UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the fiscal year ended December 31, 1998
Transition report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the transition period from ________ to ___________
Commission file number: 333-5753
Exigent International, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 59-3379927
(State of Incorporation) (I.R.S. Employer
Identification Number)
1225 Evans Road, Melbourne, Florida
32904-2314 (Address of principal executive
offices) (Zip code)
407-952-7550
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b)of the Act:
Title of Securities Exchanges on which Registered
Common Shares, $0.01 par value per share Nasdaq SmallCap Market
The Chicago Stock Exchange
Common Stock Purchase Warrants Nasdaq SmallCap Market
The Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, $0.01 par value per share
Common Stock Purchase Warrants
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___
As of March 12, 1999, the aggregate market value of the Common Stock of the
Registrant (based upon the average bid and ask prices of the Common Stock as
reported by the market makers) held by non-affiliates of the Registrant was
approximately $12,698,283.
The number of shares outstanding of the registrant's Common Stock on March
12, 1999 was 4,192,153.
Documents Incorporated by Reference
Portions of the Proxy Statement for the 1999 Annual Meeting of
Stockholders to be held June 30, 1999 (to be filed with the Securities and
Exchange Commission on or before April 30, 1999) are incorporated by reference
into Part III hereof.
<PAGE>
TABLE OF CONTENTS
PART I......................................................................4
Item 1. Business...........................................................4
Item 2. Properties.........................................................9
Item 3. Legal Proceedings..................................................9
Item 4. Submission of Matters to a Vote of Security Holders................9
PART II....................................................................10
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters..............................................10
Item 6. Selected Financial Data...........................................11
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................12
Item 8. Financial Statements and Supplementary Data.......................12
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosures.........................12
PART III...................................................................44
Item 10. Directors and Executive Officers of the Registrant...............44
Item 11. Executive Compensation...........................................44
Item 12. Security Ownership of Certain Beneficial Owners
and Management..................................................44
Item 13. Certain Relationships and Related Transactions...................44
PART IV....................................................................45
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.............................................45
SIGNATURES.................................................................49
<PAGE>
PART I
Item 1. Business
The Business section, Management's Discussion and Analysis of
Financial Condition and Results of Operations and other parts of this Form 10-K
contain certain statements that are not historical facts which are
"forward-looking statements," and can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates," the negatives thereof or other variations thereon or
comparable terminology, and include statements as to the intent, belief or
current expectations of Exigent International, Inc. and its subsidiaries
("Exigent" or the "Company") and its directors, officers and management with
respect to future operations, performance or position of the Company. These
forward-looking statements are predictions. No assurances can be given that the
future results indicated, whether expressed or implied, will be achieved.
The Company
Exigent International, Inc. is a holding company, incorporated on
March 25, 1996 to capitalize on emerging opportunities in the fields of
satellite command and control and telecommunications. Exigent was formed by
Software Technology, Inc., a Florida corporation ("STI"), to acquire and hold
all of the issued and outstanding stock of STI. On January 30, 1997, Exigent
acquired all of the issued and outstanding STI stock in exchange for 3,486,600
Exigent Common Shares and 697,320 Exigent Class A Preferred Shares (the
"Exchange"). Exigent also issued 645,270 Warrants in exchange for STI warrants
held by STI shareholders. Upon the completion of the Exchange, STI became a
wholly owned subsidiary of Exigent. In addition, on January 30, 1997, the
Company issued 425,000 Warrants to Monogenesis Corporation.
As shown in the following chart, Exigent presently operates through
three wholly-owned subsidiaries. These are STI, FotoTag, Inc., a Delaware
corporation ("FTI"), and Middleware Solutions, Inc., a Nevada corporation
("MWare"):
Exigent International, Inc.
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Software Technology, Inc. FotoTag, Inc. Middleware Solutions, Inc.
The Company, through STI, has designed and deployed satellite command
and control and telecommunications systems for more than twenty years. The
Company has provided ground control solutions for dozens of commercial and
government projects, ranging from single spacecraft to the largest satellite
constellations.
As world-wide demand for satellite-based applications has increased,
Exigent has responded by developing a suite of commercial-off-the-shelf ("COTS")
products based on the Company's decades of experience in building such systems.
Exigent engineers also provide system integration support for customers
throughout the United States.
<PAGE>
Software Technology, Inc.
Since its formation in 1978, STI has provided custom and COTS
software, systems engineering, and software engineering services to a wide range
of industry and government clients including:
o Agencies and departments of the U.S. government that use satellites
for research, communication, or in defense programs.
o Commercial telecommunication companies, particularly those focused on
low-earth-orbit ("LEO") satellite systems providing wireless telephone
services and paging.
o Commercial and government customers that require MIS and data base
development services.
o Commercial launch facilities and contractors that provide commercial
launch services.
o Aerospace and defense contractors that develop computerized weaponry
and defense systems employing satellite technology, especially
embedded software systems.
o Value Added Resellers ("VARs") and strategic partners that develop
custom or specialized computer applications.
o Engineering firms that require software design and development
services.
In addition to providing general-purpose and customized engineering
solutions, the Company has developed the OS/COMET(TM)(1) family of products:
This suite of command and control software products is the Company's flagship
software offering. Originally developed for the support of satellite ground
stations, and for spacecraft integration and testing, this related group of
software products has evolved into a general-purpose, integrated tool set. These
COTS programs provides a real-time command, control, and data acquisition
environment for government and commercial solutions. OS/COMET products can be
adapted to many complex control situations, on the ground or in space. OS/COMET
executes on POSIX-compliant UNIX(R)(2) workstations and makes extensive use of
the "X Window System(3)" and the "OSF/Motif (4)" graphical user environment
standards. It includes the following family of products:
OS/COMET is in current use in the world's two largest satellite
constellations, Iridium(R)(5) and GPS. OS/COMET is the control system used for
each Iridium satellite as well as the constellation overall. "Iridium" is a
global wireless communication system built by a consortium of investors lead by
Motorola, Inc. Iridium offers local calling and paging anywhere on the planet
through a constellation of 66 Low Earth Orbit ("LEO") satellites (plus six
on-orbit spares). As a result of the STI's performance on the Iridium program,
coupled with a long-term strategic agreement between Motorola and Exigent,
Exigent was selected by Motorola as the preferred supplier of command and
control software for the Celestri(6) and future communication systems (including
Teledesic, a constellation of broadband satellites conceived to be the "Internet
in the Sky").
OS/COMET was also selected to upgrade the ground station software for
the NAVSTAR Global Positioning System ("GPS"). A project of the United States
Air Force, the 24-satellite GPS constellation provides worldwide all- weather
positioning, navigation data, and nuclear detonation detection. GPS's 24
satellites provide worldwide navigation data for military and civilian aircraft,
spacecraft and land and marine applications.
OS/ICC (Integrated Control Center) is a versatile, extensible, and
scaleable suite of services and equipment that combines industry-leading
hardware and software products into an integrated solution. OS/ICC can be used
"out of the box" in its standard form, and yet is highly customizable for
special customer applications. The purpose of the OS/ICC is to provide seamless
software and hardware reuse and automation across the whole mission life-cycle,
from early mission planning and modeling, through vehicle testing, all the way
to on-orbit spacecraft management. It is designed to handle projects ranging
from single satellites to large constellations.
- - --------
(1) OS/COMET is a trademark of Exigent International, Inc.
(2) UNIX is a registered trademark in the United States and other countries,
licensed exclusively through X/Open Company, Limited.
(3) X Window System is a trademark of the Massachusetts Institute of
Technology.
(4) OSF/Motif is a trademark of the Open Software Foundation.
(5) IRIDIUM is a registered trademark and service mark of Iridium LLC (1997)
(6) Celestri is a trademark of Motorola,Inc.
<PAGE>
Calypso and Calypso Pro products are telemetry data decommutation
and distribution tools; the "Pro" suffix indicates an extensible version of the
basic product. These are cost-effective, easy-to-use and are designed for use in
single-node applications and test beds that do not require the complex
functionality of the more advanced products such as OS/COMET or OS/COMET Solo.
The Pluto Satellite Tool Kit deploys complex model architecture and
numerous core components for the creation of a "virtual satellite." The
satellite model so generated can be defined to be identical to an actual
spacecraft. Pluto's object-oriented architecture breaks the satellite into a set
of user-defined sub-systems, using standard object-oriented programming
techniques.
FotoTag, Inc.
FTI was formed in 1997 to provide improved efficiency and security in
the public transportation environment. FTI develops and markets internationally
a passenger/baggage reconciliation system, "FotoTag(R)(7)", for use by airlines,
airports, and other commercial transportation systems such as cruise lines or
railroads. Sales venues for Fototag products and services include foreign and
domestic airlines, and foreign and domestic agencies that control airports and
airport security.
The FotoTag product is primarily an airport passenger/baggage
reconciliation system. It is expected to provide enhanced departure control
facilities, improve passenger servicing, and reduce airline and airport
management costs. The system uses IATA-standard barcode, "smart card", and
radio-frequency identification (RFID) technology, coupled with compressed
digital photography. The FotoTag system captures passenger images and associates
this visual information with itinerary, baggage, and related travel documents.
Middleware Solutions, Inc.
MWare is an eCommerce company formed by the Company in 1998. MWare
develops inexpensive, high-performance message-oriented middleware ("MOM")
products, and distributes them directly to the end-user over the Internet or on
CD through the mail.
MWare's first product is InterPlay for Windows. InterPlay is an
advanced MOM publish/subscribe tool that provides an application-transparent
messaging facility for ActiveX environments such as Microsoft's Visual Basic,
Visual C++, and Inprise's C++ Builder 3. InterPlay provides developers with a
networking system for the Microsoft(R) Windows(R)(8) environment, priced
substantially below existing products. InterPlay is intended to make
sophisticated cost-effective networking available to the millions of application
developers currently working in the Windows world. The target audience for this
product includes programmers who are developing software for the high-volume
commercial marketplace (business applications, games, etc.), as well as those
producing in-house applications, at any scale from just a few up to thousands of
network nodes. InterPlay supports virtually any network type or topology,
whether local- area (LAN), wide-area (WAN), or the WorldWide Web.
Software Development
Exigent invested substantial funds on software development for the
development or enhancement of products which management believes are
commercially marketable. Generally, most of the Company's software development
relates to satellite command and control, developing systems for the ground and
space segments of the aerospace/defense industry, and telephone systems
providers in the telecommunications industry.
- - --------
(7) FotoTag is a registered trademark of Exigent International, Inc.
(8) Microsoft and Windows are registered trademarks of Microsoft Corporation.
<PAGE>
Exigent invests significantly in product development. The Company
capitalized $3,906,643, $1,149,685, and $556,167 of product development in the
fiscal years ended December 31, 1998 and January 31, 1998, and 1997,
respectively. These amounts include investments allocated to the OS/COMET family
of products and FTI.
Exigent expensed $180,673, $47,854, and $239,986 in its fiscal
years ended December 31, 1998, January 31, 1998 and 1997, respectively, on
internally sponsored research and development. These expenditures were made for
the evaluation of new products and technologies to expand and enhance the
Company's products and services.
Marketing and Sales
The Company relies upon senior corporate management, sales and
marketing personnel, project managers and senior technical staff to carry out
its marketing program, including the development and execution of marketing
plans, proposal presentations and the performance of related tasks. These
individuals collect information concerning requirements of current and potential
customers in the course of contract performance and formal and informal
briefings, from published literature and through participation in professional
and industry organizations. Senior management evaluates this information,
identifies potential business opportunities and coordinates proposal efforts.
The primary source of business in the Company's existing markets is by referral
from existing customers. Additionally, the Company advertises extensively in
various industry publications and participates in various trade shows, including
the recent "Satellite99 Conference".
The Company distributes its products and services and licenses
its products (a) indirectly through VARs and (b) directly to end users.
Revenue Sources
The Company's revenues are currently dependent on three
significant customers, the Naval Research Laboratory ("NRL"), Motorola, Inc.
("Motorola") and Lockheed Martin Corporation ("Lockheed"). Aggregate sales to
each of NRL, Lockheed, and Motorola for the Company's fiscal year ended December
31, 1998 were in excess of 10% of the Company's consolidated revenues. The loss
of NRL, Motorola or Lockheed as a customer would have a material adverse effect
on the business, results of operations, and financial condition of the Company
and its subsidiaries taken as a whole. During the eleven months ended December
31, 1998, the Company entered into a contract with a new government customer
which may extend into October 2003 with an initial value estimated at
$7,500,000. This effort is to provide applications system engineering related to
the client's management information system. The Company expects business with
this organization to grow and provide revenue in addition to that anticipated
from above named customers.
The government contracts to which the Company is a party are
subject to termination at the election of the contracting government entity.
See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 12 to the Financial Statements for
additional information on the Company's dependence on certain customers.
Contracts
Generally, the Company's 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 included. If
the goals are met in fewer hours, the contract value is reduced. If it takes
more hours than estimated to meet goals, the resulting fee percentage is reduced
on a pro rata basis based on cost of actual hours delivered versus the cost of
hours estimated in the contract.
Most of the Company's commercial contracts are "firm fixed price"
or "time and material" 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 development costs yield a result that is
less than the estimate for the fixed price, the Company will make a greater
profit on that contract. If development costs exceed the estimated effort for
the fixed price, the Company will have less profit on that contract. These types
of contracts are typically broken down into a set of milestones with payments
made at each milestone. These are generally called earned value milestones and
are used to benchmark progress, help the customer track status, and provide
trigger points for payments.
STI has several contracts with the NRL. Its largest contract with
NRL, which relates to space systems applications and operations, was renewed in
May 1998. It provides for services to be performed over five years, with a total
estimated cost of $57,167,518 and a fixed fee of $4,370,901. As of December 31,
1998, STI had received cost payments and fees in the aggregate of $7,930,077
under the contract. The contract with Lockheed relates to a GPS project with the
U.S. Air Force. It began in August 1995 and continues through September 30, 2000
unless modified by Lockheed. STI received $3,744,421 under this contract for the
Company's fiscal year ended December 31, 1998 with a funded backlog at that time
of approximately $1,173,248.
STI has various contracts with Motorola, some of which are fixed
price contracts and some of which are time and material contracts. Most of the
revenues from Motorola in the past four years were received under an agreement
executed in February 1994 under which STI agreed to provide Motorola with
satellite and ground control software for the system control segment of the
IRIDIUM communications system. STI expects to receive payments under the
contract for several more years. As of December 31, 1998, STI had received
approximately $44,206,259 from Motorola under this and other contracts. The
backlog as of December 31, 1998 for Motorola was $277,500. In addition to its
base business with Motorola, in January 1998 the Company entered into a
strategic alliance with Motorola in the pursuit of space programs. Over the
eleven months ended December 31, 1998, the Company invested in excess of
$1,000,000 in support of this strategic alliance.
STI also receives revenues from Allied Signal Technical Services
Corporation ("Allied") under various purchase orders. It has received
approximately $676,511 from Allied during the fiscal year ended December 31,
1998 and approximately $309,964 in backlog remains under existing purchase
orders.
Based on the development plans and schedule to incorporate
customer features and functionality, there were no revenues generated by FTI in
the Company's fiscal year ended December 31, 1998. Exigent expects its FotoTag
products to begin generating revenues in the second quarter of the 1999 fiscal
year, given that its airline and airport passenger/baggage reconciliation system
is now fully operational.
Backlog
Exigent estimates that its backlog orders believed to be firm as
of December 31, 1998 and January 31, 1998 were $14,040,033 and $11,334,085,
respectively. Approximately $7,451,567 of the backlog in the Company's fiscal
year ended December 31, 1998 relates to the unfunded portion of awarded
government contracts. There is additional value of $45,336,441 in
not-yet-awarded task orders on the Company's direct contract with the Naval
Research Laboratory, which are expected to be awarded and funded over the next
three to four fiscal years.
Competition
The Company experiences significant competition in all of the
areas in which it does business. The Company believes it is one of four
companies in the United States which derive the major portion of their revenue
from the development of satellite ground systems. The Company competes with
numerous companies having similar capabilities, some of which are larger and
have considerably greater financial resources, including Lockheed Martin
Corporation, Loral Space & Communications Ltd., Boeing, Hughes, TRW, Honeywell,
L-3 Communications Holdings, Orbital Sciences Corporation, AlliedSignal,
Computer Sciences Corporation, Alcatel Espace and Matra Marconi Space. In
addition, several smaller companies have specialized capabilities in similar
areas. In general, the markets in which the Company competes are not dominated
by a single company; instead, a large number of companies offer services that
overlap and are competitive with those offered by the Company. There can be no
assurance that the Company will be able to compete successfully.
