expected to slow for the next two fiscal
years as STI has now modernized and acquired sufficient computer resources for
expected operations. This increase in capital assets in fiscal year 1996 also
had a large impact on depreciation expense and affected operating activities. In
fiscal years 1996 and 1995, STI also spent $161,785 and $162,783, respectively,
in capitalized research and development to develop the new product, OS/COMET,
compared to none in fiscal year 1994.
Cash used in financing activities for fiscal year 1996 was $(1,084,318) of
which $900,000 was used to pay off the $900,000 borrowed under a line of credit
in fiscal year 1995 when $766,061 of cash was provided by financing activities.
Dividends of $0.30, $0.15 and $0.15 per share were declared in fiscal years
1996, 1995 and 1994, respectively, totaling $177,955, $88, 977 and $88,977.
Dividends paid for those years totaled $177,955, $127,377 and $139,554,
respectively. Cash flow used in financing activities for fiscal year 1994 was
$(191,895). Principal payments on long-term debt amounted to $6,363, $6,562 and
$52,341 in fiscal years 1996, 1995 and 1994, respectively.
As of January 31, 1996 and 1995, STI had outstanding on its lines of
credit$1,800,000 and $900,000, respectively. Draws against the line as of
January 31, 1996 and 1995 were $0 and $900,000, respectively. General and
administrative expenses in fiscal year 1996 were $3,840,669, 51% or $1,302,002
higher than fiscal year 1995 expenses of $2,538,667. This increase resulted
mainly from payment of $637,438 of additional bonuses to employees, additional
contributions of $261,046 to the ESOP and increases in advertising spending of
$91,713 and in recruiting and marketing expenses of $79,876. Other changes are
described in the Financial Statements. General and administrative expenses for
fiscal year 1994 were within 1% of 1995's expenses. On March 31, 1996, STI
borrowed $800,000 under a note bearing interest at the lender's prime rate plus
0.375% which is payable in 36 monthly payments. Management believes existing
cash, funds generated by operations and the available line of credit will be
sufficient to meet STI's operating and debt service requirements in fiscal year
1997.
July 31, 1996 Compared to January 31, 1996 and July 31, 1995
- ------------------------------------------------------------
STI's ratio of current assets to current liabilities was 3.7 at July 31,
1996 compared to the January 31, 1996 ratio of 2.1. The quick liquidity ration
was 3.4 at July 31, 1996 compared to the January 31, 1996 ratio of 2.2. The
increase in both of these ratios was mainly the result of funding accrued
bonuses of $834,030 and accrued ESOP contributions of $541,929 through the
issuance of 85,586 shares of treasury stock valued at $14.03 per share and
making cash payments of $175,188.
Cash provided by operating activities was $1,549,500 for the six months
ended July 31, 1996 (the "1997 Period") which was $167,564 more than the
$1,381,936 provided for the six months ended July 31, 1996 (the "1996 Period").
This increase is mainly the result of timing differences
29
<PAGE>
between the collection of accounts receivable, the billing of cost and estimated
earnings in excess of billings and the payment of taxes.
Cash used in investing activities was $(597,070) for the 1997 Period and
$(560,459) for the 1996 Period. This was due to STI acquiring capital assets in
the 1997 Period, specifically computing resources, required under commercial
contracts. These purchases are expected to slow over the next two fiscal years
as explained in the previous discussion of liquidity. Cash provided by financing
activities was $685,493 for the 1997 Period and $(830,117) for the 1996 Period.
On March 31, 1996, the Company drew $800,000 on a note payable to a bank to
replenish cash used for capital acquisitions. This was offset by $(111,110) of
payments on this note and $(3,397) on another note. In the 1996 Period, STI had
a net reduction in borrowings under the line of credit of $(827,000) and
payments on a note of $(3,117).
PROVISION FOR INCOME TAXES
- --------------------------
The effective rate for the year ending January 31, 1996 was 40%, up from
the fiscal year 1995 effective rate of 33%. The increase is primarily from the
state taxes on the increased taxable income and increased sales in other states.
The notes to the Financial Statements describe the differences between the U.S.
statutory and effective income tax rates.
ANALYSIS OF OPERATIONS
- ----------------------
Year Ended January 31, 1996 Compared with Years Ended January 31, 1995 and 1994
Sales for the year ending January 31, 1996 were $25,291,635, up 28% from
fiscal year 1995 sales of $19,760,600. The breakdown between government and
commercial sales for these periods were as follows:
<TABLE>
<CAPTION>
FY 96 FY 95 FY 94
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Government $12,892,121 51% $13,277,955 67% $15,237,112 91%
Commercial 12,399,514 49% 6,482,645 33% 1,523,789 9%
------------------------------------------------------------
$25,291,635 100% $19,760,600 100% $16,760,901 100%
===========================================================
</TABLE>
These sales reflect a 51% to 49% government to commercial revenue split compared
to a 67% to 33% split in fiscal year 1995. Fiscal year 1995 sales were 18%
higher than fiscal year 1994 sales of $16,760,901.
Gross profit jumped from $3,696,993 (18.7% of sales) to $5,883,499 (23.3%
of sales) for the years ended January 31, 1995 and 1996, respectively. Gross
profit for fiscal year 1994 was consistent with 1995 at $3,360,152 (20.0% of
sales). The chart below shows the gross profit breakdown between government and
commercial contracts:
30
<PAGE>
<TABLE>
<CAPTION>
Government FY 96 FY 95 FY 94
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue from services $ 12,892,121 $ 13,277,955 $ 15,237,112
Cost of sales (11,315,358) (11,063,902) (12,232,143)
------------ ------------ ------------
Gross profit $ 1,576,763 $ 2,214,053 $ 3,004,969
============ ============ ============
Gross profit as a % of sales 12.2% 16.7% 19.7%
Commercial FY 96 FY 95 FY 94
- ---------------------------------------------------------------------------
Revenue from services $ 12,399,514 $ 6,482,645 $ 1,523,789
Cost of sales (8,349,318) (5,249,819) (1,180,679)
------------ ------------ ------------
Gross profit $ 4,050,196 $ 1,232,826 $ 343,110
============ ============ ============
Gross profit as a % of sales 32.7% 19.0% 22.5%
</TABLE>
Net income rose from $493,610 (2.9% of sales) in 1994 to $722,210 (3.6% of
sales) in 1995 to $1,131,741 (4.5% of sales) in 1996. Management attributes
these increases to STI's successful diversification which increased commercial
operations in a short period of time which contracts generally have a higher
margin than cost plus government contracts.
Fiscal year 1995 saw STI obtain its first significant commercial contracts
from Motorola when it was engaged to provide satellite ground station software
for a constellation of satellites that will provide worldwide cellular telephone
service. The Motorola contract allowed STI to leverage its technology into the
commercial arena. In fiscal year 1996, STI repeated this feat by winning a
contract to provide similar software for the Global Positioning Satellite (GPS)
System. With these two contracts, STI is involved in the two premier satellite
endeavors taking place today. STI is also teamed with the GPS incumbent in
pursuit of the next generation satellite system.
Six Months Ended July 31, 1996 Compared to Six Months Ended July 31,1995
- ------------------------------------------------------------------------
Sales for the six months ending July 31, 1996 were $14,396,445, up 26% from
sales of $11,425,052 for the six months ended July 31, 1995. STI derives
revenues from both government and commercial contracts and had the following
breakdown for the six month periods then ended:
<TABLE>
<CAPTION>
1997 Period 1996 Period
----------------- -----------------
<S> <C> <C> <C> <C>
Government $ 8,783,337 61% $ 6,244,916 55%
Commercial $ 5,613,108 39% $ 5,180,136 45%
----------- --- ----------- ---
$14,396,445 100% $11,425,052 100%
=========== === =========== ===
</TABLE>
Gross profit was consistent at $2,875,182 (20% of sales) for the 1997
Period compared to $2,601,863 (22.8% of sales) for the 1996 Period. Net income
decreased from $610,739 (5.4% of sales) for the six months ended July 31, 1995
to $373,276 (2.6% of sales) for the six months ended July 31, 1996. This
decrease is due mainly to employee bonuses and management incentive awards of
$260,285 during the second quarter of the 1997 Period compared to no bonuses or
incentive awards during the same period in the prior year.
31
<PAGE>
OVERVIEW
- --------
The current contract base provides sufficient backlog to maintain STI
through fiscal year 1997. The backlog as of January 31, 1996 for commercial and
government contracts was $3,183,019 and $40,773,240 (of which $24,074,029
related to the unfunded portion of government contracts) and as of July 31, 1996
$3,309,809 commercial and $34,958,166 government (of which $22,911,988 was
unfunded). STI invested in excess of $1,000,000 over the last 18 months in its
premier software product OS/COMET. This investment facilitated significant
contract awards that management believes would have been impossible otherwise.
Commitment to maintain support for the product will continue through fiscal year
1997 and is necessary to deliver the services under contract.
STI opened a third branch office located in Maryland in October 1995 to
support the GPS contract efforts and is already expanding that facility. STI
completed expansion of its corporate headquarters to facilitate its increased
commercial activity. These increased facility costs should not affect STI's
overhead as these increases were made to accommodate existing needs and not
future expansion. The commercial satellite business is projected to continue
with strong sales worldwide and is expected to show moderate increases
throughout the end of the decade, providing additional opportunities for STI.
Demand for software engineers is expected to provide new opportunities for
STI, but will place a premium on the efforts to retain the current work force.
This risk will put additional pressure on overall payroll costs, but should be
an industry wide phenomenon. Management believes that benefits offered by STI
remain above the level of its competition and should help to stabilize its
workforce. Overhead costs for benefits should remain flat and maintain the same
percentage of wages for fiscal year 1997. Management believes it is important
that STI not reduce benefits while the software engineer demand remains high. To
do so and hold costs stable has been a management challenge and will continue to
be so in the near future; however, increased competition in the health insurance
market has helped to ease some of this pressure. Maintaining STI's comprehensive
benefit plan will also facilitate its ability to sustain an effective recruiting
campaign.
LEGAL PROCEEDINGS
-----------------
Neither the Issuer nor STI is currently involved in any material legal
proceedings.
MANAGEMENT
----------
<TABLE>
<CAPTION>
OFFICERS AND DIRECTORS OF THE ISSUER AND STI
- --------------------------------------------
NAME POSITION WITH THE ISSUER (1) POSITION WITH STI
- ---- ---------------------------- -----------------
<S> <C> <C>
Jeffrey C. Clift President, Director President, Director
Don F. Riordan, Jr. (2) Secretary/Treasurer, Director Secretary/Treasurer,
Director
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Name Position with the Issuer (1) Position with STI
- ---- ---------------------------- -----------------
<S> <C> <C>
William K. Presley Chairman of the Board, Vice Chairman of the Board,
President, Director Vice President, Director
Thomas O. Chewning, Jr. Vice President, Director Vice President, Director
Jack D. Daily Vice President, Director Vice President, Director
David J. Nowacki (2) Vice President, Director Vice President, Director
Daniel J. Stark Vice President, Director Vice President, Director
James A. Traficant Vice President, Director Vice President, Director
David R. Reading Vice President Vice President
Dean W. Boley Director Director
P. Bradley Walker Director Director
- -----------------------------------------------------------------------------------
</TABLE>
(1) All persons listed have held such positions with the Issuer since May 1,
1996.
(2) Mr. Nowacki and Mr. Riordan are the Trustees of the ESOP.
Officers serve at the discretion of the Board of Directors. Directors hold
office until the next annual meeting of shareholders and until their successors
have been elected and accept office. Directors receive directors' fees of $3,500
per year. Mr. Walker is employed by STI as a management consultant through
Joseph Walker & Sons, Inc. and received $48,000 during the 1996 fiscal year. He
is also Secretary of Monogenesis. However, there is no arrangement with
Monogenesis relating to his election or continuation as a director of the Issuer
or STI. See "Management - Certain Transactions."
Dean W. Boley, age 58, was one of the founders of STI and has been a
director and employee of STI since its beginning in 1978. He has held various
offices with STI including the office of President. He retired from STI in
October 1992. He received his B.S. in Petroleum Engineering from West Virginia
University in 1961.
Thomas O. Chewning, Jr., age 51, is currently a Vice President of STI. He
is also Director of Engineering for STI. Mr. Chewning has been a director and
President, Secretary and Treasurer of STI. He began his employment with STI in
1982. He attended Duke University and received a B.S. in Math in 1967 and M.S.
EE in 1969, both from the Florida Institute of Technology.
Jeffrey C. Clift, age 40, has been a director of STI since February 1993
and President and Chief Executive Officer of STI since October 1992. Prior to
becoming President, Mr. Clift had been Director of Operations for STI since
1988. From 1983 to 1988, he was a Software/Systems engineer for STI. As a
Software/Systems engineer, he gained experience in the analysis, design and
development of real-time software systems for Department of Defense satellite
applications
33
<PAGE>
including space data processing, satellite system and subsystem testing, ground
station operations, mission support and payload processing. From 1978 to 1982,
he was a software engineer for Harris Corporation. Mr. Clift received a B.S. EE
in 1977 from the University of Florida.
Jack D. Daily, age 54, has been a director of STI since 1988. He has also
been a Vice President and Director of Field Operations. Currently, Mr. Dailey is
Director of Space Operations. He began employment with STI in 1981. He received
his B.S. in Mathematics in 1965 from the University of Alabama and completed
course work at the University of Miami in the masters program for Management
Science.
David J. Nowacki, age 44, has been a director of STI since 1989 and a Vice
President of STI since 1991. Since November 1992, he has also been the Melbourne
Operations Manager and is responsible for operations at STI's Melbourne
facility. He has been an employee of STI since 1980. Prior to his employment
with STI, he was a software engineer with the RCA Service Corporation on the
Eastern Test Range from 1976 to 1980 where he was assigned to a missile tracking
ship. Mr. Nowacki received a B.S. in Mathematics from Waynesburg College in
Pennsylvania in 1974 and an M.S. in Mathematics from West Virginia University in
1976.
William K. Presley, age 50, has been a director of STI since 1987, Chairman
of the Board since 1989 and Vice President (or President in 1990) since 1987. He
has been employed by STI since July, 1983 as a chief systems engineer. He
received his B.S. EE from Auburn University in Alabama in 1969.
David R. Reading, age 54, has been a Vice President of STI since 1991. He
is also Director of Space Operations. He has been employed by STI since 1980 and
was a director of STI from 1992 to 1994. He received a B.S. in Computer Science
from University College of Maryland in 1981.
Don F. Riordan, Jr., age 50, has been a director of STI since 1980 and
Secretary/Treasurer and Chief Financial Officer since 1991 as well as holding
the offices of Chairman of the Board, Vice President, Secretary and Treasurer at
various times prior to 1991. He has been employed by STI since 1979 and, in
addition to administrative duties, has provided software engineering support for
Process Control Commercial Contracts. Prior to joining STI, Mr. Riordan was
project leader on several projects for the Air Force Eastern Test Range in Cape
Canaveral as well as an on-site programmer for several Air Force ETR Missile
Tracking Stations. He received his B.S. in Mathematics from Wake Forest
University in North Carolina in 1968.
Daniel J. Stark, age 53, has been a director of STI since 1978. He has been
a Vice President since 1983. He has also held the offices of President, Chairman
of the Board, Secretary and Treasurer as well as Vice President in certain years
prior to 1983. He has been an employee of STI from 1993 to the present and from
1978 to 1989. From 1989 to 1993, he was a software engineer with, and an owner
of, Sysgen International Inc. where he developed the interface command and
telemetry CTRUS box to the COMET operating system as well as other projects,
many of which were related to the COMET operating system. Prior to joining STI,
Mr. Stark was a system
34
<PAGE>
programmer with the RCA Service Corporation from 1976 to 1978. Mr. Stark
received a B.A. in Mathematics from Bellarmine College in Louisville, Kentucky
in 1965 and an M.S. in Mathematics from the Florida Institute of Technology in
1971.
James A. Traficant, age 35, has been a director of STI since 1990, Vice
President and Director of Advanced Programs since 1993 and an employee of STI
since 1984. Mr. Traficant currently is involved in the development and
management of the Advanced Programs Division. As Director of Business
Development, he worked with a founder and the President of STI to establish long
term growth and diversification strategy for STI during which time STI was
awarded contracts with commercial firms. He was also instrumental in STI's
involvement in the IRIDIUM program. Mr. Traficant received his B.S. in
Electrical Engineering from Geneva College in Pennsylvania in 1984 and his
M.B.A. from George Washington University in Washington, D.C. in 1992.
P. Bradley Walker, age 37, became a director of STI in March 1996. He has
been a consultant to Joseph Walker & Sons, Inc. (which provides consulting
services to STI) since 1992. He is also the sole proprietor of PBW Consulting.
He has been the Chairman and an owner of The Walker Group, Inc., a family
holding company, for the past eight years. He is also Secretary of Monogenesis
Corporation. The Walker Group, Inc., as a shareholder of Monogenesis, will own
stock of the Issuer after the Distribution.
EXECUTIVE COMPENSATION
- ----------------------
The following table sets forth the compensation of the President (the Chief
Executive Officer), the four most highly compensated executive officers and the
most highly compensated employee of STI who is not also an executive officer for
the fiscal years ending January 31, 1996, 1995 and 1994. Determination of most
highly compensated officers and employees is based upon compensation for fiscal
year 1996 and does not necessarily reflect the most highly compensated employees
for fiscal years 1995 and 1994. The Issuer has not paid any compensation.
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Annual Compensation Long-Term
Compensation
- ----------------------------------------------------------------------------------------
Other Annual Restricted Stock
Name and Salary Bonus Compensation(1) Awards (2)
Principal Position Year ($) ($) ($) ($)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jeffery C. Clift 1996 116,928 25,013 3,500 24,987
President, CEO 1995 112,752 30,000 3,500 -0-
1994 104,400 20,000 3,500 -0-
- ----------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Other Annual Restricted Stock
Name and Salary Bonus Compensation(1) Awards (2)
Principal Position Year ($) ($) ($) ($)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Thomas O. Chewning, Jr. 1996 106,312 7,013 3,500 39,310
Vice-President 1995 101,476 11,000 3,500 -0-
1994 85,539 4,000 3,500 -0-
- ---------------------------------------------------------------------------------------
Rudiger D. Lichti 1996 78,025 -0- -0- 110,556
1995 77,360 -0- -0- -0-
1994 69,927 -0- -0- -0-
- ---------------------------------------------------------------------------------------
Don F. Riordan, Jr. 1996 82,212 -0- 3,500 110,556
CFO, Secretary/ 1995 76,206 -0- 3,500 -0-
Treasurer 1994 69,838 -0- 3,500 -0-
- ---------------------------------------------------------------------------------------
Daniel J. Stark 1996 87,034 -0- 3,500 110,556
Vice President 1995 86,503 -0- 3,500 -0-
1994 39,040 -0- 3,500 -0-
- ---------------------------------------------------------------------------------------
James A. Traficant 1996 107,532 110,005 3,500 124,025
Vice President 1995 101,700 33,000 3,500 -0-
1994 86,016 25,000 3,500 -0-
- ---------------------------------------------------------------------------------------
</TABLE>
(1) These are annual director's fees.
(2) STI issued a total of 46,986 shares in restricted stock bonuses for fiscal
year 1996 valued at $659,214. Of these shares, 36,563 shares valued at
$512,979 were issued to the persons listed in this table. The value of all
of STI's shares at the end of the 1996 fiscal year was $9,783,400. All
restricted stock was vested upon grant. Dividends will be paid to the extent
paid on any shares. STI has a history of paying annual dividends. All shares
of stock of STI were exchanged for Common Shares and Class A Preferred
Shares as of the date hereof. See "Business- General."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
- ---------------------------------------------------------------------------
DECISIONS
- ---------
Prior to this year, executive compensation was determined by STI's board of
directors which consisted of executive officers of STI. Effective for fiscal
year 1997, STI established a compensation committee. The members of the current
committee are Dean Boley, Dave Nowacki, Don Riordan and Brad Walker. The
compensation committee is working on an executive stock incentive plan which
will use the Issuer's Class B Common Shares. The Class B Common Shares would be
convertible to Common Shares based upon a participant's performance. Officers
and divisional managers would be eligible to participate at the discretion of
the President. Various scoring groups would be established under which the
participants will be scored and through which shares will be distributed.
36
<PAGE>
CERTAIN TRANSACTIONS
- --------------------
Brad Walker, a director of STI since March of 1996, provides consulting
services to STI through Joseph Walker & Sons, Inc. ("JWSI") which received
$48,000 in consulting fees from STI during the past year as well as warrants.
See "Principal Shareholders and Security Ownership of Management." In addition,
upon completion of the Distribution, JWSI will receive additional fees of
$45,000. JWSI also expects to provide consulting services to STI and the Issuer
in the future from which fees Mr. Walker is expected to benefit.
In addition, Mr. Walker is Secretary of Monogenesis and Chairman and
control shareholder of The Walker Group, Inc. which will receive shares of stock
of the Issuer from Monogenesis in the Distribution.
PRINCIPAL AND SELLING SHAREHOLDERS AND SECURITY
OWNERSHIP OF MANAGEMENT
-----------------------
MANAGEMENT AND 5% OR GREATER SHAREHOLDERS
- -----------------------------------------
The following table sets forth information with respect to ownership of
issued and outstanding stock and warrants of the Issuer by management and 5% or
greater shareholders as of the date hereof:
37
<PAGE>
<TABLE>
<CAPTION>
Total Number of Percent Number of Percent
Securities Owned of Registered After
Name and Address Title of Class Beneficially (1)(2) Class (3) Securities (2)(4) Sale (5)
- ---------------- -------------- ------------------- -------- ---------------- --------
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dean W. Boley Common 553,160 15% 138,290 11%
832 Palmetto Terrace Class A Preferred 110,632 16% 0 16%
Oviedo, Florida Warrants 74,610 7% 74,610 0%
- -------------------------------------------------------------------------------------------------------------
Thomas O. Chewning, Jr. Common 61,755 2% 15,439 1%
931 Fostoria Drive Class A Preferred 12,351 2% 0 2%
Melbourne, Florida Warrants 8,328 1% 8,328 0%
- -------------------------------------------------------------------------------------------------------------
Jeffrey C. Clift Common 8,905 * 2,226 *
571 Wethersfield Place Class A Preferred 1,781 * 0 *
Melbourne, Florida Warrants 1,200 * 1,200 0%
- -------------------------------------------------------------------------------------------------------------
Jack D. Daily Common 13,435 * 3,359 *
135 Moncure Drive Class A Preferred 2,687 * 0 *
Alexandria, Virginia Warrants 1,812 * 1,812 0%
- -------------------------------------------------------------------------------------------------------------
Rudiger D. Lichti Common 253,470 7% 63,368 5%
304 Palm Court Class A Preferred 50,694 7% 0 7%
Indialantic, Florida Warrants 34,188 3% 34,188 0%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Total Number of Percent Number of Percent
Securities Owned of Registered After
Name and Address Title of Class Beneficially(1)(2) Class(3) Securities(2)(4) Sale(5)
- ---------------- -------------- ------------------ ------- --------------- -------
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William K. Presley Common 11,645 * 2,911 *
635 Kenwood Court Class A Preferred 2,329 * 0 *
Satellite Beach, Florida Warrants 1,572 * 1,572 0%
- ------------------------------------------------------------------------------------------------------------------
David R. Reading Common 7,135 * 1,784 *
695 Caribbean Road Class A Preferred 1,427 * 0 *
Satellite Beach, Florida Warrants 960 * 960 0%
- ------------------------------------------------------------------------------------------------------------------
Don F. Riordan, Jr. Common 257,790 7% 64,448 5%
414 LaCosta Street Class A Preferred 51,558 7% 0 7%
Melbourne Beach, Florida Warrants 34,770 3% 34,770 0%
- ------------------------------------------------------------------------------------------------------------------
Daniel J. Stark Common 552,430 15% 138,108 11%
5180 Sandlake Drive Class A Preferred 110,486 16% 0 16%
Melbourne, Florida Warrants 74,514 7% 74,514 0%
- ------------------------------------------------------------------------------------------------------------------
James A. Traficant Common 44,200 1% 11,050 1%
8305 Peach Court Class A Preferred 8,840 1% 0 1%
Fairfax Station, Virginia Warrants 5,964 1% 5,964 0%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Total Number of Percent Number of Percent
Securities Owned of Registered After
Name and Address Title of Class Beneficially(1)(2) Class(3) Securities(2)(4) Sale(5)
- ---------------- -------------- ------------------ ------- ---------------- -------
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
P. Bradley Walker (6) Common 63,750 2% 63,750 0%
12 Green Brier Class A Preferred 0 0% 0 0%
Parkersburg, West Virginia Warrants 102,000 10% 102,000 0%
- ------------------------------------------------------------------------------------------------------------------
STI ESOP (7) Common 1,704,430 45% 1,704,430 0%
1226 Evans Road Class A Preferred 340,886 49% 0 49%
Melbourne, Florida Warrants 229,896 21% 229,896 0%
- ------------------------------------------------------------------------------------------------------------------
Joseph Walker & Sons, Inc. Common 0 0% 0 0%
88 Walker Creek Road Class A Preferred 0 0% 0 0%
Walker, West Virginia Warrants 174,996 16% 174,996 0%
- ------------------------------------------------------------------------------------------------------------------
Total number of shares Common 1,574,205 42% 441,365 30%
owned by directors and Class A Preferred 302,091 43% 0 43%
executive officers as a Warrants 305,730 29% 305,730 0%
group (6)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than 1%.
OTHER SELLING SHAREHOLDERS
- --------------------------
The following table sets forth information with respect to ownership of
the Issuer by Selling Shareholders who are not part of management and hold
less than 5% of the issued and outstanding shares of any class as of the date
hereof.
40
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Total Number
Securities Owned Number of Registered
Name and Address Title of Class Beneficially (1)(2)(8) Securities (2)(4)(8)
- ---------------- -------------- ---------------------- ---------------------
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Donald M. MacKay Common 5,000 1,250
Class A Preferred 1,000 0
Warrants 672 672
- -------------------------------------------------------------------------------------------
Gregory W. Saunders Common 2,490 623
Class A Preferred 498 0
Warrants 336 336
- -------------------------------------------------------------------------------------------
Kenneth E. Zepf Common 10,755 2,689
Class A Preferred 2,151 0
Warrants 1,452 1,452
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Except as described below, all owners have sole voting power and sole
investment power over all shares listed. The number of shares owned
does not include shares allocated to such person's account in the
ESOP.
(2) All of the Warrants and the Common Shares listed as registered shares
are included in the securities offered by Selling Shareholders.
(3) These figures do not include any Common Shares which could be issued
upon the conversion of the outstanding Warrants. Holders of the
Warrants could receive up to 1,070,270 Common Shares upon exercise
of the Warrants. See "Securities".
(4) None of the Class A Preferred Shares will be registered.
(5) This is the percent of class of the shares held by the listed
shareholder assuming all Shares and Warrants offered are sold
and that no Warrants were exercised.
(6) The shares listed as beneficially owned by Mr. Walker are owned by The
Walker Group, Inc. Mr. Walker is Chairman and control shareholder of
The Walker Group, Inc. In addition, JWSI which employs Mr. Walker as
a consultant received warrants from STI as compensation for services
which warrants were exchanged for Warrants of the Issuer. See
"Management - Certain Transactions."
(7) The ESOP shares are voted by the trustees. Don Riordan and David
Nowacki are currently the trustees.
(8) None of the other Selling Shareholders own 1% or more of any class of
securities.
41
<PAGE>
Joseph Walker and Sons, Inc. ("JWSI") performed certain consulting services
for STI and the Issuer in partial consideration of which it received warrants of
STI which it exchanged for 174,996 Warrants of the Issuer which constitute
approximately 16% of the total issued and outstanding Warrants. If all of the
Warrants are exercised by JWSI and no other Warrants are exercised or shares
issued, JWSI will own approximately 4% of the issued and outstanding Common
Shares.
SECURITIES
----------
DESCRIPTION OF CAPITAL STOCK
- ----------------------------
COMMON SHARES. The Issuer is authorized to issue 30,000,000 Common Shares,
par value $.01 per share, of which 3,786,000 shares were issued and outstanding
as of the date of this Prospectus. There will be approximately 2,000 holders of
the issued and outstanding Common Shares after the Distribution. See "Principal
and Selling Shareholders and Security Ownership of Management." The holders of
Common Shares of the Issuer are entitled to one vote per share on all entitled
matters including the election of directors and do not have cumulative voting
rights. With respect to the election of directors, holders of Common Shares
(together with holders of Class B Common Shares and of any Preferred Shares with
voting rights other than Class A Preferred Shares) voting as a separate class
are entitled to elect 25% of the members of the Board of Directors of the
Issuer. Holders of Class A Preferred Shares are entitled to elect the remaining
directors. See "Risk Factors - Control By Holders of Class A Preferred Shares."
Notwithstanding the foregoing, if, on the record date for any shareholders'
meeting at which directors are to be elected, the number of issued and
outstanding Common Shares, Class B Common Shares and voting Preferred Shares
(other than Class A Preferred Shares) is less than 10% of the aggregate number
of issued and outstanding voting shares of all classes, all directors will be
elected by the holders of all voting shares voting together.
The holders of Common Shares share equally in funds legally available for
dividends when, as and if declared by the Board of Directors of the Issuer with
holders of Class B Common Shares and Class A Preferred Shares. See "Risk
Factors - Dividends." Stock dividends may only be paid to holders of Common
Shares in Common Shares and only if the same number of Class A Preferred Shares
will be paid with respect to each outstanding Class A Preferred Share. The
payment of dividends may also be subject to preferential or identical rights, if
any, of the holders of other outstanding securities. See "Risk Factors -
Authorization of Preferred Stock." Common Shares or Class A Preferred Shares may
not be combined or subdivided without at the same time making a proportionate
combination or subdivision of the shares of the other of such classes.
42
<PAGE>
Holders of Common Shares are also entitled to share ratably in all of the
assets of the Issuer available for distribution to holders of common shares
(including Class B Common Shares) upon liquidation, dissolution or winding up of
the affairs of the Issuer subject to the preference of holders of Class A
Preferred Shares, but only to the extent of the stated value of $2.50 per share,
and subject to any preferential rights of the holders of any other outstanding
preferred shares. See "Risk Factors - Authorization of Preferred Stock." Common
Shares do not have preemptive, subscription or conversion rights and are not
subject to call or redemption (there are no applicable sinking fund provisions).
All Common Shares now outstanding are fully paid and nonassessable.
43
<PAGE>
CLASS B COMMON SHARES. Class B Common Shares are a convertible security
created in order to secure highly motivated executive personnel for the Issuer
and its subsidiaries and take the place of compensation stock options, although
the Issuer remains authorized to issue stock options. There are 600,000 Class B
Common Shares authorized at $.01 par value per share. Class B Common Shares are
identical to Common Shares and have equal rights and privileges with Common
Shares except as described below. Class B Common Shares are nontransferable. The
Board of Directors, by resolution, may authorize the issuance of Class B Common
Shares; provided that, each such resolution contains a formula under which the
shares may be converted to Common Shares. In no case may the Board of Directors
set any conversion rights which could result in the issuance of more than ten
Common Shares for each Class B Common Share. At the close of business on the
fifth anniversary of the date of a resolution authorizing the issuance of any
Class B Common Shares, such issued and outstanding but unconverted shares will
be deemed to have been converted at the rate of one Common Share for each such
Class B Common Share. There are no issued and outstanding Class B Common Shares
as of the date of this Prospectus.
CLASS A PREFERRED SHARES. The Issuer is authorized to issue 5,000,000 Class
A Preferred Shares, $.01 par value and $2.50 stated value per share, of which
697,320 shares were issued and outstanding as of the date hereof. See "Principal
and Selling Shareholders and Security Ownership of Management." Holders of Class
A Preferred Shares have the right to one noncumulative vote per share on all
matters on which they are entitled to vote. For the election of directors, the
holders of a majority of Class A Preferred Shares are entitled to elect 75% of
the members of the Board of Directors. If, on the record date for any
shareholders' meeting at which directors are to be elected, the number of issued
and outstanding Common Shares, Class B Common Shares and voting Preferred Shares
(other than Class A Preferred Shares) is less than 10% of the aggregate number
of issued and outstanding voting shares of all classes, all directors will be
elected by the holders of all voting shares voting together. If more than 90% of
the aggregate number of issued and outstanding Common Shares, Class B Common
Shares, Class A Preferred Shares and voting Preferred Shares are Class A
Preferred Shares, the holders of a majority of Class B Common Shares will in
practice be able to elect all of the members of the Board of Directors. See
"Risk Factors - Control By Holders of Class A Preferred Shares."