Patents, Trademarks and Licenses
The Company has filed patent applications, some of which are
utilized in its operations. While such patent applications and any resulting
patents, in the aggregate, may become important to the operation of the
Company's business, no existing patent application is of such importance that
its loss or failure to result in one or more patent claims would, in the opinion
of management, materially affect the Company's business.
The Company has received a registration in Class 9 for the
Trademark OS/COMET (Registration No. 2,165,377) for computer software for
development of satellite communication systems, namely satellite integration and
testing, ground station support and real time telemetry processing and display.
Employees
As of December 31, 1998, the Company had 303 employees.
Item 2. Properties
Exigent's corporate headquarters are located in Melbourne,
Florida on the "Space Coast" near NASA's Kennedy Space Center. In February 1998,
Exigent, through STI, occupied a leased building of approximately 30,000 square
feet which houses the Exigent corporate headquarters, product development and
FotoTag. The lease is for a ten-year period expiring February 28, 2007. An
adjacent 29,000 square foot building is also leased by STI under a ten-year
lease, which will expire on December 1, 2005, and it houses technical employees.
Exigent has three additional offices in the greater Washington,
D.C. area, which are predominantly staffed with technical employees. In
September 1998, Exigent, through STI, renewed its existing lease of 15,296
square feet, located in Alexandria, Virginia, under a five-year lease, which
will expire on August 31, 2003. In December 1998, Exigent, through STI, occupied
an additional leased building of approximately 11,188 square feet, located in
Chantilly, Virginia, under a five-year lease, which will expire on November 30,
2003. In La Plata, Maryland, the Company leases an office of approximately 1,935
square feet under a month-by-month lease.
Exigent also leases approximately 2,494 square feet in Aurora,
Colorado under a three year lease expiring October 31, 1999, approximately 797
square feet in Aurora, Colorado under a three year lease expiring April 30,
2001, approximately 1,946 square feet in Colorado Springs, Colorado under a
three year lease expiring July 1, 2000, and approximately 2,971 square feet in
Mesa, Arizona under a three year lease expiring November 20, 1999. These
buildings are predominantly staffed with technical employees.
Management believes that its occupancy needs will be met through
the Company's next fiscal year. Due to the nature of the Company's business,
there are no special facility requirements to consider, given that software
development can be conducted in standard office space and its manufacturing
requirements are minimal and most often handled through outsourcing.
Item 3. Legal Proceedings
There are no material pending legal proceedings to which Exigent
or its subsidiaries or their properties are a party or were a party during the
fourth quarter of the Company's fiscal year ended December 31, 1998.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Trading of Exigent's Common Shares and Common Stock Purchase
Warrants during the fiscal year ending December 31, 1998 were reported on the
NASDAQ Electronic Bulletin Board (the "Bulletin Board") under the symbols XGNT
and XGNTW, respectively through February 26, 1999. Exigent received approval for
initial inclusion on the Nasdaq SmallCap Market on February 22, 1999. Trading
began on the Nasdaq SmallCap Market on March 1, 1999. Exigent Common Shares and
Common Stock Purchase Warrants are also traded on the Chicago Stock Exchange
under the symbol XNT and XNTW, respectively. There is no established trading
market for the Company's Class A Preferred Shares.
<PAGE>
The following table represents the high and low bid prices for
the Company's Common Shares and Common Stock Purchase Warrants for each quarter
of its fiscal year ended December 31, 1998, and each of the second, third and
fourth quarters of the fiscal year ended January 31, 1998, as reported in the
Daily Trade and Quote Summary provided by the Bulletin Board:
<TABLE>
<CAPTION>
Common Stock
Common Shares Purchase Warrants
Fiscal Year Ended 12/31/98 High Low High Low
<S> <C> <C> <C> <C> <C>
4th Quarter $4.13 $2.44 $1.125 $0.625
3rd Quarter $4.38 $2.75 $1.875 $0.53125
2nd Quarter $6.00 $3.81 $3.375 $1.375
1st Quarter $4.00 $2.94 $1.5625 $0.6875
Fiscal Year Ended 1/31/98
<S> <C> <C> <C> <C> <C>
4th Quarter $4.25 $2.75 $1.50 $0.625
3rd Quarter $4.13 $2.13 $1.00 $0.25
2nd Quarter $2.25 $2.00 $0.25 $0.0625
</TABLE>
The approximate number of holders of Common Shares of Exigent as
of March 12, 1999 is 1,093 (based upon the number of record holders), excluding
stockholders whose Common Shares are held in nominee or street name by brokers.
The approximate number of holders of Exigent's Common Stock Purchase Warrants as
of March 12, 1999 is 1,219 (based upon the number of record holders), excluding
holders whose Common Stock Purchase Warrants are held in nominee or street name
by brokers.
For the Company's fiscal years ended December 31, 1998 and
January 31, 1998, the Board of Directors determined not to pay any dividends for
the foreseeable future, but instead to use cash for product development and
operations.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Eleven months
ended Years Ended January 31
<S> <C> <C> <C> <C> <C>
(Amounts in thousands except per share amounts) 12/31/98 1998 1997 1996 1995
------------ ---- ---- ---- ----
Revenues $ 31,139 $ 35,749 $ 29,936 $ 25,292 $ 19,761
Cost of Sales (23,401) (26,422) (24,689) (19,408) (16,064)
---------- -------- -------- --------- ---------
Gross Profit $ 7,738 $ 9,327 $ 5,247 $ 5,884 $ 3,697
General and Administrative Expenses (6,823) (7,050) (5,344) (3,841) (2,539)
Research and Development Costs (181) (48) (240) (155) (102)
---------- -------- -------- --------- ---------
Operating Income (Loss) 734 2,229 (337) 1,888 1,056
Total Other Income (Expense) (136) (53) 1 (1) 20
---------- -------- --------- ------- ---------
Income (Loss) before Taxes 598 2,176 (336) 1,887 1,076
Income Tax Expense (180) (831) (150) (755) (354)
---------- -------- --------- -------- ---------
Net Income (Loss) $ 418 $ 1,345 $ (486) $ 1,132 $ 722
---------- -------- --------- -------- ---------
Income per Weighted Average Common Shares
Outstanding - Diluted $ 0.08 $ 0.29 $ (0.13) $ 0.29 $ 0.19
Cash Dividends $ -- $ -- $ (310) $ (178) $ (89)
Cash Dividends Paid per Share Outstanding $ -- $ -- $ 0.08 $ 0.05 $ 0.03
Total Assets $ 15,664 $14,693 $ 10,949 $ 8,328 $ 6,471
Total Long-Term Liabilities
(Excluding Deferred Income Taxes) $ 428 $ 467 $ 317 $ 10 $ 17
Total Stockholders' Equity $ 8,629 $ 7,781 $ 6,258 $ 4,893 $ 3,939
Stockholders' Equity per Weighted Average
Common Share, Outstanding - Diluted $ 1.67 $ 1.67 $ 1.72 $ 1.27 $ 0.88
Dividends Declared per Weighted Average
Common Share, Outstanding - Diluted $ -- $ -- $ 0.08 $ 0.05 $ 0.02
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company has changed the last day of its fiscal year from January
31 to December 31. Hence, the Company's most recent fiscal year was an
eleven-month period ending on December 31, 1998.
Liquidity
As of December 31, 1998 and January 31, 1998, the Company's ratio of
current assets to current liabilities was 1.7 and 1.9, respectively. As of
December 31, 1998, the Company's quick liquidity ratio was 1.4, down from 1.8
for the year ended January 31, 1998. This decrease is due to the decrease in
cash due to significant investment in software development and product
enhancements over the eleven months ended December 31, 1998 along with a delay
in the planned product sales on several key government projects.
The Company's cash portfolio (cash and cash equivalents) decreased
$3,210,538 for the eleven months ended December 31, 1998. This decrease was due
to cash used in investing activities of $4,900,806 and by operating activities
of $204,878, offset by cash provided by financing activities of $1,895,146. The
cash used in investing activities decreased due to an investment in software
development of $3,905,349 and an investment in Company facilities and capital
equipment of $1,002,041. By comparison, the Company's cash portfolio increased
$3,211,803 for the year ended January 31, 1998. This increase was due to cash
provided by operating activities of $5,239,810 and cash provided by financing
activities of $413,759 less cash in the amount of $2,441,766 used in investing
activities. The cash provided by operating activities increased primarily due to
an increase in cash received from customers through a significant increase in
product sales.
In the Company's fiscal years ended December 31, 1998 and January 31,
1998 and 1997, Exigent invested $1,002,041, $1,306,693 and $1,382,163 in capital
assets, respectively. The expenditure in the eleven months ended December 31,
1998 was due largely to the completion of remodeling and furnishing the Company
facilities as well as the installation of a wide area network serving all of the
Company's principal facilities. The expenditure in the fiscal year ended January
31, 1998 was due primarily to an investment made in computing resources to
support the demonstration of the Company's products and capabilities in an
integrated control center. The expenditures in prior fiscal years were made to
support programs and for the modernization of office equipment. In the Company's
fiscal year ended January 31, 1998, the Company made a decision to lease most
new equipment for its computing needs. Capital for equipment purchases is
expected to remain stable for the next two fiscal years as the Company has now
modernized, and has acquired computer resources for expected near-term
operations. The Company will continue its policy of leasing resources for office
computing needs.
In the Company's fiscal years ended December 31, 1998 and January 31,
1998 and 1997, the Company spent $3,905,349, $1,149,685 and $556,167,
respectively, in capitalized software development costs to develop new products
considered essential in maintaining a strong market position in the satellite
command and control industry as well as the airport security industry. During
the fiscal year ended January 31, 1998, the Company completed a thorough review
of the economic life of its capitalized software, and concluded that a change
was needed in its amortization policy to more closely match the time span
between major releases. The amortization life was therefore reduced from three
years to two years.
Cash provided by financing activities for the Company's fiscal year
ended December 31, 1998 was $1,895,146. This was comprised of $1,811,093
borrowed against the line of credit to finance operations, $511,111 borrowed
through Huntington National Bank to consolidate the outstanding term loans with
SunTrust, offset by $345,506 in principal payments on long-term debt and
$511,111 paid to close out SunTrust term notes. In addition, $429,559 of capital
was raised through the exercise of stock options and warrants. Cash provided by
financing activities for the Company's fiscal year ended January 31, 1998 was
$413,759.
In the Company's fiscal years ended December 31, 1998 and January 31,
1998, the Board of Directors determined not to pay any dividends, but instead to
use cash for product development and operations. As a private company, the
Company paid dividends of $0.45 and $0.30 ($.075 and $.050, giving retroactive
effect of the Exchange) per share in the Company's fiscal years ended January
31, 1997 and 1996, respectively, for total dividends of $309,549 and $177,955,
respectively.
Principal payments on long-term debt amounted to $345,506, $382,108
and $251,335 in the Company's fiscal years ended December 31, 1998 and January
31, 1998, and 1997, respectively. At the close of the current fiscal year ended
December 31, 1998, the Company obtained a new line of credit with Huntington
National Bank to replace the existing line with SunTrust. As of December 31,
1998 and January 31, 1998, Exigent had a line of credit with banks of $3,000,000
and $1,800,000 respectively. Draws against the line as of December 31, 1998 and
January 31, 1998 were $1,811,093 and $0, respectively. All accounts receivable,
equipment, furniture, and fixtures of STI are pledged as collateral against
amounts borrowed under the line of credit.
Management believes that capital in addition to that available through
operations and the available line of credit will be necessary to fund the
Company's plans for expansion and growth during the Company's next fiscal year
and beyond. The Company may seek debt or equity financing. However, there can be
no assurance that such financing will be available on acceptable terms, if at
all, or that adequate amounts of financing will be obtained.
Provision for Income Taxes
The effective rate for the Company's fiscal year ended December 31,
1998 was 30.1%, down 8.1% from the effective rate of 38.2% for the fiscal year
ended January 31, 1998. Note 14 to Financial Statements describes the
differences between the U.S. statutory and effective income tax rates.
Analysis of Operations
Overview
The current contract base provides sufficient backlog to maintain the
Company through the first four to six months of its next fiscal year. The
backlog as of December 31, 1998 for commercial and government contracts was
$288,339 and $13,751,694, respectively. The Company invested in excess of
$7,000,000 over the last two years in its software product OS/COMET. This
investment facilitated the significant contract awards that management believes
would otherwise have been difficult to obtain. Commitment to maintain support
for the product will continue through the Company's next fiscal year and is
necessary to deliver the services under contract.
The Company completed development of a new commercial software
product, FotoTag, during its fiscal year ended January 31, 1998 with several
significant enhancements completed late in the fiscal year ended December 31,
1998. Management expects revenue from sales of this product to begin in the
second quarter of fiscal year 1999.
The commercial satellite business is projected to continue with
growing sales worldwide and is expected to show moderate increases throughout
the end of the decade, providing additional opportunities for the Company.
Demand for software engineers is expected to provide new customer
opportunities for the Company, but this demand places a premium on efforts to
retain its current workforce. This situation puts additional pressure on overall
payroll costs, but this is an industry-wide phenomenon. Management believes that
the benefits offered by the Company remain above the level of its competition
and should help to retain its workforce. Overhead costs for benefits are
increasing, putting pressure on the Company's indirect rates. Management
believes it is important that the Company maintain superior benefits while the
demand for software engineers remains high. To do so and hold total costs stable
has been a management challenge and will continue to be so in the near future.
Maintaining the Company's comprehensive benefit plan will also facilitate its
ability to support its recruiting program.
Comparison of Years Ended December 31, 1998, January 31, 1998 and January 31,
1997
<PAGE>
Sales for the Company's eleven-month fiscal year ended December 31,
1998 were $31,139,083, down 12.9% from sales of $35,748,719 for its twelve-month
fiscal year ended January 31, 1998. The sales were down 5.0% after adjusting for
the fact that the most recent fiscal year consisted of only eleven months. The
sales for the Company's fiscal year ended January 31, 1998 increased 19% from
sales of $29,935,691 for the Company's fiscal year ended January 31, 1997. The
breakdown between government and commercial sales for these periods is as
follows:
<TABLE>
<CAPTION>
Eleven months Year ended Year ended
ended 12/31/98 1/31/98 1/31/97
----------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Government $ 24,698,289 79% $ 23,113,510 65% $ 18,233,915 61%
Commercial 6,440,794 21% 12,635,209 35% 11,701,776 39%
----------------- -------- ------------------ -------- --------------- --------
$ 31,139,083 100% $ 35,748,719 100% $ 29,935,691 100%
================= ======== ================== ========= ================ =========
</TABLE>
These sales reflect a 79% to 21% government to commercial split in the
Company's fiscal year ended December 31, 1998, compared to a 65% to 35% split in
the Company's fiscal year ended January 31, 1998 and a 61% to 39% split in the
Company's fiscal year ended January 31, 1997. Government contract revenue
increased in the Company's fiscal year ended December 31, 1998 due to the
Company obtaining additional work with the Naval Research Laboratory and other
government entities while a major contract in the commercial sector was winding
down. The Company's sales in its fiscal year ended January 31, 1998 increased
from its sales in its fiscal year ended January 31, 1997 due largely to
obtaining the Lockheed contract as well as sales of OS/Comet under the GPS
contract.
Gross profit as a percent of sales remained fairly consistent at 24.9%
($7,738,362) for the year ended December 31, 1998, versus 26.1% ($9,326,933) for
the year ended January 31, 1998, taking into account the short fiscal year and
the corresponding reduction in commercial revenue and product sales over the
eleven months. Gross profit as a percent of sales for the Company's fiscal year
ended January 31, 1997 was 17.5% of sales ($5,246,847), a significant reduction
when compared to both the Company's fiscal year ended December 31, 1998 and
January 31, 1998.
<PAGE>
The following chart shows the gross profit breakdown between
government and commercial contracts for the periods indicated:
<TABLE>
<CAPTION>
Eleven months ended Year ended Year ended
12/31/98 1/31/98 1/31/97
------------------------- --------------------- ---------------------
Government:
<S> <C> <C> <C>
Revenue $ 24,698,289 $ 23,113,510 $ 18,233,915
Cost of Sales (18,513,003) (17,842,830) (14,674,760)
------------------------- --------------------- ---------------------
Gross Profit $ 6,185,286 $ 5,270,680 $ 3,559,155
========================= ===================== =====================
Gross profit as % of sales 25.0% 22.8% 19.5%
Eleven months ended Year ended Year ended
12/31/98 1/31/98 1/31/97
------------------------- --------------------- ---------------------
Commercial:
Revenue $ 6,440,794 $ 12,635,209 $ 11,701,776
Cost of Sales (4,887,718) (8,578,956) (10,014,084)
-------------------------- --------------------- ---------------------
Gross Profit $ 1,553,076 $ 4,056,253 $ 1,687,692
========================= ===================== =====================
Gross profit as % of sales 24.1% 32.1% 14.4%
</TABLE>
General and administrative expenses for the eleven months ended
December 31, 1998 were $6,823,198, 3.2% or $226,872 lower than expenses of
$7,050,070 for the fiscal year ended January 31, 1998. When taking into
consideration the short year, expenses were 5.6% or $393,419 higher than for the
fiscal year ended January 31, 1998. This increase resulted primarily from
$250,000 in costs associated with a potential acquisition and an increase in
rent expense of $200,000. General and administrative expenses for the Company's
fiscal year ended January 31, 1998 were $7,050,070, 32% or $1,705,859 higher
than its expenses of $5,344,211 for its fiscal year ended January 31, 1997. This
increase resulted primarily from $706,139 in administrative labor costs
associated the addition of employees required to administer a public company and
to expand the business base of the Company, $290,151 in additional costs related
to marketing and recruiting and $425,000 in severance costs associated with the
unplanned departure of several senior level employees.