44
<PAGE>
Holders of Class A Preferred Shares share equally in funds legally
available for dividends when, as and if declared by the Board of Directors of
the Issuer with holders of Common Shares and Class B Common Shares. See "Risk
Factors - Dividends." Stock dividends may only be paid to holders of Class A
Preferred Shares in Class A Preferred Shares and may only be paid in shares at
all if the same number of Common Shares will be paid with respect to each
outstanding Common Share. The payment of dividends may also be subject to
preferential or identical rights, if any, of the holders of other outstanding
securities. See "Risk Factors - Authorization of Preferred Stock."
Holders of Class A Preferred Shares are entitled to receive $2.50 per share
prior to any of distribution to holders of common shares (including Common
Shares and Class B Common Shares) upon liquidation, dissolution or winding up of
the affairs of the Issuer, subject to any preferential rights of holders of
other classes of Preferred Shares. See "Risk Factors- Authorization of Preferred
Stock." Holders of Class A Preferred Shares have preemptive rights only as to
Class A Preferred Shares. Class A Preferred Shares are not subject to call or
redemption (there are no applicable sinking fund provisions). All Class A
Preferred Shares now outstanding are fully paid and nonassessable.
In addition, the Board of Directors must seek the approval of a majority of
the holders of Class A Preferred Shares to issue shares of authorized and
unissued Class A Preferred Shares. Common Shares or Class A Preferred Shares may
not be combined or subdivided without at the same time making a proportionate
combination or subdivision of the shares of the other of such classes. Each
share may also be converted into one Common Share at any time at the option of
the holder. Class Preferred Shares are nontransferable by holders except upon
the written consent of all holders of Class A Preferred Shares.
At this time, approximately 49% of the issued and outstanding Class A
Preferred Shares are owned by the ESOP. See "Principal and Selling Shareholders
and Security Ownership of Management." The ESOP, as the controller of 49% of
shares of the outstanding Class A Preferred Shares, is the largest shareholder
of Class A Preferred Shares. There are 14 holders of Class A Preferred Shares
including the ESOP. The holders of Class A Preferred Shares elect 75% of the
directors and generally control the Issuer. See "Risk Factors - Control By
Holders of Class A Preferred Shares."
PREFERRED SHARES. In addition, the Board of Directors of the Issuer, by
resolution, has the authority to issue, in one or more series, up to 10,000,000
Preferred Shares of other classes. Such unissued shares will have such
preferences, rights and limitations as are established by the Board of Directors
except that the voting rights, if any, of one Preferred Share may not exceed the
voting rights of one Common Share. See "Risk Factors - Authorization of
Preferred Stock." There are no issued and outstanding Preferred Shares as of the
date of this Prospectus, other than Class A Preferred Shares.
COMMON STOCK PURCHASE WARRANTS. The Issuer has issued and outstanding
1,070,270 Common Stock Purchase Warrants, each Warrant entitling the holder to
purchase one Common Share of the Issuer. The Warrants may be exercised at any
time during the 36 month period
45
<PAGE>
beginning on the date of this Prospectus at an exercise price of $3.00 per
share, subject to adjustment, by surrendering the Warrant to the Warrant Agent
with the subscription properly completed and executed with payment of the
exercise price. No fractional Common Shares will be issued in connection with
the exercise of Warrants. The Issuer has no right to call the Warrants.
If a holder of Warrants fails to exercise the Warrants prior to their
expiration, the Warrants will expire and the holder will have no further rights
with respect to the Warrants. If a market for the Warrants develops, the holder
may sell the Warrants instead of exercising them. There can be no assurance that
a market for the Warrants will develop or continue. See "Risk Factors - Absence
of Trading Market." If the Issuer is unable to qualify for sale the Common
Shares underlying the Warrants (or the shares are exempt from qualification) in
the states in which the various holders of the Warrants then reside, holder of
the Warrants may have no choice but to let the Warrants expire. See "Risk
Factors - Current Prospectus and State "Blue Sky" Registration or Exemption
Required to Exercise the Warrants."
A holder of Warrants will not have any rights or privileges of a
shareholder of the Issuer prior to exercise of such Warrants. The Issuer will
keep available a sufficient number of authorized Common Shares to permit
exercise of the Warrants.
The exercise price of the Warrants and the number of shares issuable upon
exercise of the Warrants will be subject to adjustment in the event of stock
dividends, stock splits, combinations, reorganizations, subdivisions and
reclassifications. No assurance can be given that the market price of the
Issuer's Common Shares will exceed the exercise price at any time during the
term of the Warrants.
The Warrants were issued pursuant to a Warrant Agreement between the Issuer
and Mid-America Bank of Louisville and Trust Company (the "Warrant Agent"). All
descriptions of the Warrants are qualified in their entirety by reference to the
Warrant Agreement which is included as an exhibit to the Registration Statement
of which this Prospectus is a part.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
- -------------------------------------------
The transfer agent and registrar for the Common Shares and the Warrant
Agent is Mid-America Bank of Louisville and Trust Company, P.O. Box 1101,
Louisville, Kentucky 40201-1101.
DIVIDENDS
---------
The Issuer has not paid any dividends. STI has paid dividends of $177,955
and $88,977 for fiscal years ended in 1996 and 1995 respectively. In connection
with a loan agreement entered into in 1995, STI is prohibited from declaring or
paying dividends in excess of the lesser of 25% of net income or $100,000, among
other actions, without the prior approval of the lender. There is no guarantee
that STI, and therefore the Issuer, will pay dividends in the future. See "Risk
Factors - Dividends" and "Authorization of Preferred Stock."
46
<PAGE>
LIABILITY AND INDEMNIFICATION OF
DIRECTORS AND OFFICERS
----------------------
Officers and directors of the Issuer are covered by certain provisions of
the Delaware General Corporation Law and the Certificate of Incorporation and
Bylaws of the Issuer, which serve to limit, and, in certain instances, to
indemnify them against, certain liabilities which they may incur in such
capacities.
ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES
- -------------------------------------------------
Delaware has enacted legislation which authorizes corporations to limit or
eliminate the personal liability of directors to corporations and their
shareholders for monetary damages for breach of a director's fiduciary duty of
care. The duty of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations authorized by
the legislation, directors are accountable to corporations and their
shareholders for monetary damages for conduct constituting negligence or gross
negligence in the exercise of their duty of care. Although the statute does not
change directors' duty of care, it enables corporations to limit available
relief to equitable remedies such as injunction or rescission by including
certain provisions in its Certificate of Incorporation.
The Issuer's Certificate of Incorporation limits the liability of its
directors to the Issuer or its shareholders (in their capacity as directors, but
not in their capacity as officers) to the fullest extent permitted by the
legislation. Specifically, the directors of the Issuer will not be personally
liable for monetary damages for breach of director's fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Issuer or its shareholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit.
INDEMNIFICATION
- ---------------
The Issuer's Certificate of Incorporation provides that the Issuer
indemnify any and all of its directors or officers or former directors or
officers or any person who may have served at its request as a director or
officer of another corporation in which it owns shares of capital stock or of
which it is a creditor against expenses actually and necessarily incurred by
them in connection with the defense of any action, suit or proceeding in which
they, or any of them, are made parties, or a party, by reason of being or having
been directors or officers of the Issuer, or of such other corporation, except
in relation to matters as to which any such director or officer or former
director or officer or person shall be adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of duty.
In addition, Section 7.1(a) of the Issuer's Bylaws provides that the Issuer
must indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or
47
<PAGE>
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Issuer) by reason
of the fact that such person is or was a director, officer, employee or agent of
the Issuer, or is or was serving at the request of the Issuer as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the Issuer, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
the conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Issuer, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that this conduct was
unlawful.
Section 7.1(b) of the Issuer's Bylaws provides that the Issuer must
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Issuer to procure a judgment in its favor by reason of the fact that such person
is or was a director, officer, employee or agent of the Issuer or is or was
serving at the request of the Issuer as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred in connection with the defense or settlement of such action
or suit if such person acted in good faith and in a manner reasonably believed
to be in or not opposed to the best interests of the Issuer, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Issuer unless and
only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery or such other court shall deem proper.
Section 7.1(d) of the Issuer's Bylaws provides that any indemnification
under Sections 7.1(a) and (b) (unless ordered by a court) shall be made by the
Issuer only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct.
Such determination shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the shareholders of the Issuer. To the
extent, however, that a director, officer, employee or agent of the Issuer has
been successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in the defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred in connection therewith, without the
necessity of authorization in the specific case under Section 7.1(c).
48
<PAGE>
Under Section 7.1(e), expenses incurred by a director, officer, employee or
agent of the Issuer in defending or investigating a threatened or pending
action, suit or proceeding may be paid by the Issuer in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director, officer, employee or agent to repay such amount
if it shall ultimately be determined that such person is not entitled to be
indemnified by the Issuer.
The indemnification and advancement of expenses provided by or granted
pursuant to the Issuer's Bylaws are not exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any Bylaw, agreement, contract, vote of shareholders or disinterested directors
or otherwise, both as to action in official capacity and as to action in another
capacity while holding such office, it being the Issuer's policy that
indemnification of the persons specified in the Bylaws shall be made to the
fullest extent permitted by law. The indemnification and advancement of expenses
provided by, or granted pursuant to the Issuer's Bylaws shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers or persons controlling the Issuer pursuant
to the foregoing provisions, the Issuer has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the 1933 Act and is therefore unenforceable.
LEGAL MATTERS
-------------
The Issuer has been advised with respect to certain legal aspects of the
offering by Ogden Newell & Welch, 1200 One Riverfront Plaza, Louisville,
Kentucky 40202.
EXPERTS
-------
The financial statements of STI at January 31, 1996, 1995 and 1994, and for
each of the years in the three year period ended January 31, 1996, appearing in
this Prospectus have been audited by Hoyman, Dobson & Company, P.A., Certified
Public Accountants, 215 Baytree Drive, Suite 1, Melbourne, Florida 32940,
independent auditors, as set forth in its report thereon appearing elsewhere
herein. The financial statements are included in reliance upon such report given
upon the authority of such firm as an expert in accounting and auditing.
49
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
--------------------
TABLE OF CONTENTS
-----------------
Software Technology, Inc.
Six Months Ended July 31, 1996 and 1995 (Unaudited)
Years ended January 31, 1996, 1995 and 1994
PAGE
----
<S> <C>
Independent Auditor's Report - March 22, 1996 47
Balance Sheets - January 31, 1996 and 1995 and July 31, 1996 48
Statements of Income and Retained Earnings - For the Years Ended 50
January 31, 1996 and 1995 and the Six Months Ended July 31,
1996 and 1995
Statements of Cash Flows - For the Years Ended January 31, 1996 and 1995 51
and the Six Months Ended July 31, 1996 and 1995
Notes to Financial Statements 54
Supplementary Information 66
Independent Auditor's Report - March 31, 1995 72
Independent Auditor's Report - August 15, 1996 73
Balance Sheets - January 31, 1995 and 1994 74
Statements of Income and Retained Earnings - For the Years Ended 76
January 31, 1995 and 1994
Statements of Cash Flows - For the Years Ended January 31, 1995 and 1994 77
Notes to Financial Statements - January 31, 1995 and 1994 79
Supplementary Information 87
</TABLE>
<TABLE>
<CAPTION>
Exigent International, Inc.
<S> <C>
Independent Auditor's Report - September 6, 1996 94
Balance Sheet - July 31, 1996 95
Notes to Financial Statement 96
</TABLE>
50
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Software Technology, Inc.
We have audited the accompanying balance sheets of Software Technology, Inc. as
of January 31, 1996 and 1995, and the related statements of income and retained
earnings, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Software Technology, Inc. as of
January 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information on pages
61-65 is presented for purposes of additional analysis and is not a required
part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
Hoyman, Dobson & Company, P.A.
Melbourne, Florida
March 22, 1996
51
<PAGE>
SOFTWARE TECHNOLOGY, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
January 31, July 31,
---------------------- -----------
1996 1995 1996
---------- ---------- -----------
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 270,084 $ 8,640 $1,908,006
Accounts receivable, pledged 1,451,244 1,586,223 1,727,103
Costs and estimated earnings
in excess of billings on
uncompleted contracts,
pledged 4,698,123 3,819,887 3,261,771
Prepaid expenses 122,807 14,491 27,353
Due from related party - - 168,001
Deferred income taxes 221,000 251,300 290,000
Federal taxes receivable - - 101,000
---------- ---------- ----------
TOTAL CURRENT ASSETS 6,763,258 5,680,541 7,483,234
---------- ---------- ----------
PROPERTY AND EQUIPMENT pledged
Cost 2,686,678 1,668,631 3,188,293
Accumulated depreciation (1,474,347) (1,068,212) (1,757,775)
---------- ---------- ----------
NET PROPERTY AND EQUIPMENT 1,212,331 600,419 1,430,518
---------- ---------- ----------
OTHER ASSETS
Research and development costs,
net of accumulated amortization
of $108,379 in 1996, $23,685
in 1995 and $158,959 for the
period ended July 31, 1996 216,189 139,098 245,720
Deposits 34,803 31,308 34,903
Cash surrender value of life insurance 21,167 19,742 19,510
---------- ---------- ----------
TOTAL OTHER ASSETS 272,159 190,148 300,133
---------- ---------- ----------
TOTAL ASSETS $8,247,748 $6,471,108 $9,213,885
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
January 31, July 31,
---------------------- ----------
1996 1995 1996
---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES
Line of credit $ - $ 900,000 $ -
Accounts payable 222,019 149,040 161,098
Accrued expenses 2,614,204 1,341,997 1,623,716
Billings in excess of costs and
estimated earnings on
uncompleted contracts 198,339 27,045 -
Income taxes payable 304,000 91,500 -
Current portion, long-term debt 6,760 5,475 249,860
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 3,345,322 2,515,057 2,034,674
---------- ---------- ----------
LONG-TERM LIABILITIES
Long-term debt, less current portion 4,461 12,109 446,854
Other liabilities 5,428 5,191 5,488
---------- ---------- ----------
TOTAL LONG-TERM LIABILITIES 9,889 17,300 452,342
---------- ---------- ----------
TOTAL LIABILITIES 3,355,211 2,532,357 2,487,016
---------- ---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 800,000
shares authorized, 768,400 issued
and 678,768 and 593,182 outstand-
ing at January 31, 1996 and 1995;
768,400 issued and 697,320 outstand-
ing at July 31, 1996 (unaudited) 7,684 7,684 7,684
Paid in capital 29,030 29,030 1,047,500
Retained earnings 5,600,586 4,646,800 5,973,862
---------- ---------- ----------
5,637,300 4,683,514 7,029,046
Treasury stock, common, 175,218
shares at January 31, 1996 and
1995 and 89,632 shares at July 31,
1996 (unaudited), at cost (744,763) (744,763) (302,177)
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY 4,892,537 3,938,751 6,726,869
---------- ---------- ----------
TOTAL LIABILITIES AND $8,247,748 $6,471,108 $9,213,885
STOCKHOLDERS' EQUITY ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
52
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
For the Years Ended For the Six Months
-------------------------------- --------------------------------
January 31, Ended July 31,
-------------------------------- --------------------------------
1996 1995 1996 1995
--------------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
REVENUES FROM SERVICES $ 25,291,635 $ 19,760,600 $ 14,396,445 $ 11,425,052
COST OF SALES (19,408,136) (16,063,607) (11,521,263) (8,823,189)
--------------- ------------- ------------- -------------
GROSS PROFIT 5,883,499 3,696,993 2,875,182 2,601,863
GENERAL AND ADMINISTRATIVE
EXPENSES (3,840,669) (2,538,667) (2,192,543) (1,462,885)
RESEARCH AND DEVELOPMENT COSTS (154,856) (102,533) (45,085) (64,705)
--------------- ------------- ------------- -------------
OPERATING INCOME 1,887,974 1,055,793 637,554 1,074,273
--------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE)
Interest income 33,987 34,805 30,633 9,467
Interest expense (26,311) (11,524) (22,394) (16,654)
Loss on disposal of fixed assets (8,509) (3,139) - 263
--------------- ------------- ------------- -------------
TOTAL OTHER INCOME (EXPENSE) (833) 20,142 8,239 (6,924)
--------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 1,887,141 1,075,935 645,793 1,067,349
INCOME TAX EXPENSE (755,400) (353,725) (272,517) (456,610)
--------------- ------------- ------------- -------------
NET INCOME 1,131,741 722,210 373,276 610,739
RETAINED EARNINGS, BEGINNING OF
PERIOD 4,646,800 4,013,567 5,600,586 4,646,800
DEDUCT: CASH DIVIDENDS ($.30 PER
SHARE IN 1996 AND $.15 PER SHARE IN
1995) (177,955) (88,977) - -
--------------- ------------- ------------- -------------
RETAINED EARNINGS, END OF PERIOD $ 5,600,586 $ 4,646,800 $ 5,973,862 $ 5,257,539
=============== ============= ============= =============
PRIMARY EARNINGS PER SHARE $ 1.67 $ 1.22 $ .54 $ 1.03
=============== ============= ============= =============
NUMBER OF SHARES USED IN
COMPUTATION 678,768 593,182 697,320 593,182
=============== ============= ============= =============
</TABLE>
The accompanying notes are an integral part of this statement.
53
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended For the Six Months
--------------------------------- --------------------------------
January 31, Ended July 31,
--------------------------------- --------------------------------
1996 1995 1996 1995
------------- ------------- -------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Cash received from customers $ 24,719,672 $ 17,488,101 $ 15,360,256 $ 11,444,054
Interest received 33,987 34,805 30,633 9,467
Cash paid to suppliers and employees (21,621,853) (18,197,759) (13,072,478) (9,764,821)
Interest paid (26,311) (11,524) (22,394) (16,654)
Income taxes paid (512,600) (349,756) (746,517) (290,110)
------------ ------------ ------------- ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 2,592,895 (1,036,133) 1,549,500 1,381,936
------------ ------------ ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition of capital assets (1,122,226) (526,512) (516,960) (537,209)
Cash proceeds from the sale of capital assets 36,878 - - 435
Cash paid for capitalized research and development (161,785) (162,783) (80,111) (23,685)
------------ ------------ ------------- ------------
NET CASH USED IN INVESTING ACTIVITIES (1,247,133) (689,295) (597,071) (560,459)
------------ ------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit (900,000) 900,000 - (827,000)
Proceeds from issuance of long-term debt - - 800,000 -
Principal payments on long-term debt (6,363) (6,562) (114,507) (3,117)
Dividends paid (177,955) (127,377) - -
------------ ------------ ------------- ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (1,084,318) 766,061 685,493 (830,117)
NET INCREASE (DECREASE) IN CASH AND CASH ------------ ------------ ------------- ------------
EQUIVALENTS 261,444 (959,367) 1,637,922 (8,640)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 8,640 968,007 270,084 8,640
------------ ------------ ------------- ------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 270,084 $ 8,640 $ 1,908,006 $ -
============ ============ ============= ============
</TABLE>
The accompanying notes are an integral part of this statement.
54
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
For the Years Ended For the Six Months
----------------------------- ----------------------------
January 31, Ended July 31,
----------------------------- ----------------------------
1996 1995 1996 1995
----------- ------------- ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY (USED IN) OPERATING ACTIVITIES:
Net income $1,131,741 $ 722,210 $ 373,276 $ 610,739
-------------- -------------- ------------- --------------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 549,621 262,304 349,353 233,841
(Gain) Loss on disposal of fixed assets 8,509 3,139 - (263)
Decrease (increase) in accounts receivable 134,979 (857,049) (275,859) (3,483,477)
Decrease (increase) on costs and estimated earnings
in excess of billings on uncompleted contracts (878,236) (1,447,859) 1,436,352 3,529,524
Decrease (increase) in prepaid expenses (108,316) 3,685 95,454 (9,177)
Increase in due from related party - - (168,001) -
Decrease in deferred charges - 24,961 - -
Decrease (increase) in deferred income taxes 30,300 (83,900) (69,000) (9,700)
Increase in federal taxes receivable - - (101,000) -
Decrease (increase) in deposits (3,495) 7,303 (100) (250)
Increase (decrease) in cash surrender value of life
insurance (1,425) (3,027) 1,657 -
Increase in bank overdraft - - - 319,755
Increase (decrease) in accounts payable 72,979 63,023 (60,921) (102,112)
Increase in accrued expenses 1,272,207 148,972 470,568 143,832
Increase (decrease) in billings in excess of costs
and estimated earnings on uncompleted contracts 171,294 27,045 (198,339) (27,045)
Increase (decrease) in income taxes payable 212,500 87,869 (304,000) 176,200
Increase in other liabilities 237 5,191 60 69
-------------- -------------- ------------- --------------
Total adjustments 1,461,154 (1,758,343) 1,176,224 771,197
-------------- -------------- ------------- --------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $2,592,895 $(1,036,133) $1,549,500 $1,381,936
============= ============= ============ =============
The accompanying notes are an integral part of this statement.
</TABLE>
55
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES (UNAUDITED)
At January 31, 1996 the client had accrued $1,375,959 in bonus and ESOP
payments. The client paid $175,188 of this amount in cash during the six months
ended July 31, 1996 (unaudited). In addition, the Company issued 46,986 shares
of treasury stock at a cost of $4.25 per share for accrued bonuses of $199,690
and 38,600 shares of treasury stock at a cost of $4.25 per share for the ESOP
payable of $164,050. The remaining balance $837,031, representing the difference
between the cost and market value of the treasury stock issued, was recorded as
additional paid in capital when the shares were issued.
On May 29, 1996, the Company accrued a bonus and issued 18,552 shares of
treasury stock at a cost of $4.25 per share, or $78,846, for bonus and
management incentive awards. The Company's stock was valued at $14.03 on the
date of the issuance, therefore, the difference between cost and market of
$181,439 was recorded as additional paid in capital.
56
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - Software Technology, Inc. (STI) is a systems and software engineering
firm providing innovative technical solutions for government and industry. STI
also produces OS/COMET -- a commercially available command and control
development and support system. STI provides systems and software engineering
services and COTS products for real-time command, control, and data acquisition
systems. STI retains expertise in leading edge technologies supporting
applications ranging from bit slice microprocessor software to large realtime
systems. STI specializes in command and control applications for ground, flight,
test, and process control and has extensive expertise in graphics, simulations,
and information systems.
REVENUE AND COST RECOGNITION - The Company recognizes revenues on time-and-
material and cost-plus-fixed-fee contracts as time is expended and costs are
incurred. The fee on cost-plus fixed fee contracts is recognized ratably over
total costs as they are incurred. Revenues and costs from fixed price contracts
are recognized on the percentage-of-completion method, measured by the
percentage of total costs incurred to date to total estimated costs for each
contract. This method is used because management considers total expended costs
to be the best available measure of progress on these contracts. Costs as used
herein exclude, in the early stages of a contract, all or a portion of the costs
of materials if, in the opinion of management, it appears that such an exclusion
would result in a more accurate measurement of the level of work performed
towards contract completion.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance such as indirect labor, supplies, repairs,
and depreciation costs.
Certain general and administrative expenses (including bid and proposal
expenses) allowable in accordance with United States Government procurement
practices are included in contract costs for government contracts because they
are identifiable with contract revenue.
Adjustments to cost estimates are made periodically, and losses expected to be
incurred on contracts in progress are charged to operations in the period such
losses are determined. The aggregate of costs incurred and income recognized on
uncompleted contracts in excess of related billings is shown as a current asset,
and the aggregate of billings on uncompleted contracts in excess of related
costs incurred and income recognized is shown as a current liability.
The Company is also engaged as seller in a number of software products.
Generally, revenue is recognized upon delivery of the software. After the sale,
if significant obligations remain or significant uncertainties exist about
customer acceptance of the software, revenue is deferred until the obligations
are satisfied or the uncertainties are resolved. When collectibility of the
receivable is in doubt, revenue is recognized under the installment method or
cost recovery method. Revenue from software services is recognized as the
services are performed.
57
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS - For purposes of the statement of cash flows, cash equivalents
include time deposits, certificates of deposit, and all highly liquid debt
instruments with original maturities of three months or less.
CONTRACT AND OTHER RECEIVABLES - The Company considers contract and other
receivables to be fully collectible; accordingly, no allowance for doubtful
accounts is required.
DEPRECIATION - The cost of property, plant and equipment is depreciated over the
estimated useful lives of the related assets. Depreciation is computed on the
straight-line method, accelerated cost recovery system and the modified
accelerated cost recovery system as appropriate.
AMORTIZATION - The cost of capitalized research and development costs are
amortized over their estimated useful lives of three years. Amortization is
computed on the straight-line method. The amortization method used is the
greater of the amount computed using (a) the ratio that current gross revenues
for a product bear to the total of current and anticipated future gross revenues
for that product or (b) the straight-line method over the remaining estimated
economic life of the product.
INCOME TAXES - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due and
deferred taxes related primarily to differences between the basis of vacation
and sick leave for financial and income tax reporting. The deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes also are recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
RESEARCH AND DEVELOPMENT COSTS - In accordance with Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
Sold, Leased or Otherwise Marketed," the Company capitalizes the direct costs
and allocated overhead associated with the development of software products.
Initial costs are charged to operations as research prior to the development of
a detailed program design or a working model. Costs incurred subsequent to the
product release, and research and development performed under contract are
charged to operations.
EARNINGS PER SHARE - Primary earnings per share are based on the weighted
average number of shares actually outstanding plus the shares that would be
outstanding assuming exercise of dilutive shares issued for bonuses and
management incentive awards, which are considered common stock equivalents.
Fully diluted earnings per share are the same amounts as primary earnings per
share.
58
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTERIM UNAUDITED FINANCIAL STATEMENTS - The unaudited interim financial
statements for the six-month periods ended July 31, 1995 and 1996 and as of July
31, 1996 have been prepared on the same basis as the Company's audited financial
statements as of and for the year ended January 31, 1996. In the opinion of
management, all adjustments, consisting of normal, recurring accruals, necessary
to present fairly the financial position of the Company at July 31, 1996 and the
results of operations and cash flows for the six month periods ended July 31,
1996 and 1995 have been included. The results of operations for such interim
periods are not necessarily indicative of the results expected for the full year
ending January 31, 1997.
NOTE 2 - ACCOUNTS RECEIVABLE
The following is a summary of accounts receivable:
<TABLE>
<CAPTION>
January 31, July 31,
-------------------------- ------------
1996 1995 1996
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
Contract receivables $1,200,577 $1,368,879 $1,548,094
Retainage receivable 249,920 204,606 179,009
Other receivables 747 12,738 -
---------- ---------- ----------
Total accounts receivable $1,451,244 $1,586,223 $1,727,103
========== ========== ==========
</TABLE>
The retainage receivable balance represents contracts which provide for
retainage provisions against billable amounts and are due upon completion
of the contracts and acceptance by the customer.
The Company expects to collect all receivables within the next fiscal year.
NOTE 3 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment:
<TABLE>
<CAPTION>
January 31, July 31,
------------------------- ----------- Estimated
1996 1995 1996 Life
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Furniture and equipment $ 404,129 $ 317,090 $ 486,316 3-8 years
Vehicles 15,703 15,703 15,703 5 years
Computer equipment 2,243,494 1,312,486 2,655,692 5 years
Leasehold improvements 23,352 23,352 30,582 39.5 years
---------- ---------- ----------
Total cost 2,686,678 1,668,631 3,188,293
Less accumulated
depreciation (1,474,347) (1,068,212) (1,757,775)
---------- ---------- ----------
Net property and
equipment $1,212,331 $ 600,419 $1,430,518
========== ========== ==========
</TABLE>
59
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 3 - PROPERTY AND EQUIPMENT (CONTINUED)
Depreciation expense charged to general and administrative expense in 1996 and
1995 was $78,737 and $62,160, respectively, and for the six months ended July
31, 1996 and 1995 (unaudited) was $42,676 and $31,921, respectively.
Depreciation expense charged to applied overhead in 1996 and 1995 was $218,555
and $139,038, respectively and for the six months ended July 31, 1996 and 1995
(unaudited) was $142,391 and $68,507, respectively. Depreciation expense charged
directly to cost of sales in 1996 and 1995 was $167,635 and $37,421,
respectively, and for the six months ended July 31, 1996 and 1995 (unaudited)
was $113,706 and $78,650, respectively.
NOTE 4 - LINE OF CREDIT
Software Technology, Inc. has a $1,800,000 line of credit as of January 31, 1996
and July 31, 1996 (unaudited) and a $900,000 line of credit with a bank as of
January 31, 1995. The note bears interest on the unpaid principal balance at an
interest rate per annum equal to the bank's prime rate plus .25% and .50%,
respectively. As of January 31, 1996 and 1995 the outstanding draws against the
lines were $0 and $900,000, respectively and as of July 31, 1996 (unaudited) was
$0. The prime rate at January 31, 1996 and 1995 was 8.5% and 9.0% respectively.
All accounts receivable, equipment, furniture and fixtures are pledged as
collateral on this line of credit.
The weighted average interest rate on short-term borrowings outstanding at
January 31, 1995 was 9.33%.
NOTE 5 - ACCRUED EXPENSES
<TABLE>
<CAPTION>
Accrued expenses consist of the following:
January 31, July 31,
-------------------------- -------------
1996 1995 1996
------------ ------------ -------------
(Unaudited)
<S> <C> <C> <C>
Accrued bonuses $ 834,030 $ 30,000 $ -
Accrued payroll taxes payable 26,672 25,826 3,014
Accrued fringe benefits 959,515 788,771 1,195,176
Accrued pension and profit sharing 252,058 216,382 335,537
Accrued ESOP payment 541,929 281,018 67,107
Accrued other - - 22,882
------------ ------------ ------------
Total accrued expenses $ 2,614,204 $ 1,341,997 $ 1,623,716
============ ============ ============
</TABLE>
60
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 6 - LONG TERM DEBT
Long term debt outstanding consists of the following:
<TABLE>
<CAPTION>
January 31, July 31,
----------------------------------------- ---------------
1996 1995 1996
---------------- ---------------- ---------------
(Unaudited)
<S> <C> <C> <C>
Unsecured note payable to bank,
payable in thirty-six monthly install-
ments of $630, including interest at
7.25% beginning October 1994, ending
August 1997. $ 11,221 $ 17,584 $ 7,825
Note payable to bank, payable in thirty-
six monthly installments of
$22,222, beginning April 1, 1996 and
ending on March 1, 1999. Interest is
payable on the unpaid balance at an
interest rate per annum equal to the
bank's prine rate plus .375%. The note
collateralized by all accounts receivable,
equipment and furniture and fixtures of
the Company and prohibits Company
from declaring or paying dividends in
excess of the lesser of 25% of net income
or $100,000 without prior lender approval. - - 688,889
-------- -------- ---------
TOTAL LONG-TERM DEBT 11,221 17,584 696,714
Less: current portion of long-term
debt (6,760) (5,475) (249,860)
-------- -------- ---------
TOTAL LONG-TERM DEBT, less
current portion $ 4,461 $ 12,109 $ 446,854
======== ======== =========
</TABLE>
Future maturities of long-term debt as of January 31, 1996 are as follows:
Amount
----------
January 31, 1997 $ 6,760
January 31, 1998 4,461
----------
$ 11,221
==========
61
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 6 - LONG TERM DEBT (CONTINUED)
Future maturities of long-term debt as of July 31, 1996, (unaudited) are as
follows:
<TABLE>
<CAPTION>
<S> <C>
July 31, 1997 $249,860
July 31, 1998 269,071
July 31, 1999 177,783
--------
$696,714
========
</TABLE>
NOTE 7 - STOCKHOLDERS EQUITY
The change in the stockholders equity accounts from January 31, 1996 to July 31,
1996 (unaudited) are as follows:
<TABLE>
<CAPTION>
Paid in Capital Treasury Stock
--------------- --------------
<S> <C> <C>
Balance January 31, 1995 and
January 31, 1996 $ 29,030 $ (744,763)
Issued 46,986 shares of treasury
stock to fund accrued bonuses,
cost $4.25. Market value of
Company's common stock $14.03. 459,523 199,690
Issued 38,600 shares of treasury
stock to fund accrued ESOP
contributions, cost $4.25.
Market value of Company's common
stock $14.03. 377,508 164,050
Issued 18,552 shares of treasury
stock for bonuses and
management incentive,
cost $4.25. Market value
of Company's common stock is
$14.03 181,439 78,846
----------- -----------
Balance July 31, 1996 (unaudited) $ 1,047,500 $ (302,177)
=========== ===========
</TABLE>
On March 20, 1996, the Company sold 174,996 ten year capital stock purchase
warrants to its financial advisors for one cent each to purchase 29,161 shares
of the Company's capital stock, for a fixed exercise price of eighteen dollars
per share. The warrants were issued for services rendered in connection with the
registration offer. As of July 31, 1996 (unaudited), the latest valuation of the
Company's stock was $14.03 per share. Since the warrants have an exercise price
of $18, these warrants currently have no value. As of July 31, 1996 (unaudited),
174,966 warrants are outstanding and none have been exercised.
62
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 8 - EMPLOYEE RETIREMENT PLANS
The Company has a defined contribution pension plan that covers substantially
all employees who have met certain age and length of service requirements.
Contributions to the plan are 5% of eligible compensation. Eligible compensation
for the years ended January 31, 1996 and 1995 was approximately $10,958,000 and
$9,401,000, respectively, and for the six months ended July 31, 1996 and 1995
(unaudited) was $6,420,567 and $5,412,160, respectively. For the years ended
January 31, 1996 and 1995 the amount of pension expense was $547,894 and
$470,066, respectively and for the six months ended July 31, 1996 and 1995
(unaudited) were $321,028 and $270,608, respectively.
The Company also sponsors a profit-sharing plan which allows substantially all
full-time employees to defer compensation under Section 401(k) of the Internal
Revenue Code and the employer to electively contribute to the plan. Employer
contributions to the plan are made at the discretion of the Board of Directors.
The employer contributions made to the plan for the years ended January 31, 1996
and 1995 were $547,894 and $470,066, respectively and for the six months ended
July 31, 1996 and 1995 (unaudited) were $281,088 and $198,274, respectively.
NOTE 9 - EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an employee stock ownership plan (ESOP). Contributions to this
plan are at the discretion of the Board of Directors. Full time employees who
have attained the age of twenty-one (21) and have one year of service are
eligible to participate in the plan. Shares purchased by the plan are allocated
annually to eligible employees proportional to their compensation, not including
overtime and bonuses. Employee stock ownership plan contributions, charged to
operations, amounted to $542,064 and $281,018 for the years ending January 31,
1996 and 1995, respectively and for the six months ended July 31, 1996 and 1995
(unaudited) were $128,412 and $162,500, respectively. The ESOP has 302,286 and
279,440 shares of the total issued and outstanding stock respectively at January
31, 1996 and 1995 and 340,886 shares at July 31, 1996 (unaudited).
NOTE 10 - LEASE OBLIGATIONS
Office space and equipment is leased under operating leases expiring in various
years through 2005.
Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of January 31, 1996 for each of the
next five years and in the aggregate are:
63
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 10 - LEASE OBLIGATIONS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
Year ending January 31: Amount
------------
1997 $ 604,307
1998 511,230
1999 417,345
2000 278,286
2001 268,748
Subsequent to 2001 790,383
------------
Total minimum future rental payments $ 2,870,299
============
</TABLE>
The minimum future rental payments have not been reduced by $178,662 of sublease
rentals to be received in the future under non-cancelable subleases. Rent
expense for the years ended January 31, 1996 and 1995 was $549,573 and $429,659,
respectively, and $313,213 and $261,848 for the six months ended July 31, 1996
and 1995 (unaudited). Rent expense was offset by sublease rental income for the
years ended January 31, 1996 and 1995 of $62,103 and $25,876, respectively, and
for both of the six month periods ended July 31, 1996 and 1995 (unaudited) of
$31,052.
NOTE 11 - ECONOMIC DEPENDENCY
The Company sells a substantial portion of its products to two major customers
in the Satellite Command and Control Industry. Transactions with these major
customers, a commercial customer and a group of U.S. Government agencies,
consist of the following:
<TABLE>
<CAPTION>
1996 Customer 1 Customer 2
------ ---------- ----------
<S> <C> <C>
Revenues $10,564,099 $6,076,692
Accounts Receivable 763,374 -
Costs and estimated earnings in excess of billings
on uncompleted contracts 3,241,681 701,094
Billings in excess of costs and estimated earnings on
uncompleted contracts (149,569) (16,868)
1995 Customer 1 Customer 2
------ ---------- ----------
<S> <C> <C>
Revenues $ 5,052,370 $5,623,172
Accounts Receivable 264,271 342,614
Costs and estimated earnings in excess of billings
on uncompleted contracts 2,501,763 525,000
Billings in excess of costs and estimated earnings on
uncompleted contracts - -
</TABLE>
64
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 11 - ECONOMIC DEPENDENCY (CONTINUED)
<TABLE>
<CAPTION>
Six months ended
July 31, 1996
----------------
(Unaudited) Customer 1 Customer 2
---------- ----------
<S> <C> <C>
Revenues $5,149,417 $3,516,236
Accounts Receivable 77,439 86,376
Costs and estimated earnings in excess of billings
on uncompleted contracts 1,661,445 730,593
Billings in excess of costs and estimated earnings on
uncompleted contracts - -
Six months ended
July 31, 1995
----------------
(Unaudited) Customer 1 Customer 2
---------- ----------
Revenues $4,310,507 $2,664,960
Accounts Receivable 3,173,115 419,134
Costs and estimated earnings in excess of billings
on uncompleted contracts 785,988 514,776
Billings in excess of costs and estimated earnings on
uncompleted contracts - -
</TABLE>
NOTE 12 - RESEARCH AND DEVELOPMENT COSTS
Some research and development costs are charged to operations when incurred and
are included in operating expenses. The amounts charged for the years ending
January 31, 1996 and 1995 were $154,856 and $102,533, respectively, and for the
six months ended July 31, 1996 and 1995 (unaudited) were $45,085 and $64,705,
respectively.
During the years ended January 31, 1996 and 1995, $161,785 and $162,783,
respectively, of research and development costs for computer software to be sold
or otherwise marketed were capitalized. For the six months ended July 31, 1996
(unaudited) $80,111 of research and development costs were capitalized. The
amortization of costs related to computer software product development held for
sale was $84,694 and $23,685 for the years ended January 31, 1996 and 1995
respectively and $50,580 and $54,763 for the six months ended July 31, 1996 and
1995 (unaudited). The amount of unamortized computer software costs at January
31, 1996 and 1995 was $216,189 and $139,098, respectively, and $245,720 for the
six months ended July 31, 1996 (unaudited).
In management's opinion, the net realizable value of future sales exceeds the
carrying value of unamortized software development costs, therefore, no
adjustment to carrying value is required.
65
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 13 - INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109
"Accounting for Income Taxes."
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year ended January 31, Six months ended July 31,
---------------------- -------------------------
1996 1995 1996 1995
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Current expense
Federal $596,000 $358,400 $278,517 $381,310
State 129,100 79,225 63,000 85,000
Deferred tax benefit
due to temporary
differences
Federal 26,800 (71,800) (50,000) 800
State 3,500 (12,100) (19,000) (10,500)
-------- -------- -------- --------
Total provision for
income taxes $755,400 $353,725 $272,517 $456,610
======== ======== ======== ========
</TABLE>
The following is a reconciliation of the provisions for income taxes to the
expected amounts using the statutory rate:
<TABLE>
<CAPTION>
Year ended January 31, Six months ended July 31,
---------------------- -------------------------
1996 1995 1996 1995
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Expected statutory
amount 34.0% 34.0% 34.0% 34.0%
Nondeductible meals
and entertainment .3 .3 .4 .3
Nondeductible officers
life insurance .5 .9 .7 .5
Tax penalties - .2 - -
Dividends (1.6) (1.5) - -
Research and
experimental credit (.6) (2.1) - -
State income taxes 4.6 4.7 6.4 5.3
Other 2.8 (3.6) .7 2.7
-------- ------- -------- --------
Actual tax provision 40.0% 32.9% 42.2% 42.8%
======== ======= ======== ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes.
66
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 13 - INCOME TAXES (CONTINUED)
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of January 31, 1996 and 1995 and for the
six months ended July 31, 1996 (unaudited):
<TABLE>
<CAPTION>
Six months
January 31, ended
------------------- -------------
1996 1995 July 31, 1996
-------- -------- -------------
(Unaudited)
<S> <C> <C> <C>
Accrued payroll expenses $301,000 $251,300 $382,000
Depreciation 2,400 - 3,000
Amortization (82,400) - (95,000)
-------- -------- --------
Net deferred tax asset $221,000 $251,300 $290,000
======== ======== ========
</TABLE>
NOTE 14 - CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of temporary cash investments. The Company places
its temporary cash investments with a financial institution. The amount of
credit exposure in excess of federally-insured limits at January 31, 1996 was
$1,325,459 and at July 31, 1996 (unaudited) was $2,559,417.
NOTE 15 - COMMITMENTS AND CONTINGENCIES
The Company has outstanding purchase commitments of $42,020 as of January 31,
1996. These represent outstanding purchase orders for which neither the item nor
invoice has been received.
NOTE 16 - RELATED PARTY (UNAUDITED)
Software Technology paid $1,698,001 of incorporation and registration costs
through July 31, 1996 (unaudited) on behalf of Exigent International, Inc., a
development stage enterprise. These costs will be repaid by Exigent
International, Inc. once the registration process is complete.
The Company's management is the same as the management of Exigent International,
Inc.
Software Technology paid $48,000 in consulting fees during the year ended
January 31, 1996 and issued warrants on March 20, 1996 (see Note 7) to a company
for which one of the directors of Software Technology, Inc. provides consulting
services. Consulting fees paid to this company for the six months ended July 31,
1996 (unaudited) were $24,810.
67
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 17 - SUBSEQUENT EVENT
A. NOTE PAYABLE
On March 31, 1996, the Company drew $800,000 down on a note payable which was
dated August 31, 1995. The note bears interest on the unpaid principal balance
at an interest rate per annum equal to the bank's prime rate plus .375%. The
principal is payable in 36 monthly payments of $22,222 beginning April 1, 1996
and ending on March 1, 1999. The note is collateralized by all accounts
receivable, equipment and furniture and fixtures of the Company and prohibits
the Company from declaring or paying dividends in excess of the lesser of 25% of
net income or $100,000 without the prior approval of the lender. The following
are future maturities of the above note payable:
<TABLE>
<CAPTION>
Amount
------------------
<S> <C>
1997 $222,222
1998 266,667
1999 266,667
2000 44,444
--------------------
$800,000
====================
</TABLE>
B. TREASURY STOCK
In March and April 1996, the Company reissued 46,986 shares of treasury stock,
at cost, in the form of bonuses for service performed during the year ended
January 31, 1996. The cost of the stock $199,690 is recorded as accrued bonuses
at January 31, 1996.
Also, in April 1996, the Company reissued 38,600 shares of treasury stock, at
cost in the form of a contribution to the ESOP plan for the year ended January
31, 1996. The cost of the stock $164,050 is recorded as part of accrued ESOP
payment at January 31, 1996.
On May 29, 1996 (unaudited) the Company reissued 18,552 shares of treasury
stock, at cost, in the form of bonuses for services performed during 1996. The
difference between the market value of the stock, $14.03 per share or $260,285
and its cost, $4.25 per share or $78,846 was recorded as paid in capital.
NOTE 18 - RECLASSIFICATION
Certain amounts in the January 31, 1996 and 1995 balance sheet and statement of
cash flows have been reclassified from cost and estimated earnings in excess of
billings on uncompleted contracts to accounts receivable to be consistent with
the July 31, 1996 (unaudited) presentation.
68
<PAGE>
SUPPLEMENTARY INFORMATION
69
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF COST OF SALES
FOR THE YEARS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
COST OF SALES
Central engineering labor $ 4,544,944 $ 3,476,820
Branch engineering labor 1,625,937 1,388,754
Offsite engineering labor 3,555,422 4,064,085
Arizona engineering labor 1,058,314 421,330
Other direct costs 2,670,284 1,359,502
Applied overhead 6,108,091 5,455,649
Less: research and development costs (154,856) (102,533)
---------------- ----------------
TOTAL COST OF SALES $ 19,408,136 $ 16,063,607
================ ================
</TABLE>
See accompanying notes and accountant's report.
70
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEARS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ --------------
GENERAL AND ADMINISTRATIVE EXPENSES
<S> <C> <C>
Marketing & recruiting salary $ 147,041 $ 138,968
Referral fee 4,200 -
Bonuses and incentive awards 839,271 201,833
Bid and proposal 129,076 167,339
Marketing and recruiting expense 136,127 56,251
Contributions 1,980 4,665
Penalties - 4,804
Office salaries 182,598 155,920
System managers salaries 39,463 29,284
Advertising 91,994 281
Conference and meeting expense 13,481 8,816
Entertainment 2,880 1,924
Taxes - other 6,889 770
Officers' administrative time 119,426 114,101
Insurance 32,252 16,633
Officers' life insurance 27,063 27,837
Tangible and intangible property tax 23,762 19,367
Directors' fees 35,000 35,000
Professional fees 55,715 43,787
Miscellaneous business expense 23,187 30,813
Severance pay 24,080 6,600
Utilities 8,654 7,811
Communication 25,013 14,200
Rent 28,729 23,034
Equipment rent/repair/maintenance 41,614 34,867
Depreciation 78,737 62,160
Travel and meals 89,891 69,276
Unallowable overhead travel - 117
Relocation 388 906
Office supplies 61,863 56,258
Dues and subscriptions 9,099 4,267
Process improvements 52,089 17,881
Non-productive time 828 13,117
Training and meetings 61,963 19,871
Administrative time 411,930 398,593
ESOP contributions 542,064 281,018
Administrative personnel expense 491,223 469,917
Automobile expenses 1,099 381
------------- -------------
TOTAL GENERAL AND ADMINISTRATIVE
EXPENSES $ 3,840,669 $ 2,538,667
============= =============
See accompanying notes and accountant's report.
</TABLE>
71
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF APPLIED OVERHEAD
FOR THE YEARS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
APPLIED OVERHEAD
PERSONNEL OVERHEAD
Vacation $ 846,623 $ 754,568
Holiday 499,859 442,968
Sick leave 313,043 277,834
Continuing education 52,858 54,097
Employee morale 54,879 34,478
Payroll taxes 988,925 890,096
Pension administrative costs 69,972 80,462
Pension 547,894 470,066
Insurance 1,150,305 1,210,224
Long term disability pay 15,460 -
Profit sharing 547,894 470,066
Service award 8,033 7,831
Other - 1,548
---------- ----------
TOTAL PERSONNEL OVERHEAD 5,095,745 4,694,238
---------- ----------
CENTRAL DEPARTMENT OVERHEAD
Utilities 62,649 51,994
Communication 96,093 55,400
Office rent 178,452 154,013
Repair/rent/maintenance 98,120 51,926
Depreciation 134,525 85,325
Amortization 84,694 23,685
Relocation 4,402 20,652
Facilities consultant 813 -
Dues and subscriptions 680 1,577
Office supplies 72,416 59,036
Non-productive time 2,943 4,615
Administrative time 137,340 100,425
---------- ----------
TOTAL CENTRAL DEPARTMENT OVERHEAD 873,127 608,648
---------- ----------
</TABLE>
See accompanying notes and accountant's report
72
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF APPLIED OVERHEAD (CONTINUED)
FOR THE YEARS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
BRANCH DEPARTMENT OVERHEAD
Utilities 11,147 10,711
Communication 31,390 31,718
Office rent 240,117 206,483
Equipment repair and maintenance 22,574 26,241
Depreciation 31,738 26,857
Travel 59 515
Relocation 12,357 6,258
Dues and subscriptions 1,531 1,589
Office supplies 28,168 20,088
Non-productive time 1,937 294
Administrative time 73,562 60,821
------- -------
TOTAL BRANCH DEPARTMENT OVERHEAD 454,580 391,575
------- -------
OFF-SITE OVERHEAD
Communication 26 338
Repairs and maintenance 472 -
Depreciation 2,736 602
Travel 366 239
Relocation 16,695 39,676
Dues and subscriptions 1,013 798
Office supplies 1,460 1,294
Non-productive time 3,321 5,657
Administrative time 12,759 4,428
------- -------
TOTAL OFF-SITE OVERHEAD 38,848 53,032
------- -------
</TABLE>
See accompanying notes and accountant's report
73
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF APPLIED OVERHEAD (CONTINUED)
FOR THE YEARS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ARIZONA OVERHEAD
Communication 3,576 396
Rent 420 185
Repair/rent/maintenance 4,332 418
Depreciation 49,556 26,254
Travel 968 -
Relocation 43,239 140,680
Office supplies 12,565 2,622
Administrative time 21,030 7,518
Non-productive time 1,328 -
---------- ----------
TOTAL ARIZONA OVERHEAD 137,014 178,073
---------- ----------
PERSONNEL EXPENSES APPLIED TO GENERAL
AND ADMINISTRATIVE (491,223) (469,917)
---------- ----------
TOTAL APPLIED OVERHEAD $6,108,091 $5,455,649
========== ==========
</TABLE>
See accompanying notes and accountant's report
74
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Software Technology, Inc.
We have audited the balance sheet of Software Technology, Inc. (a C-corporation)
as of January 31, 1995, and the related statements of income and retained
earnings, and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the financial position of Software Technology, Inc. as
of January 31, 1995, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information on pages 15-20 is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Hoyman, Dobson & Company, P.A.
Melbourne, Florida
March 31, 1995
75
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Software Technology, Inc.
We have audited the balance sheet of Software Technology, Inc. (a C-corporation)
as of January 31, 1994, and the related statements of income, retained earnings,
and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Software Technology, Inc. as of
January 31, 1994, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information on pages 15-20 is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit off the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Hoyman, Dobson & Company, P.A.
Melbourne, Florida
August 15, 1996
76
<PAGE>
SOFTWARE TECHNOLOGY, INC.
BALANCE SHEETS
JANUARY 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 8,640 $ 968,007
Accounts receivable 1,586,223 729,174
Costs and estimated earnings in excess of
billings on uncompleted contracts, pledged 3,819,887 2,372,028
Prepaid expenses 14,491 18,176
Deferred charges - 24,961
Deferred income taxes 251,300 167,400
---------- ----------
TOTAL CURRENT ASSETS 5,680,541 4,279,746
---------- ----------
PROPERTY AND EQUIPMENT
Cost 1,668,631 1,197,412
Accumulated depreciation (1,068,212) (901,867)
---------- ----------
NET PROPERTY AND EQUIPMENT 600,419 295,545
---------- ----------
OTHER ASSETS
Intangible assets, net of accumulated amortization 139,098 -
of $23,685 in 1995 and $0 in 1994
Deposits 31,308 38,611
Cash surrender value of life insurance 19,742 16,715
---------- ----------
TOTAL OTHER ASSETS 190,148 55,326
---------- ----------
TOTAL ASSETS $6,471,108 $4,630,617
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
SOFTWARE TECHNOLOGY, INC.
BALANCE SHEETS (CONTINUED)
JANUARY 31, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Line of credit $ 900,000 $ -
Accounts payable 149,040 86,017
Accrued expenses 1,341,997 1,193,025
Billings in excess of costs and estimated earnings
on uncompleted contracts 27,045 -
Income taxes payable 91,500 3,631
Stock dividend payable - 38,400
Current portion, long-term debt 5,475 4,026
---------- ----------
TOTAL CURRENT LIABILITIES 2,515,057 1,325,099
---------- ----------
LONG-TERM LIABILITIES
Long-term debt, less current portion 12,109 -
Other liabilities 5,191 -
---------- ----------
TOTAL LONG-TERM LIABILITIES 17,300 -
---------- ----------
TOTAL LIABILITIES 2,532,357 1,325,099
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 800,000 shares
authorized, 768,400 issued and 593,182 outstanding 7,684 7,684
Paid in capital 29,030 29,030
Retained earnings 4,646,800 4,013,567
---------- ----------
4,683,514 4,050,281
Treasury stock, common, 175,218 shares at cost (744,763) (744,763)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 3,938,751 3,305,518
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,471,108 $4,630,617
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
77
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
REVENUES FROM SERVICES $ 19,760,600 $ 16,760,901
COST OF SALES 16,063,607 13,400,749
------------ ------------
GROSS PROFIT 3,696,993 3,360,152
GENERAL AND ADMINISTRATIVE EXPENSES 2,538,667 2,510,867
RESEARCH AND DEVELOPMENT COSTS 102,533 126,478
------------ ------------
OPERATING INCOME 1,055,793 722,807
------------ ------------
OTHER INCOME (EXPENSE)
Interest income 34,805 38,633
Interest expense (11,524) (2,502)
Loss on disposal of fixed assets (3,139) (49,428)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) 20,142 (13,297)
------------ ------------
INCOME BEFORE INCOME TAXES 1,075,935 709,510
INCOME TAX EXPENSE 353,725 215,900
------------ ------------
NET INCOME, AS RESTATED FOR 1994 722,210 493,610
RETAINED EARNINGS, BEGINNING OF YEAR 4,013,567 3,608,934
DEDUCT: CASH DIVIDENDS ($.15 PER SHARE
IN 1995 AND 1994) (88,977) (88,977)
------------ ------------
RETAINED EARNINGS, END OF YEAR $ 4,646,800 $ 4,013,567
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
78
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $17,488,101 $16,265,406
Interest received 34,805 38,633
Cash paid to suppliers and employees (18,197,759) (15,350,784
Interest paid (11,524) (2,502)
Income taxes paid (349,756) (304,164)
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,036,133) 646,589
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition of capital assets (526,512) (193,883)
Cash paid for capitalized research and development (162,783) -
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (689,295) (193,883)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit 900,000 -
Principal payments on long-term debt (6,562) (52,341)
Dividends paid (127,377) (139,554)
----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 766,061 (191,895)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (959,367) 260,811
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 968,007 707,196
----------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 8,640 $ 968,007
=========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
79
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- --------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Net income $ 722,210 $ 493,610
Adjustments to reconcile net income to net cash ----------- ---------
provided by (used in) operating activities:
Depreciation and amortization 262,304 155,012
Loss on disposal of fixed assets 3,139 49,464
(Increase) decrease in accounts receivable (857,049) 355,845
Increase in costs and estimated earnings in
excess of billings on uncompleted contracts (1,447,859) (373,289)
Decrease in other receivables - 14,745
(Increase) decrease in prepaid expenses 3,685 (15,619)
(Increase) decrease in deferred charges 24,961 (24,961)
Increase in deferred income taxes (83,900) (132,500)
Decrease in deposits 7,303 22,654
Increase in cash surrender value of life insurance (3,027) (3,610)
Increase in accounts payable 63,023 31,400
Increase in accrued expenses 148,972 515,027
Increase in billings in excess of costs and
estimated earnings on uncompleted contracts 27,045 (485,425)
Increase in income taxes payable 87,869 44,236
Increase in other liabilities 5,191 -
----------- --------
Total adjustments (1,758,343) 152,979
----------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $(1,036,133) $ 646,589
=========== =========
SUPPLEMENTAL INFORMATION ON NONCASH
INVESTING AND FINANCIAL ACTIVITIES:
In 1994, the Company financed leasehold improvements
with a note payable in the amount of $20,120.
</TABLE>
The accompanying notes are an integral part of this statement.
80
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - Software Technology, Inc. (STI) is a systems and software engineering
firm providing innovative technical solutions for government and industry. STI
also produces OS/COMET -- a commercially available command and control
development and support system. STI provides systems and software engineering
services and COTS products for real-time command, control, and data acquisition
systems. STI retains expertise in leading edge technologies supporting
applications ranging from bit slice microprocessor software to large realtime
systems. STI specializes in command and control applications for ground, flight,
test, and process control and has extensive expertise in graphics, simulations,
and information systems.
REVENUE AND COST RECOGNITION - The Company recognizes revenues on time-and-
material and cost-plus-fixed-fee contracts as time is expended and costs are
incurred. The fee on cost-plus fixed fee contracts is recognized ratably over
total costs as they are incurred. Revenues and costs from fixed price contracts
are recognized on the percentage-of-completion method, measured by the
percentage of total costs incurred to date to total estimated costs for each
contract. This method is used because management considers total expended costs
to be the best available measure of progress on these contracts. Costs as used
herein exclude, in the early stages of a contract, all or a portion of the costs
of materials if, in the opinion of management, it appears that such an exclusion
would result in a more accurate measurement of the level of work performed
towards contract completion.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance such as indirect labor, supplies, repairs,
and depreciation costs.
Certain general and administrative expenses (including bid and proposal
expenses) allowable in accordance with United States Government procurement
practices are included in contract costs for government contracts because they
are identifiable with contract revenue.
The asset "Costs and estimated earnings in excess of billings on uncompleted
contracts" represents costs and associated revenues which have been recognized
but not billed.
The Company is also engaged as seller in a number of software transactions.
Generally, revenue is recognized upon delivery of the software. After the sale,
if significant obligations remain or significant uncertainties exist about
customer acceptance of the software, revenue is deferred until the obligations
are satisfied or the uncertainties are resolved. When collectibility of the
receivable is in doubt, revenue is recognized under the installment method or
cost recovery method. Revenue from software services is recognized as the
services are performed.
CASH EQUIVALENTS - For purposes of the statement of cash flows, cash equivalents
include time deposits, certificates of deposit, and all highly liquid debt
instruments with original maturities of three months or less.
81
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONTRACT AND OTHER RECEIVABLES - The Company considers contract and other
receivables to be fully collectible; accordingly, no allowance for doubtful
accounts is required.
DEPRECIATION - The cost of property, plant and equipment is depreciated over the
estimated useful lives of the related assets. Depreciation is computed on the
straight-line method, accelerated cost recovery system and the modified
accelerated cost recovery system as appropriate.
AMORTIZATION - The costs of capitalized research and development costs are
amortized over their estimated useful lives of three years. Amortization is
computed on the straight-line method. The amortization method used is the
greater of the amount computed using (a) the ratio that current gross revenues
for a product bear to the total of current and anticipated future gross revenues
for that product or (b) the straight-line method over the remaining estimated
economic life of the product.
INCOME TAXES - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due and
deferred taxes related primarily to differences between the basis of vacation
and sick leave for financial and income tax reporting. The deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes also are recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
RESEARCH AND DEVELOPMENT COSTS - In accordance with Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed," the Company capitalizes the direct costs
and allocated overhead associated with the development of software products.
Initial costs are charged to operations as research prior to the development of
a detailed program design or a working model. Costs incurred subsequent to the
product release, and research and development performed under contract are
charged to operations.
EARNINGS PER SHARE - Earnings per share mounts are based on the weighted average
number of shares outstanding (539,182 in 1996 and 1995).
82
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 2 - ACCOUNTS RECEIVABLE
The following is a summary of accounts receivable at January 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Contract receivables $1,368,879 $473,819
Retainage receivable 204,606 262,175
Billings in excess of costs and estimated earnings on
uncompleted contracts - (6,820)
Other receivables 12,738 -
--------- -------
Total accounts receivable $1,586,223 $729,174
========= =======
</TABLE>
The retainage receivable balance represents contracts which provide for
retainage provisions against billable amounts and are due upon completion of the
contracts and acceptance by the customer.
NOTE 3 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at January 31:
<TABLE>
<CAPTION>
Estimated
1995 1994 Life
---- ---- ---------
<S> <C> <C> <C>
Furniture and equipment $ 317,090 $ 333,539 3-8 years
Vehicles 15,703 15,703 5 years
Computer equipment 1,312,486 848,170 5 years
Leasehold improvements 23,352 - 39.5 years
--------- ---------
Total cost 1,668,631 1,197,412
Less accumulated depreciation (1,068,212) (901,867)
--------- ---------
Net property and equipment $ 600,419 $ 295,545
========= =========
</TABLE>
Depreciation expense charged to general and administrative expense in 1995 and
1994 was $62,160 and $43,360, respectively. Depreciation expense charged to
applied overhead in 1995 and 1994 was $139,038 and $99,390, respectively.
Depreciation expense charged to cost of sales in 1995 and 1994 was $37,421 and
$12,262, respectively.
83
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 4 - LINE OF CREDIT
Software Technology, Inc. has a $900,000 line of credit with a bank. The note
bears interest on the unpaid principal balance at an interest rate per annum
equal to the bank's prime rate plus .50%. As of January 31, 1995 and 1994 the
outstanding draws against the line were $900,000 and $0, respectively. The prime
rate at January 31, 1995 was 9%. All accounts receivable are pledged as
collateral on this line of credit.
The weighted average interest rate on short-term borrowings outstanding at
January 31, 1995 was 9.33%.
NOTE 5 - ACCRUED EXPENSES
Accrued expenses consist of the following at January 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Accrued bonus $ 30,000 $ -
Accrued payroll taxes payable 25,826 22,407
Accrued fringe benefits 788,771 556,205
Accrued pension and profit sharing 216,382 175,706
Accrued employee stock ownership 281,018 438,707
--------- ---------
Total accrued expenses $1,341,997 $1,193,025
========= =========
</TABLE>
NOTE 6 - LONG TERM DEBT
Long term debt outstanding at January 31 consists of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C><C>
Note payable to bank, payable in forty-eight monthly
installments of $345, including interest at 10.91% be-
ginning May 1990, secured by a van. $ - $1,018
Note payable to bank, payable in thirty-six monthly
installments of $3,008, including interest at prime plus
.75% beginning March 1991, secured by equipment and
fixtures. - 3,008
Unsecured note payable to bank, payable in thirty-six
monthly installments of $630, including interest at
7.25% beginning October 1994. 17,584 -
------ -----
</TABLE>
84
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 6 - LONG TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
TOTAL LONG-TERM DEBT 17,584 4,026
Less: current portion of long-term debt 5,475 4,026
------ ------
TOTAL LONG-TERM DEBT, less current portion $12,109 $ -
====== ======
Following are maturities of long-term debt for each of the next three years:
Amount
------
1996 $ 5,475
1997 6,941
1998 5,168
------
$17,584
=======
</TABLE>
NOTE 7 - EMPLOYEE RETIREMENT PLAN
The Company has a defined contribution pension plan that covers substantially
all employees who have met certain age and length of service requirements.
Contributions to the plan are 5% of eligible compensation. Eligible compensation
for the years ended January 31, 1995 and 1994 was approximately $9,401,000 and
$8,774,000, respectively. For the years ended January 31, 1995 and 1994 the
amount of pension expense was $470,066 and $438,707, respectively.
The Company also sponsors a profit-sharing plan which allows substantially all
full-time employees to defer compensation under Section 401(k) of the Internal
Revenue Code and the employer to electively contribute to the plan. Employer
contributions to the plan are made at the discretion of the Board of Directors.
The employer contributions made to the plan for the years ended January 31, 1995
and 1994 were $470,066 and $263,224, respectively.
NOTE 8 - EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an employee stock ownership plan (ESOP). Contributions to this
plan are at the discretion of the Board of Directors. Full time employees who
have attained the age of twenty-one (21) and have one year of service are
eligible to participate in the plan. Shares purchased by the plan are allocated
annually to eligible employees proportional to their compensation, not including
overtime and bonuses. Employee stock ownership plan contributions, charged to
operations, amounted to $281,018 and $438,707 for the years ending January 31,
1995 and 1994, respectively. The ESOP has 279,440 shares of the total issued and
outstanding stock at January 31, 1995 and 1994.
85
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 9 - LEASE OBLIGATIONS
Office space and equipment is leased under operating leases expiring in various
years through 2003.
Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of January 31, 1995 for each of the
next five years and in the aggregate are:
<TABLE>
<CAPTION>
Year ending January 31: Amount
----------
<S> <C>
1996 $ 468,821
1997 466,391
1998 426,694
1999 340,205
2000 202,786
Subsequent to 2000 1,029,786
----------
Total minimum future rental payments $2,934,683
==========
</TABLE>
The minimum future rental payments have not been reduced by $242,089 of sublease
rentals to be received in the future under non-cancelable subleases. Rent
expense for the years ended January 31, 1995 and 1994 was $429,659 and $443,556,
respectively which was offset by sublease rental income for the years ended
January 31, 1995 and 1994 of $25,876 and -0-, respectively.
NOTE 10 - ECONOMIC DEPENDENCY
The Company sells a substantial portion of its products to two major customers.
Sales to these major customers aggregated $5,052,370 and $5,623,172 for the year
ended January 31, 1995 and $322,800 and $7,320,963 for the year ended January
31, 1994. Amounts due from these major customers included in accounts
receivable, were $264,271 and $342,614 at January 31, 1995 and $322,800 and
$666,938 at January 31, 1994, respectively. Amounts included in costs and
estimated earnings in excess of billings on uncompleted contracts were
$2,501,763 and $525,000 at January 31, 1995 and $0 and $228,076 at January 31,
1994, respectively.
NOTE 11 - RESEARCH AND DEVELOPMENT COSTS
Most research and development costs are charged to operations when incurred and
are included in operating expenses. The amounts charged for the years ending
January 31, 1995 and 1994 were $102,533 and $126,478, respectively.
During the year ended January 31, 1995, $162,783 of research and development
costs for computer software to be sold or otherwise marketed were capitalized.
The amortization of costs related to computer software products held for sale
was $23,685. The amount of unamortized computer software costs at January 31,
1995 was $139,098.
86
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 11 - RESEARCH AND DEVELOPMENT COSTS (CONTINUED)
In management's opinion, the net realizable value of future sales exceeds the
carrying value of unamortized software development costs; therefore, no
adjustment to carrying value is required.