Net income decreased significantly to $418,160 (1.3% of sales) in the
Company's fiscal year ended December 31, 1998 from $1,345,429 (3.8% of sales)
for the fiscal year January 31, 1998. Management attributes the decrease to the
decreased revenue in its commercial business. This decrease was due in large
part to the completion of a large fixed price development contract accompanied
with the slippage of several major commercial opportunities into fiscal year
1999. The decision to take a more conservative position on amortization of
capitalized software in the Company's fiscal year ended January 31, 1998 had a
significant impact on the current year earnings. The net income for the
Company's fiscal year ended December 31, 1998 was decreased as a result of this
action by approximately $175,000 or $0.02 per share. In addition, shortening the
fiscal year to eleven months had a minor impact of approximately $40,000 on the
current year earnings. Net income increased significantly from a net loss of
$486,238 (1.6% of sales) in the fiscal year ended January 31, 1997 to $1,345,429
(3.8% of sales) in the Company's fiscal year ended January 31, 1998. Management
attributes this increase to the increased product sales from 1.5% of total
revenue in the fiscal year ended January 31, 1997 to 5.6% of total revenue in
the fiscal year ended January 31, 1998 and the nearly $1,000,000 cost of the
public offering incurred during the twelve months ended January 31, 1997.
Year 2000 Issues
Some existing computer programs will be unable to recognize dates
properly in the Year 2000 ("Y2K") and beyond. During 1997, Exigent conducted an
informal study of its products, systems and operations, including systems under
development, to improve business functionality, to identify those of its
computer hardware, software and process control systems that do not properly
recognize dates after December 31, 1999, and those that are linked to third
parties' systems. Based on this informal study, Exigent recognized that the
OS/COMET product required certain modifications to be Y2K compliant. Those
modifications have been made to the software and are available in the current
release, Version 3.5. Exigent has also initiated communications with certain
third parties whose computer systems' functionality could adversely impact the
Company. These communications will facilitate coordination of any necessary Y2K
conversions and will, additionally, permit Exigent to determine the extent to
which the Company may be vulnerable to the failure of third parties to address
their own Y2K issues.
The costs of Exigent's Y2K compliance efforts are being funded with
cash flows from operations. Some of these costs relate solely to the
modification of existing systems, while others are for new systems that will
improve business functionality. In total, these costs are not expected to be
substantially different from the normal, recurring costs that are incurred for
systems development and implementation, in part due to the reallocation of
internal resources and the deferral of other projects. As a result, these costs
are not expected to have a material adverse effect on Exigent's overall results
of operations or cash flows.
The assessment of the costs of Exigent's Y2K compliance effort, and
the timetable for the Company's planned completion of its own Y2K modifications,
are management's best estimates. These estimates were based upon numerous
assumptions regarding future events, including assumptions as to the continued
availability of certain resources, and, in particular, personnel with expertise
in this area, and as to the ability of such personnel to locate and either
re-program or replace, and test, all affected computer hardware, software and
process control systems in accordance with the Company's planned schedule. There
can be no guarantee that these estimates will prove accurate, and actual results
could differ from those estimated if these assumptions prove inaccurate.
Based upon progress to date, however, Exigent believes that it is
unlikely that the foregoing factors will cause actual results to differ
significantly from those estimated. As to the systems of the third parties that
are linked to Exigent's, there can be no guarantee that those of such systems
that are not now Y2K-compliant will be timely converted to compliance.
Additionally, there can be no guarantee that third parties of business
importance to Exigent will successfully and timely reprogram or replace, and
test, all of their own computer hardware, software and process control systems.
Outlook
This section captioned "Outlook" and other parts of this Annual Report
on Form 10-K include certain forward-looking statements within the meaning of
the federal securities laws. Actual results and the occurrence or timing of
certain events could differ materially from those projected in any of such
forward-looking statements due to a number of factors, including those set forth
below and elsewhere in this Form 10-K. See "Other Forward-Looking Statements"
below.
Diversification and Long Term Growth. The Company expects to diversify
its business by developing additional COTS products for sale in both commercial
and government markets. The Company currently plans to seek opportunities for
long term growth through acquisitions, development of products for commercial
applications, and leveraging the Company's existing technologies and products.
Product Development. The Company is developing new products and
product offerings, including the next generation OS/COMET, the Active Tracking
Engine ("ATE") and the OS/ICC. The Company plans to investigate other new
product development opportunities as part of its effort to expand its product
offerings and market.
Other Forward-Looking Statements
Statements contained in this Form 10-K that are not historical facts
are forward-looking statements made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. In addition, words such as
"believes," "anticipates," "expects" and similar expressions are intended to
identify forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of the Company or events, or timing
of events, relating to the Company to differ materially from any future results,
performance or achievements of the Company or events, or timing of events,
relating to the Company expressed or implied by such forward-looking statements.
The Company cannot assure that it will be able to anticipate or respond timely
to changes which could adversely affect its operating results in one or more
fiscal quarters. Results of operations in any past period should not be
considered indicative of results to be expected in future periods. Fluctuations
in operating results may result in fluctuations in the price of the Company's
common stock.
The more prominent known risks and uncertainties inherent in the
Company's business ar set forth below. However, this section does not discuss
all possible risks and uncertainties to which the Company is subject, nor can it
be assumed that there are not other risks and uncertainties which may be more
significant to the Company.
Such other factors include, among others, those described in Item 1.
"Business," and this Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations " and the following:
o continued dependence on a small number of significant customers for
substantially all of the Company's revenue and the potential loss of
one or more of the Company's principal customers;
o continued dependence on government agencies for a significant portion
of the Company's revenue;
o the shortage of qualified and competent software engineers and the
risk that the Company will be unable to retain its key employees and
managers, especially in the event the Company loses one or more
contracts or principal customers;
o dependence on the satellite command and control industry and the
potential failure to diversify the Company's product and service
offerings and to expand its markets for commercial applications;
o possible difficulties in raising private or public capital for
financing working capital needs and potential acquisitions on terms
favorable or acceptable to the Company;
o the possible inability of the Company to find or secure acquisitions
on terms favorable or acceptable to the Company in pursuit of its plan
for growth and diversification;
o continued availability of a commercial line of credit;
o the expense of new product development, the potential failure by the
Company to complete new products on a timely basis, and the failure of
such products to achieve substantial market acceptance;
o the potential loss of customers or opportunities because of the
Company's relationship as a competitor to some of its principal
customers;
o the potential loss of other broadband satellite customer opportunities
because of the Company's strategic alliance relationship with Motorola
SatCom or on the IRIDIUM and Teledesic product; and
o the potential negative impact of salary increases on bid rates due to
the amount of the Company's revenue related to services.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable
Item 8. Financial Statements and Supplementary Data
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Exigent International, Inc.
We have audited the accompanying consolidated balance sheet of Exigent
International, Inc. and subsidiaries as of December 31, 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the eleven months ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Exigent
International, Inc. and subsidiaries at December 31, 1998, and the consolidated
results of their operations and their cash flows for the eleven months ended
December 31, 1998 in conformity with generally accepted accounting principles.
Ernst & Young LLP
Orlando, Florida
March 12, 1999
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Exigent International, Inc.
We have audited the accompanying consolidated balance sheet of Exigent
International, Inc. and subsidiaries as of January 31, 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the two years ended January 31, 1998 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Exigent
International, Inc. and subsidiaries at January 31, 1998, and the consolidated
results of their operations and their cash flows for each of the two years ended
January 31, 1998 and 1997 in conformity with generally accepted accounting
principles.
Hoyman, Dobson & Company, P.A.
Melbourne, Florida
April 4, 1998
<PAGE>
EXIGENT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, January 31,
1998 1998
-------------------- -------------------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 429,970 $ 3,640,508
Accounts receivable, pledged 1,873,772 2,747,383
Costs and estimated earnings in excess of
billings on uncompleted contracts, pledged 5,072,788 3,823,768
Prepaid expenses 10,677 64,288
Income taxes receivable 843,938 -
Deferred income taxes 595,000 663,000
Inventories - 5,288
--------------- ---------------
TOTAL CURRENT ASSETS 8,826,145 10,944,235
--------------- ---------------
PROPERTY AND EQUIPMENT
Cost 6,265,709 5,304,630
Accumulated depreciation (3,982,347) (3,135,923)
--------------- ---------------
NET PROPERTY AND EQUIPMENT 2,283,362 2,168,707
--------------- ---------------
OTHER ASSETS
Software development costs, net of accumulated amortization 4,463,729 1,508,887
Deposits 74,179 43,466
Cash surrender value of life insurance 17,028 17,028
Organizational costs - 10,638
--------------- --------------
TOTAL OTHER ASSETS 4,554,936 1,580,019
--------------- --------------
TOTAL ASSETS $ 15,664,443 $ 14,692,961
=============== ==============
</TABLE>
<PAGE>
The accompanying notes are an integral part of this statement.
<PAGE>
EXIGENT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, January 31,
1998 1998
-------------------- ---------------------
CURRENT LIABILITIES
<S> <C> <C>
Line of credit $ 1,811,093 $ -
Accounts payable 227,750 392,799
Accrued expenses 2,734,200 3,401,311
Billings in excess of costs and estimated earnings
on uncompleted contracts 270,418 1,252,700
Income taxes payable 5,098 242,524
Current portion, long-term debt 204,456 511,111
--------------- ------------
TOTAL CURRENT LIABILITIES 5,253,015 5,800,445
--------------- ------------
LONG-TERM LIABILITIES
Long-term debt, less current portion 427,816 466,667
Deferred income taxes 1,355,000 645,000
Other liabilities 44 -
--------------- ------------
TOTAL LONG-TERM LIABILITIES 1,782,860 1,111,667
--------------- ------------
TOTAL LIABILITIES 7,035,875 6,912,112
--------------- ------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Class A Preferred Shares, $.01 par value, 5,000,000
shares authorized, 609,882 and 688,792 issued and
outstanding at December 31, 1998 and January 31, 1998,
respectively, at $2.50 per share liquidation/dissolution
preference 6,099 6,888
Common Shares, $.01 par value, 40,000,000 shares
authorized, 4,130,103 and 3,872,655 issued and
outstanding at December 31, 1998 and January 31, 1998,
respectively 41,301 38,726
Class B common stock, $.01 par value; 600,000 shares
authorized, no shares issued of outstanding - -
Paid in capital 2,012,780 1,585,007
Retained earnings 6,568,388 6,150,228
-------------- ------------
TOTAL STOCKHOLDERS' EQUITY 8,628,568 7,780,849
-------------- ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 15,664,443 $ 14,692,961
============== ============
</TABLE>
<PAGE>
The accompanying notes are an integral part of this statement.
<PAGE>
EXIGENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the eleven months For the year ended For the year ended
ended December 31, January 31, January 31,
1998 1998 1997
-------------------- --------------------- -------------------
<S> <C> <C> <C>
REVENUES $ 31,139,083 $ 35,748,719 $ 29,935,691
COST OF SALES 23,400,721 26,421,786 24,688,844
-------------------- --------------------- -------------------
GROSS PROFIT 7,738,362 9,326,933 5,246,847
GENERAL AND ADMINISTRATIVE EXPENSES 6,823,198 7,050,070 5,344,211
RESEARCH AND DEVELOPMENT COSTS 180,671 47,854 239,986
-------------------- --------------------- -------------------
OPERATING INCOME (LOSS) 734,493 2,229,009 (337,350)
-------------------- --------------------- -------------------
OTHER INCOME (EXPENSE)
Interest income 42,786 36,887 55,939
Interest expense (172,035) (91,276) (55,119)
Gain (loss) on disposal of fixed assets 3,292 (4,655) -
Other, net (10,376) 6,229 -
-------------------- --------------------- -------------------
TOTAL OTHER INCOME (EXPENSE) (136,333) (52,815) 820
-------------------- --------------------- -------------------
INCOME (LOSS) BEFORE INCOME TAXES 598,160 2,176,194 (336,530)
INCOME TAX EXPENSE 180,000 830,765 149,708
-------------------- --------------------- -------------------
NET INCOME (LOSS) $ 418,160 $ 1,345,429 $ (486,238)
==================== ===================== ===================
EARNINGS (LOSS) PER SHARE - BASIC $ 0.10 $ 0.36 $ (0.13)
==================== ===================== ===================
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 4,034,039 3,787,639 3,642,514
==================== ===================== ===================
==================== ===================== ===================
EARNINGS (LOSS) PER SHARE - DILUTED $ 0.08 $ 0.29 $ (0.13)
==================== ===================== ===================
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 5,157,531 4,647,290 3,642,514
==================== ===================== ===================
</TABLE>
<PAGE>
The accompanying notes are an integral part of this statement.
<PAGE>
EXIGENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Class A Preferred Paid in Retained Treasury
Shares Amount Shares Amount Capital Earnings Stock Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE FEBRUARY 1, 1996 768,400 $ 7,684 - $ - $ 29,030 $5,600,586 $(744,763)$ 4,892,537
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 - 199,690 659,213
Issued 38,600 shares of treasury
stock to fund accrued ESOP
contributions, cost $4.25.
Market value of Company's common
stock $14.03. - - - - 377,508 164,050 541,558
Issued 18,552 shares of treasury
stock for bonuses and management
incentives, cost $4.25. Market
value of Company's common stock $14.03. - - - - 181,439 78,846 260,285
Cash dividend of $0.45 per common share
($0.075 giving retroactive effect of
stock exchange.) - - - - (309,549) - (309,549)
Issued warrants for services - - - 17,497 - - 17,497
Retired 71,080 shares of treasury stock (71,080) (711) - - (301,466) - 302,177 -
Five for one exchange of stock 2,789,280 27,893 - - (27,893) - -
Issued one share of class A preferred
stock for every five shares of common
stock for total issuance of 697,320
shares of class A preferred stock - 697,320 6,973 (6,973) - - - -
Issued 300,000 shares of stock for
services and cash 300,000 3,000 - 675,000 - - 678,000
Issued warrants for cash - - - 4,250 - - 4,250
Net loss - - - - (486,238) - (486,238)
-----------------------------------------------------------------------------------------------
BALANCE JANUARY 31, 1997 3,786,600 37,866 697,320 6,973 1,407,915 4,804,799 - 6,257,553
Exercise of convertible securities 77,652 776 - 177,092 - - - 177,868
Shares retired (125) (1) - - - - (1)
Class A preferred converted to common 8,528 85 (8,528) (85) - - - -
Net income - - - - - 1,345,429 - 1,345,429
-----------------------------------------------------------------------------------------------
BALANCE JANUARY 31, 1998 3,872,655 38,726 688,792 6,888 1,585,007 6,150,228 - 7,780,849
Exercise of convertible securities 178,788 1,788 - - 427,771 - - 429,559
Class A preferred converted to common 78,910 789 (78,910) (789) - - - -
Cancelled shares (250) (2) - - 2 - - -
Net income - - - - - 418,160 - 418,160
----------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1998 4,130,103 $41,301 609,882 $6,099 $2,012,780 $6,568,388 - $ 8,628,568
========================================================================================
</TABLE>
<PAGE>
The accompanying notes are an integral part of this statement.