NOTE 12 - INCOME TAXES
The components of the provision for income taxes at January 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
Current expense -------- -------
<S> <C> <C>
Federal $358,400 $290,020
State 79,225 58,380
Deferred tax benefit due to temporary differences
Federal (71,800) (112,126)
State (12,100) (20,374)
-------- --------
$353,725 $215,900
======== ========
</TABLE>
The following is a reconciliation of the provisions for income taxes to the
expected amounts using the statutory rate:
<TABLE>
<CAPTION>
1995 1994
<S> ---- ----
Expected statutory amount <C> <C>
Nondeductible meals and entertainment 34.0% 34.0%
Nondeductible officers life insurance .3 -
Tax penalties .9 1.2
Dividends .2 -
Deferred tax adjustment (1.5) (1.8)
Research and experimental credit - (12.2)
State income taxes (2.1) -
Other 2.4 4.9
(1.3) 4.3
Actual tax provision ---- ----
32.9% 30.4%
</TABLE> ==== ====
87
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 12 - INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes.
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of January 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Accrued payroll expenses $251,300 $167,400
</TABLE>
NOTE 13 - CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of temporary cash investments. The Company places
its temporary cash investments with a financial institution. The amount of
credit exposure in excess of federally-insured limits at January 31, 1995 was
$530,053.
NOTE 14 - COMMITMENTS AND CONTINGENCIES
The Company has outstanding purchase commitments of $83,560 as of January 31,
1995. These represent outstanding purchase orders for which neither the item nor
invoice has been received.
NOTE 15 - RECLASSIFICATION
Certain amounts in the balance sheet and income statement for the year ended
January 31, 1994 have been reclassified to be consistent with the year ended
January 31, 1995 presentation.
NOTE 16 - RESTATEMENT
The accompanying financial statements for the year ended January 31, 1994 have
been restated to correct an error in recording the deferred income taxes made in
the year ended January 31, 1994. The effect of the restatement was to increase
net income for the year ended January 31, 1994 by $86,600.
88
<PAGE>
SUPPLEMENTARY INFORMATION
89
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF COST OF SALES
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
COST OF SALES
Central engineering labor $ 3,476,820 $ 2,594,504
Branch engineering labor 1,388,754 1,416,829
Offsite engineering labor 4,064,085 3,594,815
Arizona engineering labor 421,330 -
Other direct costs 1,359,502 1,915,045
Applied overhead 5,455,649 3,924,730
Less: research and development costs (102,533) (45,174)
----------- -----------
TOTAL COST OF SALES $16,063,607 $13,400,749
=========== ===========
</TABLE>
See accompanying notes and accountant's report.
90
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995
-------- --------
GENERAL AND ADMINISTRATIVE EXPENSES
<S> <C> <C>
Marketing & recruiting salary $138,968 $122,252
Bonus 121,500 6,300
Bid and proposal 167,339 320,012
Marketing & recruiting expense 56,251 71,418
Contributions 4,665 2,099
Penalties 4,804 67
Office salaries 155,920 192,740
System managers salaries 29,284 22,579
Advertising 281 21,702
Conference 8,816 6,447
Entertainment 1,924 1,825
Awards 80,333 -
Taxes - other 770 1,175
Officer's administrative time 114,101 109,325
Insurance 16,633 25,323
Officers' life insurance 27,837 24,879
Tangible & intangible property tax 19,367 18,779
Directors' fees 35,000 35,000
Miscellaneous 21,802 6,371
Professional fees 43,787 35,044
Miscellaneous business expense 9,011 6,251
Severance pay 6,600 7,336
Utilities 7,811 17,835
Communication 14,200 10,744
Rent 23,034 43,925
Equipment rent/repair/maintenance 34,867 30,966
Depreciation 62,160 43,360
Travel 59,434 35,811
Unallowable overhead travel 117 -
Travel and meals 9,842 3,506
Amortization - 691
Relocation 906 -
Facilities consultant - 5,564
Office supplies 56,258 33,175
Dues and subscriptions 4,267 3,306
Process improvements 17,881 -
Non-productive time 13,117 281
Training and meetings 19,871 23,196
</TABLE>
See accompanying notes and accountant's report.
91
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES (CONTINUED)
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Administrative time $ 398,593 $ 301,159
Training and meeting expense - 12,369
ESOP 281,018 438,707
Administrative personnel expense 469,917 468,645
Automobile expenses 381 703
---------- ----------
TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES $2,538,667 $2,510,867
========== ==========
</TABLE>
See accompanying notes and accountant's report.
92
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF APPLIED OVERHEAD
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995
-------------- -----------
APPLIED OVERHEAD
PERSONNEL OVERHEAD
<S> <C> <C>
Vacation $ 754,568 $ 606,086
Holiday 442,968 359,596
Sick leave 277,834 221,409
Continuing education 54,097 41,477
Employee morale 34,478 30,437
Payroll taxes 890,096 721,020
Pension administrative costs 80,462 43,702
Retirement 470,066 438,707
Insurance 1,210,224 888,577
Profit sharing 470,066 263,224
Service award 7,831 2,711
Other 1,548 -
-------------- -----------
TOTAL PERSONNEL OVERHEAD 4,694,238 3,616,946
-------------- -----------
CENTRAL DEPARTMENT OVERHEAD
Utilities 51,994 65,447
Communication 55,400 38,798
Office rent 154,013 144,878
Repair/rent/maintenance 51,926 33,702
Depreciation 85,325 81,275
Amortization 23,685 11,571
Relocation 20,652 10,704
Facilities consultant - 22,257
Dues and subscriptions 1,577 1,110
Office supplies 59,036 21,972
Non-productive time 4,615 4,324
Administrative time 100,425 34,638
------------- -----------
TOTAL CENTRAL DEPARTMENT OVERHEAD 608,648 470,676
------------- -----------
</TABLE>
See accompanying notes and accountant's report.
93
<PAGE>
SOFTWARE TECHOLOGY, INC.
SCHEDULES OF APPLIED OVERHEAD (CONTINUED)
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995
------------- --------------
BRANCH DEPARTMENT OVERHEAD
<S> <C> <C>
Utilities 10,711 5,451
Communication 31,718 24,443
Office rent 206,483 157,378
Equipment repair and maintenance 26,241 18,216
Depreciation 26,857 16,564
Travel 515 1,195
Relocation 6,258 2,980
Dues and subscriptions 1,589 1,483
Office supplies 20,088 20,444
Non-productive time 294 980
Administrative time 60,821 26,268
------------- --------------
TOTAL BRANCH DEPARTMENT OVERHEAD 391,575 275,402
------------- --------------
OFF-SITE OVERHEAD
Communication 338 279
Depreciation 602 1,551
Travel 239 410
Relocation 39,676 15,467
Dues and subscriptions 798 1,032
Office supplies 1,294 2,016
Non-productive time 5,657 9,416
Administrative time 4,428 180
------------- --------------
TOTAL OFF-SITE OVERHEAD 53,032 30,351
------------- --------------
</TABLE>
See accompanying notes and accountant's report.
94
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF APPLIED OVERHEAD (CONTINUED)
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
ARIZONA OVERHEAD
<S> <C> <C>
Communication 396 -
Rent 185 -
Repair/rent/maintenance 418 -
Depreciation 26,254 -
Relocation 140,680 -
Office supplies 2,622 -
Administrative time 7,518 -
--------------- --------------
TOTAL ARIZONA OVERHEAD 178,073 -
--------------- --------------
PERSONNEL EXPENSES APPLIED TO GENERAL
AND ADMINISTRATIVE (469,917) (468,645)
-------------- --------------
TOTAL APPLIED OVERHEAD $ 5,455,649 $ 3,924,730
============== ==============
</TABLE>
See accompanying notes and accountant's report.
95
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Exigent International, Inc.
(A Development Stage Enterprise)
We have audited the accompanying balance sheet of Exigent International, Inc.,
(a Delaware corporation and development stage enterprise) as of July 31, 1996.
This financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Exigent International, Inc. as
of July 31, 1996, in conformity with generally accepted accounting principles.
Hoyman, Dobson & Company, P.A.
Melbourne, Florida
September 6, 1996
96
<PAGE>
EXIGENT INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
<TABLE>
<CAPTION>
July 31, 1996
-------------
<S> <C>
ASSETS
Current Assets
Prepaid costs $ 168,001
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Due to related party $ 168,001
Stockholders' Equity -
---------
Total Liabilities and Stockholders' Equity $ 168,001
=========
</TABLE>
See notes to Balance Sheet.
97
<PAGE>
EXIGENT INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENT
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - Exigent International, Inc. is a development stage enterprise
which was incorporated on March 25, 1996, in Delaware, to be the issuer
for a registration of Software Technology, Inc. and Monogenesis Corporation.
DEVELOPMENT STAGE - The Company has not commenced operations as of July 31, 1996
and the only activity to date has been solely in conjunction with the
incorporation and registration process.
NOTE 2 - PREPAID COSTS
Prepaid costs represent costs incurred related to incorporation and registration
paid by Software Technology, Inc. (See Related Party Note 3). These costs will
be offset against the gross proceeds from the offering once the registration
process is complete.
NOTE 3 - RELATED PARTY
Exigent International, Inc., will acquire all of the issued and outstanding
stock and all the outstanding warrants of Software Technology, Inc., a Florida
corporation, in exchange for stock and warrants of the Company upon the filed
registration statement becoming effective.
The company's management is the same as the management of Software Technology,
Inc.
NOTE 4 - CAPITAL STRUCTURE
Exigent International, Inc. is authorized at July 31, 1996 to issue the
following number of shares at the stated par value:
<TABLE>
<CAPTION>
Shares Par Value
Authorized Per Share
---------- ---------
<S> <C> <C>
Common Shares 30,000,000 $ 0.01
Class B Common Shares 5,000,000 $ 0.01
Class D Common Shares 600,000 $ 0.01
Preferred Shares 10,000,000 $ 0.01
</TABLE>
98
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations 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 Issuer. The delivery of this
Prospectus at any time does not imply that the information herein is correct as
of any time subsequent to its date of issue. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of these securities.
-----------------------
TABLE OF CONTENTS
-----------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Information 2
Summary 2
Risk Factors 7
Plan of Distribution 12
Use of Proceeds 14
Capitalization 14
Business 16
Management's Discussion 27
and Analysis of Financial
Condition
Legal Proceedings 31
Management 31
Principal and Selling 35
Shareholders and Security
Ownership of
Management
Securities 38
Dividends 42
Liability and Indemnification 42
of Directors
Legal Matters 44
Experts 45
Financial Statements 46
-----------------------
</TABLE>
3,520,245 COMMON SHARES
AND
1,070,270 COMMON STOCK
PURCHASE WARRANTS
OF
EXIGENT INTERNATIONAL, INC.
------------------------------
PROSPECTUS
------------------------------
, 1996
--------------
UNTIL [90 DAYS], 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
- ------- --------------------------------------
Item 13. Other Expenses of Issuance and Distribution
-------------------------------------------
Expenses of the offering are estimated to be approximately $150,000 which
amount includes the following items:
<TABLE>
<CAPTION>
<S> <C>
Registration fee - federal $ 1,853
Registration fees - state $ 0
Transfer Agent Fees* $20,000
Printing and EDGAR Filing Costs* $18,000
Legal Fees (including fees relating
to the reorganization)* $50,000
Accounting Fees $15,000
Consultant Fees $45,000
</TABLE>
- --------------------------------------------------------------------------------
* estimates
Item 14. Indemnification of Directors and Officers
-----------------------------------------
The Issuer has provisions in its Certificate of Incorporation which limit
its directors' monetary liability to it or its shareholders except: (a) for any
breach of the director's duty of loyalty to the corporation or its shareholders;
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (c) for unlawful payment of dividends
or unlawful repurchase or redemption of its own stock; or (d) for any
transaction from which the director derived an improper personal benefit.
The Issuer is required to indemnify its officers and directors for any
liability incurred by them in their capacity as such except in relation to
matters as to which any such director or officer or former director or officer
or person shall be adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of duty.
Item 15. Recent Sales of Unregistered Securities
---------------------------------------
On the effective date of this Registration Statement, the Issuer issued
3,486,600 Common Shares and 697,320 Class A Preferred Shares to the shareholders
of Software Technology, Inc. in exchange for all of STI's issued and outstanding
stock. The Issuer issued 645,270 Common Stock Purchase Warrants in exchange for
all of STI's issued and outstanding warrants on the same date. The Issuer claims
exemption from registration under Section 4(2) of the Securities Act of 1933.
<PAGE>
The securities issued to Monogenesis Corporation, 2,149,975 of the Common
Shares issued to STI shareholders and all of the Warrants will be registered
under this Registration Statement. The remaining securities issued will bear a
restrictive legend.
Item 16. Exhibits and Financial Statement Schedules
------------------------------------------
<TABLE>
<CAPTION>
Index to Exhibits and Financial Statement Schedules
---------------------------------------------------
- -------------------------------------------------------------------------------------------------
Exhibit Page
Table Number Number
------------ ------
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
I. Plan of Acquisition, Reorganization, Arrangement, 2
Liquidation or Succession
- -------------------------------------------------------------------------------------------------
(i) Stock Purchase Agreement and Plan of *
Reorganization (excluding all Schedules except 1.1)
- -------------------------------------------------------------------------------------------------
(ii) Amendment to Stock Purchase Agreement and Plan
of Reorganization
- -------------------------------------------------------------------------------------------------
II. Articles of Incorporation and Bylaws 3
- -------------------------------------------------------------------------------------------------
(i) Certificate of Incorporation of Exigent International, *
Inc.
- -------------------------------------------------------------------------------------------------
(ii) Amended and Restated Certificate of Incorporation of
Exigent International, Inc.
- -------------------------------------------------------------------------------------------------
(iii) Bylaws of Exigent International, Inc. *
- -------------------------------------------------------------------------------------------------
III. Opinion of Counsel - Legality of Securities Being 5 *
Registered
- -------------------------------------------------------------------------------------------------
IV. Material Contracts 10
- -------------------------------------------------------------------------------------------------
(i) Agreement Between Exigent International, Inc. and *
Transfer Agent
- -------------------------------------------------------------------------------------------------
(ii) Common Stock Purchase Warrant Agreement *
Between Exigent International, Inc. and Warrant
Agent
- -------------------------------------------------------------------------------------------------
(iii) Contract Between Motorola, Inc. Government and
Systems Technology Group, Satellite
Communications Division and Software Technology,
Inc.
- -------------------------------------------------------------------------------------------------
(iv) Contract Between Naval Research Laboratory and
Software Technology, Inc.
- -------------------------------------------------------------------------------------------------
(v) Subcontract/Purchase Order Between Loral Federal
Systems Company and Software Technology, Inc.
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Exhibit Page
Table Number Number
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
(vi) Purchase Orders from Allied Signal Technical
Services Corporation
- -------------------------------------------------------------------------------
V. Subsidiaries of the Registrant 21 *
- -------------------------------------------------------------------------------
VI. Consent of Experts 23
- -------------------------------------------------------------------------------
(i) Consent of Hoyman, Dobson & Company, P.A.,
Certified Public Accountants
- -------------------------------------------------------------------------------
(ii) Consent of Counsel - See Exhibit 5
- -------------------------------------------------------------------------------
VII. Financial Data Schedule 27
- -------------------------------------------------------------------------------
</TABLE>
* Filed with the Registration Statement to which this is Pre-Effective
Amendment No. 1.
Item 17. Undertakings
------------
The undersigned registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, 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 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 Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this pre-effective amendment no. 1 to this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Melbourne, State of Florida, on October 8, 1996.
Exigent International, Inc.
By: /s/ Jeffrey C. Clift
--------------------
Jeffrey C. Clift, President, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
/s/ Jeffrey C. Clift on October 8, 1996
- -----------------------------------------------------
Jeffrey C. Clift, President, Chief Executive Officer
/s/ Don F. Riordan, Jr on October 8, 1996
- -----------------------------------------------------
Don F. Riordan, Jr., Chief Financial Officer
The following are at least a majority of the directors of Exigent
International, Inc.:
/s/ Jeffrey C. Clift on October 8, 1996
- -----------------------------------------------------
Jeffrey C. Clift
/s/ Don F. Riordan, Jr. on October 8, 1996
- -----------------------------------------------------
Don F. Riordan, Jr.
/s/ David J. Nowacki on October 16, 1996
- -----------------------------------------------------
David J. Nowacki
/s/ Daniel J. Stark on October 16, 1996
- -----------------------------------------------------
Daniel J. Stark
/s/ William K. Presley on October 16, 1996
- -----------------------------------------------------
William K. Presley
/s/ Thomas O. Chewning, Jr. on October 16, 1996
- -----------------------------------------------------
Thomas O. Chewning, Jr.
</TABLE>
<PAGE>
Exhibit 2(ii)
AMENDMENT TO STOCK PURCHASE AGREEMENT
AND PLAN OF REORGANIZATION
This Amendment (this "Amendment") to Stock Purchase Agreement and Plan of
Reorganization (the "Agreement") is entered into as of this ____ day of October,
1996 by and among Software Technology, Inc., a Florida corporation ("STI");
Monogenesis Corporation, a Delaware corporation ("Monogenesis"); Joseph Walker &
Sons, Inc., a Delaware corporation ("JWSI"); and the persons listed on Schedule
1.1 that are currently shareholders of STI (collectively referred to as the
"Shareholders").
WHEREAS, the parties have entered into the Agreement under which the
Shareholders will exchange their securities in STI for securities in Exigent
International, Inc. ("Exigent"), the Holding Company referred to in the
Agreement, and register certain of the securities to be issued by Exigent; and
WHEREAS, the parties desire to amend the Agreement to reflect current share
holdings and to change the designation of certain of the proposed classes of
stock of Exigent;
NOW THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, the parties amend the Agreement as follows:
1. Subject to the terms and conditions set forth in this Amendment and in
the Agreement, on the Closing Date (as defined in the Agreement), Exigent shall
cause to be issued and delivered to the Shareholders and JWSI the class and the
number of shares of its stock and the number of warrants set forth opposite
their names on Schedule 1.1, which is attached hereto and made a part hereof, in
exchange for which the Shareholders and JWSI shall deliver to Exigent all of the
issued and outstanding stock and warrants of STI.
2. The capitalization of Exigent described in the Agreement shall be
changed. Exigent shall have three classes of stock authorized: Common Shares,
Class B Common Shares and Preferred Shares as well as common stock purchase
warrants as described in the Agreement. In addition, Exigent shall designate
5,000,000 of the authorized Preferred Shares, Class A Preferred Shares. All
references to "Class B Common Shares" in the Agreement shall be amended to read
"Class A Preferred Shares" and all references to "Class D Common Shares" shall
be amended to read "Class B Common Shares."
3. All other provisions of the Agreement shall remain in full force and
effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Stock
Purchase Agreement and Plan of Reorganization to be executed and delivered on
the date first above written.
SOFTWARE TECHNOLOGY, INC.
By:
--------------------------------
Title:
-----------------------------
MONOGENESIS CORPORATION
By:
--------------------------------
Scot D. Walker, President
JOSEPH WALKER AND SONS
By:
--------------------------------
Title:
-----------------------------
THE SHAREHOLDERS
Software Technology, Inc. Restated
Employee Stock Ownership Plan and
Trust Agreement
By:
--------------------------------
Title:
-----------------------------
-----------------------------------
Dean W. Boley
-----------------------------------
Daniel J. Stark
2
<PAGE>
-----------------------------------
Don F. Riordan, Jr.
-----------------------------------
Rudiger D. Lichti
-----------------------------------
Thomas O. Chewning, Jr.
-----------------------------------
James A. Traficant
-----------------------------------
Jack D. Daily
-----------------------------------
William K. Presley
-----------------------------------
Kenneth E. Zepf
-----------------------------------
Jeffrey C. Clift
-----------------------------------
David R. Reading
-----------------------------------
Donald M. McKay
-----------------------------------
Gregory W. Saunders
3
<PAGE>
SCHEDULE 1.1
HOLDING COMPANY STOCK AND WARRANTS TO BE ISSUED TO STI SHAREHOLDERS
-------------------------------------------------------------------
<TABLE>
<CAPTION>
RESTRICTED REGISTERED CLASS B REGISTERED
NAME COMMON SHARES COMMON SHARES COMMON SHARES WARRANTS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dean W. Boley 414,870 138,290 110,632 74,610
- ----------------------------------------------------------------------------------------------------
Daniel J. Stark 414,322 138,108 110,486 74,514
- ----------------------------------------------------------------------------------------------------
Don F. Riordan, Jr. 193,342 64,448 51,558 34,770
- ----------------------------------------------------------------------------------------------------
Rudiger D. Lichti 190,102 63,368 50,694 34,188
- ----------------------------------------------------------------------------------------------------
Thomas O. Chewning, Jr. 46,316 15,439 12,351 8,328
- ----------------------------------------------------------------------------------------------------
James A. Traficant 33,150 11,050 8,840 5,964
- ----------------------------------------------------------------------------------------------------
Jack D. Daily 10,076 3,359 2,687 1,812
- ----------------------------------------------------------------------------------------------------
William K. Presley 8,734 2,911 2,329 1,572
- ----------------------------------------------------------------------------------------------------
Kenneth E. Zepf 8,066 2,689 2,151 1,452
- ----------------------------------------------------------------------------------------------------
Jeffrey C. Clift 6,679 2,226 1,781 1,200
- ----------------------------------------------------------------------------------------------------
David R. Reading 5,351 1,784 1,427 960
- ----------------------------------------------------------------------------------------------------
Donald M. McKay 3,750 1,250 1,000 672
- ----------------------------------------------------------------------------------------------------
Gregory W. Saunders 1,867 623 498 336
- ----------------------------------------------------------------------------------------------------
ESOP -0- 1,704,430 340,886 229,896
- ----------------------------------------------------------------------------------------------------
TOTAL 1,336,625 2,149,975 697,320 470,274
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 3(ii)
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EXIGENT INTERNATIONAL, INC.
---------------------------
Exigent International Inc., a corporation organized and existing under the
General Corporation Laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Exigent International, Inc. (the
"Corporation"). The Corporation was originally incorporated under the same name,
and the original Certificate of Incorporation of the Corporation was filed with
the Secretary of State of Delaware on March 25, 1996.
2. Pursuant to Section 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated and Amended Certificate of Incorporation
restates, integrates and further amends the provisions of the Certificate of
Incorporation of the Corporation.
3. The text of the Amended and Restated Certificate of Incorporation is
hereby restated and amended to read in its entirety as follows:
1. NAME. The name of the Corporation is "Exigent International, Inc."
2. PURPOSES. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
3. CLASSES OF STOCK. The total number of shares which the Corporation is
authorized to issue is 45,600,000 shares of which 30,000,000 shares shall be
designated "Common Shares;" 600,000 shall be designated "Class B Common Shares;"
15,000,000 shall be designated "Preferred Share," of which 5,000,000 shall be
designated "Class A Preferred Shares." The number of Class B Common Shares
authorized shall not exceed 2% of the number of Common Shares authorized. All
shares of stock of the Corporation shall have a par value of $0.01 per share. No
holder of shares of any class of stock of the Corporation now or hereafter
authorized shall be entitled to cumulative voting or shall have any preferential
or preemptive right to subscribe for, purchase or receive any shares of the
Corporation of any class now or hereafter authorized, or any portions or
warrants for such shares, or any securities convertible into or exchangeable for
such shares, which may at any time be issued, sold or offered for sale by the
Corporation; except that, holders of Class A Preferred Shares shall have
preemptive rights with respect to the issuance of Class A Preferred Shares only.
In addition, the Corporation shall not issue, sell or offer to sell any Class A
Preferred Shares without
<PAGE>
the prior approval of the holders of a majority of the issued and outstanding
Class A Preferred Shares.
4. COMMON SHARES. The rights, preferences and limitations of the Common
Shares are as follows:
(a) DIVIDENDS. Except as provided in subparagraph 4(b), Common Shares,
Class B Common Shares and Class A Preferred Shares shall have equal dividend
rights and the Corporation shall not declare or pay dividends on shares of one
of such classes unless an equal amount is declared and paid on shares of the
other two classes.
(b) SHARE DISTRIBUTION. The Corporation shall make a share distribution
of Common Shares only as follows: (i) Common Shares shall only be distributed as
a stock dividend on Common Shares; and (ii) a stock dividend shall only be
declared with respect to either Common Shares or Class A Preferred Shares, if a
stock dividend of the same number of shares shall be declared with respect to
both such classes.
(c) STOCK COMBINATIONS OR SPLITS. The Corporation shall not combine or
subdivide either Common Shares or Class A Preferred Shares without at the same
time making a proportionate combination or subdivision of shares of both such
classes.
(d) VOTING. Each holder of Common Shares shall be entitled to one vote
for each share of stock registered in such holder's name, except that, the
holders of Class A Preferred Shares shall have exclusive voting power if no
Common Shares, Class B Common Shares or other classes or series of voting
Preferred Shares are issued and outstanding. In all other cases, voting power
shall be divided among classes as follows:
(i) With respect to the election of directors, holders of Common
Shares together with the holders of Class B Common Shares and all classes or
series of voting Preferred Shares other than Class A Preferred Shares voting
together as a separate class shall be entitled to elect that number of directors
which constitutes 25% of the authorized number of members of the board of
directors and, if such 25% is not a whole number, then the holders of Common
Shares, Class B Common Shares and all classes or series of voting Preferred
Shares other than Class A Preferred Shares shall be entitled to elect the
nearest higher whole number of directors that is at least 25% of such
membership. Holders of Class A Preferred Shares voting as a separate class shall
be entitled to elect the remaining directors.
(ii) The holders of Common Shares, Class B Common Shares and all
classes or series of voting Preferred Shares other
2
<PAGE>
than Class A Preferred Shares shall be entitled to vote together as a separate
class on the removal, with or without cause, of any director elected by such
holders.
(iii) Any vacancy in the office of a director elected by the holders
of the Common Shares, Class B Common Shares and all classes or series of voting
Preferred Shares other than Class A Preferred Shares may be filled by a vote of
such holders voting together as a separate class. In the absence of a
stockholder vote, in the case of a vacancy in the office of a director elected
by such classes, the vacancy may be filled by the remaining directors as
provided in the bylaws of the Corporation. Any director elected by the board of
directors to fill a vacancy shall serve until the next annual meeting of
stockholders and until his or her successor has been elected and has qualified.
If permitted by the bylaws, the board of directors may increase the number of
directors and any vacancy so created may be filled by the board of directors;
provided that, so long as the holders of Common Shares, Class B Common Shares
and all classes or series of voting Preferred Shares other than Class A
Preferred Shares have the rights provided in subparagraph 4(d) of this
certificate in respect of the last preceding annual meeting of stockholders, the
board of directors may be so enlarged by the board of directors only to the
extent that at least 25% of the enlarged board consists of directors elected by
the holders of the Common Shares, Class B Common Shares and all classes or
series of voting Preferred Shares other than Class A Preferred Shares or by
persons appointed to fill vacancies created by the death, resignation or removal
of persons elected by the holders of the Common Shares, Class B Common Shares
and all classes or series of voting Preferred Shares other than Class A
Preferred Shares.
(iv) Notwithstanding the foregoing, holders of Common Shares, Class B
Common Shares and all classes or series of voting Preferred Shares other than
Class A Preferred Shares shall not have the right to elect directors as set
forth above if, on the record date for any stockholders' meeting at which
directors are to be elected, the number of issued and outstanding Common Shares,
Class B Common Shares and all classes or series of voting Preferred Shares other
than Class A Preferred Shares is less than 10% of the aggregate number of issued
and outstanding voting shares of all classes. In such case, all directors to be
elected at such meeting shall be elected by the holders of all voting shares
voting together as a single class.
(v) The holders of the Common Shares, Class B Common Shares and all
classes or series of voting Preferred Shares other than Class A Preferred Shares
shall be entitled to vote as a separate class only when required by law to do so
irrespective of the limitations placed herein on the voting rights of such
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<PAGE>
stockholders, or when a separate class vote is required by specific provision
therefor in this certificate of incorporation or in the bylaws of the
Corporation. Holders of all voting shares shall vote as a single class, in all
other matters including, but not limited to, any amendment to this certificate
in order to increase or decrease the aggregate number of authorized Common
Shares, Class B Common Shares, Class A Preferred Shares or Preferred Shares.
5. Class B Common Shares. Class B Common Shares shall be identical to
Common Shares and have equal rights and privileges, except as otherwise set
forth below:
(a) Issuance. The board of directors, by resolution, may authorize
the issuance of Class B Common Shares; provided that, each resolution
authorizing the issuance of Class B Common Shares shall provide a formula under
which the shares issued may be converted into Common Shares. In no case shall
the board of directors set any conversion rights which could result in the
issuance of more than 10 Common Shares for each Class B Common Share.
(b) Transfer. Class B Common Shares shall be non-transferable.
(c) Conversion.
(i) The board of directors shall decide, in its sole discretion,
if a holder of record of Class B Common Shares is deemed to have met any
conditions placed upon the conversion of the holder's Class B Common Shares into
Common Shares. At such time as a holder of record of Class B Common Shares has
received a written notice from the board of directors of the Corporation that
such holder is deemed to have met all conditions for conversion of any Class B
Common Shares into Common Shares as set forth in the resolution authorizing the
issuance of such shares, the holder may convert the Class B Common Shares
described in the notice into fully paid and non-assessable Common Shares. Any
such conversions may be effected by surrendering the certificate or certificates
for the Class B Common Shares to be converted, duly endorsed, at the office of
the Corporation, or the transfer agent, if any, together with a written notice
to the Corporation that such holder elects to convert such Class B Common Shares
and stating the name or names in which the certificate or certificates for
Common Shares are to be issued. The conversion shall be deemed to have been made
at the close of business on the date of surrender and the person or persons
entitled to receive the Common Shares issuable on conversion shall be treated
for all purposes as the record holder or holders of such Common Shares on that
date.
4
<PAGE>
(ii) At the close of business on the fifth anniversary of the
date of the resolution authorizing the issuance of any Class B Common Shares,
issued and outstanding but unconverted Class B Common Shares shall be deemed to
have been converted at the rate of one fully paid and non-assessable Common
Share for one Class B Common Share and, commencing at the close of business on
such anniversary, the record holder of such Class B Common Shares shall be
treated for all purposes as the record holder of the Common Shares issuable on
such conversion.
(iii) The Corporation shall hold in reserve the number of
authorized but unissued Common Shares as may be necessary to convert issued and
outstanding Class B Common Shares to Common Shares without the necessity of a
declaration by the directors. No Class B Common Shares may be issued unless the
number of authorized but unissued and unreserved Common Shares is sufficient to
satisfy the conversion of such Class B Common Shares.
6. Class A Preferred Shares. Class A Preferred Shares shall have a stated
value of $2.50 per share and shall be identical in all respects and have equal
rights and privileges with Common Shares, except as otherwise provided herein.
(a) Call; Transfer. Class A Preferred Shares shall be noncallable.
Class A Preferred Shares shall only be transferrable with the prior written
consent of all holders of Class A Preferred Shares. Any transfer of Class A
Preferred Shares without prior approval as described above, whether voluntary or
involuntary or by operation of law, will be deemed to be an exercise of such
holder's conversion rights described below and any Class A Preferred Shares
which are so transferred shall be converted to Common Shares.
(b) Share Distribution. The Corporation shall make a share
distribution of Class A Preferred Shares only as follows: (i) Class A Preferred
Shares shall only be distributed as a stock dividend on Class A Preferred
Shares; and (ii) a stock dividend shall only be declared with respect to either
Common Shares or Class A Preferred Shares, if a stock dividend of the same
number of shares shall be declared with respect to both such classes.
(c) Stock Combination. The Corporation shall not combine or subdivide
either Common Shares or Class A Preferred Shares without at the same time making
a proportionate combination or subdivision of shares of both such classes.
(c) Voting. Each holder of Class A Preferred Shares shall be entitled
to one vote for each share of stock registered in such holder's name, except
that holders of Common Shares, Class B Common Shares and other classes or series
of voting Preferred Shares shall have exclusive voting power if no shares of
Class A
5
<PAGE>
Preferred Shares are issued and outstanding. In all other cases, voting power
shall be divided among classes as follows:
(i) With respect to the election of directors, holders of Class
A Preferred Shares voting as a separate class shall be entitled to elect
directors after holders of all other classes of shares have elected the number
of directors calculated as provided in subparagraph 4(d)(i).
(ii) The holders of Class A Preferred Shares shall be entitled
to vote as a separate class on the removal, with or without cause, of any
director elected by the holders of Class A Preferred Shares.
(iii) Any vacancy in the office of a director elected by the
holders of the Class A Preferred Shares may be filled by a vote of such holders
voting as a separate class. In the absence of a stockholder vote, in the case of
a vacancy in the office of a director elected by such class, the vacancy may be
filled by the remaining directors as provided in the bylaws of the Corporation.
Any director elected by the board of directors to fill a vacancy shall serve
until the next annual meeting of stockholders and until his or her successor has
been elected and has qualified.
(iv) The holders of Class A Preferred Shares shall be entitled
to vote as a separate class only when required by law to do so irrespective of
the limitations placed herein on the voting rights of such stockholders, or when
a separate class vote is required by specific provision therefor in this
certificate of incorporation or in the bylaws of the Corporation. Holders of all
voting shares shall vote as a single class, in all other matters.