<PAGE>
EXIGENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the eleven months For the year ended For the year ended
ended December 31, January 31, January 31,
1998 1998 1997
-------------------- --------------------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 418,160 $ 1,345,429 $ (486,238)
-------------------- --------------------- -------------------
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 1,845,239 1,271,878 855,252
Public offering costs - - 692,495
(Gain) loss on disposal of fixed assets (3,292) 4,655 -
Deferred income taxes 788,000 69,000 134,000
Changes in operating assets and liabilities:
Accounts receivable 873,611 162,363 (1,458,502)
Costs and estimated earnings in excess of
billings on uncompleted contracts (1,249,020) 13,060 861,295
Prepaid expenses 53,611 (3,860) 62,378
Inventory 5,288 (5,288) -
Income taxes receivable (843,938) 796,143 (796,143)
Deposits (30,713) (2,855) (5,808)
Cash surrender value of life insurance - 3,241 898
Accounts payable (165,049) (707,324) 878,104
Accrued expenses (667,111) 1,222,111 1,026,052
Billings in excess of costs and estimated earnings
on uncompleted contracts (982,282) 834,274 220,087
Income taxes payable (237,426) 242,524 (304,000)
Other liabilities 44 (5,541) 113
-------------------- --------------------- -------------------
Total adjustments (623,038) 3,894,381 2,166,221
-------------------- --------------------- -------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: (204,878) 5,239,810 1,679,983
-------------------- --------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition of capital assets (1,002,041) (1,306,693) (1,382,163)
Cash proceeds from the sale of capital assets 6,584 14,612 -
Cash paid for capitalized software development (3,905,349) (1,149,685) (556,167)
Cash paid for organizational costs - - (11,938)
-------------------- --------------------- -------------------
NET CASH USED BY INVESTING ACTIVITIES (4,900,806) (2,441,766) (1,949,728)
-------------------- --------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under line of credit 1,811,093 (182,000) 182,000
Proceeds from issuance of long-term debt 511,111 800,000 800,000
Principal payments on long-term debt (856,617) (382,108) (251,335)
Proceeds from exercise of stock options and warrants 429,559 177,867 7,250
Dividends paid - - (309,549)
-------------------- --------------------- -------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,895,146 413,759 428,366
-------------------- --------------------- -------------------
NET CASH INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,210,538) 3,211,803 158,621
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,640,508 428,705 270,084
-------------------- -------------------- -------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 429,970 $ 3,640,508 $ 428,705
==================== ===================== ===================
</TABLE>
<PAGE>
The accompanying notes are an integral part of this statement.
<PAGE>
EXIGENT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
SUPPLEMENTAL CASH FLOW DISCLOSURES
NONCASH ACTIVITIES - During the year ended January 31, 1997, the Company issued
46,986 shares of treasury stock with a cost of $4.25 per share ($199,690) for
accrued bonuses and 38,600 shares of treasury stock with a cost of $4.25 per
share ($164,050) for accrued ESOP payable. The difference between the cost and
market value of the treasury stock issued ($837,031) was recorded as additional
paid in capital when the shares were issued.
During the year ended January 31, 1997, the Company issued 18,552 shares of
treasury stock with 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.
On January 30, 1997, the following noncash transactions occurred:
The Company stockholders exchanged 100% of Software Technology, Inc.'s
outstanding common stock, 697,320 shares, for 3,486,600 shares of Exigent's
common stock and 697,320 shares of Exigent's Class A preferred stock which
reduced paid in capital by $34,866.
The Company retired 71,080 shares of treasury stock with a cost of $4.25 per
share ($302,177). The remaining balance of $301,466, representing the difference
between the par value and cost of the treasury stock issued, was recorded as a
reduction of paid in capital.
The Company issued 300,000 shares of Exigent common stock to Monogenesis
Corporation in exchange for cash and services performed related to the business
combination (See Note 1). The shares had been valued at $2.25 per share
($675,000) by independent appraisal for purposes of administration of the
Company's employee stock ownership plan. The Company received $3,000 in cash and
expensed services, which were incurred at a cost of $675,000. The Company
reported an increase in the par value of its stock of $3,000 and additional paid
in capital of $675,000 as a result of the transaction.
INTEREST AND INCOME TAXES PAID - During the eleven months ended December 31,
1998 and the years ended January 31, 1998 and 1997, the Company made income tax
payments of $463,450, $6,230 and $1,115,851, respectively.
Interest paid for the eleven months ended December 31, 1998 and the years ended
January 31, 1998 and 1997 was $172,035, $91,276 and $55,119, respectively.
The accompanying notes are an integral part of this statement.
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - Exigent International, Inc. (Exigent or the Company), a Delaware
corporation, was formed on March 25, 1996 as a holding company. On January 30,
1997, it acquired all of the outstanding stock of Software Technology, Inc.
(STI) in exchange for stock of Exigent, the "Exchange". STI, therefore, became a
wholly owned subsidiary of Exigent and was the consolidated group's (the
"Company") only business operation at January 30, 1997. In March 1997, FotoTag,
Inc. (FotoTag) was formed as a wholly owned subsidiary of Exigent. Exigent, from
the date of formation through January 30, 1997, had no material activity other
than arranging the Exchange.
STI, formed in 1978 in Florida, provides systems and software engineering
services and commercial off the shelf products for real-time command, control,
and data acquisition systems for government and industry throughout the U.S. STI
also produces OS/COMET - a commercially available command and control
development and support system.
FotoTag Inc., a Delaware corporation, was created as a subsidiary of Exigent in
1997 to provide the structure for concentration on tracking and control system
solutions for international high technology applications. The subsidiary's first
product, also called FotoTag(R), is used for tracking airport and airline
passengers and their checked bags.
Middleware Solutions, Inc. ("MWare"), a Nevada corporation, was formed in 1998
to develop inexpensive, high-performance Message-Oriented Middleware products
and distribute them directly to the end-user over the Internet. MWare products
are characterized as "shrink-wrapped", meaning that they offer a complete
solution to a given problem. The first product to be released by MWare is
Interplay.
POOLING OF INTERESTS - On January 30, 1997, Exigent acquired STI in a business
combination accounted for as a pooling of interests. STI became a wholly owned
subsidiary of the Company through the exchange of 3,486,600 shares of Exigent's
common stock and 697,320 shares of Exigent's Class A preferred stock for all of
the outstanding stock and warrants of STI. The accompanying financial statements
for the year ended January 31, 1997 have been prepared on the basis that the
companies were combined for the full year.
CONSOLIDATION POLICY - The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries.
Intercompany transactions and balances have been eliminated in consolidation.
FISCAL YEAR - The financial statements for 1998 and 1997 include the twelve
months of operations ended January 31, 1998 and 1997, respectively. During 1998
the Company changed its fiscal year end from January 31 to December 31.
Accordingly, the financial statements for the period ended December 31, 1998
("fiscal 1998B") include only eleven months of operations.
Comparative unaudited results of operations for the eleven months ended December
31, 1997 are as follows:
Total Revenue $32,766,371
Cost sales 25,229,859
G&A expenses 5,616,910
R&D expenses 16,767
-------------------
Operating Income 1,902,835
Interest income 31,845
Interest expense (83,503)
Other income 2,026
-------------------
Net income before taxes 1,853,203
Income tax expense 739,400
-------------------
Net income $ 1,113,803
===================
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 U.S. Government procurement practices are
included in contract costs 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 sells a number of software products. Generally, revenue is
recognized upon shipment 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 provided.
Revenue from software maintenance contracts is recognized on a straight line
basis over the life of the contract.
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 costs of capitalized software development are amortized over
their estimated useful lives of two years. Amortization is computed on the
straight-line method. The Company periodically reviews the capitalized software
development cost to ensure that future anticipated gross revenues related to the
products exceeds the unamortized cost.
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SOFTWARE DEVELOPMENT COSTS - In accordance with SFAS No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed," the
Company capitalizes the direct costs and allocated indirect expenses 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's release, and
research and development performed as contractual requirements are charged to
operations.
EARNINGS (LOSS) PER SHARE - Earnings (loss) per share is computed and presented
in accordance with SFAS No. 128, "Earnings per Share".
NEW ACCOUNTING PRONOUNCEMENTS - The Company reviewed the application of SFAS No.
130, "Reporting Comprehensive Income", and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", and has determined that
neither pronouncement is material to the Company's reported results or footnote
disclosures. The Company does not have any material transactions to be reported
under SFAS No. 130 and substantially all of its operations are in one business
segment, the manufacture and sale of software products and services, with
respect to the segment disclosure requirements of SFAS No. 131.
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amount
reported in the balance sheets for cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximates fair value
because of the immediate or short-term maturity of these instruments. The fair
value of indebtedness approximates its carrying value and was determined using
market interest rates for debt with similar maturities.
RECLASSIFICATION - Certain reclassifications have been made to reflect prior
year amounts to current year presentation.
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 December 31, 1998 and January 31, 1998 was $766,000 and $3,694,629,
respectively.
Most of the Company's revenues are derived primarily from products and services
related to satellite command and control. Should the demand for such services
take a substantial downturn and the number of satellites deployed is materially
reduced, the Company's business opportunities would be limited significantly.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
The Company recognizes revenue on certain contracts using the
percentage-of-completion method, which is based upon total estimated costs for
each contract. The estimate is subject to change as the work progresses on each
contract.
STOCK BASED COMPENSATION - The Company follows APB 25 "Accounting for Stock
Issued to Employees", and related interpretations in accounting for its stock
based compensation rather than the alternative fair value accounting provided
under SFAS No. 123, "Accounting for Stock-Based Compensation".
IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and circumstances
indicate that the cost of assets may be impaired, an evaluation of recovery
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with the asset would be compared to the
asset's carrying amount to determine if a write down to market value or
discounted cash flow value is required.
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 2 - ACCOUNTS RECEIVABLE
The following is a summary of accounts receivable:
<TABLE>
<CAPTION>
December 31, January 31,
1998 1998
----------------- -----------------
<S> <C> <C>
Contract receivables $ 1,784,205 $ 2,482,463
Retainage receivable 80,404 229,954
Other receivables 9,163 34,966
------------------ ----------------
Total accounts receivable $ 1,873,772 $ 2,747,383
================= ================
</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>
December 31, January 31, Estimated
-------------------------
1998 1998 Life
--------- ---------- -----------
<S> <C> <C> <C>
Furniture and equipment $ 879,960 $ 585,663 3-8 years
Vehicles 15,703 15,703 5 years
Computer equipment 4,823,732 4,607,879 3-5 years
Leasehold improvements 416,395 95,385 10 years
Capital leases 129,919 - 5 years
----------- -------------
Total cost 6,265,709 5,304,630
Less accumulated
depreciation (3,982,347) (3,135,923)
------------ -------------
Net property and equipment $ 2,283,362 $ 2,168,707
============= =============
</TABLE>
<PAGE>
Depreciation expense charged to general and administrative expense for the
eleven months ended December 31, 1998, and the years ended January 31, 1998 and
1997 was $636,395, $394,116, and $131,535, respectively. Depreciation expense
charged to applied overhead for the eleven months ended December 31, 1998, and
the years ended January 31, 1998 and 1997 was $196,558, $359,528, and $306,916,
respectively. Depreciation expense charged directly to cost of sales in 1998B,
1998 and 1997 was $51,141, $213,077, and $308,044, respectively.
NOTE 4 - LINE OF CREDIT
On December 31, 1998, STI closed on a new $3,000,000 line of credit with a bank
replacing a $1,800,000 line. As of December 31, 1998 and January 31, 1998, the
outstanding draws against the lines were $1,811,093 and $0, respectively. The
outstanding balances accrue interest at LIBOR plus 2.5% The interest rate at
December 31, 1998 and January 31, 1998 was 7.56% and 8.25%, respectively. The
line of credit requires that the Company maintain various financial covenants
including leverage, working capital, current ratio and debt coverage
requirements. Advances under the line of credit are based on a borrowing base
computation. All accounts receivable, equipment, furniture and fixtures of STI
are pledged as collateral on the line of credit.
The weighted average interest rate on short-term borrowings during the periods
ended December 31, 1998 and January 31, 1998 and 1997 were 7.56%, 8.25% and
8.50%, respectively.
NOTE 5 - ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31, January 31,
1998 1998
---------- -------------
<S> <C> <C>
Accrued payroll taxes $ 526,920 $ 680,456
Accrued fringe benefits 1,626,370 1,338,515
Accrued pension and profit sharing 270,910 343,064
Accrued ESOP payment 101,735 137,225
Accrued severance pay 103,428 265,000
Accrued 401K payable 98,481 220,351
Other accrued expenses 6,356 266,700
Accrued bonuses - 150,000
--------------- ------------
Total accrued expenses $ 2,734,200 $3,401,311
=============== ============
</TABLE>
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 6 - LONG TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long term debt outstanding consists of the following:
<TABLE>
<CAPTION>
December 31, January 31,
1998 1998
------------------ -------------------
<S>
Capital lease for furniture and fixtures payable to lessor in monthly <C> <C>
installments of $2,681 through August 1, 2003. $121,161 -
Note payable to bank in monthly installments of $17,038 through June 5, 2001
including interest at either the bank's prime rate or
LIBOR plus 2.5%. The note is collateralized by all accounts 511,111 receivable,
equipment, furniture and fixtures of STI.
Note payable to bank in monthly installments of $22,222, through -
August 15, 2000 including interest at the bank's prime rate plus
.375%. The note was paid in full in 1998.
Note payable to bank in monthly installments of $22,222, through February 28,
1999 including interest at the bank's prime rate plus
.375%. The note was paid in full in 1998. -
688,889
-
288,889
TOTAL LONG-TERM DEBT 632,272 977,778
----------------- ------------------
Less: current portion of long-term debt (204,456) (511,111)
TOTAL LONG-TERM DEBT, less current portion $ 427,816 $ 466,667
================= =================
</TABLE>
Future maturities of long-term debt as of December 31, 1998 are as follows:
Amount
--------------
1999 $ 204,456
2000 204,456
2001 180,088
2002 25,963
2003 17,309
$ 632,272
==============
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 7 - CLASS A PREFERRED STOCK
Each share of Class A preferred stock is convertible to a share of common stock
at the option of the holder. Each share of Class A preferred stock participates
equally with each share of common stock upon declaration of dividends and voting
rights. Upon liquidation or dissolution, the Class A preferred stockholders are
entitled to receive $2.50 per share prior to any distribution to holders of
common shares. The Class A preferred shares are not subject to call or
redemption. The dividends of the Class A preferred stock are noncumulative.
NOTE 8 - STOCK WARRANTS
Common stock warrants and related exercise prices have been adjusted, where
applicable, to reflect the effects of the aforementioned common stock and
warrant exchange.
On March 20, 1996, STI sold 174,996 ten-year capital stock purchase warrants to
its financial advisors for one cent each to purchase 174,996 shares of STI's
capital stock, for a fixed exercise price of $3 per share. The warrants were
issued for services rendered in connection with the registration offer. STI
determined the value of these warrants to be $17,497 and recorded this amount in
general and administrative expenses in 1997.
On January 30, 1997, the Company issued common stock purchase warrants in the
amount of 229,896 to participants of the Software Technology, Inc. Restated
Employee Stock Ownership Plan and Trust; 240,378 to other affiliates of the
Company and 174,996, in exchange for the STI warrants described previously, to a
company engaged as a consultant. In addition, on January 30, 1997, the Company
issued 425,000 warrants to Monogenesis Corporation for $4,250 in cash. Each
warrant entitles the holder to purchase one share of Exigent's common stock at
an exercise price of $3 per share. The terms of these warrants provide that they
may be exercised during the period beginning January 30, 1997 and ending three
years from that date.
Total warrants outstanding at December 31, 1998 and January 31, 1998 were
1,036,080 and 1,064,754, respectively. The warrants exercised during the eleven
months ended December 31, 1998 and the year ended January 31, 1998 were 28,674
and 3,852, respectively. Additionally, at January 31, 1998, 1,664 warrants were
canceled.
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 9 - 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 were 10% of eligible compensation for fiscal 1998B and
1998 and 5% of eligible compensation for 1997. For fiscal 1998B, 1998, and 1997,
the amount of pension expense was $1,763,632, $1,381,023, and $618,838,
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 1997 were $618,838. No
contributions were made in fiscal 1998B and 1998.
NOTE 10 - 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) are eligible to participate in the
plan. Contributions to the plan are allocated annually to eligible employees
proportionate to their compensation, not including overtime and bonuses.
Employee stock ownership plan contributions charged to operations and applied to
overhead amounted to $0 and $692,241, respectively, for the eleven months ended
December 31, 1998, $0 and $552,409, respectively, for the year ending January
31, 1998, and $0 and $247,535, respectively, for the year ending January 31,
1997. The ESOP had 1,891,694 and 2,056,142 shares of the total issued and
outstanding stock, respectively, at December 31, 1998 and January 31, 1998.
Dividends paid on the ESOP shares, as well as other shares are considered to be
reductions in retained earnings. The shares owned by the ESOP are considered to
be outstanding shares and therefore included in the earnings per share
calculation.
The plan acquired 93,833, 62,000, and 0 shares during the eleven months ended
December 31, 1998 and years ended January 31, 1998 and 1997, respectively, from
shareholders. Shares distributed from the plan as a result of termination of
employment were 306,548, 51,174, and 0, during the eleven months ended December
31, 1998 and years ended January 31, 1998, and 1997, respectively. The shares'
fair market value was determined based on the trading value of common shares of
the Company at December 31, 1998 and January 31, 1998.
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 11 - LEASE OBLIGATIONS
Office space and equipment is leased under operating leases expiring in various
years through 2007.
The Company's corporate headquarters are located in Melbourne, Florida. The
Company is currently leasing a 29,000 square foot building pursuant to a
ten-year lease, which will expire on December 1, 2005, and a 30,000 square foot
building pursuant to a ten-year lease, which will expire on February 28, 2007.
It has the right to renew the aforementioned leases 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 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, the Company leases 15,296 square feet
of space in Alexandria, Virginia which lease will expire August 31, 2003
(subject to the right to renew for up to three additional one year terms),
approximately 2,494 square feet of space in Aurora, Colorado which lease will
expire October 31, 1999, approximately 1,946 square feet in Colorado Springs,
Colorado, which lease will expire July 1, 2000, another 1,935 square feet of
space in LaPlata, Maryland which lease is currently renewed on a month-to-month
basis, approximately 2,971 square feet of space in Mesa, Arizona which will
expire November 30, 1999 and approximately 11,188 square feet in Chantilly,
Virginia which lease will expire in November 30, 2003.
Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of December 31, 1998 for each of the
next five years and in the aggregate are:
Year ending December 31:
1999 1,423,941
2000 1,298,855
2001 1,245,804
2002 1,028,722
2003 921,732
Subsequent to 2003 699,354
------------------
Total minimum future rental payments $ 6,618,408
=================
Rent expense for the eleven months ended December 31, 1998 and the years ended
January 31, 1998 and 1997 was $1,211,795, $830,609 and $649,638, respectively.
Rent expense was offset by sublease rental income for the years ended January
31, 1998 and 1997 of $15,064, and $66,655, respectively.
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 12 - ECONOMIC DEPENDENCY
The Company sold a substantial portion of its products and services to three
major customers during the eleven months ended December 31, 1998 and years ended
January 31, 1998 and 1997 in the Satellite Command and Control Industry.
Transactions with these major customers; a commercial customer, a government
contractor and a group of U.S. Government agencies, consisted of the following:
<TABLE>
<CAPTION>
Eleven months ended December 31, 1998 Customer 1 Customer 2 Customer 3
- - ------------------------------------- -------------------- --------------------- -----------------
<S> <C> <C> <C>
Revenues $ 14,735,309 $ 5,985,651 $3,744,421
Accounts receivable - at year end 584,252 416,524 37,837
Costs and estimated earnings in excess of billings
on uncompleted contracts - at year end 2,117,731 297,137 402,718
Billings in excess of costs and estimated earnings
on uncompleted contracts - at year end - (40,738) (172,235)
Year ended January 31, 1998 Customer 1 Customer 2 Customer 3
- - --------------------------- -------------------- -------------------- -----------------
Revenues $ 11,700,279 $ 11,435,270 $ 5,157,842
Accounts receivable - at year end 913,281 737,996 642,109
Costs and estimated earnings in excess of billings
on uncompleted contracts - at year end 1,904,120 623,662 444,411
Billings in excess of costs and estimated earnings
on uncompleted contracts - at year end - (363,766) (30,061)
Year ended January 31, 1997 Customer 1 Customer 2 Customer 3
- - --------------------------- -------------------- -------------------- -------------------
Revenues $ 10,308,204 $ 7,840,135 $ 3,133,871
Accounts receivable - at year end 1,313,767 - 164,184
Costs and estimated earnings in excess of billings
on uncompleted contracts - at year end 1,753,614 1,108,647 415,899
Billings in excess of costs and estimated earnings
on uncompleted contracts - at year end (54,673) - (173,823)
</TABLE>
<PAGE>
NOTE 13 - SOFTWARE DEVELOPMENT COSTS
Some software development costs are charged to operations when incurred and are
included in operating expenses. The amounts charged for the eleven months ended
December 31, 1998 and years ended January 31, 1998, and 1997 were $180,673,
$47,854, and $239,986, respectively.
During the eleven months ended December 31, 1998 and years ended January 31,
1998, and 1997, $3,905,349, $1,149,685 and $556,167, respectively, of software
development costs for computer software to be sold or otherwise marketed were
capitalized. The amortization of costs related to computer software product
development held for sale was $950,507, $304,397 and $108,757 for the eleven
months ended December 31, 1998 and years ended January 31, 1998, and 1997,
respectively.
NOTE 14 - 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>
Eleven months ended Year ended
December 31, January 31, January 31,
1998 1998 1997
----------------- ---------------- ---------------
<S> <C> <C> <C>
Current expense (benefit)
Federal $ (444,000) $ 593,000 $ 3,469
State (154,000) 150,000 12,239
Deferred tax expense
Federal 575,000 63,765 124,000
State 203,000 24,000 10,000
----------------- ---------------- -------------
Total provision for income taxes $ 180,000 $ 830,765 $ 149,708
================= ================= =============
</TABLE>
The following is a reconciliation of the provisions for income taxes to the
expected amounts using the statutory rate:
<TABLE>
<CAPTION>
Eleven months ended Year ended January 31,
December 31,
1998 1998 1997
------------------- ----------------- ---------------
<S> <C> <C> <C>
Expected statutory amount 34.0% 34.0% 34.0%
State income taxes 5.4 4.6 (3.7)
Nondeductible meals and entertainment 4.2 .6 (2.1)
Tax penalties 2.1 - -
Nondeductible officers life insurance 0.2 .1 (2.9)
Research and experimental credit (15.8) (.8) 19.9
Nondeductible contributions - .1 -
Dividends - ESOP - - 15.1
Public offering costs - - (107.0)
Other - (.4) 2.2
--------------- ----------------- ------------------
Actual tax provision 30.1% 38.2% (44.5)%
=============== ================= ==================
</TABLE>
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 14 - INCOME TAXES (CONTINUED)
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.
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities:
<TABLE>
<CAPTION>
December 31, January 31,
1998 1998
-------------- --------------
<S> <C> <C>
Deferred tax assets
Accrued vacation and sick pay $ 554,000 $ 379,277
NOL carryforwards 337,000 -
Tax credit carryforwards 346,000 -
Other 9,000 -
Accrued severance pay 32,000 90,519
Revenue reserve - 98,717
Accrued incentive compensation - 58,069
Deferred bid and proposal costs - 36,418
-------------- ---------------
$ 1,278,000 $ 663,000
============== ===============
Deferred tax liabilities
Depreciation (304,000) (38,060)
Amortization (1,734,000) (606,940)
--------------- ----------------
$ (2,038,000) $ (645,000)
================ ================
</TABLE>
At December 31, 1998, the Company had net operating loss carryforwards of
$872,000 expiring in 2018.
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 15 - STOCK OPTIONS
On June 11, 1997, the Company reserved 600,000 shares of Exigent's common stock
for its nonqualified stock option plan (Plan 1NQ). The terms of these options
provide that the options are exercisable on the date of grant and expire three
years after the date the options were granted. Plan 1NQ is administered by the
Company's CEO. Plan 1NQ gives broad powers to the CEO to administer and
interpret the Plan, including the authority to select the individuals to be
granted options and the particular form and conditions of each option granted.
All options are granted at an exercise price of not less than 100% of the fair
market value on the date of grant. Awards may be granted pursuant to Plan 1NQ
through June 11, 2007. Plan 1NQ may be terminated earlier by the Board of
Directors at its sole discretion.
On March 10, 1997, the Company reserved 200,000 shares of Exigent's common stock
for its qualified incentive stock option plan (Plan 2Q). The terms of these
options provide that the options are exercisable on the date of grant and expire
three years after the date of grant. Plan 2Q is administered by the Company's
CEO. Plan 2Q gives broad powers to the CEO to administer and interpret the Plan,
including the authority to select the individuals to be granted options and the
particular form and conditions of each option granted. All options are granted
at an exercise price of not less than 100% of the fair market value at the date
of grant. Awards may be granted pursuant to Plan 2Q through March 9, 2007. Plan
2Q may be terminated earlier by the Board of Directors at its sole discretion.
On July 30, 1997, the Company reserved 240,000 shares for a second qualified
stock incentive plan (Plan 3Q) under terms similar to the first qualified plan.
The terms of these options provide that the options are exercisable one year
from the date of grant and expire three years after the date of grant. Plan 3Q
is administered by the Company's CEO. Plan 3Q gives broad powers to the CEO to
administer and interpret the Plan, including the Authority to select the
individuals to be granted options and to prescribe the particular form and
conditions of each option granted. However, a Committee of the Board of
Directors shall approve each grant of an option pursuant to Plan 3Q in advance
of issuance. In addition, the Plan stipulates that the aggregate number of
shares of stock for which options may be granted shall be allocated 50% to new
hire employees and the remaining 50% to such employees as the CEO shall select
at his discretion. All options are granted at an exercise price not less than
100% percent of the fair market value at date of grant. Awards may be granted
pursuant to Plan 3Q through July 29, 2007. Plan 3Q may be terminated earlier by
the Board of Directors at its sole discretion.
On September 30, 1997, the Company reserved 120,000 shares of common stock for
its non-qualified non-employee director stock option plan (Plan 5NQ). Each
optionee who is granted options will receive 40,000 shares of common stock. The
terms of these options provide that the options are exercisable on a quarterly
basis following grant at the rate of 2,500 shares per quarter for the 16
quarters following grant date, provided the optionee continues to serve on the
Board of Directors. Optionees will be eligible to receive a grant of options
upon their initial election to the Board. All options will expire ten years
after the date of grant. Plan 5NQ is administered by the Company's Board of
Directors or a committee thereof. All options are granted at an exercise price
equal to the fair market value of the Company's common stock on the date of the
grant. Awards may be granted pursuant to Plan 5NQ through September 30, 2007.
Plan 5NQ may be terminated earlier by the Board of Directors at its sole
discretion.
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 15 - STOCK OPTIONS (CONTINUED)
On April 4, 1998, the Company reserved 250,000 shares of common stock for a
qualified non-officer stock option plan (Plan 4Q). The terms of these options
provide that the options are exercisable on the date of grant and expire three
years after the options were granted. Plan 4Q is administered by the Company's
CEO. Plan 4Q gives broad powers to the CEO to administer and interpret the plan,
including the authority to select the individuals to be granted options and the
particular form and conditions of each option granted. Options granted are to be
tied to the corporate financial performance goals of the officer's plan. All
options are granted at an exercise price of not less than 100% of the fair
market value on the date of grant of such option. Awards may be granted within
10 years from the date the plan is adopted. Plan 4Q may be terminated earlier by
the Board of Directors at its sole discretion.
On May 8, 1998, the Company reserved 500,000 shares of Exigent's common stock
for its nonqualified stock option plan (Plan 6NQ). The terms of these options
provide that the options are exercisable on the date of grant and expire three
years after the date the options were granted. Plan 6NQ is administered by the
Company's CEO, except with respect to options granted to the CEO, in which case
the Board of Directors of the Company shall administer the grants in accordance
with the applicable approved Compensation Committee award program. Plan 6NQ
gives broad powers to the CEO to administer and interpret the plan, including
the authority to select the individuals to be granted options and the particular
form and conditions of each option granted. All options are granted at an
exercise price equal to the fair market value on the day of grant. Awards may be
granted pursuant to Plan 6NQ through May 7, 2008. Plan 6NQ may be amended,
modified or terminated earlier by the Board of Directors at its sole discretion.
On December 17, 1998, the Company reserved 2,500,000 shares of Exigent's common
stock for an Omnibus Stock Option and Incentive Plan (the "Plan").
Implementation of the Plan is subject to shareholder approval. The Plan is
administered by the Compensation Committee of the Board of Directors and subject
to the recommendations of the CEO. The Plan gives broad powers to the
Compensation Committee to administer and interpret the Plan, including the
authority to select the individuals to be granted options and to prescribe the
particular form and conditions of each grant. The Plan sets forth automatic
stock option grants to Independent Directors of the Board of Directors, whom are
no longer participating in Non-Qualified Stock Option Plan 5NQ, a grant of
10,000 shares of stock on January 1 of each year, each such grant shall become
exercisable at the rate of 2,500 shares per quarter, vesting on the last day of
the quarter. Options will vest if an Independent Director is still serving on
the Board of Directors at quarterly vesting date. The Committee may at any time
discontinue granting awards under the Plan (except to Independent Directors).
The Board of Directors may at any time, prospectively or retroactively, amend
the Plan, including the provisions with respect to grants to Independent
Directors, or for any purpose that may at the time be permitted by law, or may
at any time terminate the Plan as to further grants of awards by law, or may at
any time terminate the Plan as to further grants of awards.
All plans, with the exception of the Omnibus Stock Option and Incentive Plan,
were approved by the shareholders at the June 30, 1998 Shareholders' Meeting.
Each plan noted above allows the plan administrator the discretion, to grant
stock appreciation rights with each option granted. As of December 31, 1998, no
stock appreciation rights had been granted.
At December 31, 1998, there were 0, 1,912, 775, 2,486, 0, 0, and 2,102,523
additional shares available for grant under Plan 1NQ, Plan 2Q, Plan 3Q, Plan 4Q,
Plan 5NQ, Plan 6NQ and the Omnibus Stock Option Plan, respectively. Using the
Black Scholes option-pricing model, the per share weighted-average fair value of
stock options granted during the eleven months ended December 31, 1998 and the
year ended January 31, 1998, where exercise price equals the market price of the
stock on the grant date was $1.57 and $0.86, respectively. No stock options were
granted prior to fiscal 1998.
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 15 - STOCK OPTIONS (CONTINUED)
The following weighted average assumptions were used:
1998B 1998
------------------------------
Exercise price equal to market price
on grant date 6.22% 6.21%
Expected risk-free interest rate 4.72 3.05
Expected life in years 50% 50%
Expected volatility 0.00% 0.00%
Expected dividend yield
The Company applies APB Opinion No. 25 in accounting for its option plans and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements for stock options granted. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net income (loss) and earnings (loss)
per share would have been reduced to the pro forma amounts indicated below:
1998B 1998
------------------------------
Net income (loss): $ 418,160 $1,345,429
As reported $(552,077) $ 951,559
Pro forma
Earnings (loss) per share-diluted:
As reported $ 0.08 $ 0.29
Pro forma $ (0.11) $ 0.21
<PAGE>
Stock option activity, during the periods indicated, is as follows:
<TABLE>
<CAPTION>
For the year ended December 31, 1998 For the year ended January 31, 1998
--------------------------------------------------------------------------------------
Weighted Average Weighted Average
Options Exercise Price Options Exercise Price
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding - beginning of year 726,350 $ 2.45 - $ -
Granted 1,522,854 3.30 836,400 2.32
Exercised (149,050) 2.28 (73,800) 2.45
Forfeited (20,700) 3.35 (36,250) 2.53
Outstanding - end of year 2,079,454 $ 3.04 726,350 $ 2.45
======================================================================================
Exercisable at end of year 1,380,594 689,750
Weighted-average fair value of
options granted during the year $ 1.57 $ 0.86
</TABLE>
At December 31, 1998, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $2.13 to $4.26 and 1.45
years to 7.90 years, respectively, with the weighted average at $3.04 and 4.25
years.
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 16 - EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basis and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
Eleven months ended Year ended January 31,
December 31,
1998 1998 1997
----------------- -------------- ------------
<S> <C> <C> <C>
Numerator:
Net income (loss) $ 418,160 $ 1,345,429 $ (486,238)
Preferred stock dividends - - -
----------- ------------ ------------
Numerator for basic and diluted earnings
per share - income available to common
stockholders $ 418,160 $ 1,345,429 $ (486,238)
---------- ------------ -----------
Denominator:
Denominator for basic earnings per share -
weighted-average shares 4,034,039 3,787,639 3,642,514
Effect of dilutive securities:
Convertible preferred stock 632,041 695,899 -
Stock options and warrants 491,451 163,752 -
Denominator for diluted earnings per share -
adjusted weighted-average shares 5,157,531 4,647,290 3,642,514
=========== =========== =========
Basic earnings (loss) per share $ 0.10 $ 0.36 $ (0.13)
=========== ============ ============
Diluted earnings (loss) per share $ 0.08 $ 0.29 $ (0.13)
=========== ============ =============
</TABLE>
The effect of dilutive securities is not included in the computation for the
year ended January 31, 1997 because to do so would be antidilutive.
Basic earnings (loss) per share was restated for the years ended January 31,
1998 and 1997 due to an error in the computation.