(e) CONVERSION.
----------
(i) Each holder of record of Class A Preferred Shares may at any
time or from time to time, in such holder's sole discretion and at such holder's
option, convert any whole number or all of such holder's Class A Preferred
Shares into fully paid and non-assessable Common Shares at the rate (subject to
adjustment as hereinafter provided) of one Common Share for each Class A
Preferred Share surrendered for conversion. Any such conversion may be effected
by surrendering the certificate or certificates for the Class A Preferred Shares
to be converted, duly endorsed, at the office of the Corporation, or the
transfer agent, if any, together with a written notice to the Corporation that
such holder elects to convert all or a specified number of Class A Preferred
Shares and stating the name or names in which the certificate or certificates
for such Common Shares are to be issued. The conversion shall be deemed to have
been made at the close of business on the date of
6
<PAGE>
surrender and the person or persons entitled to receive the Common Shares
issuable on conversion shall be treated for all purposes as the record holder or
holders of such Common Shares on that date.
(ii) The Corporation shall hold in reserve the number of
authorized but unissued Common Shares as may be necessary to convert all issued
and outstanding Class A Preferred Shares to Common Shares without the necessity
of a declaration by the directors. No Class A Preferred Shares may be issued
unless the number of authorized but unissued and unreserved Common Shares is
sufficient to satisfy the conversion of such Class A Preferred Shares.
(iii) No fraction of a Common Share shall be issued on
conversion of any Class A Preferred Share. In lieu thereof, the Corporation
shall pay the holder the fair market value of any such fraction in cash. The
fair market value shall be based, in the case of publicly traded securities, on
the last sale price for such securities on the business day next prior to the
date such fair market value is to be determined (or, in the event no sale is
made on that day, the average of the closing bid and asked prices for that day
on the principal stock exchange on which Common Shares are traded or, if the
Common Shares are not then listed on any national securities exchange, the
average of the closing bid and asked prices for the day quoted by the NASDAQ
System), or, in the case of non-publicly traded securities, the fair market
value on such day determined by a qualified independent appraiser appointed by
the board of directors of the Corporation. Any such determination of fair market
value shall be conclusive and binding on the Corporation and on each holder of
Class A Preferred Shares and Common Shares.
(f) LIQUIDATION. Holders of issued and outstanding Class A Preferred
Shares shall have preference over the Common Shares and Class B Common Shares
upon the voluntary or involuntary liquidation of the Corporation, but only to
the extent that the holders of Class A Preferred Shares shall be paid the stated
value of $2.50 per share prior to any distribution being made to the holders of
Common Shares or Class B Common Shares. In such case, after receiving the stated
value of their shares, the holders of Class A Preferred Shares shall receive no
further distribution.
7. OTHER PREFERRED SHARES. The board of directors, by resolution, shall
have the authority to issue, in one or more series, Preferred Shares, having
such preferences, rights and limitations as established by the board of
directors. However, the voting rights, if any, of one Preferred Share (other
than Class A Preferred Shares described above) shall not exceed the voting
rights of one Common Share.
7
<PAGE>
8. DURATION. The period of duration of the Corporation shall be
perpetual.
9. POWERS OF BOARD OF DIRECTORS. The affairs of the Corporation shall be
managed and conducted by a board of directors. The board of directors shall have
the authority, without first obtaining the approval of the stockholders of the
Corporation, unless otherwise provided herein, upon such terms and conditions as
the board deems appropriate:
(a) to grant rights or options to subscribe for or purchase, and
issue, shares of authorized and unissued stock of the Corporation of any class
now or hereafter authorized, to any persons, including officers and directors of
the Corporation;
(b) to make distributions to its stockholders out of its capital
surplus, and to purchase its own shares out of its unreserved and unrestricted
capital surplus;
(c) to the extent permitted by the applicable laws of the State of
Delaware, to guarantee or assume liability for the payment of the principal of,
or dividends or interest on, or sinking fund payments in respect to, stocks,
bonds, debentures, warrants, rights, scrip, notes, evidences of indebtedness or
other securities or obligations of any kind; and liability for the performance
of any other contract or obligation, made or issued by any domestic or foreign
corporation, partnership, association, trustee, group, individual or entity; and
(d) to make, alter and repeal the bylaws of the Corporation.
10. NUMBER OF AND INITIAL BOARD OF DIRECTORS. The number of directors
shall be fixed by, or in the manner provided in, the bylaws.
11. ELECTION OF DIRECTORS. Elections of directors need not be by written
ballot unless otherwise provided by the bylaws of the Corporation.
12. STOCKHOLDERS' MEETINGS. Meetings of stockholders may be held at the
Corporation's principal offices, or as the bylaws may provide. In order to
constitute a quorum for purposes of actions by the stockholders of the
Corporation, one-third of the shares entitled to vote must be present or
represented by proxy at the meeting.
13. BOOKS. The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of
8
<PAGE>
Delaware at such place or places as may be designated from time to time by the
board of directors or in the bylaws of the Corporation.
14. CREDITORS. Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or if the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
15. DIRECTOR'S LIABILITY. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director; provided that a director's liability
shall not be limited: (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders; (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (c) for
unlawful payment of dividends or unlawful repurchase or redemption of its own
stock; or (d) for any transaction from which the director derived an improper
personal benefit.
16. INDEMNIFICATION. The Corporation shall indemnify any and all of its
directors or officers or former directors or officers or any person who may have
served at its request as a director or officer of another corporation in which
it owns shares of capital stock or of which it is a creditor against expenses
actually and necessarily incurred by them in connection with the defense of any
action, suit or proceeding in which they, or any of them, are made parties, or a
party, by reason of being or having been directors or officers or a director or
officer of the Corporation, or of such
9
<PAGE>
other corporation, except in relation to matters as to which any such director
or officer or former director or officer or person shall be adjudged in such
action, suit or proceeding to be liable for negligence or misconduct in the
performance of duty. Such indemnification shall not be deemed exclusive of any
other rights to which those indemnified may be entitled, under any bylaw,
agreement, vote of stockholders, or otherwise.
17. AMENDMENTS. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
18. REGISTERED OFFICE AND AGENT. The address of the Corporation's
registered office in the County of New Castle of the State of Delaware is
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 and the
name of its registered agent is The Corporation Trust Company.
The undersigned, being the President of Exigent International, Inc., for
the purpose of amending and restating the Certificate of Incorporation of the
Corporation under the General Corporation Law of the State of Delaware hereby
acknowledges the foregoing to be his act and deed and that the facts stated
herein are true this _____ day of ________________, 1996.
By: _____________________________________
Jeffrey C. Clift, President
Exigent International, Inc.
State of _________________________ )
) SS
County of ________________________ )
I, ___________________, a notary of said state and county do certify that
Jeffrey C. Clift, as President of Exigent International, Inc., whose name is
signed to the writing above bearing date the ______ day of __________, 1996 has
this day acknowledged the same before me. Given under my hand this _____ day of
_____________, 1996.
My commission expires: ___________________________________________________
___________________________________________________
[seal] Notary Public
10
<PAGE>
Exhibit 10(iii)
CONTRACT
C262RS
BETWEEN
MOTOROLA, INC.
GOVERNMENT And SYSTEMS TECHNOLOGY GROUP
SATELLITE COMMUNICATIONS DIVISION
AND
SOFTWARE TECHNOLOGY INC.
IN SUPPORT OF THE
IRIDIUM(R) COMMUNICATIONS SYSTEM
FEBRUARY 7 1994
IRIDIUM is a registered trademark and service mark of Iridium, Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PREAMBLE.................................................................4
RECITALS.................................................................4
CLAUSES..................................................................4
1. DESCRIPTION OF WORK............................................4
2. PERFORMANCE SCHEDULE...........................................6
3. PRICE AND PAYMENT..............................................6
4. INVOICES.......................................................6
5. AUTHORIZED REPRESENTATIVES.....................................6
6. GENERAL TERMS AND CONDITIONS...................................7
7. EXHIBITS.......................................................7
8. ORDER OF PRESCEDENCE...........................................7
9. KEY PERSONNEL..................................................8
10. DEVELOPMENT OF COPYRIGHTABLE WORKS AND
SOFTWARE.......................................................8
ll. PROPOTETARY INFORMATION........................................8
12. CODE OF CONDUCT................................................9
13. DEVELOPMENT AND OWNERSHIP OF
OS/COMET ENHANCEMENTS..........................................9
14. OS/COMET SOFTWARE SOURCE CODE
IN ESCROW......................................................9
15. BACKGROUND INTELLECTUAL
PROPERTY DESCRIPTION...........................................9
16. ASSIGNMENT OF COPYRIGHTS.......................................10
17. TERMINATION OF LETTER CONTRACT.................................10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
18. MODIFICATIONS OF GENERAL
TERMS AND CONDITIONS................................. 10
19. RELATIONSHIP WITH OTHER AGREEMENTS................... ll
20. EFFECTIVE DATE....................................... 11
SIGNATURES..................................................... 11
EXHIBITS
GENERAL TERMS AND CONDITIONS.............................. PREPRINTED
KEY PERSONNEL LIST........................................ B-1
COPYRIGHT ASSIGNMENT...................................... C-1
OS/COMET DEFINITION....................................... D-1
MOTOROLA CODE OF CONDUCT.................................. E-1
OS/COMET SOFTWARE SITE LICENSE AGREEMENT.................. F-1
MAINTENANCE SUPPORT....................................... G-1
DELIVERABLES AND DELIVERY SCHEDULE........................ H-1
PRICES AND PAYMENT SCHEDULE............................... I-1
STATEMENT OF WORK - BUILD 2............................... J-l-l
</TABLE>
<PAGE>
PREAMBLE
This contract is entered into between Motorola, Inc., acting through the
Satellite Communications Division of the Government and Systems Technology
Group, (hereinafter "Motorola"), a Delaware corporation with offices located at
2501 South Price Road, Chandler, Arizona 85248-2899, and Software Technology,
Inc. (hereinafter "STI"), a Florida corporation with offices located at 1225
Evans Road, Melbourne, Florida 32904-2314.
RECITALS
WHEREAS, Motorola is developing a global personal communications system
known as the IRIDIUM Communications System that will use a constellation of
satellites in low-earth orbit, and a number of "gateway" surface facilities in
various countries around the world that will link the satellites with the
public-switched telephone network; and,
WHEREAS, Iridium, Inc.; a privately-owned Delaware corporation is intended
to become the owner/operator of the Space System portion of the IRIDIUM
Communications System; and,
WHEREAS, Motorola and Iridium, Inc. executed an Iridium Space System
Contract which is intended to function as the mechanism whereby Motorola will
sell to Iridium, Inc. The Space System portion of the Iridium Communications
System; and,
WHEREAS, Iridium, Inc. and Motorola have executed and IRIDIUM
Communications System Operations and maintenance contract, whereby Motorola will
operate and maintain the IRIDIUM Space System for a period of five years
following completion of the Space System contract; and,
WHEREAS, Motorola intends to supply various Gateway configuration under
separate contracts with operators of IRIDIUM Gateways; and,
WHEREAS, this Contract is intended to function as the vehicle by which
STI shall provide Satellite and Ground Control Software for the System Control
Segment of the IRIDIUM Communications System as a subcontractor to Motorola
under the aforementioned Contacts; and,
NOW, THEREFORE, in consideration of the foregoing, Motorola and STI (the
"PARTIES") agree as follows:
CLAUSES
1. DESCRIPTION OF WORK.
(a) STI shall license the OS/COMET software described in OS/COMET
Definition, Exhibit D, under terms of the mutually agreed to OS/COMET Software
Site License Agreement, Exhibit F. As Contract Line Item Number (CLIN) 1.1, STI
shall install OS/COMET Release 2.1 on Motorola's designated computer platform in
accordance with the provisions of Exhibit J.1, Statement of Work - SGC Build 2.
- - (b) As CLIN 1.2, STI shall provide Maintenance Support for the OS/COMET
software in accordance with the provisions of Exhibit G, "Maintenance Support".
(c) STI shall provide, on a firm-fixed-price basis, the necessary labor,
materials, personnel, facilities and services required to design, develop,
manufacture, test and deliver Satellite & Ground Control ("SGC") software. The
SGC software to be provided under this Contract shall be accomplished under
tasks, otherwise known as Software Builds (sequentially numbered 2
<PAGE>
through 6), which shall be defined, negotiated, and authorized on an incremental
basis. Each Software Build undertaken shall be in accordance with its own
Statement of Work (SOW). As Software Builds are defined and negotiated, an
amendment to this Contract authorizing the work, and defining prices, payments,
and delivery schedules for the particular Software Build shall be executed.
(i) As CLIN 2.1, STI shall provide SGC Software Build 2 in
accordance with Exhibit J. l, Statement of Work - SGC Build 2:
(d) Motorola and STI are in agreement that Design-To-Cost (DTC) principles
will be applied to ensure that Motorola receives the best and most useful
Satellite and Ground Control (SGC) software application that can be delivered
for the price. The following list of DTC principles shall be applied as
guidelines for Motorola and STI to follow in achieving the desired SGC
capability:
PROPRIETARY INFORMATION
(vi) STI shall establish and maintain vigorous communications with key
Motorola technical and contracting personnel to thoroughly and
effectively communicate
<PAGE>
the nature and impact of design changes that result from the
considerations outlined above.
(e) STI shall collocate sufficient Systems Engineers and Project Management
personnel with the SGC Product Team in Motorola's Chandler, Arizona facilities
to satisfy Software Build SOW's. Motorola shall provide STI personnel who are
required to be on-site at Motorola's Satellite Communications Division
facilities at Chandler, Arizona with office space, telephone and other
facilities reasonably required for the performance of the tasks associated with
a Software Build SOW.
2. PERFORMANCE SCHEDULE.
(a) For SGC Software Build 2, STI shall perform all work hereunder and
deliver the Goods Documentation and Services of Contract Line Item Numbers
(CLIN's) 1.1 through 2.1 as required by the Statement of Work - SGC Build 2,
Exhibit J.l, in accordance with the performance schedule in Exhibit H,
Deliverables and Delivery Schedule.
3. PRICE AND PAYMENT.
(a) SGC Software Build 2. For complete and timely delivery of the Goods,
Documentation and Services specified in CLIN(s) 1.1 through 2.1, Motorola shall
pay STI the firm-fixed-prices specified in Exhibit I, Prices and Payment
Schedule.
4. INVOICES
Invoices for payment shall be sent to Motorola at the following address:
MOTOROLA, Inc.
Government and Systems Technology Group
Accounts Payable
P.O. Box 9B
Scottsdale. A2: 85252
A copy of each invoice shall be sent concurrently to Motorola's
Contracting Representative.
5. AUTHORIZED REPRESENTATIVES. (a) The only representatives of Motorola and
STI authorized to make changes to this Contract and to sign contractual
documents (the "Contracting Representatives") are the following:
MOTOROLA SOFTWARE TECHNOLOGY, INC.
Satellite Communications Division 1225 Evans Road
2501 South Price Road Melbourne, Florida 32904-2314
Chandler, Arizona 85248-2899
11
<PAGE>
Attn: Robert Seiber, Mail Stop Attn: Don Riordan
G1153 Strategic Business Manager S Secretary/Treasurer
Phone: (602) 732-2734 Phone: (407) 723-3999
FAX: (602) 732-6124 FAX: (407) 676-4510
Alternate: Attn: Rose Gazarek, Mail Alternate:
Stop G1153 Strategic Business Attn:
Manager Phone: (602) 732-2062
FAX: (602) 732-6124
Phone:
FAX:
(b) Either Party may change its aforementioned representatives at any
time by providing written notice to the other Party.
6. GENERAL TERMS AND CONDITIONS
MOTOROLA'S GENERAL TERMS AND CONDITIONS OF PURCHASE FOR THE IRIDIUM
COMMUNICATIONS SYSTEM (Apr 94) attached hereto as Exhibit A shall govern this
Contract, except to the extent expressly modified herein. Provisions of this
Contract shall be referred to as "Clauses" and provisions of Exhibit A shall be
referred to as "Articles."
7. EXHIBITS
The following Exhibits attached hereto are hereby incorporated by
reference into this Contract:
Exhibit A Motorola's General Terms and Conditions of Purchase for the
IRIDIUM Communications System (Apr 94).
Exhibit B Key Personnel List
Exhibit C Copyright Assignment
Exhibit D OS/COMET Definition
Exhibit E Motorola Code of Conduct
Exhibit F OS/COMET Software License Agreement
Exhibit G Maintenance Support
Exhibit H Deliverables and Delivery Schedule
Exhibit I Prices and Payment Schedule
Exhibit J.1 Statement of Work - SGC Build 2
8. ORDER OF PRECEDENCE.
In the event of any inconsistency among or between the parts of this
Contract, such inconsistency shall be resolved by giving precedence in the order
of the parts as set forth below:
(a) These Contract Clauses
(b) Exhibit A, General Terms and Conditions of Purchase
<PAGE>
(c) Exhibit J.1, Statement of Work - SGC Build 2
(d) Exhibit H, Deliverables and Delivery Schedule
(e) Exhibit I, Prices and Payment Schedule
(f) Exhibit F, OS/COMET Software License Agreement
(g) Exhibit C, Copyright Assignment
(h) Exhibit D, OS/COMET Definition
(i) Exhibit G, Maintenance Support
(j) Exhibit B, Key Personnel List (k)
Exhibit E, Motorola Code of Conduct
9. KEY PERSONNEL
It is understood that the key STI personnel assigned to this work and
identified in Exhibit B are essential to the successful completion of the work
hereunder and that they shall not be reassigned or replaced except upon unusual
and pressing changes in business conditions. STI shall notify Motorola ten (10)
days prior to reassignment or replacement of any key personnel. All changes in
key personnel must be pre-approved by Motorola. Any replacement of key
personnel must be with personnel who are equally knowledgeable and capable.
10. DEVELOPMENT OF COPYRIGHTABLE WORKS AND
SOFTWARE.
(a) If the work identified in Clause 1, Description of Work, of this
Contract includes the development of copyrightable works, including software, to
be created in whole or in part by STI and or its Subcontractors such
copyrightable works are works for hire for Motorola. Such copyrightable works
are and shall be the exclusive property of Motorola, in which Motorola has all
rights, title and interest, including copyright renewal rights.
(b) STI does not have and shall not be deemed to have any rights, title,
or interest in such copyrightable works or in software developed under this
Contract whether under trade secret, copyright, patent or other intellectual
property laws.
(c) STI will not disclose copyrightable works or software developed
hereunder to third parties unless the disclosure is specifically authorized in
writing by Motorola.
(d) STI will assist Motorola and its nominees in every reasonable way
during and subsequent to the term of this Contract (at Motorola's request and
expense) to obtain for Motorola or its nominee's benefit, copyrights or other
forms of legal protection on such works throughout the world.
11. PROPRIETARY INFORMATION.
The Parties have executed a Mutual Non-Disclosure Agreement ("NDA"), dated
21 February 1991 and amended 19 March 1993. For purposes of this Contract,
Article 10 of the "General Terms and Conditions of Purchase" dated April, 1994
(Exhibit A), entitled "Intellectual Property Rights", shall supersede the NDA.
Otherwise, the NDA shall remain in full force and effect.
<PAGE>
12. CODE OF CONDUCT.
Notwithstanding STI's status as an independent contractor, STI agrees that,
with respect to all work performed under or related to this Contract, STI will
comply with all applicable provisions of the Motorola CODE OF CONDUCT (CODE),
Exhibit E hereof. Should STI require interpretation of any section of the CODE
or its application to any specific situations, STI shall contact Motorola's
Senior Counsel, Bryan Cheuvront, at 2501 S. Price Road, Chandler, Arizona (602)
7323181. STI agrees to indemnify and hold Motorola harmless of, from, for and
against all claims or damages arising from its failure to comply with this
provision.
13. DEVELOPMENT AND OWNERSHIP OF OS/COMET ENHANCEMENTS.
STI understands and agrees that STI shall fund, independently from this
Contract funding, and develop features and/or enhancements identified as
OS/COMET Release 2.1. These features shall be incorporated as part of the
OS/COMET product as offered for sale to the general public. STI further
understands and agrees that the development of these features and enhancements
and their incorporation into the OS/COMET software is of critical importance to
Motorola. STI further agrees that these features and enhancements shall be made
available to Motorola as part of the SGC software in accordance with the
schedule identified in Exhibit H, Deliverables and Delivery Schedule.
14. OSICOMET SOFTWARE SOURCE CODE IN ESCROW.
(a) STI hereby agrees to place OS/COMET software source code and any
related documentation in escrow with a mutually acceptable, United States of
America based, software escrow agent. Further, STI shall agree that the
agreement with the escrow agent provides for release of the source code and
related documentation to Motorola under the following conditions.
(i) STI is unwilling or unable to support or maintain the OS/COMET
software in breach of the provisions of this Contract; or
(ii) STI, as a corporation, is declared bankrupt or is dissolved; or
(iii) this Contract is terminated for Default under the provisions of
Article 21, Default, of the General Terms and Conditions of
Purchase (Exhibit A), or
(iv) if the ownership of a majority of the outstanding shares of
stock of STI is acquired by a third party (either by a change
or series of changes in such ownership) and such third party
directly or indirectly competes with Motorola in terrestrial or
space-based cellular communications.
(b) The period for which OS/COMET software and related documentation,
including updated source code and related documentation corresponding to any new
product releases which STI may from time to time produce, shall be maintained in
escrow for a minimum of nine (9) years from the date of this Contract. Motorola
may, solely at its option, elect to cancel the requirement for this Escrow
Account at any time prior to the expiration of this nine (9) year period.
15. BACKGROUND INTELLECTUAL PROPERTY DESCRIPTION.
Exhibit D, entitled "OS/COMET Definition", contains a description of the
OS/COMET software, associated layered applications, and related documentation
constituting the OS/COMET software as of the date of this Contract. This
description shall serve as further definition of the "Background Intellectual
Property" as described in Article 10, Intellectual Property Rights of the
<PAGE>
General Terms and Conditions of Purchase (Exhibit A). As new product releases of
OS/COMET are made by STI, STI shall provide an updated and current list to
Motorola for incorporation into Exhibit D.
16. ASSIGNMENT OF COPYRIGHTS.
Upon completion and delivery of the Software Builds and associated
documentation constituting the SGC software, described in a Software Build SOW,
STI agrees to provide a complete description of the software and documentation
constituting each Software Build which will be incorporated into a Copyright
Assignment (Exhibit C). STI further agrees to execute a Copyright Assignment for
each Software Build, of the form contained in Exhibit C upon the request of
Motorola.
17. TERMINATION OF LETTER CONTRACT.
This Contract constitutes the definitive contract referenced in Paragraph
4, entitled "Negotiation", of Letter Contract No. C262RS between the Parties
dated 30 March 1994. Consequently, upon execution of this Contract, said Letter
Contract shall terminate and is hereby superseded by this Contract, no further
payments shall be made by Motorola to STI and no further claims shall be made by
STI under said Letter Contract.
18. MODIFICATION OF GENERAL TERMS AND CONDITIONS.
Motorola's General Terms and Conditions of Purchase for the IRIDIUM
Communications System (Apr. 94), Article 177 Warranty, paragraph (a) is hereby
modified in its entirety to read:
PROPRIETARY INFORMATION
<PAGE>
19. RELATIONSHIP WITH OTHER AGREEMENTS
The following agreement, soon to be executed, relates to the effort
described herein. The rights and responsibilities of the parties within this
related agreement is set forth within the separate and independent agreement.
Professional Services Agreement C300RS, dated May 5, 1994
20. EFFECTIVE DATE
This Contract shall be deemed effective as of February 7, 1994.
SIGNATURE
S
IN WITNESS WHEREOF, the authorized representatives of the Parties have
executed this Contract by signing below.
MOTOROLA, INC. SOFTWARE TECHNOLOGY, INC.:
Satellite Communications Division:
BY /s/ Robert Seiber BY /s/ Jim Traficante
-------------------------------- ------------------------
Robert Seiber Jim Traficante
Strategic Business Manager VP Advanced Programs
<PAGE>
Exhibit 10(iv)
================================================================================
AWARD/CONTRACT 1. THIS CONTRACT IS RATED ORDER RATING PAGE OF PAGES
UNDER DPAS (15 CFR 350)
DO-C9 1 66
- --------------------------------------------------------------------------------
2. CONTRACT (Prec. Inst. Ident.) NO. 3. EFFECTIVE DATE
N00014-95-C-2044 SEE BLOCK 20C
- --------------------------------------------------------------------------------
4. REQUISITION/PURCHASE REQUEST/PROJECT NO.
81-0119-95
- --------------------------------------------------------------------------------
5. ISSUED BY CODE N00173
---------------
CONTRACTING OFFICER
NAVAL RESEARCH LABORATORY
4555 OVERLOOK AVE, SW
WASHINGTON DC 20375-5326
- --------------------------------------------------------------------------------
6. ADMINISTERED BY (If other than Item 5) CODE S1002A
-------------
DCMAO ORLANDO
3555 MAGUIRE BLVD
ORLANDO FL 32803-3726
SCD: C
- --------------------------------------------------------------------------------
7. NAME AND ADDRESS OF CONTRACTOR (No., street, city, county, State and Zip
Code)
SOFTWARE TECHNOLOGY INC
1225 EVANS ROAD
MELBOURNE FL 32904-2314
- --------------------------------------------------------------------------------
CODE 3R623
- --------------------------------------------------------------------------------
8. DELIVERY
[_] FOB ORIGIN [X] OTHER (See below)
- --------------------------------------------------------------------------------
9. DISCOUNT FOR PROMPT PAYMENT
NET 30
- --------------------------------------------------------------------------------
10. SUBMIT INVOICES (4 Copies unless otherwise specified) TO THE ADDRESS SHOWN
IN: > ITEM
SEE ITEM 12
- --------------------------------------------------------------------------------
11. SHIP TO/MARK FOR CODE N00173
------------
SEE SECTION F - DELIVERIES OR PERFORMANCE
- --------------------------------------------------------------------------------
12. PAYMENT WILL BE MADE BY CODE SC1020
------------
DFAS COLUMBUS CENTER
DFAS SOUTHEASTERN PO BOX 182225
COLUMBUS OH 43218-2225
- --------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION:
[_] 10 U.S.C 2304(c) ( ) [_] 41 U.S.C. 253(c) ( )
- --------------------------------------------------------------------------------
14. ACCOUNTING AND APPROPRIATION DATA
SEE SECTION G
- --------------------------------------------------------------------------------
15A. ITEM NO. 15B. SUPPLIES/SERVICES
SEE PAGE 2
Attn: CAROL A. PARNELL 3230.CP
202/767-0547
STI BAFO Letter dated 27 Dec 94 is incorporated by reference
- --------------------------------------------------------------------------------
15C. QUANTITY 15D. UNIT 15E. UNIT PRICE 15F. AMOUNT
- --------------------------------------------------------------------------------
15G. TOTAL AMOUNT OF CONTRACT > $9,935,187.00
- --------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- --------------------------------------------------------------------------------
(X) SEC. DESCRIPTION PAGES(S)
- --------------------------------------------------------------------------------
PART 1 - THE SCHEDULE
- --------------------------------------------------------------------------------
X A SOLICITATION/CONTRACT FORM 1
-------------------------------------------------------------------------------
X B SUPPLIES OR SERVICES AND PRICES/COSTS 2-3
- --------------------------------------------------------------------------------
C DESCRIPTION/SPECS./WORK STATEMENT N/A
- --------------------------------------------------------------------------------
D PACKAGING AND MARKING N/A
- --------------------------------------------------------------------------------
E INSPECTION AND ACCEPTANCE N/A
- --------------------------------------------------------------------------------
X F DELIVERIES OR PERFORMANCE 3
- --------------------------------------------------------------------------------
X G CONTRACT ADMINISTRATION DATA 4-5
- --------------------------------------------------------------------------------
X H SPECIAL CONTRACT REQUIREMENTS 6
- --------------------------------------------------------------------------------
(X) SEC. DESCRIPTION PAGES (S)
- --------------------------------------------------------------------------------
PART II - CONTRACT CLAUSES
- --------------------------------------------------------------------------------
X I CONTRACT CLAUSES 6
- --------------------------------------------------------------------------------
PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH
- --------------------------------------------------------------------------------
X J LIST OF ATTACHMENTS 7
- --------------------------------------------------------------------------------
PART IV - REPRESENTATIONS AND INSTRUCTIONS
- --------------------------------------------------------------------------------
K REPRESENTATIONS, CERTIFICATIONS AND
OTHER STATEMENTS OF OFFERORS
- --------------------------------------------------------------------------------
L INSTRS., CONDS. AND NOTICES TO OFFERORS N/A
- --------------------------------------------------------------------------------
M EVALUATION FACTORS FOR AWARD N/A
- --------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- --------------------------------------------------------------------------------
17. [_] CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is required to sign this
document and return________copies to issuing office.) Contractor agrees to
furnish and deliver all items or perform all the services set forth or otherwise
identified above and on any continuation sheets for the consideration stated
herein. The rights and obligations of the parties to this contract shall be
subject to and governed by the following 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.)
- --------------------------------------------------------------------------------
18. [X] AWARD (Contractor is not required to sign this document) Your offer on
Solicitation Number N00014-94-R-CP05 thru Amend 0002 including the additions
or changes made by you which additions or changes are set forth in full above,
is hereby accepted as to the items listed above and on any continuation sheets.
This award consummates the contract which consists of the following documents:
(a) the Government's solicitation and your offer and (b) this award/contract. No
further contractual document is necessary.
- --------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (Type or print)
- --------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR 19C. DATE SIGNED
BY ____________________________________________
(Signature of person authorized to sign)
- --------------------------------------------------------------------------------
20A. NAME OF CONTRACTING OFFICER
- --------------------------------------------------------------------------------
20B. UNITED STATES OF AMERICA 20C. DATE SIGNED
BY ______________________________________ 1/23/95
(Signature of Contracting Officer)
- --------------------------------------------------------------------------------
NSN 7540-01-152-8069 26-107
PREVIOUS EDITION UNUSABLE *U.S.G.P.O.: 1990-262-081/20013
STANDARD FORM 26 (REV 4-45)
Prescribed by GSA
FAR (48 CFR) 532-4
<PAGE>
CONTRACT NO. N00014-95-C-2044
SOFTWARE ENGINEERING SUPPORT
PAGE 2
SECTION B as follows:
TOTAL EST.
ITEM SUPPLIES OR SERVICES ESTIMATED FIXED COST PLUS
NUMBER COST FEE FIXED FEE
BASE EFFORT
- -----------
0001 The Contractor shall conduct
research as described below
and in Section C. $ 9,235,195 $ 699,992 $ 9,935,187
0002 Reports and Data in accordance
with Exhibit A (DD 1423) *NSP *NSP *NSP
TOTAL ESTIMATED COST AND FIXED FEE: $ 9,235,195 $ 699,992 $ 9,935,187
FOR THE BASE PERIOD OF PERFORMANCE
OPTION 1
- --------
0003 The Contractor shall conduct $ 4,728,049 $ 359,384 $ 5,087,433
research as described below
and in Section C.
0004 Reports and Data in accordance
with Exhibit A (DD 1423) *NSP *NSP *NSP
OPTION 2
- --------
0005 The Contractor shall conduct $ 4,733,415 $ 359,840 $ 5,093,255
research as described below
and in Section C.
0006 Reports and Data in accordance
with Exhibit A (DD 1423) *NSP *NSP *NSP
<PAGE>
CONTRACT NO. N00014-95-C-2044
SOFTWARE ENGINEERING SUPPORT
PAGE 3
<TABLE>
<CAPTION>
ITEM SUPPLIES OR SERVICES ESTIMATED FIXED COST PLUS
NUMBER COST FEE FIXED FEE
OPTION 3
- --------
<C> <S> <C> <C> <C>
0007 The Contractor shall conduct $ 4,727,394 $ 359,238 $ 5,086,722
research as described below
and in Section C.
0008 Reports and Data in accordance
with Exhibit A (DD 1423) *NSP *NSP *NSP
TOTAL ESTIMATED COST AND FIXED FEE: $23,424,053 $1,778,544 $25,202,597
WITH ALL OPTIONS
</TABLE>
SECTION F AS FOLLOWS:
F-1 DELIVERIES OR PERFORMANCE
Contracting Officer's Technical Representative
David Schriftman
Naval Research Laboratory
Contract Number: N00014-95-C-2044
Code: 8140.2
4555 Overlook Avenue, SW
Washington DC 20375-5326
c. The principal place of performance of this contract shall be the:
Alexandria South Associates
One Beltway Center Building, 6th Floor
5904 Richmond Highway,
Alexandria, VA
<PAGE>
CONTRACT NO. N00014-95-C-2044
SOFTWARE ENGINEERING SUPPORT
PAGE 4
SECTION G AS FOLLOWS:
G-2 CONTRACTING OFFICER'S TECHNICAL REPRESENTATIVE (COTR) -- FUNCTION/
LIMITATIONS
David Schriftman (202)767-6537 is hereby designated the cognizant COTR who will
represent the Contracting Officer in the administration of technical details
within the scope of this contract and inspection and acceptance.
G-4 ACCOUNTING AND APPROPRIATION DATA
See page 5 for the applicable accounting and appropriation data.
G-5 EXPLANATION OF LIMITATION OF FUNDS
The Total Estimated Cost plus Fixed Fee of the contract will not exceed
$9,935,187, including a Total Estimated Cost of $9,235,195, and a Fixed Fee of
$699,992.
The amount presently available for payment and allotted to this contract is a
Total Estimated Cost Plus Fixed Fee of $298,174, including a Total Estimated
Cost of $277,166, and a Fixed Fee of $21,008.
The amount of $298,174 allotted is estimated to cover the period Date of
Contract Award through 11 February 1995.
G-8 5252.232-9001 SUBMISSION OF INVOICES (COST-REIMBURSEMENT, TIME-
AND-MATERIALS, LABOR-HOUR, OR FIXED PRICE INCENTIVE)
(b) The Contractor shall submit invoices and any necessary supporting
documentation, in an original and 4 copies, to the contract auditor* at the
following address:
DCAA Melbourne Branch Office
6767 N. Wickham Road Suite 507
Melbourne, FL 32940-2025
<PAGE>
N00014-95-C-2044
Page 05
G-4 ACCOUNTING AND APPROPRIATION DATA
1. The following accounting and appropriation data is applicable to this
contract.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
APPROPRIATION OBJ AUTHRN
ACRN AND SUBHEAD CLAS BCN SA ACCT A TT PAA COST CODE AMOUNT
AA 1731810.D6AC 000 41756 0 068941 2D 000000 193261C052A1 $247,174.00
FUNDING DOCUMENT - N4175694RC46112
AB 1741810.D6AC 000 41756 0 068941 2D 000000 194277C052A1 $ 51,000.00
FUNDING DOCUMENT - N4175694RC46116
</TABLE>
<PAGE>
CONTRACT NO. N0001495-C-2044
SOFTWARE ENGINEERING SUPPORT
PAGE 6
SECTION H AS FOLLOWS:
H-3 TYPE OF CONTRACT
This is a Cost Plus Fixed Fee Term Level of Effort Contract.
H-4 KEY PERSONNEL (5252.237-9705) (DEC 88)
The following are identified as key personnel:
Douglas C. Bentz
David J. Cacciaglia
Jack D. Daily
Brian Davis
Orville L. Jerrell
Bonnie B. Kramer
Donald D. McBride
Michael L. Steininger
Robert S. Tormala
SECTION I AS FOLLOWS:
DELETE FAR 52.215-30 Facilities Capital Cost of Money (SEP 1987)
FAR 52.227-12 Patent Rights--Retention by the Contractor (Long
Form) (JUN 1989)
FAR 52.215-24 Subcontractor Cost or Pricing Data (DEC 1991)
FAR 52.219-09 Small Business and Small Disadvantaged Business
Subcontracting Plan (JAN 1991) and Alternate 1 (Aug
1989)
FAR 52.219-16 Liquidated Damages - Small Business Subcontracting
Plan (AUG 1989)
DFARS 252.215-7000 Pricing Adjustments (DEC 1991)
SECTION J AS FOLLOWS:
J-3 ATTACHMENT NO. 2 - DD 254, Contract Security Classification Specification
for Ser 006-95. dated 20 Jan 95, pages 5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SOLICITATION, OFFER AND AWARD THIS CONTRACT IS A RATED ORDER UNDER DPAS (15 CFR 350) RATING PAGE OF 1 OF 70 PAGES
- ------------------------------------------------------------------------------------------------------------------------------------
2. CONTRACT NO. 3. SOLICITATION NO. 4. TYPE OF SOLICITATION 5. DATE ISSUED 6. REQUISITION/PURCHASE
N00014-94-R-CP05 [_] SEALED BID (IFB) NO.
[X] NEGOTIATED (RFP) 15 SEP 94
- ------------------------------------------------------------------------------------------------------------------------------------
7. ISSUED BY CODE N00173 8. ADDRESS OFFER TO (If other than Item 7)
CONTRACTING OFFICER
NAVAL RESEARCH LABORATORY
ATTN: Code 3230.CP
WASHINGTON DC 20375-5326
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE: In sealed bid solicitations "offer" and "offeror" mean "bid" and "bidder".
- ------------------------------------------------------------------------------------------------------------------------------------
SOLICITATION
- ------------------------------------------------------------------------------------------------------------------------------------
9. Sealed offers in original and 6 copies for furnishing the supplies or services in the Schedule will be received at the place
specified in Item 8, or if handcarried, in the depository located in Bldg. 222 Room 115A. Naval Research Laboratory until
4:00 local time 2 NOV. 94
---- ----
Hour Date
- ------------------------------------------------------------------------------------------------------------------------------------
CAUTION - LATE Submissions, Modifications, and Withdrawals: See Section L. Provision No. 52.214-7 or 52.215-10. All offers are
subject to all terms and conditions contained in this solicitation.
- ------------------------------------------------------------------------------------------------------------------------------------
10. FOR INFORMATION A. NAME B. TELEPHONE NO. (Include area code (NO COLLECT CALLS), CONTRACT CLAUSES)
CALL: Carol Parnell 202-767-0547
- ------------------------------------------------------------------------------------------------------------------------------------
II. TABLE OF CONTENTS
- ------------------------------------------------------------------------------------------------------------------------------------
( ) SEC. DESCRIPTION PAGES(S) ( ) SEC. DESCRIPTION PAGES(S)
- ------------------------------------------------------------------------------------------------------------------------------------
PART I - THE SCHEDULE PART II - CONTRACT CLAUSES
- ------------------------------------------------------------------------------------------------------------------------------------
X A SOLICITATION/CONTRACT FORM 1 X I CONTRACT CLAUSES 19
- ------------------------------------------------------------------------------------------------------------------------------------
X B SUPPLIES OR SERVICES AND PRICES/COSTS 2 PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.
- ------------------------------------------------------------------------------------------------------------------------------------
X C DESCRIPTION/SPEC./WORK STATEMENT 4 X J LIST OF ATTACHMENTS 30
- ------------------------------------------------------------------------------------------------------------------------------------
X D PACKAGING AND MARKING 5 PART IV - REPRESENTATIONS AND INSTRUCTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
X E INSPECTION AND ACCEPTANCE 6 X K REPRESENTATIONS, CERTIFICATIONS AND OTHER
STATEMENTS OF OFFERORS 31
- ------------------------------------------------------------------------
X F DELIVERIES OR PERFORMANCE 7
- ------------------------------------------------------------------------------------------------------------------------------------
X G CONTRACT ADMINISTRATION DATA 8 X L INSTRS., CONDS., AND NOTICES TO OFFERORS 58
- ------------------------------------------------------------------------------------------------------------------------------------
X H SPECIAL CONTRACT REQUIREMENTS 13 X M EVALUATION FACTORS FOR AWARD 67
- ------------------------------------------------------------------------------------------------------------------------------------
OFFER (Must be fully completed by offeror)
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE: Item 12 does not apply if the solicitation includes the provisions at 52.214-16. Minimum Bid Acceptance Period.
- ------------------------------------------------------------------------------------------------------------------------------------
12. In compliance with the above, the undersigned agrees, if this offer is accepted within ________________________________calendar
days (60 calendar days unless a different period is inserted by the offeror) from the date for receipt of offers
specified above, to furnish any or all items upon which prices are offered at the price set opposite each item, delivered at the
designated point(s), within the time specified in the schedule.
- ------------------------------------------------------------------------------------------------------------------------------------
13. DISCOUNT FOR PROMPT PAYMENT 10 CALENDAR DAYS 20 CALENDAR DAYS 30 CALENDAR DAYS CALENDAR DAYS
(See Section I. Clause No. 52.232-8) . 0 % 0 % 0 % 0 %
- ------------------------------------------------------------------------------------------------------------------------------------
14. ACKNOWLEDGMENT OF AMENDMENTS AMENDMENT NO. DATE AMENDMENT NO. DATE
(The offeror acknowledges receipt of amend-
ments to the SOLICITATION for offerors and 001 10/15/94
related documents numbered and dated): 002 10/10/94
- ------------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND CAGE CODE 3R623 FACILITY[ ] 16. NAME AND TITLE OF PERSON AUTHORIZED TO SIGN OFFER
ADDRESS Software Technology, Inc. (Type or print)
OF 1225 Evans Road Don F. Riordan
OFFEROR Melbourne, Florida 32904-2314 Secretary / Treasurer
- ------------------------------------------------------------------------------------------------------------------------------------
15B. TELEPHONE NO. (Include 15C. CHECK IF REMITTANCE ADDRESS 17. SIGNATURE 18. OFFER DATE
area code) IS DIFFERENT FROM ABOVE - ENTER 10-24-94
(407) 723-3999 [_] SUCH ADDRESS IN SCHEDULE.
- ------------------------------------------------------------------------------------------------------------------------------------
AWARD (To be completed by Government)
- ------------------------------------------------------------------------------------------------------------------------------------
19. ACCEPTED AS TO ITEMS NUMBERED 20. AMOUNT 21. ACCOUNTING AND APPROPRIATION
- ------------------------------------------------------------------------------------------------------------------------------------
22. AUTHORITY FOR USING OTHER THAN FULL AND OPEN 23. SUBMIT INVOICES TO ADDRESS SHOWN IN ITEM
COMPETITION: (4 Copies unless otherwise specified) .
[_] 10 U.S.C. 2304(c)( ) [_] 41 U.S.C.253(c)( )
- ------------------------------------------------------------------------------------------------------------------------------------
24. ADMINSTERED BY (if other than Item 7) CODE [ ] 25. PAYMENT WILL BE MADE BY CODE[ ]
- ------------------------------------------------------------------------------------------------------------------------------------
26. NAME OF CONTRACTING OFFICER (Type or print) 27. UNITED STATES OF AMERICA 28. AWARD DATE
(Signature of Contracting Officer)
- ------------------------------------------------------------------------------------------------------------------------------------
IMPORTANT - Award will be made on this Form, or on Standard Form 26, or by other authorized official written notice.
===================================================================================================================================
NSN 7540-01-152-8064 33-133 STANDARD FORM (REV. 4-85)
PREVIOUS EDITION NOT USABLE Prescribed by GSA
FAR (48 CFR) 53.214(C)
</TABLE>
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
SOFTWARE ENGINEERING SUPPORT
PAGE 2
PART I- SECTION B
SUPPLIES/SERVICES AND PRICES
ITEM SUPPLIES OR SERVICES ESTIMATED FIXED TOTAL EST.
NUMBER COST FEE COST PLUS
FIXED FEE
BASE EFFORT
- -----------
0001 The Contractor shall conduct $9,284,565 $745,611 $10,030,176
research as described below
and in Section C.
0002 Reports and Data in accordance
with Exhibit A (DD 1423) *NSP *NSP *NSP
TOTAL ESTIMATED COST AND FIXED FEE: $9,284,565 $745,611 $10,030,176
FOR THE BASE PERIOD OF PERFORMANCE
OPTION 1
- --------
0003 The Contractor shall conduct $4,783,904 $385,551 $ 5,169,455
research as described below
and in Section C.
0004 Reports and Data in accordance *NSP *NSP *NSP
with Exhibit A (DD 1423)
OPTION 2
- --------
0005 The Contractor shall conduct $4,810,133 $387,912 $ 5,198,045
research as described below
and in Section C.
0006 Reports and Data in accordance
with Exhibit A (DD 1423) *NSP *NSP *NSP
19
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
SOFTWARE ENGINEERING SUPPORT
PAGE 3
ITEM SUPPLIES OR SERVICES ESTIMATED FIXED COST PLUS
NUMBER COST FEE FIXED FEE
OPTION 3
- --------
0007 The Contractor shall conduct $ 4,824,366 $ 389,193 $ 5,213,559
research as described below
and in Section C.
0008 Reports and Data in accordance *NSP *NSP *NSP
with Exhibit A (DD 1423)
TOTAL ESTIMATED COST AND FIXED FEE: $23,702,968 $1,908,267 $25,611,235
WITH ALL OPTIONS
*Not Separately Priced
20
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
SOFTWARE ENGINEERING SUPPORT
PAGE 4
PART I - SECTION C
DESCRIPTIONS/SPECIFICATIONS/WORK STATEMENTS
C-l The work and services to be performed hereunder shall be subject to the
requirements and standards contained in Attachment 1, Statement of Work, and
Exhibit A, DD Form 1423, Contracts Data Requirements List, which are
incorporated by reference into Section C.
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
SOFTWARE ENGINEERING SUPPORT
PAGE 5
PART I - SECTION D
PACKAGING AND MARKING
D-1 PACKAGING AND MARKING
Preservation, packaging, packing and marking of all deliverable contract line
items must conform to normal commercial packing standards to assure safe
delivery at destination.
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
SOFTWARE ENGINEERING SUPPORT
PAGE 6
PART I - SECTION E
INSPECTION AND ACCEPTANCE
E-l INSPECTION AND ACCEPTANCE
Inspection and acceptance of the final delivery under this contract must be
accomplished by the Contracting Officer's Technical Representative (COTR)
designated in Section G of this contract within seven (7) days after delivery of
final report. Inspection and acceptance will be performed at the Naval Research
Laboratory, Washington DC 20375-5326.
<PAGE>
SOLICITATION NO. N0001494-R-CP05
SOFTWARE ENGINEERING SUPPORT
PAGE 7
PART I - SECTION F
DELIVERIES OR PERFORMANCE
F-1 DELIVERIES OR PERFORMANCE
a. The research work under this contract for CLIN 0001 will be conducted
during the period from Date of Contract Award through two years.
b. The research work under this contract for Option 1, CLIN 0003, if exercised
shall be conducted during the period from exercise of option through one year.
c. The research work under this contract for Option 2, CLIN 0004, if exercised
shall be conducted during the period from exercise of option through one year.
d. The research work under this contract for Option 3, CLIN 0005, if exercised
shall be conducted during the period from exercise of option through one year.
The contract period of performance shall not exceed 5 years.
e. Distribution, consignment and marking instructions for all contract line
items shall be in accordance with the following:
1. Item No. 0002 and 0004, 0006, 0008, 0010 if options are exercised
shall be shipped FOB Naval Research Laboratory, Washington DC 20375-
5326, consigned to:
Contracting Officer's Technical Representative
*
Naval Research Laboratory
Contract Number: *
Code: *
4555 Overlook Avenue, SW
Washington DC 20375-5326
c. The principal place of performance of this contract shall be *
* To be assigned at time of award.
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
SOFTWARE ENGINEERING SUPPORT
PAGE 8
PART I - SECTION G
CONTRACT ADMINISTRATION
G-1 PROCURING OFFICE REPRESENTATIVE
In order to expedite administration of this contract, the Administrative
Contracting Officer (ACO) will direct inquiries to the appropriate office listed
below. Please do not direct routine inquiries to the person listed in Item 20A
on Standard Form 26.
Contract Matters - Carol Parnell (202) 767-0547, Autovon 297-0547, or Telecopier
(202) 767-6197
Security Matters - Charles Rogers, Code 1221, (202) 767-2240, Autovon 297-2240
Safety Matters - Kirk J. King, Code 1240, (202) 767-2232, Autovon 297-2232
Patent Matters - Mr. Thomas McDonnell, Code 3008.2, (202) 767-3427, Autovon
297-3427
Release of Data - Mr. James W. Gately, Jr., Code 4810 (202) 767-2541, Autovon
297-2541
The ACO will forward invention disclosures and reports directly to the Associate
Counsel for Patents, Code 3008.2, Naval Research Laboratory, Washington DC
20375-5326. The Associate Counsel for Patents will return the reports along with
a recommendation to the Administrative Contracting Officer. The Associate
Counsel for Patents will represent the Contracting Officer with regard to
invention reporting matters arising under this contract.
G-2 CONTRACTING OFFICER'S TECHNICAL REPRESENTATIVE (COTR) -- FUNCTIONS
/LIMITATIONS
(To be assigned at time of award) is hereby designated the cognizant COTR who
will represent the Contracting Officer in the administration of technical
details within the scope of this contract and inspection and acceptance. The
COTR is not otherwise authorized to make any representations or commitments of
any kind on behalf of the Contracting Officer or the Government. The COTR does
not have the authority to alter the Contractor's obligations or change the
specifications in the contract. If, as a result of technical discussions, it is
desirable to alter contract obligations or statements of work, a modification
must be issued in writing and signed by the Contracting Officer. The COTR is
responsible for reviewing the bills and charges submitted by the Contractor and
informing the ACO of areas where exceptions are to be taken.
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G-3 SPECIAL DISTRIBUTION OF PAYMENT INVOICES
The Contractor shall submit an informational copy of invoices to:
Naval Research Laboratory
Code 3332.3
4555 Overlook Ave., S. W.
Washington D. C. 20375-5326
G-4 ACCOUNTING AND APPROPRIATION DATA
* To be completed at time of award.
G-5 EXPLANATION OF LIMITATION OF FUNDS
The Total Estimated Cost plus Fixed Fee of the contract will not exceed $,
including a Total Estimated Cost of $, and a Fixed fee of $.
The amount presently available for payment and allotted to this contract is a
Total Estimated Cost Plus Fixed Fee of $, including a Total Estimated Cost of $,
and a Fixed Fee of $.
The amount of $ allotted is estimated to cover the period * through *.
THE FUNDING AVAILABLE IS A CEILING WHICH THE CONTRACTOR MAY NOT EXCEED
(EXCEPT AT HIS OWN RISK) WITHOUT THE WRITTEN APPROVAL OF THE CONTRACTING
OFFICER.
* To be completed at time of award.
G-6 TECHNICAL DIRECTION MEMORANDUM (TDM)
a. For the purposes of this clause, technical direction includes the following:
(1) Direction to the Contractor which shifts work emphasis between
work areas or tasks, requires pursuit of certain lines of inquiry, fills in
details or otherwise describes work which will accomplish the objectives
described in the statement of work;
(2) Guidelines to the contractor which assist in interpretation of
drawings, specifications or technical portions of work description.
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b. Technical instructions must be within the scope of work stated in the
contract. Technical instructions may not be used to:
(1) Assign additional work under the contract;
(2) Direct a change as defined in the contract clause entitled "Changes";
(3) Increase or decrease the estimated contract cost, the fixed fee, or the
time required for contract performance; or
(4) Change any of the terms, conditions or specifications of the contract.
c. The TDM shall be written by the Contracting Officer's Technical
Representative (COTR), with the original given to the Contractor and a copy
retained in the COTR's file. Technical direction may be issued orally only in
emergency situations. If technical direction is issued orally, a TDM must follow
within two (2) working days from the date of the oral direction. Amendments,
corrections, or changes to TDMs shall also be in written format and shall
include all the information set forth in e. below
d. A TDM shall be considered issued when the Government deposits it in the mail,
or if transmitted by other means, when it is physically delivered to the
contractor.
e. TDMS shall include, but not be limited to, the following information:
(1) Date of TDM,
(2) Contract Number,
(3) Reference to the relevant portion or item in the Statement of Work,
(4) The specific technical direction or clarification, and
(5) The signature of the COTR.
f. COTRs shall retain all files containing TDMs for a period of two (2) years
after the final contract completion date.
g. The only individual authorized in any way to amend or modify any of the terms
of this contract shall be the Contracting Officer. When, in the opinion of the
Contractor, any technical direction calls for effort outside the scope of the
contract or inconsistent with this special provision, the Contractor shall
notify the Contracting Officer in writing within ten (10) working days after its
receipt.
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G-7 ADMINISTRATION FUNCTIONS
Contract administration and payment functions are delegated to the
designated DCMD and DCMAO identified in Blocks 6 and 12 of Page 1 with the
exception of those functions at FAR 42.302(a) (31), (38), (39), (40) and (43)
which will be retained by the Naval Research Laboratory in accordance with DFARS
242.203 for that portion of the work performed on the Naval Research Laboratory.
G-8 5252.232-9001 SUBMISSION OF INVOICES (COST-REIMBURSEMENT, TIME-
AND-MATERIALS, LABOR-HOUR, OR FIXED PRICE INCENTIVE)
SUBMISSION OF INVOICES (COST-REIMBURSEMENT, TIME-
AND-MATERIALS, LABOR-HOUR, OR FIXED PRICE INCENTIVE)
(JUL 1992)
(a) "Invoice" as used in this clause includes contractor requests for interim
payments using public vouchers (SF 1034) but does not include contractor
requests for progress payments under fixed price incentive contracts.
(b) The Contractor shall submit invoices and any necessary supporting
documentation, in an original and 4 copies, to the contract auditor* at the
following address: To be completed at award
______________________________
______________________________
unless delivery orders are applicable, in which case invoices will be segregated
by individual order and submitted to the address specified in the order. In
addition, an information copy shall be submitted to See Section G for designated
COTR. Following verification, the contract auditor* will forward the invoice to
the designated payment office for payment in the amount determined to be owing,
in accordance with the applicable payment (and fee) clause(s) of this contract.
(c) Invoices requesting interim payments shall be submitted no more than once
every two weeks, unless another time period is specified in the Payments clause
of this contract. For indefinite delivery type contracts, interim payment
invoices shall be submitted no more than once every two weeks for each delivery
orders. There shall be a lapse of no more than 60 calendar days between
performance and submission of an interim payment invoice.
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(d) In addition to the information identified in the Prompt Payment clause
herein, each invoice shall contain the following information, as
applicable:
(1) Contract line item number (CLIN)
(2) Subline item number (SLIN)
(3) Accounting Classification Reference Number (ACRN)
(4) Payment terms
(5) Procuring activity
(6) Date supplies provided or services performed
(7) Costs incurred and allowable under the contract
(8) Vessel (e.g., ship, submarine or other craft) or system for which
supply/service is provided
(e) A DD Form 250, "Material Inspection and Receiving Report",
X is required with each invoice submittal.
___
___ is required only with the final invoice.
___ is not required.
(f) A Certificate of Performance
___ shall be provided with each invoice submittal.
X is not required.
___
(g) The Contractor's final invoice shall be identified as such, and shall list
all other invoices (if any) previously tendered under this contract.
(h) Cost of performance shall be segregated, accumulated and invoiced to the
appropriate ACRN categories to the extent possible. When such segregation of
costs by ACRN is not possible for invoices submitted with CLIN/SLINS with more
than one ACRN, an allocation ratio shall be established in the same ratio as the
obligations cited in the accounting data so that costs are allocated on a
proportional basis.
Alternate I (JUL 1992). as prescribed at 5232.908(b), add the following
paragraph (i) to the basic clause:
(i) When a vendor invoice for a foreign currency is provided as supporting
documentation, the Contractor shall identify the foreign currency and indicate
on the vendor invoice the rate of exchange on the date of payment by the
Contractor. The Contractor shall also attach a copy of the bank draft or other
suitable documents showing the rate of exchange. The contractor shall provide an
English translation if the vendor invoice is written in a foreign language.
(End of Clause)
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(d) In addition to the information identified in the Prompt Payment clause
herein, each invoice shall contain the following information, as
applicable:
(1) Contract line item number (CLIN)
(2) Subline item number (SLIN)
(3) Accounting Classification Reference Number(ACRN)
(4) Payment terms
(5) Procuring activity
(6) Date supplies provided or services performed
(7) Costs incurred and allowable under the contract
(8) Vessel (e.g., ship, submarine or other craft) or system for which
supply/service is provided
(e) A DD FORM 250, "Material Inspection and Receiving Report",
X is required with each invoice submittal.
---
is required only with the final invoice.
---
is not required.
---
(f) A Certificate of Performance
shall be provided with each invoice submittal.
---
X is not required.
---
(g) The Contractor's final invoice shall be identified as such, and shall list
all other invoices (if any) previously tendered under this contract.
(h) Cost of performance shall be segregated, accumulated and invoiced to the
appropriate ACRN categories to the extent possible. When such segregation
of costs by ACRN is not possible for invoices submitted with CLIN/SLINS
with more than one ACRN, an allocation ratio shall be established in the
same ratio as the obligations cited in the accounting data so that costs
are allocated on a proportional basis.
Alternate I (JUL 1992). As prescribed at 5232.908(b), add the following
paragraph (i) to the basic clause:
(i) When a vendor invoice for a foreign currency is provided as supporting
documentation, the Contractor shall identify the foreign currency and
indicate on the vendor invoice the rate of exchange on the date of payment
by the Contractor. The Contractor shall also attach a copy of the bank
draft or other suitable documents showing the rate of exchange. The
contractor shall provide an English translation if the vendor invoice is
written in a foreign language.
(End of Clause)
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PART I - SECTION H
SPECIAL CONTRACT REQUIREMENTS
H-1 INSURANCE REQUIREMENTS (COST PLUS FIXED FEE CONTRACTS ONLY)
In accordance with Section I, FAR 52.228-7 "Insurance - Liability to Third
Persons" (APR 1984) and FAR 28.307-2, insurance of the following kinds, in not
less than the following amounts, must be procured and maintained by the
Contractor throughout the period of performance.
Type of Insurance
-----------------
1) Employer's Liability ......................$100,000.00
Per Coverage Property
Person Per Accident Per Accident
------ ------------ ------------
2) Comprehensive General $500,000.00
Liability
3) Comprehensive Automobile $200,000.00 $500,000.00 $20,000.00
Liability
4) Workman's Compensation
as required by law
H-2 METRIFICATION REQUIREMENTS (5252.210-9708) (DEC 88)
(a) All scientific and technical reports delivered pursuant to the terms
of this contract must identify units of measurement in accordance with the
International System of Units (SI) commonly referred to as the "Metric System".
Conversion to U.S. customary units may also be given where additional clarity is
deemed necessary. Guidance for application of the metric system is contained in
the American Society of Testing Materials document entitled "Standard Practice
for Use of the International Systems of Units (The Modernized Metric System)"
(ASTM Designation E38S89A).
(b) This provision also applies to journal article preprints and reprints
commercially published books or chapters of books, and theses or dissertations
submitted in lieu of a scientific or technical report.
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H-3 TYPE OF CONTRACT
*To be completed at time of award.
H-4 KEY PERSONNEL (5252.237-9705) (DEC 88)
a. The Contractor agrees to assign to the contract tasks those persons
identified below as "key personnel." No substitutions may be made except in
accordance with this clause.
b. The Contractor understands that during the first ninety (90) days of
the contract performance period, no personnel substitutions will be permitted
unless these substitutions are unavoidable because of the incumbent's sudden
illness, death or termination of employment. In any of these events, the
Contractor shall promptly notify the Contracting Officer and provide the
information described in paragraph c. below. After the initial ninety (90) day
period the Contractor must submit to the Contracting Officer all proposed
substitutions, in writing, at least fifteen (15) days in advance (thirty (30)
days if security clearance must be obtained) of any proposed substitution and
provide the information required by paragraph c. below.
c. Any request for substitution must include a detailed explanation of the
circumstances necessitating the proposed substitution, a resume for the proposed
substitute, and any other information requested by the Contracting Officer. Any
proposed substitute must have qualifications equal to or superior to the
qualifications of the incumbent. The Contracting Officer or his authorized
representative will evaluate such requests and promptly notify the Contractor of
his approval or disapproval thereof.
d. In the event that any of the identified key personnel cease to perform
under the contract and the substitute is disapproved, the contract may be
immediately terminated in accordance with the Termination clause of the "General
Provisions."
The following are identified as key personnel:
* TO BE COMPLETED AT AWARD
H-5 OPTION TO EXTEND SERVICES
The Government may require continued performance of any services within the
limits and at the rates stated in the Schedule. The Contracting Officer may
exercise the option by written notice to the Contractor within the period of
performance of the contract.
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H-6 LEVEL OF EFFORT (5252.216-9706) (DEC 88)
(a) The Contractor agrees to provide the total level of effort specified
in next next sentence in performance of the work described in this contract. The
total level of effort for performance of this contract shall be 174,240 for CLIN
0001, 81,600 for CLIN 0003 if exercised, 79,680 for CLIN 0004 if exercised
76,800 for CLIN 0005 if exercised total hours of direct labor, including
subcontractor direct labor for those subcontractors specifically identified in
the Contractor's proposal as having hours included in the proposed level of
effort. A breakdown of labor categories and hours is set forth in paragraph (k)
below.
(b) The level of effort for this contract shall be expended at an average
rate of 7,260 for CLIN 0001, 6,800 for CLIN 0003 if exercised, 6,640 for CLIN
0004 if exercised, 6,400 for CLIN 0005 if exercised hours per month. It is
understood and agreed that the rate of direct labor hours expended each month
may fluctuate in pursuit of the technical objective, provided such fluctuation
does not result in the use of the total hours of effort prior to the expiration
of the term of the contract.
(c) The Contractor is required to notify the Contracting Officer when any
of the following situations occur, or are anticipated to occur: If during any
three consecutive months the monthly average is exceeded by 25% or, at any time
it is forecast that during the last three months of the contract less than 50%
of the monthly average will be used during any given month; or, when 85% of the
total level of effort has been expended.
(d) If, during the term of the contract, the Contractor finds it necessary
to accelerate the expenditure of direct labor to such an extent that the total
hours of effort specified would be used prior to the expiration of the term, the
Contractor shall notify the Contracting Officer in writing setting forth the
acceleration required the probable benefits which would result and an offer to
undertake the acceleration at no increase in the estimated cost or fixed fee
together with an offer setting forth a proposed level of effort, cost breakdown,
and proposed fixed-fee for continuation of the work until expiration of the term
hereof. The offer shall provide that the work proposed will be subject to the
terms and conditions of this contract and any additions or changes required by
then current law, regulations, or directives, and that the offer, with a written
notice of acceptance by the Contracting Officer, shall constitute a binding
contract. The Contractor shall not accelerate any effort until receipt of such
written approval by the Contracting Officer. Any agreement to accelerate will be
formalized by contract modification.
(e) The Contracting Officer may, by written order, direct the Contractor
to accelerate the expenditure of direct labor such that the total labor-hours of
effort specified in paragraph (a) above would be used prior to the expiration of
the term. This order shall specify the acceleration required and the resulting
revised term. The Contractor shall acknowledge this order within five days of
receipt.
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(f) If the total level of effort specified in paragraph (a) above is not
provided by the Contractor during the term of this contract, the Contracting
Officer shall either (i) reduce the fixed fee of this contract as follows:
Fee Reduction =
Fixed Fee x (Required LOE Hours - Expended LOE Hours)
---------------------------------------
Required LOE Hours
or (ii) subject to the provisions of the clause of this contract entitled
"Limitation of Cost," require the Contractor to continue to perform the work
until the total number of hours of direct labor specified in paragraph (a) shall
have been expended at no increase in the fixed fee of this contract.
(g) In the event the government fails to fully fund the contract in a
timely manner, the term of the contract may be extended accordingly with no
change to cost or fee. If the government fails to fully fund the contract, the
fee will be adjusted in direct proportion to that effort which was performed.
(h) Notwithstanding any of the provisions of the above paragraphs, the
Contractor may furnish labor-hours up to five percent in excess of the total
direct labor-hours specified in paragraph (a) above, provided that the
additional effort is furnished within the term hereof, and provided further that
no increase in the estimated cost or fixed-fee is required, and no adjustment in
the fixed-fee shall be made provided that the Contractor has delivered at least
95% of the level of effort required in paragraph (a) above.
(i) It is understood that the mix of labor categories provided by the
Contractor under the contract, as well as the distribution of effort among those
categories, may vary considerably from the initial mix and distribution of
effort which was estimated by the government or proposed by the Contractor.
(j) Nothing herein shall be construed to alter or waive any of the rights
or obligations of either party pursuant to the Clause entitled "Limitation of
Costs" or "Limitation of Funds," either of which incorporated herein applies to
this contract.
(k) The anticipated breakdown by labor category of the total level of
effort is as follows:
SEE ATTACHMENT NO. 3 FOR ESTIMATED LEVEL OF EFFORT
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H-7 SUBCONTRACTORS/CONSULTANTS
(a) The following subcontractors/consultants have been identified in the
Contractor's proposal as necessary for performance of this contract.
Subcontractor/Consultant Name Time or Unit Estimated Cost
*To Be Inserted at Time of Award if applicable.
(b) The Contracting Officer's consent required by Paragraph (c) of the
contract clause entitled "Subcontracts (Cost-Reimbursement and Letter
Contracts)" is hereby given for the listed subcontracts/consultants unless (i)
they are of the cost-reimbursement, time-and-materials, or labor-hour type and
are estimated to exceed $10,000, including any fee, (ii) are proposed to exceed
S100,000, or (iii) are one of a number of subcontracts with a single
subcontractor, under this contract, for the same or related supplies or services
that, in the aggregate, are expected to exceed $100,000. In such cases consent
shall be requested from the Administrative Contracting Officer.