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
NOTE 17 - COMMITMENTS AND CONTINGENCIES
The Company has outstanding purchase commitments of $2,498,005 as of December
31, 1998. These represent outstanding purchase orders for which neither the item
nor invoice has been received.
NOTE 18 - RELATED PARTY
STI issued 29,161 warrants of STI on March 20, 1996 to a company for which one
of the directors of STI provided consulting services. The STI warrants were
converted into Exigent warrants on January 30, 1997 (see Note 8). Consulting
fees paid by STI to this company for the years ended January 31, 1998 and 1997
were $45,485 and $94,620, respectively.
During fiscal year 1997, the director discussed above was also Secretary of
Monogenesis and Chairman and controlling shareholder of another company that
received shares of the stock of the Company from Monogenesis. On January 31,
1998, this director's services were terminated and on March 23, 1998 he resigned
from the Board.
Exigent paid $38,603 in consulting fees during the eleven months ended December
31, 1998 to a director of Exigent for consulting services.
<PAGE>
EXIGENT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1998 AND YEARS ENDED
JANUARY 31, 1998 AND 1997
Note 19 - Quarterly Financial Information (unaudited)
<TABLE>
<CAPTION>
Two months
Quarter ended ended
--------------------------------------------------------
Eleven months ended December 31, 1998 30-Apr-98 31-Jul-98 31-Oct-98 31-Dec-98
------------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenue $ 7,685,375 $ 8,811,196 $ 9,361,584 $ 5,280,928
Income (loss) before income taxes 161,751 380,734 122,420 (66,745)
Net income 97,618 227,949 73,479 19,114
Basic earnings per share 0.02 0.05 0.02 0.00
Diluted earnings per share * 0.02 0.04 0.01 0.00
Market price per share
High 4.25 6.19 4.47 4.25
Low 2.94 3.88 2.88 2.44
* Due to rounding Diluted earnings per share does not tie to the sum of the quarters
</TABLE>
<TABLE>
<CAPTION>
Quarter ended
---------------------------------------------------------------------------
30-Apr-97 31-Jul-97 31-Oct-97 31-Jan-98
------------------ ---------------- ---------------- ----------------
Year ended January 31, 1998
<S> <C> <C> <C> <C>
Revenue $ 8,114,034 $ 8,657,569 $ 9,140,753 $ 9,836,363
Income before income taxes 485,798 577,089 444,399 668,908
Net income 288,548 359,209 271,464 426,208
Basic earnings per share 0.06 0.08 0.06 0.16
Diluted earnings per share 0.06 0.08 0.06 0.09
Market price per share
High 4.50 2.88 4.38 4.38
Low 2.00 2.00 2.13 2.75
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosures
On March 18, 1998, the Board of Directors of the Company approved
changing the Company's certifying accountant to Ernst & Young LLP. The change
was effective for the fiscal year ended December 31, 1998. The certifying
accountant for the previous years and the fiscal year ended January 31, 1998,
Hoyman, Dobson & Company, P.A., continues to provide various accounting services
to the Company and its subsidiaries. The change was made because the new
certifying accountant has greater national resources to serve the Company's
growing needs.
The principal accountant's report on the financial statements for the
previous two years has not contained an adverse opinion or disclaimer of opinion
nor were such reports qualified or modified as to uncertainty, audit scope or
accounting principles. The Company has not had any disagreements with its
principle accountants on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure during its two
most recent fiscal years or since then. During its two most recent fiscal years
or since then, the Company has not been advised by its principal accountant: (i)
that the internal controls necessary for the Company to develop reliable
financial information do not exist; (ii) that information has come to the
accountant's attention that has led the accountant to no longer be able to rely
on management's representations or that have made the accountant unwilling to be
associated with the financial statements prepared by management; (iii) of the
need to expand significantly the scope of its audit, or that information has
come to the accountant's attention that if further investigated may materially
impact the fairness or reliability of either a previously issued audit report or
the underlying financial statements, or the financial statements covering a
period subsequent to the date of the most recent financial statements covered by
an audit report or cause the accountant to be unwilling to rely on management's
representations or be associated with the Company's financial statements; or
(iv) that information has come to the accountant's attention that the accountant
has concluded materially impacts the fairness or reliability of either a
previously issued audit report or the underlying financial statements, or the
financial statements issued or to be issued covering the fiscal periods
subsequent to the date of the most recent financial statements covered by an
audit report.
By letter dated March 27, 1998, Hoyman, Dobson & Company, P.A.
confirmed its agreement with the foregoing, as disclosed in Item 4 of the
Company's filing on Form 8-K on March 30, 1998, which letter is attached as
Exhibit 16 to such Form 8-K.
PART III
Item 10. Directors and Executive Officers of the Registrant
"Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement for the 1999 Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
on or before April 30, 1999 (the "1999 Proxy Statement") are hereby incorporated
by reference.
Item 11. Executive Compensation
"Compensation of Executive Officers" and "Compensation Committee
Interlocks and Insider Participation" in the 1999 Proxy Statement are hereby
incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
"Principal Stockholders" in the 1999 Proxy Statement is hereby
incorporated by reference.
Item 13. Certain Relationships and Related Transactions
"Certain Relationships and Related Transactions" in the 1999 Proxy
Statement is hereby incorporated by reference.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements (See Item 8 of this Report) Reports of
Independent Auditors - March 12, 1999 and April 4, 1998 Consolidated
Balance Sheets - December 31, 1998 and January 31, 1998 Consolidated
Statements of Operations - For the Eleven Months Ended December 31,
1998, and the Years ended January 31, 1998 and 1997 Consolidated
Statements of Stockholders' Equity - For the Eleven Months Ended
December 31, 1998, and Years Ended January 31, 1998 and 1997
Consolidated Statements of Cash Flows - For the Eleven Months Ended
December 31, 1998, and Years Ended January 31, 1998 and 1997 Notes to
Financial Statements For the Eleven Months Ended December 31, 1998,
and Years Ended January 31, 1998 and 1997
(2) None
(3) Exhibits Index
Exhibit Number Exhibit
2.1 Stock Purchase Agreement and Plan of Reorganization (including all
Schedules except 1.1) (1)
2.2 Amendment to Stock Purchase Agreement and Plan of Reorganization (2)
3.1 Second Amended and Restated Certificate of Incorporation of Exigent
International, Inc. (3)
3.2 Amended and Restated Bylaws of Exigent International, Inc. (4)
4 Form of Rights Agreement between Exigent International, Inc. and
Reliance Trust Company (Rights Agent) dated as of October 27, 1998 (5)
10.1 Agreement between Exigent International, Inc. and Transfer Agent (6)
10.2 Common Stock Purchase Warrant Agreement between Exigent International,
Inc. and Warrant Agent (7)
10.3 Contract between Motorola, Inc. Government and Systems Technology
Group, Satellite Communications Division and Software Technology, Inc.
(8)
10.4 Contract between Naval Research Laboratory and Software Technology,
Inc. dated April 30, 1998 (9)
10.5 Subcontract/Purchase Order between Lockheed-Martin Federal Systems
Company and Software Technology, Inc. (10)
10.6 Purchase Orders from Allied Signal Technical Services Corporation (11)
10.7 Lease Agreement, dated May 14, 1993, between Henderson Evans, L.C. and
Software Technology, Inc. (12)
10.8 Lease Agreement, dated March 31, 1997, between Henderson Comet, L.C.
and Software Technology, Inc. (13)
<PAGE>
10.9 Agreement of Lease, dated August 15, 1994, between Alexandria South
Associates, L.P. and Software Technology, Inc. (14)
10.10 Addendum Number One to Agreement of Lease, dated September 1, 1998,
between Hunting Creek, LLC and Software Technology, Inc.
10.11 Incentive Stock Option Plan 1Q (nonqualified) (15)
10.12 Independent Director Stock Option Plan (5NQ) (16)
10.13 Employment Agreement dated June 11, 1997 between Exigent
International, Inc. and Jeffrey C. Clift (17)
10.14 Employment Agreement dated June 11, 1997 between Exigent
International, Inc. and William K. Presley (18)
10.15 Employment Agreement dated June 11, 1997 between Exigent
International, Inc. and Bernard R. Smedley (19)
10.16 Employment Agreement dated June 11, 1997 between Exigent
International, Inc. and Don F. Riordan, Jr. (20)
10.17 Confidential Release and Waiver Agreement between Daniel J. Stark and
Exigent International, Inc. dated August 11, 1998 (21)
10.18 Loan Agreement, dated December 31, 1998, between Software Technology,
Inc. and the Huntington National Bank
10.19 Unlimited Continuing and Unconditional Guaranty, dated December 31,
1998, between Exigent International, Inc. and the Huntington National
Bank
10.20 Deed of Lease Agreement, dated September 4, 1998, between
Massachusetts Mutual Life Insurance Company and Software Technology,
Inc.
10.21 Amendment to Employment Agreement, dated May 13, 1998, between Bernard
R. Smedley and Exigent International, Inc.
10.22 Amendment to Employment Agreement, dated September 14, 1998, between
Bernard R. Smedley and Exigent International, Inc.
10.23 Amendment to Employment Agreement, dated October 27, 1998, between
Bernard R. Smedley and Exigent International, Inc.
10.24 Employment Agreement, dated December 17, 1998, between Jeffrey B.
Weinress and Exigent International, Inc.
10.25 Form of Employment Agreement for selected employees of Exigent
International, Inc.
10.26 Amendment to Employment Agreement, dated May 13, 1998, between Don F.
Riordan, Jr. and Exigent International, Inc.
10.27 Amendment to Employment Agreement, dated September 14, 1998, between
Don F. Riordan, Jr. and Exigent International, Inc.
10.28 Amendment to Employment Agreement, dated October 27, 1998, between Don
R. Riordan, Jr. and Exigent International, Inc.
10.29 Amendment to Employment Agreement, dated May 13, 1998, between William
K. Presle and Exigent International, Inc.
10.30 Amendment to Employment Agreement, dated September 14, 1998, between
William K. Presley and Exigent International, Inc.
10.31 Amendment to Employment Agreement, dated October 27, 1998, between
William K. Presley and Exigent International, Inc.
10.32 Incentive Stock Option Plan 3Q (23)
10.33 Incentive Stock Option Plan 4Q (24)
10.34 Stock Option Plan 6NQ (25)
10.35 The Software Technology, Inc. Restated Employee Stock Ownership Plan
16 Letter re Change in Certifying Accountant (22)
21 Subsidiaries
27 Financial Data Schedule
(1) Exhibit 2 to the Registration Statement on Form S-1 of
Exigent International, Inc., declared effective on January
30, 1997.*
(2) Exhibit 2(ii) to Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-1 of Exigent International,
Inc., declared effective on January 30, 1997*
(3) Exhibit 3.1 to Form 10-Q filed on September 14, 1998.*
(4) Exhibit 3.2 to Form 10-Q filed on September 14, 1998.*
(5) Exhibit 4.1 to Form 8-K and to Form 8-A filed November 3,
1998.*
(6) Exhibit 10(i) to the Registration Statement on Form S-1 of
Exigent International, Inc., declared effective on January
30, 1997.*
(7) Exhibit 10(ii) to the Registration Statement on Form S-1 of
Exigent International, Inc., declared effective on January
30, 1997.*
(8) Exhibit 10(iii) to Pre-Effective Amendment No. 2 and
Pre-Effective Amendment No. 3 to the Registration Statement
on Form S-1 of Exigent International, Inc., declared
effective on January 30, 1997.*
(9) Exhibit 10.17 to Form 10-Q filed June 12, 1998.*
(10) Exhibit 10.6 to Pre-Effective Amendment No. 2 to the
Registration Statement on Form S-1 of Exigent International,
Inc., declared effective on January 30, 1997.*
(11) Exhibit 10(vi) to Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-1 of Exigent International,
Inc., declared effective on January 30, 1997.*
(12) Exhibit 10.8 to Form 10-K filed on April 30, 1998.*
(13) Exhibit 10.9 to Form 10-K filed on April 30, 1998.*
(14) Exhibit 10.10 to Form 10-K filed on April 30, 1998.*
(15) Exhibit 4 to Form 8-K filed on October 27, 1997 and to Form
S-8 filed on October 27, 1997.*
(16) Exhibit 4 to Form 8-K filed on March 30, 1998 and to Form
S-8 filed on April 1, 1998.*
(17) Exhibit 10.13 to Form 10-K filed on April 30, 1998.*
(18) Exhibit 10.14 to Form 10-K filed on April 30, 1998.*
(19) Exhibit 10.15 to Form 10-K filed on April 30, 1998.*
(20) Exhibit 10.16 to Form 10-K filed on April 30, 1998.*
(21) Exhibit 10 to Form 10-Q filed December 15, 1998.*
(22) Exhibit 16 to Form 8-K filed on March 30, 1998.*
(23) Exhibit 4 to Form 8-K and to Form S-8 filed on January 2,
1998.*
(24) Exhibit 4 to Form 8-K and to Form S-8 filed on April 21,
1998.*
(25) Exhibit 4 to Form 8-K and to Form S-8 filed on May 21,
1998.*
* Incorporated by reference
(b) Reports on Form 8-K:
Form 8-K was filed on March 30, 1998 to report (1) that
Software Technology, Inc. was awarded a contract for
approximately $61.5M, (2) that Scott Bradford Helm was
appointed to serve on the Company's Board of Directors, and
(3) the Company's adoption of a stock option plan for
employees of Exigent and its subsidiaries (Plan 6NQ).
Form 8-K was filed on April 21, 1998 to report the Company's
adoption of a stock option plan for its employees (Plan 4Q).
Form 8-K was filed on May 21, 1998 to report (1) a change of
certifying public accountants, and (2) the Company's
adoption of a stock option plan for nonemployee directors
(Plan 5NQ).
Form 8-K was filed on November 3, 1998 to report the
adoption of a Shareholders Rights Plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Exigent International, Inc.
March 31, 1999 By:/s/ Bernard R. Smedley
- - ------------------------ ----------------------------------------
Date Bernard R. Smedley, Chief Executive
Officer
March 31, 1999 By: /s/ Jeffery B. Weinress
- - ------------------------ ----------------------------------------
Date Jeffery B. Weinress, Senior Vice
President, Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
March 31, 1999 By: /s/ Bernard R. Smedley
- - ------------------------ ----------------------------------------
Date Bernard R. Smedley, Director
March 31, 1999 By: /s/ Arthur H. Collier
- - ------------------------ ----------------------------------------
Date Arthur H. Collier, Director
March 31, 1999 By:/s/ Scott Helm
- - ------------------------ ----------------------------------------
Date Scott Helm, Director
March 31, 1999 By:/s/ Robert M. Janowiak
- - ------------------------ ----------------------------------------
Date Robert M. Janowiak, Director
March 31, 1999 By: /s/ William K. Presley
- - ------------------------ ----------------------------------------
Date William K. Presley, Director
March 31, 1999 By: /s/ Don F. Riordan, Jr.
- - ------------------------ ----------------------------------------
Date Don F. Riordan, Jr., Director
March 31, 1999 By: /s/ Daniel J. Stark
- - ------------------------ ----------------------------------------
Date Daniel J. Stark, Director
Lease Renewal Addendum Number One
Software Technology, Inc.
Exhibit 10.10
ADDENDUM NUMBER ONE TO AGREEMENT OF LEASE
BY AND BETWEEN
HUNTING CREEK, LLC, A Delaware limited liability company
(Formerly Alexandria South Associates, L.P.) AS LANDLORD
AND
SOFTWARE TECHNOLOGY, INC., A Florida Corporation, AS TENANT
The above referenced Agreement of Lease dated August 15, 1994 is hereby
amended and modified in the following manner:
1. TERM - - Five (5) years beginning on September 1, 1998, the "Lease
Commencement Date" and ending on August 31, 2003, the "Lease Expiration
Date." 2. BASE ANNUAL RENT - - It is agreed that effective September 1,
1998, the base annual rent shall be Two Hundred Ninety Four Thousand Four
Hundred Forty Eight and 00/100 Dollars ($294,448.00), payable in equal
monthly installments of Twenty Four Thousand Five Hundred Thirty Seven and
33/100 Dollars ($24,537.33) subject to annual escalations and passthroughs
per the existing Agreement of Lease. 3. ADDITIONAL RENT - - Pro rata share
of Operating Expense increases over the Operating Expense Amount of the
Base Year 1999. 4. TENANT IMPROVEMENTS - - Landlord shall provide, at
Landlord's expense, reconfiguration of the Premises in accordance with the
plan attached as Exhibit "A" prepared by Architecture & Design Associates,
Inc. dated May 18, 1998 and approved by Tenant on May 29, 1998 ("Tenant
Approved Plans") utilizing Building standard materials and specifications.