(c) Any changes to the above list must be authorized by the Administrative
Contracting Officer (ACO).
H-8 REPORT PREPARATION (5252.235-9714) (DEC 88)
Scientific or technical reports prepared by the Contractor and deliverable
under the terms of this contract will be prepared in accordance with format
requirements contained in ANSI Z39.18, "Scientific and Technical Reports:
Organization, Preparation and Production".
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H-9 RESTRICTIONS ON PRINTING (5252.235-9716) (DEC88)
Unless otherwise authorized in writing by the Contracting Officer, reports,
data, or other written material whose production is funded by this contract and
delivered hereunder may only be reproduced by duplicating processes and may not
exceed 5,000 single page reports or a total of 25,000 pages of multiple-page
reports. These restrictions do not preclude the writing, editing, or preparation
of manuscript or reproducible copy of related illustrative materials if required
as a part of this contract, or incidental printing such as forms or materials of
this contract, or incidental printing such as forms or materials necessary for
the contractor to perform in accordance with the terms of the contract. At least
on copy of each technical report submitted to the Defense Technical Information
Center must be black typing, or a reproduction of black on white paper, or
suitable for reproduction by photographic techniques. Reprints of published
technical articles are not within the scope of this paragraph.
H-10 On-site Use of Government Property
This provision is applicable to any portion of the contract performed on-
site at the Naval Research Laboratory, including its field sites.
The Governent will be responsible for all facilities and equipment
required in the performance of the contract on-site at the Naval Research
Laboratory unless stated otherwise elsewhere in the contract. Such facilities
and equipment may be used on a rent-free basis on-site at the Naval Research
Laboratory by contractor personnel in the performance of the contract. The
property shall remain in the possession and control of the Naval Research
Laboratory.
Notwithstanding any other provision of this contract, the unavailability of
such property shall not entitle the contractor to an equitable adjustment of any
terms and conditions of the contract.
H-11 FIRMR 201-39.5202-1 FIRMR Applicability. (OCT 1990)
--------------------------------------------
This solicitation/contract requires the use or delivery of Federal information
processing resources but the agency has determined that FIRMR part 201-39 does
not apply based on the exception set forth in 201-39.101-3(b)(1)(ii)(B).
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PART II - SECTION I
CONTRACT CLAUSES
COST-PLUS-FIXED-FEE - RESEARCH AND DEVELOPMENT
I- 1 CLAUSES INCORPORATED BY REFERENCE (FAR 52.252-02)
This contract incorporates one or more clauses by reference, with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make their full text available.
A. FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1) CLAUSES
CLAUSE NUMBER CLAUSE TITLE
FAR 52.202-01 Definitions (SEP 1991)
FAR 52.203-01 Officials Not to Benefit (APR 1984)
FAR 52.203-03 Gratuities (APR 1984)
FAR 52.203-05 Covenant Against Contingent Fees (APR 1984)
FAR 52.203-07 Anti-Kickback Procedures (OCT 1988)
FAR 52.203-10 Price or Fee Adjustment for Illegal or Improper Activity (SEP
1990)
FAR 52.209-06 Protecting the Government's Interest When Subcontracting
with Contractors Debarred, Suspended, or Proposed for
Debarment (NOV 1992)
FAR 52.212-08 Defense Priority and Allocation Requirements (SEP 1990)
FAR 52.212-13 Stop-Work Order (AUG 1989) and Alternate I (APR 1984)
FAR 52.215-01 Examination of Records by Comptroller General (FEB 1993)
FAR 52.215-02 Audit--Negotiation (FEB 1993)
FAR 52.215-27 Termination of Defined Benefit Pension Plans (SEP 1989)
FAR 52.215-30 Facilities Capital Cost of Money (SEP 1987)
FAR 52.215-31 Waiver of Facilities Capital Cost of Money (SEP 1987)
FAR 52.215-33 Order of Precedence (JAN 1986)
FAR 52.216-07 Allowable Cost and Payment (JUL 1991)
FAR 52.216-08 Fixed Fee (APR 1984)
FAR 52.219-08 Utilization of Small Business Concerns and Small
Disadvantaged Business Concerns (FEB 1990)
FAR 52.219-13 Utilization of Women-Owned Small Businesses (AUG 1986)
FAR 52.220-01 Preference for Labor Surplus Area Concerns (APR 1984)
- -------------
*WILL BE INCLUDED IF CONTRACTOR DOES NOT PROPOSE FACILITIES CAPITAL COST OF
MONEY
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FAR 52.220-03 Utilization of Labor Surplus Area Concerns (APR 1984)
FAR 52.222-01 Notice to the Government of Labor Disputes (APR 1984)
FAR 52.222-03 Convict Labor (APR 1984)
FAR 52.222-04 Contract Work Hours and Safety Standards Act--Overtime
Compensation (MAR 1986)
FAR 52.222-26 Equal Opportunity (APR 1984)
FAR 52 222-35 Affirmative Action for Special Disabled and Vietnam Era
Veterans (APR 1984)
FAR 52.222-36 Affirmative Action for Handicapped Workers (APR 1984)
FAR 52.222-37 Employment Reports on Special Disabled Veterans and
Veterans of the Vietnam Era (JAN 1988)
FAR 52.223-03 Hazardous Material Identification and Material Safety
Data (NOV 1991)
FAR 52.223-06 Drug-Free Workplace (JUL 1990)
FAR 52.225-11 Restrictions on Certain Foreign Purchases (MAY 1992)
FAR 52.225-14 Inconsistency Between English Version and Translation of
Contract (AUG 1989)
FAR 52.227-01 Authorization and Consent (APR 1984) and Alternate I
(APR 1984)
FAR 52.227-02 Notice and Assistance Regarding Patent and Copyright
Infringement (APR 1984)
**FAR 52.227-11 Patent Rights--Retention by the Contractor (Short Form)
(JUN 1989)
**FAR 52.227-12 Patent Rights--Retention by the Contractor (Long Form)
(JUN 1989)
***FAR 52.228-07 Insurance--Liability to Third Persons (APR 1984)
FAR 52.229-09 Taxes-Cost Reimbursement Contracts with Foreign
Governments (MAR 1990)
FAR 52.230-03 Disclosure and Consistency of Cost Accounting Practices
(AUG 1992)
FAR 52.230-04 Consistency in Cost Accounting Practices (AUG 1992)
FAR 52.230-05 Administration of Cost Accounting Standards (AUG 1992)
FAR 52.232-09 Limitation on Withholding of Payments (APR 1984)
FAR 52.232-17 Interest (JAN 1991)
- ----------------------
**CLAUSE AT 52.227-11 WILL BE INCLUDED IF THE CONTRACTOR IS A SMALL BUSINESS
CONCERN OR NONPROFIT ORGANIZATION. CLAUSE AT 52.227-12 WILL BE INCLUDED IF THE
CONTRACTOR IS OTHER THAN A SMALL BUSINESS CONCERN OR NONPROFIT ORGANIZATION.
***WILL BE INCLUDED IF CONTRACTOR IS PARTIALLY OR TOTALLY IMMUNE FROM TORT
LIABILITY TO THIRD PERSONS AS A STATE AGENCY OR AS A CHARITABLE INSTITUTION.
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FAR 52.232-18 Availability of Funds (APR 1984)
....FAR 52.232-20 Limitation of Cost (APR 1984)
****FAR 52.232-22 Limitation of Funds (APR 1984)
FAR 52.232-23 Assignment of Claims (JAN 1986)
FAR 52.232-25 Prompt Payment (SEP 1992)
FAR 52.233-01 Disputes (DEC 1991)
FAR 52.233-03 Protest After Award (AUG 1989) and Alternate I (JUN
1985)
FAR 52.237-02 Protection of Government Buildings, Equipment and
Vegetation (APR 1984)
FAR 52.242-01 Notice of Intent to Disallow Costs (APR 1984)
FAR 52.242-02 Production Progress Reports (APR 1991)
FAR 52.242-13 Bankruptcy (APR 1991)
FAR 52.243-02 Changes--Cost-Reimbursement (AUG 1987) and Alternate V
(APR 1984)
FAR 52.243-06 Change Order Accounting (APR 1984)
FAR 52.244-02 Subcontracts (Cost-Reimbursement and Letter Contracts)
(JUL 1985) and Alternate I (APR 1985)
FAR 52.244-05 Competition in Subcontracting (APR 1984)
FAR 52 245-05 Government Property (Cost-Reimbursement Time-and-
Material, or Labor-Hour Contracts) (JAN 1986)
FAR 52.246-09 Inspection of Research and Development (Short Form)
(APR 1984)
FAR 52.246-23 Limitation of Liability (APR 1984)
FAR 52.247-34 F.O.B. Destination (NOV 1991)
FAR 52.247-63 Preference for U.S.-Flag Air Carriers (APR 1984)
FAR 52.249-06 Termination (Cost-Reimbursement) (MAY 1986)
FAR 52.249-14 Excusable Delays (APR 1984)
FAR 52.253-01 Computer Generated Forms (JAN 1991)
b. DEPARTMENT OF DEFENSE FEDERAL ACQUISITION REGULATION CLAUSES
DFARS 252.201-7000 Contracting Officer's Representative (DEC 1991)
DFARS 252.203-7001 Special Prohibition on Employment (APR 1993)
DFARS 252.204-7003 Control of Government Personnel Work Product (APR 1992)
DFARS 252.209-7001 Disclosure of Ownership or Control by a Foreign
Government that Supports Terrorism (APR 1993)
DFARS 252.219-7009 Certificate of Competency (APR 1993)
- ------------------
****LIMITATION OF COSTS CLAUSE WILL BE APPLICABLE WHEN THE CONTRACT IS
FULLY FUNDED. LIMITATION OF FUNDS CLAUSE WILL BE APPLICABLE WHEN THE CONTRACT
IS INCREMENTALLY FUNDED.
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
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DFARS 252.223-7001 Hazard Warning Labels (DEC 1991)
DFARS 252 223-7006 Prohibition on Storage and Disposal of Toxic and
Hazardous Materials (APR 1993)
DFARS 252.225-7016 Restriction of Antifriction Bearings (APR 1993)
DFARS 252.231-7000 Supplemental Cost Principles (DEC 1991)
DFARS 252.232-7006 Reduction or Suspension of Contract Payments Upon
Finding of Fraud (AUG 1992)
DFARS 252.242-7001 Certification of Indirect Costs (DEC 1991)
DFARS 252.242-7002 Submission of Commercial Freight Bills for Audit (DEC
1991)
DFARS 252.242-7004 Material Management and Accounting System (DEC 1991)
DFARS 252.243-7001 Pricing of Contract Modification (DEC 1991)
DFARS 252.246-7000 Material Inspection and Receiving Report (DEC 1991)
c. FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1)
FAR 52.204-02 Security Requirements (APR 1984)
FAR 52.227-10 Filing of Patent Applications--Classified Subject
Matter (APR 1984)
d. DEPARTMENT OF DEFENSE FAR SUPPLEMENT (DFARS) (48 CFR CHAPTER 2)
DFARS 252.209-7002 Disclosure of Ownership or Control by a Foreign
Government (APR 1993)
e. DEPARTMENT OF DEFENSE FAR SUPPLEMENT (DFARS) (48 CFR CHAPTER 2)
DFARS 252.225-7001 BUY AMERICAN ACT AND BALANCE OF PAYMENTS PROGRAM (DEC
1991)
f. FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1)
FAR 52.203-12 Limitation on Payments to Influence Certain Federal
Transactions (JAN 1990)
g. DEPARTMENT OF DEFENSE FAR SUPPLEMENT (DFARS) (48 CFR 2)
DFARS 252.227-7013 Rights in Technical Data and Computer Software (OCT
1988)
DFARS 252.227-7018 Restrictive Markings on Technical Data (OCT 1988)
DFARS 252.227-7029 Identification of Technical Data (APR 1988)
DFARS 252.227-7030 Technical Data--Withholding of Payment (OCT 1988)
DFARS 252.227-7031 Data Requirements (OCT 1988)
DFARS 252.227-7032 Rights in Technical Data and Computer Software
(Foreign) (JUN 1975)
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
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DFARS 252.227-7034 Patents--Subcontracts (APR 1984)
DFARS 252.227-7036 Certification of Technical Data Conformity (MAY 1987)
DFARS 252.227-7037 Validation of Restrictive Markings on Technical Data
(APR 1988)
..... DFARS 252.227-7039 Patents--Reporting of Subject Inventions (APR 1990)
h. FEDERAL ACQUISITION REGULATION (48CFR CHAPTER 1)
FAR 52.222-02 Payment for Overtime Premiums "0" (JUL 1990)
FAR 52.223-02 Clean Air and Water (APR 1984)
FAR 52.230-05 Administration of Cost Accounting Standards (AUG
1992)
FAR 52.246-24 Limitation of Liability--High Value Items (APR 1984)
i. DEPARTMENT OF DEFENSE FAR SUPPLEMENT (DFARS) (48 CHAPTER 2)
DFARS 252.203-7000 Statutory Prohibition on Compensation to Former DoD
Employees (DEC 1991)
DFARS 252.215-7001 Availability of Contractor Records (DEC 1991)
DFARS 252.215-7002 Cost Estimating System Requirements (DEC 1991)
DFARS 252.231-7001 Penalties for Unallowable Costs (APR 1993)
DFARS 252.233-7000 Certification of Claims and Requests for Adjustment
or Relief (APR 1993)
j. FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1)
......FAR 52.215-22 Price Reduction for Defective Cost or Pricing Data
(JAN 1991)
******FAR 52.215-24 Subcontractor Cost or Pricing Data (DEC 1991)
FAR 52.219-09 Small Business and Small Disadvantaged Business
Subcontracting Plan (JAN 1991) and Alternate 1 (AUG
1989)
FAR 52.220-04 Labor Surplus Area Subcontracting Program (APR 1984)
FAR 52.226-1 Utilization of Indian Organizations and Indian-Owned
Economic Enterprises (AUG 1991)
FAR 52.219-16 Liquidated Damages - Small Business Subcontracting
Plan (AUG 1989)
k. DEPARTMENT OF DEFENSE FAR SUPPLEMENT (DFARS) (48 CFR CHAPTER 2)
DFARS 252.203-7003 Prohibition Against Retaliatory Personnel Actions
(APR 1992)
DFARS 252.205-7000 Provision of Information to Cooperative Agreement
Holders (DEC 1991)
- ------------------------
*****WILL BE INCLUDED IF CLAUSE AT 52.227-11 IS INCLUDED IN CONTRACT.
******WILL BE INCLUDED WHEN CERTIFIED COST AND PRICING DATA ARE REQUIRED.
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SOLICITATION NO. N00014-94-R-CP05
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....**DFARS 252.215-7000 Pricing Adjustments (DEC 1991)
DFARS 252.225-7026 Reporting of Contract Performance Outside the United
States (APR 1993)
l. FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1)
FAR 52.222-28 Equal Opportunity Preaward Clearance of Subcontracts
(APR 1984)
m. DEPARTMENT OF DEFENSE FAR SUPPLEMENT (DFARS) (48 CHAPTER 2)
DFARS 252.203-7002 Display of DoD Hotline Poster (DEC 1991)
DFARS 252.249-7001 Notification of Substantial Impact on Employment (DEC
1991)
o. DEPARTMENT OF DEFENSE FAR SUPPLEMENT (48 CFR CHAPTER 2)
DFARS 252.223-7004 Drug-Free Work Force (Sep 1988)
p. DEPARTMENT OF DEFENSE FAR SUPPLEMENT (48 CFR CHAPTER 2)
DFARS 252.249-7001 Notification of Substantial Impact on Employment (DEC
1991)
q. FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1)
FAR 52.215-39 Reversion or Adjustment of Plans For Postretirement
Benefits Other Than Pensions (PRB) (JUL 1991)
I-2 ADDITIONAL APPLICABLE CLAUSES:
a. REQUIREMENT FOR CERTIFICATE OF PROCUREMENT INTEGRITY-MODIFICATION
(NOV 1990) (52.203-9)
(a) Definitions. The definitions set forth in FAR 3.104-4 are hereby
incorporated in this clause.
(b) The Contractor agrees that it will execute the certification set forth
in paragraph (c) of this clause when requested by the Contracting Officer in
connection with the execution of any modification of this contract.
(c) Certification. As required in paragraph (b) of this clause, the
officer or employee responsible for the modification proposal shall execute the
following certification:
- ---------------------
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
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PAGE 25
CERTIFICATE OF PROCUREMENT INTEGRITY
MODIFICATION (NOV 1990)
(1) I, [Name of certifier] am the officer or employee responsible for
the preparation of this modification proposal and hereby certify that, to the
best of my knowledge and belief, with the exception of any information described
in this certification, I have no information concerning a violation or possible
violation of subsection 27(a), (b), (d) or (f) of the Office of Federal
Procurement Policy Act, as amended* (41 U.S.C.423), (hereinafter referred to as
"the Act"), as implemented in the FAR, occurring during the conduct of this
procurement (contract and modification number).
(2) As required by subsection 27(e)(1)(B) of the Act, I further
certify that to the best of my knowledge and belief, each officer, employee,
agent, representative, and consultant of [Name of Offeror] who has participated
personally and substantially in the preparation or submission of this proposal
has certified that he or she is familiar with and will comply with, the
requirements of subsection 27(a) of the Act, as implemented in the FAR, and will
report immediately to me any information concerning a violation or possible
violation of subsections 27(a), (d), or (f) of the Act as implemented in the
FAR, pertaining to this procurement.
(3) Violations or possible violations: (Continue on plain bond paper
if necessary and label Certificate of Procurement Integrity-Modification
(Continuation Sheet), ENTER "NONE" IF NONE EXISTS) "NONE"
--------
- ---------------------------
[Signature of the officer or employee responsible for the modification proposal
and date]
/s/ Don F. Riordan Secretary/Treasurer 10-24-94
[Type name of the officer or employee responsible for the modification proposal]
Don F. Riordan
* Subsections 27 (a), (b), and (d) are effective on December 1, 1990. Subsection
27(f) is effective on June 1991.
THIS CERTIFICATION CONCERNS A MATTER WITHIN THE JURISDICTION OF AN AGENCY OF THE
UNITED STATES AND THE MAKING OF A FALSE, FICTITIOUS, OR FRAUDULENT CERTIFICATION
MAY RENDER THE MAKER SUBJECT TO PROSECUTION UNDER TITLE 18, UNITED STATES CODE,
SECTION 1001.
(End of certification)
(d) In making the certification in paragraph (2) of the certificate, the
officer or employee of the competing Contractor responsible for the offer or
bid, may rely upon a one-time certification from each individual required to
submit a certification to the competing Contractor, supplemented by periodic
training. These certifications shall be obtained at the earliest possible date
after an individual required to certify begins employment or association with
the contractor. If a contractor decides to rely on a certification executed
prior to the suspension of section 27 (i.e., December 1, 1989), the Contractor
shall ensure that an individual who has so certified is notified that section 27
has been reinstated. These certifications shall be maintained by the Contractor
for a period of 6 years from the
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
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PAGE 26
date a certifying employee's employment with the company ends or, for an agency,
representative, or consultant, 6 years from the date such individual ceases to
act on behalf of the contractor.
(e) The certification required by paragraph (c) of this clause is material
representation of fact upon which reliance will be placed in executing this
modification.
c. TRANSPORTATION OF SUPPLIES BY SEA (DEC 1991) (DFARS 252.247-7023)
(a) Definitions.
As used in this clause:
(1) "Components" means articles, materials, and supplies incorporated
directly into end products at any level of manufacture, fabrication or
assembly by the Contractor or any subcontractor.
(2) "Department of Defense" (DoD) means the Army, Navy, Air Force, Marine
Corps, and defense agencies.
(3) "Foreign flag vessel" means any vessel that is not a U.S.-flag vessel.
(4) "Ocean transportation" means any transportation aboard a ship, vessel,
boat, barge, or ferry through international waters.
(5) "Subcontractor" means a supplier, materialman, distributor or vendor
at any level below the prime contractor whose contractual obligation
to perform results from, or is conditioned upon, award of the prime
contract and who is performing any part of the work or other
requirement of the prime contract.
(6) "Supplies" means all property, except land and interests in land, that
is readily identifiable for eventual use by DoD at the time of
transportation by sea.
(i) An item is clearly identifiable for eventual use by the DoD if,
for example, the contract documentation contains a reference to
a DoD contract number or a military destination.
(ii) "Supplies" includes (but is not limited to) public works,
buildings and facilities, ships, floating equipment and vessels
of every character, type, and description, together with parts,
subassemblies, accessories, and equipment; machine tools,
material, equipment, and stores of all kinds; end items,
construction materials and the components of the foregoing.
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
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PAGE 27
(7) "U.S.-flag vessel" means a vessel of the United States or belonging to
the United States, including any vessel registered or having national
status under the laws of the United States.
(b) The Contractor shall employ United States-flag vessels, and no others, in
the transportation by sea of any supplies to be furnished in the
performance of its contract. The Contractor and its subcontractors may
request that the Contracting Officer authorize shipment in foreign-flag
vessels, or designate available U.S.-flag vessels, if the Contractor or a
subcontractor believes that--
(1) U.S.-flag vessels are not available for timely shipment;
(2) The freight charges are excessive or unreasonable; or
(3) Freight charges are higher than charges to private persons for
transportation of like goods.
(c) The Contractor must submit any request for use of other than U.S.-flag
vessels in writing to the Contracting Officer at least forty-five (45) days
prior to the sailing date necessary to meet its delivery schedules. The
Contracting Officer will process requests submitted after such date(s) as
expeditiously as possible, but the failure of the appropriate official to
grant approvals to meet the shipper's sailing date will not of itself
constitute a compensable delay under this or any other clause of this
contract. Requests shall contain at a minimum:
(1) Type, weight, and cube of cargo;
(2) Required shipping date;
(3) Special handling and discharge requirements;
(4) Loading and discharge points;
(5) Name of shipper and consignee;
(6) Prime contract number; and
(7) A documented description of efforts made to secure U.S.-flag
vessels, including points of contract (with names and telephone
numbers) with at least two (2) U.S.-flag carriers contacted.
Copies of telephone notes, telegraphic and facsimile messages or
letters will be sufficient for this purpose.
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
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(d) The Contractor shall, within thirty (30) days after each shipment covered
by this clause, provide the Contracting Officer and the Division of
National Cargo, Office of Market Development, Maritime Administration, U.S.
Department of Transportation, Washington DC 20590, one copy of the rated on
board vessel operating carrier's ocean-bill-of-lading, which shall contain
the following information--
(1) Prime contract number;
(2) Name of vessel;
(3) Vessel flag of registry;
(4) Date of loading;
(5) Port of loading;
(6) Port of final discharge;
(7) Description of commodity;
(8) Gross weight in pounds and cubic feet if available;
(9) Total ocean freight in U.S. dollars; and
(10) Name of the steamship company.
(e) The Contractor agrees to provide with its final invoice under this contract
a representation that to the best of its knowledge and belief--
(1) No ocean transportation was used in the performance of this contract;
(2) Ocean transportation was used and only United States-flag vessels were
used for all ocean shipments under the contract;
(3) Ocean transportation was used, and to the extent any non-U.S.-flag
vessel were used, the Contractor had the written consent of the
Contracting Officer for all non-U.S.-flag ocean transportation; or
(4) Ocean transportation was used and some or all of the shipments were
made on non U.S.-flag vessels without the written consent of the
Contracting Officer. The Contractor shall describe these shipments in
the following format:
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
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ITEM CONTRACT
DESCRIPTION LINE ITEMS QUANTITY
----------- ---------- --------
Total
(f) If the final invoice does not include the required representation, the
Government will reject and return it to the Contractor as an improper
invoice for the purposes of the Prompt Payment clause of this contract. In
the event there has been unauthorized use of non-u.s.-flag vessels in the
performance of this contract, the Contracting Officer is entitled to
equitably adjust the contract, based on the unauthorized use.
(g) The Contractor shall include this clause, including this paragraph (g), in
all subcontracts under this contract, which exceed the small purchase
limitation of section 13.000 of the Federal Acquisition Regulation.
(End of clause)
***d. NOTIFICATION OF TRANSPORTATION OF SUPPLIES BY SEA (DEC 1991)
(DFARS 252.247-7024)
(a) The Contractor has indicated by the response to the solicitation
provision at 252.247-7022, Representation of Extent of Transportation of
Supplies by Sea, that it did not anticipate transporting by sea any supplies of
this contract. If however, after the award of this contract, the Contractor
should learn that supplies will be transported by sea, the Contractor shall
notify the Contracting Officer of the fact that transportation by sea will be
used and hereby agrees to comply with all the terms and conditions of the clause
at 252.247-7023, entitled "Transportation of Supplies by Sea", contained in this
contract.
(b) The Contractor shall include this clause, including this paragraph (b),
revised as necessary to reflect the relationship of the contracting parties, in
all subcontracts hereunder.
(End of clause)
- ----------------
*****will be included if contractor's response indicated it did not anticipate
transporting by sea any supplies of this contract.
<PAGE>
SOLICITATION NO. N00014-94-R-CP05
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PART III - SECTION J
LIST OF ATTACHMENTS
J-l EXHIBIT A - DD Form 1423, Contract Data Requirements - 21 pages
J-2 ATTACHMENT NO. 1 - Statement of Work - 40 pages
J-3 ATTACHMENT NO. 2 - DD 254, Contract Security Classification Specification
form Ser 047-94, dated 940428, page/s 2.
J-4 ATTACHMENT NO. 3 - Estimated level of effort - 10 pages
<PAGE>
Exhibit 10(v)
Loral Federal Systems Company
700 North Frederick Avenue, Gaithersburg, Md. 20879
Subcontract/Purchase Order No. 249389
Date: August 4, 1995
Seller: Software Technology, Inc. Payment Terms: Net 30
1225 Evans Road
Melbourne, FL 32904
Attn: Mr. Rob Trew
1. PARTIES/TYPE OF CONTRACT
------------------------
This Cost Plus Award Fee and Time and Material Subcontract between the
Loral Federal Systems Company (hereafter referred to as "Buyer" or "Loral"
or "LFSC" or its successor in interest) located at 700 North Frederick
Avenue, Gaithersburg, Maryland, and Software Technology, Inc. (hereafter
referred to as "Seller") located at 1225 Evans Road, Melbourne, Florida, is
placed on the basis set forth herein.
The Buyer's procurement representative is the only person authorized to
approve changes to the terms and conditions or the requirements of the
Subcontract. If the Seller complies with any order, direction,
interpretation, approval, or disapproval, conditional approval, or
determination (written or oral), from someone other than the Buyer's
procurement representative, it shall be at Seller's own risk and Buyer
shall not be liable for any increased cost or delay in performance in
accordance with the requirements set forth herein. The Seller shall ensure
that all Seller's personnel are aware of this provision.
LFSC is a signatory to the Defense Industry Initiatives on Business Conduct
and Ethics (DII).
The Seller agrees to indemnify Buyer for any amounts required to be paid to
the United States Government by virtue of the Seller's violation of Public
Law 700-679 (see FAR 52.203-10(c)).
2. PRODUCT/SERVICES
----------------
- Seller will provide supplies and services as set forth in Schedule A.
Notwithstanding any provisions elsewhere in this subcontract, for level-
of-effort SLINS, the Buyer reserves the right to modify the target hours in
this contract to a lower quantity, solely on the basis of Buyer's
evaluation of the Seller's overall costs, schedule and
1
<PAGE>
technical performance, and/or as a function of hours required by the
Buyer's customer. The Buyer reserves unilateral right to select the
description categories deemed most appropriate for the task being
performed. Performance by the Seller pursuant to SLINS 007 and 008 will be
by individual tasks in accordance with the Task Order Process and Special
Provision H. 902 of Attachment 3 hereto.
3. REQUIREMENTS/DATA
-----------------
This is a rated order certified for national defense use, and Seller shall
follow all requirements of the Defense Priorities and Allocations System
Regulation (15 CFR Part 350). Seller accepts said rating unless rejected in
writing within 10 days if "DO" rating, or 5 days if "DX" rating from the
date of order receipt.
Government Contract Number: F04606-95-D-0239 DPAS Rating: DO A1
- Statement of Work
All drawings, specifications or other documents referenced in this Purchase
Order but not attached are incorporated and made a part by this reference.
4. PERIOD OF PERFORMANCE AND/OR DELIVERY SCHEDULE
----------------------------------------------
Work under this Purchase Order shall commence on award and continue through
September 30, 2000, unless modified by the Buyer.
Options for Increased Quantities
The Buyer may increase the quantities of Services called for in Schedule A
by up to 50% of the "QTY" (Quantity) Limits specified therein, at the costs
and/or prices contained in the Rate Tables that are a part of Schedule A.
The Buyer's Authorized Representative may exercise these options from time
to time as required for each SUBSLIN specified under SLINS 0002, 0007 and
0008 by providing written notice to the Seller during the Period of
Performance of the affected SLIN(S) (Government Fiscal Year(s)).
All articles, services and/or data shall be delivered to the following LFSC
location:
Loral Federal Systems Company
700 North Frederick Avenue
Gaithersburg, Md. 20879
Attn: S. Dickison
Mail Drop 182/3B62
2
<PAGE>
A. Transportation Routing Guidelines:
1. Do not insure or declare value
2. 0-70 LBS (32KG) United Parcel Service (if available); if not 0-40 LBS
(18KG) Parcel Post (Zones 1 - 8) up to $1,000.00 value.
All other Ship Via: N/A
3. FOB: N/A
4. Transportation charges appearing on invoice must be supported by paid
freight bill or equivalent. See "Transportation" clause of attached
"LFSC Terms and Conditions".
B. Packing Slip
Seller shall submit a packing slip with each shipment of supplies against
this Purchase Order/Release. At a minimum, the packing slip shall contain
the following information:
1) Purchase Order Number/Release Number
2) Itemized list of supplies within the shipment
3) List of back-order items remaining to be delivered
4) Date of shipment
5. CONSIDERATION AND PAYMENT
-------------------------
FUNDING OF COST REIMBURSEMENT PURCHASE ORDER:
ALLOTMENT OF FUNDS
This Purchase Order is incrementally funded with respect to both cost and
fee in accordance with FAR 52.232-20 and 52.232-22. The amounts presently
available and allotted to this purchase order for payment of cost and fee
and the period of performance which it, is estimated the allotted amounts
cover are as follows:
SLIN 002 SLIN 004
Allotted To Cost: TBD Allotted to Cost: $103,000.00
Allocated To Award Fee Pool: TBD Allocated to Award Fee Pool: TBD
Period Of Performance: TBD Period of Performance Thru: 10/15/95
PAYMENT OF AWARD FEE
The Seller may earn an award fee as set forth in Attachment 4, hereto,
entitled "Award Fee Evaluation Plan", and as provided hereunder.
A. Such fee may be earned by the Seller on the basis of his
3
<PAGE>
performance in accordance with the terms of Attachment 4.
B. Award Fee for SLIN 004 is allocated to semi-annual Award Fee Periods
as follows:
Subcontract Award thru 03/31/96: $68,442
04/01/96 thru 09/30/96: $68,442
10/01/96 thru 03/31/97: $68,442
04/01/97 thru 09/30/97: $92,249
10/01/97 thru 03/31/98: N/A
04/01/98 thru 09/30/98: N/A
10/01/98 thru Completion: N/A
Award Fee for SLINS 00203, 00204 and 00205:
The award fee for SLINS 00203, 00204 AND 00205 is allocated to
semi-annual Award Fee Periods as follows:
Available
Award Fee Period Award Fee
04/01/97 thru 09/30/97 $ 559.00
10/01/97 thru 03/31/98 5,855.00
04/01/98 thru 09/30/98 5,855.00
10/01/98 thru 03/31/99 5,855.00
04/01/99 thru 09/30/99 5,855.00
C. Seller may submit invoices for award fee to which he becomes entitled
immediately upon written notification by the Buyer of the amount of
the award.
D. The decision of the fee determination official on the amount of the
award fee shall not be subject to dispute under the "Disputes clause
of this Subcontract".
E. The award fee earned will be documented by the Buyer in a Subcontract
alteration which specifies amount awarded, and the rating received for
the period covered.
F. Any portion of the available Award Fee not earned for an evaluation
period at only transferable to a subsequent period at the unilateral
discretion of the Buyer.
G. If actual hours delivered for SLIN 0002 or SLIN 0004 are greater than
ninety (90) percent of planned hours for any given Fiscal Year, but
less than one hundred ten (110) percent of planned hours, then no
adjustment shall be made to the Award Fee Pool for the given Fiscal
Year. However, should actual delivered hours be less than ninety (90)
percent or greater than one
4
<PAGE>
hundred ten (110) percent of planned hours, the Award Fee Pool may be
adjusted proportionately, at the sole and unilateral discretion of the
Buyer. Should decreases in delivered verses planned hours be a result
of demonstrable performance efficiencies, the Buyer's intent is to
leave the Award Fee Pool(s) intact.
8UYER'S TOTAL LIABILITY
It is recognized that Buyer's limitation for incurred costs is $103,000.00.
Seller is not authorized to incur any costs, obligations, or liabilities,
of any nature whatsoever over this amount and any such additional costs,
obligations, or liabilities incurred or assumed by Seller shall be at his
sole risk and account and the Buyer and/or the Government shall not be
liable in any manner to pay or reimburse the Seller on account thereof.
Seller shall notify Buyer when the amount of costs incurred is within
seventy-five (75%) of the above-cited ceiling.
6. INVOICING
---------
All invoice originals and one copy shall be submitted to the following
Loral Federal Systems Company (LFSC)
PO Box 190
Owego, NY 13827-0190
Attn: Accounts Payable
INVOICES
Each invoice submitted for payment shall indicate complete Subcontract
number and be set up in accordance with the line items specified in this
Subcontract.
One copy of each invoice and all correspondence pertaining to this
Subcontract shall be submitted to:
Loral Federal Systems Company
700 North Frederick Avenue
Gaithersburg, MD 20879
Attn: S. Dickison 182/3B62
7. TERMS AND CONDITIONS
--------------------
This Subcontract is subject to the following terms and conditions:
- LFSC Terms and Conditions, dated 07/94
- Confidential Disclosure Agreement (CDA), dated October 18, 1994.
- Certifications and Representations dated February 23, 1995.
5
<PAGE>
8. SPECIAL PROVISIONS
------------------
The Special Provisions included as Attachment 3 hereto are hereby included
with the same force and effect and Order of Precedence as if incorporated
directly into this Section 8 of the Subcontract. Additionally, the
following special provisions shall apply to this Subcontract.
SELLER ON BUYER PREMISES
------------------------
The following provisions shall apply to any work performed under this
Subcontract by Seller employees on Buyer owned or leased premises or near
premise facilities provided by Buyer.
A. Coordinators/Supervisors
1. LFSC shall appoint a technical coordinator(s) who shall be responsible
for maintaining liaison with Seller's supervisor(s). LFSC's technical
coordinator shall have no authority to amend or modify this Subcontract or
make any commitment for or on behalf of IFSC.
2. LFSC shall appoint a Procurement representative who shall be responsible
for the commitment of all LFSC funds, implementation, administration and
issuance of all LFSC Subcontracts.
3. Seller shall appoint a supervisor(s) who shall be on-site and shall
supervise and direct the work of Seller's employees.
4. Each party shall inform the other of the names of the individuals
appointed.
B. Independent Seller
1. Seller's relationship to LFSC shall be that of an independent
contractor. Personnel supplied by Seller hereunder shall be deemed
employees of Seller and shall not for any purposes be considered employees
or agents of LFSC. Seller assumes full responsibility for the actions of
such personnel while performing services under this Subcontract and shall
be solely responsible for their supervision, daily direction and control,
payment of salary (including withholding of income taxes and social
security), workers' compensation, disability benefits and the like.
Seller's supervisors/management shall resolve all performance and personnel
matters of Seller's employees.
2. Nothing contained in this Subcontract shall be construed as granting to
Seller or any personnel of Seller rights under any LFSC benefit plan.
6
<PAGE>
C. EMPLOYMENT SOLICITATION
Buyer shall not solicit applications for permanent or supplemental
employment from Seller's employees. However, in the event that any Seller
employee applies for and is offered employment by the Buyer, Seller shall
not charge Buyer with any personnel placement fees, damages, or any other
charges connected with such hiring.
D. SELLER'S EMPLOYEES
1. Seller agrees to take appropriate preventive steps before the assignment
of any of its employees to perform work under this agreement that it
reasonably believes will ensure that its employees and its subcontractors'
employees at any level, will not engage in inappropriate conduct while on
LFSC premises. Inappropriate conduct shall include, but is not limited to:
being under the influence of or affected by alcohol, illegal drugs, or
controlled substances; the manufacture, use, distribution, or sale or
possession of alcohol, illegal drugs or any other controlled substance,
except for approved medical purposes; the possession of a weapon of any
sort; and/or harassment, threats or violent behavior. Violation of this
provision may result in termination of this contract and any other remedy
available to LFSC at law or in equity.
2. LFSC may, at its sole discretion, have Seller remove any specified
employee of Seller from LFSC's premises and request that such employee not
be reassigned to any LFSC premises under this Subcontract.
3. Seller shall make reasonable inquiry of its employees regarding any past
employment with LFSC and Seller shall inform LFSC before assigning any
known former LFSC employee to perform work under this Subcontract. LFSC may
request that Seller not make such assignment.
E. SOLICITATION AND DISTRIBUTION
No solicitation or distribution of any kind is permitted on LFSC premises
except as required to be permitted by law.
F. OWNERSHIP OF MATERIALS
All reports, memoranda or other materials in written, including machine
readable, form prepared by Seller pursuant to this Subcontract and
furnished to LFSC by Seller hereunder shall become the sole property of
LFSC.
G. WARRANTIES
7
<PAGE>
1. Seller warrants that it is and shall remain free of any obligation or
restriction which would interfere or be inconsistent with or present a
conflict of interest concerning the services to be furnished by Seller
under this Subcontract.
2. Seller warrants that it shall perform all services contracted for
under this Subcontract in a workmanlike manner and in accordance with the
requirements set forth in the Statement of Work and/or Subcontracts issued
hereunder.
H. LEASED EMPLOYEES
Seller shall provide LFSC any information about Seller's personnel that
LFSC is required by law to obtain, including information on "leased
employees" and "management services organization" as these terms are used
in Secs. 414(m), (n) and (o) of the Internal Revenue Code.
I. IMMIGRATION
Seller shall comply with the Immigration Reform and Control Act of 1986 as
amended.
J. ACCESS TO/USE OF LFSC FACILITIES
1. Seller employees shall enter and leave LFSC premises via designated
entrances and sign in and out as specified by LFSC.
2. Seller shall provide LFSC the names of Seller employees prior to their
reporting to work on LFSC premises. All such employees shall be provided a
Contractor badge which they must prominently display while on LFSC
premises.
3. Seller employees may park in available LFSC lots in spaces not
restricted for other use. Improperly parked cars may be towed away at
Seller's expense. Difficulty in obtaining parking places shall not
constitute justification for late performance or for additional
compensation to Seller.
4. Seller employees may have access within the LFSC work location to
cafeterias, restrooms and in the event of a medical emergency, LFSC medical
facilities for first aid. Other than these, Seller employees' access is
restricted to those areas required for the performance of Seller's services
under this Subcontract.
5. Seller employees may not participate in recreational or social
activities, education courses, seminars, internal award programs, library
privileges and other benefits and facilities provided for LFSC employees.
8
<PAGE>
6. Seller shall ensure that Seller employees use LFSC telephones only for
LFSC business purposes. Seller shall reimburse LFSC for any unauthorized
calls.
7. Seller employees may not send or receive personal mail on LFSC premises
or use LFSC's information system networks for other than LFSC business
purposes.
8. Seller employees shall not have access to or use of LFSC Internal Use
documents or forms, unless such access is required to perform services
under this Subcontract. Seller shall ensure that Seller employees do not
provide such documents to others and shall return them to LFSC at the
completion of the services for which they were required.
9. Seller employees shall not bring onto LFSC premises weapons of any
sort, cameras, recording equipment, radios, or any other equipment not
specifically authorized by LFSC.
10. Seller shall ensure that Seller employees wear appropriate business
attire unless otherwise specified in the Statement of Work.
11. Seller employees shall follow LFSC's current smoking guidelines for
the specified work location.
12. TERMINATION, RESIGNATION OR REPLACEMENT OF SELLER EMPLOYEES
On the day of termination, resignation or replacement of any Seller
employee assigned to Buyer premises, all of the following, items in
possession of the employee shall be returned to the Buyer's designated
manager/technical coordinator:
(A) Buyer confidential materials (if authorized via appropriate agreement
and "Internal Use Only" material).
(B) Buyer keys, books, tools, or other equipment, and identification
badges.
The Seller shall also notify the Buyer's designated manager/technical
coordinator immediately by telephone, and confirm in writing within one (1)
working day, the name of any Seller employee who resigns or is terminated,
if the employee had access to Buyer's data processing interface procedures
or to the Buyers data facility.
13. GENERAL BUSINESS ACTIVITIES
General business activities not related to the Subcontract shall not be
conducted by the Seller on Buyer premises, e.g., general
9
<PAGE>
recruitment, employment or termination interviews, general employee
meetings, etc. On an exception basis, the Seller may conduct training
meetings for their employees when it is related to work performed under the
Subcontract and approved in advance by the Buyer's procurement
representative. The subject for such meetings shall also be submitted to
and approved in advance by the Buyer's procurement representative.
K. HOLIDAYS AND OTHER CLOSINGS
1. Unless authorized, Seller shall not provide services on LFSC holidays
or when the work location is otherwise closed.
2. LFSC shall provide Seller with LFSC's established holiday schedule for
the work location.
3. LFSC shall advise Seller as soon as reasonably possible of any
unplanned or emergency closing. Seller shall have the responsibility to
notify its personnel of such closing. Should an emergency closing occur
prior to the start of a normal shift, the Seller will not be reimbursed for
the time not worked. In the event of an emergency closing during a normal
shift, the Seller will be paid for the remaining normal work day of that
shift. Seller resident supervision shall use their own judgment regarding
the early release of their personnel because of inclement weather when the
site has not closed. This action must be communicated to and coordinated
with LFSC's management and/or technical coordinator(s).
L. NOTICE ON SEXUAL HARASSMENT
Contractor shall distribute the following notice on sexual harassment
to all of its employees who are assigned to work on LFSC premises:
"LFSC is committed to providing a work environment free from sexual
harassment. Sexual harassment is unwelcome sexual conduct which has
the purpose or effect of unreasonably interfering with an
individual's work performance or which creates an offensive or
hostile work environment.
If you believe that you have been the victim of sexual harassment
while working on LFSC premises, you are encouraged to report such
incidents directly to your employer and directly to LFSC by calling:
LFSC-Manassas -(703) 367-0768; LFSC-Gaithersburg/Bethesda/Rockville -
(301) 240-6559; or LFSC-Owego - the Manager of Human Resources and
Site EO Compliance Officer between 8:30AM and 4:30PM Eastern Time.
10
<PAGE>
If you are calling long distance from outside LFSC, you may call this
number collect.
All complaints to LFSC of such conduct will be investigated promptly
and dealt with appropriately."
M. SAFETY AND SECURITY
1. Seller shall take all necessary precautions for the safety of its
employees and of Buyer's employees while on Buyer's premises. Seller shall
comply with Buyer location safety and security requirements which shall be
provided by Buyer at the start of this Subcontract and as such requirements
are revised. Safety glasses, safety shoes or other necessary equipment
shall be furnished by the Seller for use in areas where such equipment is
required by the Buyer.
All accidents involving Seller personnel shall be immediately reported to
the Buyer's manager/technical coordinator or procurement representative,
and to the Buyer's site safety department. A copy of the accident report
shall be furnished to Buyer's procurement representative. Buyer's medical
department or first aid stations may be used by Seller's employees for
emergency assistance and symptomatic relief of minor health problems. For
other health problems, Seller employees shall contact their own physician
or contact Seller management for advice and service.
2. Security
Seller shall comply with all LFSC security requirements. LFSC reserves the
right to review any site where work is being performed by Seller for
conformity to LFSC security requirements. Seller shall notify the LFSC
technical coordinator of any security problems.
a. Equipment/Asset Security
1. LFSC equipment/assets remain the property of LFSC and are provided for
use only on LFSC premises where Seller is located and only for the purposes
of this Subcontract. Such equipment/assets shall not be altered or moved
without LFSC's written permission. Seller shall not permit any liens or
attachments to be filed against LFSC equipment/assets. Seller shall pay for
any damage to LFSC equipment/assets resulting from Seller's use thereof,
normal wear and tear excepted.
2. Seller shall instruct its employees of the importance of protecting LFSC
assets. At a minimum, procedures to protect LFSC assets shall include the
following:
11
<PAGE>
i. Clear work areas of all papers and materials at end of day.
ii. Secure confidential or valuable items in locked desks, file cabinets
or credenzas at end of day.
iii. Seller shall cooperate with LFSC in any investigation conducted by
LFSC involving LFSC assets.
b. Information Asset Security
i. Seller shall not connect or allow connection to an LFSC-owned computer
without the prior written approval of LFSC and will only connect with,
interact with, inspect and/or use those programs, tools or routines
specifically made available by LFSC and which are necessary for Seller to
provide services under this Subcontract.
ii. Seller shall ensure that:
- Terminals connected to LFSC-owned computers are used only for the
purposes of this Subcontract;
- Unattended terminals are protected from unauthorized use or
access;
- Telephone numbers for computer dial ports are not posted for
general view; and
- Terminals connected to LFSC-owned computers are attended by
authorized personnel or protected from access by unauthorized Personnel.
3. Seller shall ensure that any programs, tools or routines made available
on LFSC-owned computers are not copied.
4. Seller shall ensure that information access passwords and cipher keys
are protected from inadvertent disclosure and disclosed only to Seller
employees with a need to know.
5. Seller shall ensure that user identifiers and verification passwords
are not shared and are protected from inadvertent disclosure. Seller shall
notify LFSC immediately in the event of suspected compromise of such user
identifiers and verification passwords or upon termination of a user's
business need for access.
6. LFSC may perform periodic audits of Seller's data sets residing on LFSC
computers.
c. Emergency Procedures
Seller shall instruct its employees to follow LFSC's emergency procedures
for the assigned LFSC work location. LFSC shall furnish Seller with a copy
of LFSC's Emergency Planning Program for the work
12
<PAGE>
location. Each Seller employee shall be briefed by Seller on his/her
assigned building and assembly area.
N. SELLER'S AGREEMENT WITH EMPLOYEES
It is the Seller's responsibility to advise each of its employees of the
specific conditions and procedures set herein and to obtain an appropriate
signed agreement with each employee, or others whose service Seller may
require, sufficient to ensure compliance with said conditions and
procedures for work performed on Buyer premises. Such agreements shall be
signed by Seller's employees prior to the start date of assignment. Upon
request, the Seller shall provide to the Buyer's procurement representative
a copy of the executed agreements between the Seller and its employees.
9. TRAVEL, SUBSISTENCE AND INCIDENTAL EXPENSES
Travel expenses incurred by the Seller for lodging, subsistence and
incidental expenses shall be considered to be reasonable and allowable only
to the extent that they do not exceed the rates and amounts established by
the General Services Administration. The Seller's certification of invoices
under this order shall be construed to be a certification that invoiced
travel cost are compliant with public law 99-234.
10. GOVERNMENT-INDUSTRY DATA EXCHANGE PROGRAM (GIDEP)
(a) The Seller shall provide and maintain procedures to enable his full
participation in the Government-Industry Data Exchange Program (GIDEP)
in compliance with MIL-STD-1556a. Compliance with this clause shall
not relieve the Seller from complying with any other provisions of the
contract.
(b) The Seller agrees to insert paragraph (a) of this clause in any
purchase order hereunder exceeding $100,000.00. When so inserted, the
word "Seller" shall mean any sub-tier vendor.
11. SECURITY CLASSIFICATION
The work to be performed under this Subcontract will involve access up to
and including SECRET material and/or information. The elements of
information and the appropriate level of security classification are
outlined in DD Form 254, "Contract Security Classification Specification",
dated XX which has been provided under separate cover and which is
incorporated herein and made a part hereof by this reference. All work must
be performed in accordance with the industrial security manual and all
revisions thereto.
13
<PAGE>
12. COMPUTER INFORMATION SECURITY
-----------------------------
Seller shall neither copy nor use computer programs, database or other
information stored in Buyer's computer systems, except as required in the
performance of work under this Purchase Order.
13. CONFLICT OF INTEREST
--------------------
The Seller warrants that, to the best of his knowledge and belief, and
except as may be otherwise set forth in this Subcontract, he does not have
any organizational conflict of interest. As used herein, the term
"organizational conflict of interest" means that a relationship exists
whereby a Seller (including his Chief Executives, Directors, proposed
Consultants or Subcontractors) has interests which (1) may diminish his
capacity to give impartial, technically sound, objective assistance and
advice or may otherwise result in a biased work product or, (2) may result
in any unfair competitive advantage. It does not include the "normal flow
of benefits" from the performance of a contract.
The Seller agrees that, if after award he discovers an organizational
conflict of interest with respect to this Subcontract, he shall make an
immediate and full disclosure in writing to the Buyer which shall include a
description of the action which the Seller has taken or proposes to take to
avoid, eliminate or neutralize the conflict. The Buyer may, however,
terminate the contract for the convenience of the Buyer if it would be in
the best interests of the Buyer.
In the event that the Seller was aware of the organizational conflict of
interest prior to award of this Subcontract and intentionally did not
disclose the conflict to the Buyer, or failed to disclose to the Buyer an
organizational conflict of interest which he became aware of after the
award of this Subcontract, the Buyer may terminate the contract at no cost
to the Buyer.
14. COST/SCHEDULE STATUS REPORTS (CSSR) REQUIREMENTS
------------------------------------------------
(a) The Seller shall establish, maintain and use in the performance of
this contract written management operating instructions that provide
for planning and control of costs, measurement of performance (value
for completed tasks), and generation of timely and reliable
information for input to the Cost/Schedule Status Report (C/SSR).
(b) The Seller shall be required to implement those instructions necessary
to ensure that timely and reliable information exists and will
continue to exist for the C/SSR reporting elements. The Seller's
instructions in operation must, as a minimum, provide for:
14
<PAGE>
(i) Establishing the time-phased budgeted cost for work scheduled,
the budgeted cost for work performed, the actual cost of work
performed, the budget at completion, and estimate at
completion;
(ii) Application of all direct and indirect costs and provisions for
the use and control of management reserve and undistributed
budget;
(iii) Handling changes to the contract budget base for both Buyer
directed changes and internal replanning;
(iv) Establishing sufficient constraints to preclude subjective
adjustment of data such that the use of the data for contract
performance measurement or status assessment becomes
questionable. In no case should the total allocated budget
exceed the contract budget base unless prior written approval
is provided by the Buyer;
(v) Establishing variance analyses thresholds, instructions and
capability to accurately identify and explain significant cost
and schedule variances both on a cumulative basis and projected
at completion basis;
(vi) Access to all pertinent records, instructions and data
requested by the Buyer during the contract.
(c) A summary written description consisting of the management
instructions used for generating C/SSR information will be identified
by title and date, and subject to the approval of the Buyer for use
under the contract. Such instructions shall be used by the Seller in
the performance of the C/SSR data item.
(d) Prior to Buyer's agreement that the Seller's instructions provide
reliable cost and schedule information and within (90) calendar days
after contract award (or as otherwise agreed to by the parties), the
Seller shall be prepared to familiarize the Buyer with the cost and
schedule information being generated in satisfaction of the C/SSR
contractual data requirements. As part of the familiarization process,
the Seller shall furnish the Buyer the summary written description of
the instructions that will provide for the generation of the C/SSR
data.
(e) Subsequent Seller changes to the instructions and summary written
description shall be submitted to the Buyer for review and approval
prior to implementation. The Buyer shall advise the Seller of the
acceptability of such changes within sixty (60) days after receipt
from the Seller.
15
<PAGE>
(f) The Seller agrees to provide access to all pertinent records,
instructions, and data requested by the Buyer for the purpose of
permitting surveillance to ensure continuing application of the
approved instructions in satisfying the C/SSR data item.
(g) The Seller shall require a subcontractor to furnish C/SSR's in each
case where a subcontract is other than firm fixed-price, and is 12
months or more in duration, and either:
(i) Has a dollar amount which exceeds $2 million, unless specifically
waived by the Buyer, or
(ii) Has a critical task relative to this contract. Critical tasks
will be defined by mutual agreement between the SELLER AND THE
BUYER.
(h) Each such subcontractor's reported cost and schedule information will
be incorporated into the Seller's C/SSR.
(i) If the Seller uses on this contract a cost/schedule control
system which previously has been accepted by a DoD component as
meeting the requirements of the DoD Cost/Schedule Control Systems
Criteria (C/SCSC) on a contract of the same nature (e.g.,
development, production, etc.), this system may be used to
satisfy all aspects of the management instructions for the
Cost/Schedule Control requirements of this contract.
(j) Contract Work Breakdown Structure (CWBS)
(i) The Seller shall develop the Contract Work Breakdown Structure
(CWBS) from the summary CWBS set forth herein. The summary CWBS
will provide the basis for any further extension by the Seller to
lower levels during the performance of the contract.
(ii) The Seller shall use the CWBS as a framework for contract
planning, budgeting, and reporting status of costs and schedule
to the Buyer. Major elements of work that are subcontracted will
be identified in the CWBS.
15. KEY PERSONNEL
-------------
The Loral team has identified the individual listed below from your company
as a "key person" for the GOSC effort.
The Subcontractor shall notify the Buyer prior to making any change in the
personnel identified below as a key individual to be assigned for
participation in the performance of this subcontract. The Subcontract
16
<PAGE>
or must demonstrate that the qualifications of the prospective successor
personnel are equal to or better than the qualifications of the personnel
being replaced.
The Subcontractor agrees that notification shall be a minimum of thirty
(30) days prior to the replacement of a "key person" performing under
this contract. Notification shall be written and include a resume of the
intended successor. Loral reserves the right to interview candidate
personnel.
Key Personnel by Name: Brian Davis
16. WEEKLY COST REPORTS
-------------------
In addition to Cost Reporting required by Paragraph 14 above, the
Subcontractor shall provide a weekly financial summary beginning the week
following the submission of the first monthly report. This report shall be
in a Seller prescribed, informal project oriented system. The objective is
to provide LFSG with information as close to attached "Schedule 2" as is
possible.
17. NOTIFICATION OF DOD FY95 APPROPRIATIONS ACT FUNDING
---------------------------------------------------
Seller is advised that prime contract payment for work required hereunder
will be made with Department of Defense funds subject to the Defense
Appropriations Act of 1995 (PL 103-335).
18. ORDER OF PRECEDENCE
In the event of an inconsistency in this Purchase Order, unless otherwise
provided herein, the inconsistency shall be resolved by giving precedence
in the following order.
a) This Subcontract including Attachment 3 Special Provisions and
Schedule A
b) DD-254, DOD Contract Security Classification Specification
c) Attachment 1, LFSC Terms and Conditions, dated 07/94
d) Attachment 2, STATEMENT OF Work, including its Appendices and
Attachments
e) Attachment 4, OCS Subcontract Award Fee Plan
f) Attachment 5, Certifications and Representations, dated
February 23, 1995
g) Attachment 6, Confidential Disclosure Agreement, dated October 18,
1994
17
<PAGE>
19. ACCEPTANCE
----------
This Purchase Order is the entire agreement between Buyer and Seller. It
supersedes all prior agreements, oral or written and all other
communications relating to the subject matter of this Purchase Order.
Any terms contained in Seller invoices, acknowledgements, shipping
instructions or other forms that are inconsistent with or different from
this Purchase Order shall be void and of no effect.
This Purchase Order is executed in duplicate originals as of the date
specified on page one.
Please sign and return this purchase Order to LFSC within ten (10) working
days after receipt.
LFSC
Seller:
By: /s/ Gary G. Goodes By: /s/ Don F. Riordan, Jr.
-------------------------- --------------------------
Title: Mgr. Subcontracts Title: Secretary/Treasurer
----------------------- -----------------------
Date: 4 August, 1995 Date: 1 August 1995
------------------------ ------------------------
<PAGE>
Exhibit 10(vi)
[logo ALLIEDSIGNAL]
AERSOSPACE
ALLIEDSIGNAL TECHNICAL SERVICES CORPORATION
One Bendix Road
Columbia, Maryland 21045-1897
Telephone 410-964-7000
Send All Invoices to
THE ACCOUNTS PAYABLE DEPT.
One Bendix Road
Columbia, Maryland 21045-1897
PURCHASE ORDER NUMBER: FE
-------------- HQ 284299 S 010
DATE ISSUED:
10/20/93 08/19/96
PAGE
1
Ship to Destination Indicated by "X" in Box Below.
[XX] One Bendix Road
Columbia, Maryland 21045-1897
[__]
TO: SOFTWARE TECHNOLOGY
1229 EVANS ROAD
MELBOURNE, FL 32904 2314 TERMS OF PAYMENT:
-----------------
ATTN: NET 30
PHONE NO.: CONTRACT NO: FOB:
------------ ----
437/723-3999 93-C-4717 NOT APPLICABLE
SHIP VIA:
---------
NOT APPLICABLE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ITEM QUANTITY U.M. PART NUMBER PART DESCRIPTION TAX UNIT PRICE EXTENDED PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
256
130 1.000 4.0 WBS 3.6 001 SOFTWARE SERVICES 256 N 982,925.000 982,925.00
ADVANCED DATA ANALYSIS
COST: 911,804
FIXED FEE: 71,121
140 1.000 1.0 WBS 3.7 002 SOFTWARE SERVICES N 146,949.000 146,949.00
SYSTEM ENGINEER
COST: 131,316
FIXED FEE: 10,633
150 1.000 1.0 WBS 3.8 003 SOFTWARE SERVICES N 612,088.000 612,088.00
S/W ENG SUPPORT
COST 567,800
FIXED FEE: 44,288
160 1.000 1.0 WBS 3.1 006 SOFTWARE SERVICES N 81,000.000 81,000.00
TRAVEL
COST: 81,000
170 1.000 1.0 WBS 3.13 SOFTWARE SERVICES N 381,203.000 381,203.00
MOCS LABOR 282
- ------------------------------------------------------------------------------------------------------------------------------------
DELIVERY DATE
- -------------
08/31/97
08/31/97
08/31/97
08/31/97
08/31/97
- --------------------------------------------------------------------------------
</TABLE>
DELIVER TO:
- -----------
BOB ALLISON
- --------------------------------------------------------------------------------
BUYER (PRINTED NAME)
- --------------------------------------------------------------------------------
D. FORTE
- --------------------------------------------------------------------------------
BUYER (FULL WRITTEN SIGNATURE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Official conditions applying to this order are checked (x) or noted below.
[_] Certified Defense Priorities And Allocations System (DPAS) Rating
Seller is Required To Follow All Provisions of DPAS (15 CFR Part 350).
[_] This is to certify that the material purchased on this order, designated
above as non-taxable, is for resale and is exempt from either the Maryland
retail sales act (Purchaser's license No. 01631124) or the taxing authority
as designated by appropriate comments in the P.O. text.
This order is subject to the General Purchase Order Provisions set forth on
attached form GP/AS (6-93) & SP/FFP (1/93) AS REQD
Acceptance of this purchase order by the seller constitutes an acceptance of all
the terms and conditions and specifications contained in, attached to, or
referenced by this purchase order.
- --------------------------------------------------------------------------------
The acceptance of the material on this order is dependent upon proper
identification of each line item as shown on this purchase order. Each line item
must be identified by item number, part number and quantity. In the event a
direct substitute is made the item must show the substitute part number and the
original part number as shown on the purchase order. MIL packaging not required
unless specified.
THIS ORDER MUST BE ACKNOWLEDGED ON ATTACHED RETURN ACKNOWLEDGEMENT COPY
---------------------------
<PAGE>
PURCHASE ORDER
--------------
<TABLE>
Send All Invoices to NUMBER: FE HQ 284299 S 010
THE ACCOUNTS PAYABLE DEPT.
One Bendix Road DATE ISSUED: 10/20/93 08/19/96
Columbia, Maryland 21045-1897
PAGE 2
[LETTERHEAD OF ALLIED SIGNAL] Ship to Destination Indicated by "X" in Box Below.
[XX] One Bendix Road
Columbia, Maryland 21045-1897
TO: SOFTWARE TECHNOLOGY
- -- 1225 EVANS ROAD [_]
MELBOURNE, FL 32904 2314 TERMS OF PAYMENT:
----------------
ATTN: NET 30
PHONE NO.: 407/723-8998 CONTRACT NO.: 93-C-4717 FOB: NOT APPLICABLE
------------ ---
SHIP VIA: NOT APPLICABLE
--------
- ------------------------------------------------------------------------------------------------------------------------------------
ITEM QUANTITY U.M. PART NUMBER PART DESCRIPTION TAX UNIT PRICE EXTENDED PRICE DELIVERY DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COST: 353,621
FIXED FEE: 27,582
180 1.000 LO WBS 3.13 SOFTWARE SERVICES N 27,750.000 27,750.00 08/31/97
MCCS TRAVEL
COST: 27,750
NOTE:
THIS AMENDMENT ADDS LINE ITEMS 13 THRU 18 TO THE
ORDER, EXERCISING OPTION FOR P.O.P. 9/1/96 THRU
8/31/97.
OLD PO TOTAL: $5,871,617.00
NEW PO TOTAL: $8,104,532.00
INCREASE OF : $2,231,915.00
* * * * END OF PURCHASE ORDER * * * * TOTAL 2,231,915.00
- ------------------------------------------------------------------------------------------------------------------------------------
Special conditions applying to this order are checked (x) or noted below. | DELIVER TO: BOB ALLISON
----------------------------------------------
[XX] Certified Defense Priorities And Allocations System (DPAS) Rating XXX | BUYER (PRINTED NAME)
Seller Is Required To Follow All Provisions Of DPAS (15 CFR Part 350) |
[XX] This is to certify that the material purchased on this order, designated above as non-taxable, |
is for resale and is exempt from either the Maryland retail sales act (Purchaser's license |
No. 01631124) or the taxing authority as designated by appropriate comments in the P.O. text. | D. FORTE
--------------------------------
| BUYER (FULL WRITTEN SIGNATURE)
--------------------------------
This order is subject to the General Purchase Order Provisions set forth on attached form GP/AS |
(6-93) & SP/FFP (1/93) AS REQD |
Acceptance of this purchase order by the seller constitutes an acceptance of all the terms and |
conditions and specifications contained in, attached to, or referenced by this purchase order. |
- ----------------------------------------------------------------------------------------------------
The acceptance of the material on this order is dependent upon proper identification of each line
item as shown on this purchase order. Each line item must be identified by item number, part
number and quantity. In the event a direct substitute is made the item must show the substitute
part number and the original part number as shown on the purchase order. MIL packaging not
required unless specified.
THIS ORDER MUST BE ACKNOWLEDGED ON ATTACHED RETURN ACKNOWLEDGEMENT COPY
---------------------------
</TABLE>
<PAGE>
Exhibit 23 (i)
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------
We consent to the reference to our firm under the captions "Experts" and
"Financial Statements" and to the use of our audit reports on Software
Technology, Inc. dated August 15, 1996, March 22, 1996, and March 31, 1995 and
on Exigent International, Inc., dated September 6, 1996 in the Form S-1
Registration Statement filed on behalf of Exigent International, Inc. for the
registration of 3,520,245 Common Shares and 1,070,270 Common Stock Purchase
Warrants of Exigent International, Inc. under Section 8(a) of the Securities Act
of 1933.
Dated: October 15, 1996 Hoyman, Dobson & Company, P.A.
By: /s/ Charles W. Hoyman, Jr.
------------------------------------
Title: President
---------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Financial Statements of Software Technology, Inc. for Fiscal Year Ended January
31, 1996 and for the Six Months Ended July 31, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> JAN-31-1996 JUL-31-1996
<PERIOD-START> FEB-01-1995 FEB-01-1996
<PERIOD-END> JAN-31-1996 JUL-31-1996
<CASH> 270 1,908
<SECURITIES> 0 0
<RECEIVABLES> 6,149 4,989
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 6,763 7,483<F1>
<PP&E> 2,687 3,188
<DEPRECIATION> 1,474 1,758
<TOTAL-ASSETS> 8,248 9,214
<CURRENT-LIABILITIES> 3,345 2,035
<BONDS> 10 452
<COMMON> 8 8
0 0
0 0
<OTHER-SE> 4,885 6,719
<TOTAL-LIABILITY-AND-EQUITY> 8,248 9,214
<SALES> 0 0
<TOTAL-REVENUES> 25,292 11,425
<CGS> 0 0
<TOTAL-COSTS> 19,408 8,823
<OTHER-EXPENSES> 3,996 2,238
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 26 22
<INCOME-PRETAX> 1,887 646
<INCOME-TAX> 755 273
<INCOME-CONTINUING> 1,132 373
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,132 373
<EPS-PRIMARY> 1.67 0.54<F2>
<EPS-DILUTED> 0.25 0.08<F3>
<FN>
<F1> These numbers include accounts receivable and costs and estimated earnings
in excess of billings on uncompleted contracts.
<F2> Earnings per share are as reflected on the financial statements of Software
Technology, Inc. prior to the reorganization; the weighted average number
of shares outstanding for such fiscal year ended January 31, 1996 and six
months ended July 31, 1996 were 678,768 and 697,320, respectively.
<F3> Earnings per share fully diluted are earnings per share adjusted to reflect
the number of shares issued and outstanding after the reorganization
(4,483,920 shares).
</FN>
</TABLE>