All Building HVAC, fire and life safety code requirements (including but
not limited to sprinklers, exit signs, heatpumps, and VAV boxes) shall be
installed and/or relocated as required by "Exhibit A" at Landlord's
expense. The Tenant's Premises shall be constructed or modified per
"Exhibit A", at Landlord's sole cost and expense, to comply with the
requirements of the Americans with Disabilities Act standards (ADA) as
required at time of construction permit issuance. NOTE: Alteration and/or
installation of phone, computer equipment and cabling shall be excluded
from said Tenant Improvements provided by Landlord.
5. TERMINIATION OF LEASE - - Article 21(b)(i) is hereby null and void and is
replaced by the following verbiage:
Landlord may terminate this Lease by giving notice of such termination to
Tenant, a) if Tenant is in default due to failure to pay Monthly Payment(s)
or Additional Rent when due and Tenant fails to cure such default within
ten (10) days after such notice is received; or b) if Tenant fails to cure
any non-monetary default within thirty (30) days after such notice (which
thirty (30) day period shall be extended for such additional period of time
as reasonably may be necessary to cure such default if by its nature such
default cannot be cured in such thirty (30) day period, so long as,
however, Tenant shall commence to cure such default within such thirty (30)
day period and shall proceed diligently to cure same); PROVIDED, HOWEVER,
that this Subparagraph may not be invoked while a case under the Bankruptcy
Code is pending in which Tenant is the subject debtor, unless Tenant or its
Trustee in Bankruptcy is unable to comply with the provisions of
Subparagraph 21 (b)(vi), 21 (b)(vii), and 21 (b)(vii). Upon the giving of
notice and failure of Tenant to cure within the above-prescribed time, this
Lease shall terminate and Tenant shall be obligated to quit and surrender
the Premises. Any other notice to quit or notice of Landlord's intention to
re-enter is hereby expressly waived by Tenant. If Landlord elects to
terminate this Lease under these provisions, all covenants and agreements
herein made by Landlord shall cease without prejudice to the right of
Landlord to recover from Tenant all rent accrued to the time of termination
or recovery of possession of the Premises by Landlord, whichever is later,
and any other monetary damages or loss sustained by Landlord, including,
but not limited to, loss of rent, costs of advertising, commissions,
physical alterations, and rent concessions of any kind.
6. TENANT'S FINANCIAL DATA - - Article 32(o) is amended to provide any needed
or requested financial data regarding Tenant or entities or individuals
related to Tenant will be acquired by Landlord from Tenants' public filings
with the Securities and Exchange Commission. Tenant shall have no
obligation to provide information in excess of or addition to the SEC
public filings.
7. SIGNAGE - - Article 36 is hereby amended to provide Tenant, at its costs
and expense, the right, during the Term and any extensions thereto, to
modify and/or replace any existing Tenant signage on the Penthouse of the
Building which signage shall be mutually agreeable to both Landlord and
Tenant. The specifications for any such modifications and/or replacement
must meet existing Fairfax County Zoning Regulations and shall be defined
and shall be incorporated as an addendum to the Lease.
8. OPTION TO EXTEND - - Article 38 "Option to Extend" is hereby null and void
and is replaced by the following:
Provided the Tenant is not in default of its Lease terms and conditions,
Tenant shall have the right to extend the lease for three (3) additional
one (1) year terms at ninety-five percent (95%) of the then current fair
market rate, as mutually agreed upon by Landlord and Tenant, but in no
event shall the renewal rate be less that the Tenant's then current rental
rate in effect at the expiration of the current term. Tenant shall give
Landlord no less than one hundred eighty (180) days written notice of its
intent to exercise said option to renew.
9. OPTION TO CONTRACT - - Article 39 "Reduction to Size of Premises" is hereby
null and void and is replaced by the following verbiage:
Provided the Tenant is not in default of Lease terms and conditions, at any
time during the last three (3) years of the renewal term, Tenant shall have
the right to "give back" to the Landlord up to 4,106 rentable square feet
of space by providing Landlord with one hundred eighty (180) days prior
written notice accompanied by liquidated damages in an amount equal to one
hundred twenty five percent (125%) of the unamortized brokerage commissions
and Tenant Improvements on a pro-rata basis as applied to the actual square
footage contracted amortized at ten percent (10%) interest per annum. The
total cost of commissions is $73,612.00 and the total cost of Tenant
Improvements is $173,700.00. Such right to contract shall continue during
Tenant's renewal periods. In the event Tenant elects to contract, Tenant
shall forgo its right of Building signage.
10. RIGHT OF FIRST OFFER - - Provided the Tenant is not in default of the
Lease, Tenant shall have the first of offering to lease any space available
in the Building (Expansion Area), subject to expansion rights, if any, of
existing tenant(s). Tenant shall have five (5) business days from
Landlord's written offer to lease the then available Expansion Area at the
terms provided by Landlord in the Landlord's offer. Should Tenant elect not
to lease the Expansion Area(s), Landlord shall be relieved of any further
obligation to Tenant and Landlord shall be free to lease the offered
Expansion Area(s) to other tenant(s). However, in the event the Landlord is
willing to accept an offer for the Expansion Area(s) at terms materially
less advantageous to Landlord than the terms contained in Landlord's offer
to Tenant, then Landlord shall advise Tenant of such terms and Tenant shall
have five (5) business days from Landlord's notice to lease the available
Expansion Area at the terms then deemed acceptable by Landlord.
11. SUBLEASING AND ASSIGNMENT - - The provisions of Article 12 of the Lease
notwithstanding, fifty percent (50%) of any net profits from subleasing
shall be retained by the Landlord and fifty percent (50%) shall be retained
by Tenant. Landlord will provide to subtenant(s) and assignee(s) all rights
and services provided for in Tenant's lease.
12. ROOF RIGHTS - - Tenant shall have reasonable access to and use of a portion
of the Building roof at no charge to Tenant, specific location to be by
mutual agreement, subject to local government codes and coordination with
Building management for the installation and maintenance of its
communication equipment throughout the term and any extensions thereof.
Tenant shall obtain all required permits and submit plans to Landlord for
review and approval prior to installation. Upon expiration of the Lease,
Tenant shall remove its communication equipment from the roof at Tenant's
sole expense, including making all required roof repairs. All roof work
required to install and remove said dishes shall be performed by a
Landlord-approved contractor so as not to void any existing roof warranty.
13. NON-DISTURBANCE/QUIET ENJOYMENT - - Landlord shall use its best efforts to
obtain a non-disturbance agreement from its current lender and from future
lenders, which shall not allow for the early termination or any
modification of the Lease and its various extensions and options. In no
event shall this Lease be void or voidable should Landlord's lender(s)
refuse to supply a non-disturbance agreement.
14. LANDLORD'S ADDRESS FOR NOTICES - -
Landlord's Address for Notice: Hunting Creek, LLC
ATTN: William B. Fetsch, Manager
6535 Copa Court
Falls Church, Virginia 22044-1401
With a Copy to: Gates, Hudson & Associates, Inc.
3020 Hamaker Court
Suite 301
Fairfax, Virginia 22031
Notice to Tenant: Dr. C. Camden McCarl
Manager of DC Engineering
Software Technology, Inc.
5904 Richmond Highway, Suite 610
Alexandria, Virginia 22303
Mr. Stuart P. Dawley
General Counsel
Exigent International, Inc.
1225 Evans Road
Melbourne, Florida 32904-2314
Fax: (407) 952-7555
15. HAZARDOUS MATERIALS REPRESENTATION - - Landlord represents and warrants
that the air within the Premises, and any associated common areas, is free,
and shall remain free during the term of the Lease, of any concentrations
of asbestos or any other hazardous materials that violate federal, state or
local regulations or ordinances or present a health threat to Tenant, its
employees or agents, ("Hazardous Materials"). Tenant represents and
warrants that it will not use Hazardous Materials in or about the Premises.
16. COMMISSION - - The Fred Ezra Company (Broker) is acting solely as agent for
the Tenant in this lease transaction, with a fiduciary duty solely to
Tenant. Broker is not acting as agent for the Landlord in this transaction,
however, Tenant is not liable for the payment of brokerage commissions to
either Gates, Hudson & Associates, Inc., or the Fred Ezra Company. Landlord
recognizes The Fred Ezra Company as the cooperating broker in this
transaction and will compensate the Broker with a market commission
according to a separate agreement.
<PAGE>
ALL OTHER TERMS AND CONDITIONS OF THE ABOVE REFERENCED
AGREEMENT OF LEASE SHALL REMAIN IN FULL FORCE AND EFFECT
WITNESS AS TO LANDLORD: LANDLORD: HUNTING CREEK, LLC
/s/ Robin B. Fetsch BY: /s/ William B. Fetsch
- - ---------------------------- ------------------------------
(Corporate Seal) DATE: 31 - July 1998
ATTEST AS TO TENENT: TENANT: SOFTWARE TECHNOLOGY, INC.
A FLORIDA CORPORATION
/s/ Don F. Riordan, Jr. BY: /s/ B.R. Smedley
- - ---------------------------- ------------------------------
(Corporate Seal)
PRINTED NAME: B.R. Smedley
----------------
TITLE: President
-----------------------
DATE: 22 - July 1998
-----------------------
APPROVED FOR GATES, HUDSON & ASSOCIATES, INC.
BY: /s/ Jeffrey G. Weaver, Sr. V.P.
---------------------------------
Exhibit 10.18
LOAN AGREEMENT
THIS AGREEMENT made and entered into as of this 31st day of December, 1998,
by and between SOFTWARE TECHNOLOGY, INC., a Florida corporation, whose address
is 1225 Evans Road, Melbourne, Florida 32904 (the "Borrower"), EXIGENT
INTERNATIONAL, INC., a Delaware corporation, and FOTOTAG, INC., a Delaware
corporation, (the "Guarantors"), and THE HUNTINGTON NATIONAL BANK, whose address
is 685 S. Babcock Street, Melbourne, Florida 32901 (the "Lender").
W I T N E S S E T H:
WHEREAS, Borrower has negotiated with Lender for a revolving line of credit
loan in the principal amount of THREE MILLION DOLLARS ($3,000,000.00) (the
"Revolving Loan") and a term loan in the principal amount of FIVE HUNDRED ELEVEN
THOUSAND ONE HUNDRED ELEVEN and 22/100 DOLLARS ($511,111.22) (the "Term Loan")
to be used by Borrower to refinance and obtain additional credit to be secured
by collateral as described in Exhibit "A", attached hereto and made a part
hereof by reference. (The Revolving Loan and Term Loan are collectively referred
to as "the Loan"). The Loan will be guaranteed by the Guarantors.
WHEREAS, Borrower, Guarantors and Lender wish to enter into this Agreement
in order to set forth the terms and conditions of the disbursement of said Loan.
NOW, THEREFORE, in consideration of the premises set forth above and the
sum of TEN DOLLARS ($10.00) each to the other in hand paid, the receipt and
sufficiency of which is hereby acknowledged, Borrower, Guarantors and Lender do
hereby agree as follows:
ARTICLE I
LOAN DOCUMENTS
Prior to any disbursements, Borrower shall execute and deliver, or cause to
be executed and delivered, to Lender the following documents (hereinafter
collectively and together with this Agreement referred to as "Loan Documents"),
all in a form satisfactory to Lender:
A. Assignment of Loan Documents, Allonge Endorsements to Notes and UCC-3
Assignments to be executed by SunTrust, N.A. to Lender.
1. For Line of Credit in the amount of $l,800,000.00.
2. For Term Loan with a current principal balance of $66,666.74.
3. For Term Loan with current principal balance of $444,444.48 .
<PAGE>
B. Notes.
1. Interim Promissory Note for Line of Credit of even date herewith
payable to the order of Lender executed by Borrower, in the principal amount of
ONE MILLION TWO HUNDRED THOUSAND AND 00/100 ($1,200,000.00) DOLLARS.
2. Consolidation Note for Line of Credit of even date herewith payable
to the order of the Lender executed by Borrower, in the principal amount of
THREE MILLION AND 00/100 ($3,000,000.00) DOLLARS.
3. Consolidation Note for Term Loans of even date herewith payable to
the order of the Lender executed by Borrower, in the principal amount of FIVE
HUNDRED ELEVEN THOUSAND ONE HUNDRED ELEVEN AND 22/100 ($511,111.22) DOLLARS.
(Each of these notes are collectively referred to as "Notes".)
C. Uniform Commercial Code-Financing Statements (Local and State). Uniform
Commercial Code-Financing Statements (local and state) covering all of
Borrower's assets including, but not limited to: accounts, inventory, deposit
accounts, general intangibles, contract rights, leasehold improvements,
machinery, equipment, intellectual property, instruments, documents, chattel
paper, trade names, trademarks and patents.
D. Opinion of Borrower's Counsel. An opinion of counsel for Borrower and
Guarantor (as hereinbelow defined) licensed in the State of Florida shall be
furnished to Lender prior to closing to the effect that: (a) all of the Loan
Documents are valid and enforceable and legally convey to and vest in Lender all
of the rights therein stated and purported to be conveyed; (b) Borrower and any
Guarantor are corporations in good standing and all requirements of the
corporate documents governing Borrower and any Guarantor have been complied with
to authorize and complete the Loan; (c) Borrower and any Guarantor have the full
right and legal authority to carry out the terms of this Agreement and any
documentation to be executed pursuant to this Agreement; and (d) Such opinion
letter shall address such other matters included in Lender's Request for Opinion
Letter.
E. Guaranties. The unqualified and unconditional guaranty of EXIGENT
INTERNATIONAL, INC., a Delaware corporation, and FOTOTAG, INC., a Delaware
corporation.
F. Security Agreement. As security for payment of the indebtedness
evidenced by the Notes, the Borrower shall execute and deliver to the Lender a
Security Agreement of even date herewith (the "Security Agreement") pursuant to
which the Borrower shall grant the Lender a first security interest in all of
the assets of the Borrower described in the Security Agreement. Borrower agrees
that all of the Liabilities of Borrower arising under the Loan Agreement shall
be secured by the Collateral. Borrower further agrees that the Lender shall have
sole discretion as to the manner of application of the sale or the disposition
of the Collateral and shall be entitled to conduct one or more sales of the
Collateral in addition to all other rights and remedies contained herein. As
additional security for payment of the indebtedness evidenced by this Loan, the
Guarantors shall execute an unconditional guarantee in favor of the Lender
described in Paragraph E. above.
<PAGE>
G. Other Documents. Such other documents as may be required by Lender in
accordance with the terms of the Loan Commitment dated December 9, 1998 executed
by Lender and Borrower in connection with the Loan ("Loan Commitment").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to make the Loan, the Borrower and Guarantors
make the following representations and warranties:
A. Borrower is a corporation duly organized, existing and in good standing
under the laws of the State of Florida, and has the corporate power to own
property and to carry out its businesses now being conducted, and is duly
qualified as a foreign corporation to do business in every jurisdiction in the
United States of America in which the nature of its business makes such
qualification necessary and is in good standing in such jurisdictions.
Guarantors are corporations duly organized, existing and in good standing under
the laws of the State of Delaware. Borrower and Fototag,Inc. are wholly-owned
subsidiaries of Exigent International, Inc.
B. Borrower is duly authorized under all applicable provisions of law to
execute and deliver the Notes and to execute, deliver and perform the Loan
Agreement and the Security Agreement, all corporate action on its part required
for the lawful execution, delivery and performance thereof has been duly taken
and the Loan Agreement, the Security Agreement and the Notes, upon the due
execution and delivery thereof, will be the valid and enforceable instruments
and obligations of Borrower in accordance with their terms. Neither the
execution of the Loan Agreement, the Security Agreement not the creation or
issuance of the Notes, nor the fulfillment of or compliance with their
provisions and terms will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a violation of or default under any
applicable law, regulation, order, writ or decree of the charter or bylaws of
the Borrower or any agreement or instrument to which Borrower is now a party or
create any lien, charge or encumbrance upon any of the property or assets of
Borrower pursuant to the terms of any agreement or instrument to which Borrower
is a party or by which it is bound other than the security interest contemplated
hereby.
C. No written approval of any federal, state or local governmental
authority is necessary to carry out the terms of the Loan Agreement, the
Security Agreement or the Notes and no consents or approvals are required in the
making or performance of the Loan Agreement, the Security Agreement or the
Notes.
<PAGE>
D. The audited consolidated balance sheet of the Borrower and Guarantors,
as of January 31, 1998, is true and correct and the consolidated balance sheet
of Borrower and Guarantors, dated as of October 31, 1998, and related statement
of income for the quarter then ended, a copy of which has been provided to the
Lender, is true and correct, subject to normal, year end adjustments and fairly
presents the financial condition of the Borrower and Guarantors, all in
accordance with Generally Accepted Accounting Principles consistently applied
and since October 31, 1998, no material adverse change in Borrower's and
Guarantors' financial condition or business operation has occurred.
E. Except as previously disclosed to Lender in writing, there are no
pending or threatened actions or proceedings before any court, arbitrator or
governmental or administrative body or agency which may materially adversely
affect the properties, business or condition, financial or otherwise, of
Borrower or Guarantors or in any way adversely affect or call into question the
power and the authority of Borrower to enter into or perform the Loan Agreement,
the Notes or the Security Agreement.
F. No part of the proceeds of advances made pursuant to the Loan Agreement
will be or have been used to purchase or carry, or to reduce or retire any loan
incurred to purchase or carry, any margin stocks (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any such
margin stocks. Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying such margin stocks. If requested by the
Lender, Borrower shall furnish to the Lender, in connection with the loan made
hereunder, a statement in conformance with the requirements of Federal Reserve
Form U-l referred to in said Regulation. In addition, no part of the proceeds of
the loans made hereunder will be used for the purchase of commodity future
contracts (or margins therefor for short sales) for any commodity not required
for the normal raw material inventory of the Borrower.
G. Borrower is now solvent and able to pay its debts as they mature and
Borrower now owns property whose fair salable value is greater than the amount
required to pay its Indebtedness.
H. Borrower has not incurred any material or accumulated funding deficiency
within the meaning of the Employee Retirement Income Security Act of 1974 or any
liability to the Pension Benefit Guarantee Corporation established under such
Act (or any successor thereto under such Act) in connection with any employee
benefit plan established or maintained by the Borrower.
I. Each of the representations and warranties of the Borrower contained in
the Security Agreement are hereby reaffirmed in all respects as of the date
hereof.
J. Neither this Loan Agreement nor any other Agreements contains any
misrepresentation or untrue statement of fact or omits to state any material
fact necessary to make any of such agreements, reports, schedules, certificates
or instruments not misleading.
K. Borrower has good, indefeasible and merchantable title to the
Collateral, free and clear of all liens, claims, security interests and
encumbrances.
<PAGE>
L. Borrower has good and marketable title to its properties and assets,
including the properties and assets reflected in the balance sheet described
above, except for such assets as have been disposed of since the date of said
financial statements as no longer used or useful in the conduct of its business
or as have been disposed of in the ordinary course of business, and all such
properties and assets are free and clear of all liens, mortgages, pledges,
encumbrances or charges.
M. Borrower is not a party to nor is it bound by any contract or agreement
or subject to any charter or other corporate restrictions which adversely
affects the business, properties or condition, financial or otherwise, of
Borrower except as disclosed in the financial statements referenced above and
notes thereto.
N. Borrower owns, possesses or has the right to use all necessary patents,
licenses, trademarks, trademark rights, trade names, trade name rights and
copyrights material to the conduct of its businesses now conducted, without
known conflict with any patent, license, trademark, trade name or copyright of
any other Person.
The effectiveness of this Loan Agreement shall be subject to the continuing
accuracy of all representations and warranties of the Borrower and Guarantors
contained herein. Each advance made to Borrower pursuant to the Loan Agreement
shall constitute and automatic warranty and representation by Borrower and
Guarantors to the Lender that there does not exist a Default or any Event of
Default or any event or condition which, with notice, lapse of time and/or the
making of such advance, would constitute a Default or any Event of Default and a
reaffirmation as of the date of said request of all the representations and
warranties of Borrower and Guarantors contained in the Loan Agreement. Borrower
and Guarantors covenant, warrant and represent to the Lender that all
representations and warranties of Borrower and Guarantors contained in this Loan
Agreement shall be true at the time of execution of the Loan Agreement and the
Other Agreements and shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto.
<PAGE>
ARTICLE III
CONDITIONS OF CLOSING
The effectiveness of the Loan Agreement shall be subject to the fulfillment
of the following conditions precedent to the first advance under the Loan:
A. Borrower shall have delivered to the Lender the fully executed Security
Agreement, Notes, financing statements and other letters, instruments and
documents as Lender shall require, including, but not limited to, a Certificate
of good standing of the Borrower certified by the Secretary of State or other
appropriate governmental authority accompanied by a certificate from the
appropriate officer of Borrower certifying that the copy attached to such
certificate of the Articles of Incorporation is complete and that the Articles
of Incorporation have not been amended, annulled, rescinded or revoked since the
date they were certified by the Secretary of State or other appropriate
governmental authority, a copy of the bylaws of the Borrower in effect on the
date of the Loan Agreement accompanied by a certificate from an appropriate
officer of Borrower that the copy is true and complete and that the Bylaws have
not been amended, annulled, rescinded or revoked since the date of the Bylaws or
the last amendment reflected in the copy, if any, and a certificate of the
Secretary certifying the names and true signatures of the Borrower authorized to
sign the Loan Agreement, the Security Agreement, the Notes and any Other
Agreements to be executed and delivered hereunder.
B. The Borrower shall provide the Lender with a list of all Indebtedness at
the time of closing.
C. All instruments and documents incident to the issuance and delivery of
the Notes shall be reasonably satisfactory in form and substance to the Lender
and Lender's counsel and the Lender shall have received the executed Loan
Agreement, the Security Agreement and all other documents which it may
reasonably request in connection therewith and copies of resolutions of Borrower
authorizing the transactions contemplated by the Loan Agreement, such
resolutions and other documents, when appropriate, to be certified by
appropriate corporate or governmental authorities.
D. The Lender shall have received the Guaranty Agreements executed by the
Guarantors.
The effectiveness of the Loan Agreement shall be further subject to the
fulfillment of the following conditions precedent to any subsequent advance to
Borrower under this Loan:
A. The Lender shall have received at the time of any subsequent advance
such other approvals, opinions or documents as the Lender may reasonably
request.
B. No event has occurred or is continuing or would result from such advance
that would constitute a Default or Event of Default as set forth below.
C. The continuing accuracy of all representations and warranties of the
Borrower contained herein.
ARTICLE IV
AFFIRMATIVE COVENANTS
The Borrower further agrees that, so long as any Liabilities remain unpaid
to Lender, it will comply with the following requirements:
A. As soon as practicable, in any event within forty-five (45) days after
the end of each calendar quarter of each calendar year, deliver or cause to be
delivered to the Lender a consolidated balance sheet of Borrower and Guarantors
as at the last day of such quarter and related consolidated statement of income
for such quarter and cumulative year to date for Borrower and Guarantors,
setting forth in each case comparative form figures for the corresponding period
in the preceding calendar Year, all in reasonable detail certified by an
authorized officer of Borrower to have been prepared in accordance with
Generally Accepted Accounting Principles applied on a consistent basis, subject
to changes resulting from normal year-end adjustments.
<PAGE>
B. As soon as practicable and in any event within ninety (90) days after
the end of each Fiscal Year, deliver to the Lender (i) a consolidated balance
sheet of Borrower and Guarantors as at the end of such Fiscal Year, and related
consolidated statements of income and retained earnings and changes in financial
position for such Fiscal Year, setting forth in each case comparative form
figures for the corresponding period in the preceding Fiscal Year, all in
reasonable detail and satisfactory in scope to the Lender and certified by and
containing an unqualified opinion of a nationally recognized firm of independent
certified public accountants, and (ii) management letters, if any, delivered to
the Borrower by such independent certified public accountants, in connection
with their examination of such financial statements.
C. Together with each delivery of those items required by Paragraphs A. and
B., above, Borrower shall deliver to the Lender an officer's certificate setting
forth: (i) to the best of his knowledge, Borrower has kept, observed, performed
and fulfilled each and every agreement binding on and contained in this Loan
Agreement and is not at the time in default of the keeping, observance,
performance or fulfillment of any of the terms, provisions and conditions
hereof, and (ii) that no Default or Event of Default, as has been specified
below, has occurred or specifying all such Defaults or Events of Default which
they may have knowledge.
D. With reasonable promptness, deliver such additional financial or other
date as the Lender may reasonably request. The Lender is hereby authorized to
deliver a copy of any financial statements or any other information relating to
the business operations or financial condition of the Borrower and Guarantors
which may be furnished to it or come to its attention pursuant to this Loan
Agreement or otherwise, to any regulatory body or agency having jurisdiction
over the Lender or to any Person which shall, or shall have the right or
obligation, to succeed to all or any part of the Lender's interest in the Note
or Other Agreements.
E. Promptly pay or cause to be paid all taxes, assessments and other
governmental charges that may lawfully be levied or assessed upon the income or
profits of Borrower; provided, however, Borrower shall not be required to pay
any such tax, assessment, charge, levy or claim so long as the validity thereof
shall be actively contested in good faith by proper proceedings; but provided
further that any such tax, assessment, charge, levy or claim shall be paid,
stayed or bonded forthwith upon the commencement of proceedings to foreclose any
lien securing the same.
F. Do or cause to be done all things necessary to preserve and to keep in
full force and effect its corporate existence and rights.
<PAGE>
G. At its sole cost and expense, keep and maintain the Collateral insured
for its full insurable value against loss or damage, fire, theft, explosion and
all other hazards and risk ordinarily insured against by other owners or users
of such properties in similar businesses, and maintain adequate workers'
compensation insurance, and notify the Lender promptly of any event or
occurrence causing a material loss or decline in the value of the Collateral and
the estimated (or actual, if available) amount of such loss or decline. All
policies of insurance shall be in form and with insurers recognized as adequate
by prudent business persons and all such policies shall be in such amounts as
may be satisfactory to the Lender. Upon request, Borrower shall deliver to the
Lender the original (or certified copy) of each policy of insurance and evidence
of payment of all premiums therefor. Such policies of insurance shall contain an
endorsement, in form and substance acceptable to the Lender, showing loss
payable to the Lender. Such endorsement, or an independent instrument furnished
to the Lender, shall provide that the insurance companies will give the Lender
at least thirty (30) days prior written notice before any such policy or
policies of insurance shall be altered or canceled and that no act or default of
Borrower or any other person shall affect the right of the Borrower to loss or
damage. Borrower hereby directs all insurers under such policies of insurance
where loss or damage exceeds $25,000 under any such policy of insurance to pay
all proceeds payable hereunder directly to the Lender. So long as no Default or
Event of Default exists hereunder, at the option of the Borrower, in the case of
insurance proceeds arising from the loss or damage of building and equipment,
the proceeds may be used to replace or restore same. Should the Borrower elect
not to replace or restore the lost property, any insurance proceeds shall be
applied first to any accrued interest due to the Lender, then to the principal
balance of the liabilities in such order as the Borrower may direct. Borrower
irrevocably makes, constitutes and appoints the Lender (and all officers,
employees or agents designated by the Lender) as such Borrower's true and lawful
attorney (and agent-in-fact), effective from and after the occurrence of a
Default or Event of Default, for the purpose of making, settling and adjusting
such claim under the policies of insurance (providing that the Lender shall
consult with Borrower prior to finally making, settling or adjusting claims
under such policies of insurance), endorsing the name of Borrower on any check,
draft or instrument or other item or payment for the proceeds of such policies
of insurance and for making all determinations and decisions with respect to
such policies of insurance. In the event Borrower, at any time or times
hereafter, shall fail to maintain any of the policies of insurance required
above or to pay any premium in whole or in part related thereto, then the
Lender, without waiving or releasing any obligation or default by Borrower
hereunder, may (but shall be under no obligation to do so) at any time or times
hereafter obtain and take any other action with respect thereto which the Bank
deems advisable. All sums so disbursed by the Lender, including reasonably
attorneys' fees, court costs, expenses and other charges relating thereto, shall
be payable, on demand by Borrower and shall be additional Liabilities hereunder
secured by the Collateral. The Lender agrees to give Borrower notice of payment
of each and every premium paid by Borrower to insurers as required hereunder.
H. Maintain its property in good order and repair and from time to time
make all needful and proper repairs, renewals, replacements, additions and
improvements thereto.
I. Keep true books of record and account in which full, true and correct
entries will be made of all of its dealings and transactions and set up on its
books such reserves as may be required by Generally Accepted Accounting
Principles.
J. Conform to and duly observe all laws, regulations and other valid
requirements of any regulatory authority with respect to the conduct of its
business.
<PAGE>
K. Upon any officer of the Borrower obtaining knowledge of a Default or
Event of Default hereunder or under any other obligation of Borrower, cause such
officer or individual, as the case may be, to properly deliver to the Lender a
certificate certifying the nature thereof, the period of existence thereof, and
whatever action the Borrower proposes to take with respect thereto.
L. Upon any officer of the Borrower obtaining knowledge of a material
litigation, dispute or proceedings being instituted or threatened against
Borrower, or any attachment, levy, execution or other process being instituted
against any assets of Borrower, cause such officer or individual, as the case
may be, to promptly give the Bank written notice of such litigation, dispute,
proceeding, levy, execution or other process.
M. Use it best efforts to comply with all of the requirements of the
Employee Retirement Income Security Act of 1974 (ERISA) applicable to it and
furnished to the Lender a statement of the principal financial officer of
Borrower describing in reasonable detail any Reportable Event (as defined in
ERISA).
N. Continue at all times to maintain its chief executive offices and
principal place of business at Melbourne, Brevard County, Florida.
O. Maintain its primary operating banking accounts with the Lender.
P. With respect to the consolidated financial statements of Borrower and
the Guarantors, maintain the following financial ratios in the amounts indicated
below:
1. Maximum Total Liabilities divided by Tangible Net Worth of 2.25:l.0
at fiscal year end December 3l, l999 and quarterly thereafter.
2. Minimum Working Capital of $1,500,000.00 at fiscal year end
December 31, l998, and March 31, l999, increasing to $2,000,000.00 at June 30,
l999 and each quarter thereafter.
3. Minimum Current Ratio of l.30:l.0 at fiscal year end December 3l,
l998, and March 3l, l999, increasing to l.50:1.0 at June 30, l999 and each
quarter thereafter.
4. Minimum Debt Service Coverage l.20 times at calendar year end and
annually thereafter.
ARTICLE V
NEGATIVE COVENANTS
Except for any currently existing matter which has previously been
disclosed to Lender or unless Lender otherwise consents in writing, Borrower
covenants and further agrees that from the date hereof until payment in full of
the principal and interest under the Notes, unless the Lender otherwise consents
in writing, it will not;
A. Incur, create, assume or permit to exist any Indebtedness in excess of
$50,000.00 other than the Indebtedness to the Lender.
<PAGE>
B. Incur, create, assume or permit to exist any mortgage, pledge, security
interest, encumbrance, lien or other charge of any kind upon any of its
properties or assets of any character under conditional sales or other title
retention agreements in excess of $50,000.00 except those mortgages, liens and
security interests granted in favor of the Lender.
C. Lend or advance money, credit or property in excess of $50,000.00 to any
employee, officer, director, stockholder, or affiliate except in the ordinary
course of the Borrower's business.
D. Guarantee, assume, endorse or otherwise become or remain liable in
connection with the obligations (including the accounts payable) of any other
Person, in excess of $50,000.00, other than the endorsements of negotiable
instruments in the ordinary course of business for deposit or collection.
E. Enter into any transaction that materially and adversely affects the
Collateral or Borrower's ability to repay the Liabilities or permit, other than
in the ordinary course of business, or agree to any extension, compromise or
settlement or make any change or modification of any kind or nature with respect
to any account including any terms relating thereto.
F. Merge or consolidate with any other corporation or sell, lease, transfer
or otherwise dispose of all or a substantial portion of its assets, outside of
the normal course of business.
ARTICLE VI
SPECIFIC PROVISIONS
A. Revolving Loan Amount. The maximum principal amount outstanding under
the Revolving Loan at any time shall not exceed the lesser of the Borrowing Base
(as defined in Exhibit 1 below) or Three Million Dollars ($3,000,000.00). On or
before the first business day of each calendar month, Borrower shall furnish to
the Lender, in a form satisfactory to the Lender, a current Borrowing Base
Certificate with all calculations and documentation necessary to determine the
current Borrowing Base and the Borrowing Base set forth therein shall be deemed
the Borrowing Base until receipt and approval by Lender of a new Borrowing Base
Certificate.
B. Revolving Loan and Term Loan Interest Rate. Except upon a Default, the
interest rate for the Revolving Loan and Term Loan may be adjusted from time to
time as follows:
1. If Borrower's most recent Form 10Q report furnished to Lender
indicates the following ratios: Total Liabilities to Total Net Worth less than
1.50:1.0 and Working Capital in excess of $2,500,000.00, then the interest rate
otherwise stated for the Revolving Loan (but not the Term Loan) shall be reduced
by 0.50% for the subsequent calendar quarter.
<PAGE>
2. If Borrower's most recent Form 10Q report furnished to Lender
indicates the following ratios: Total Liabilities to Total Net Worth less than
1.00:1.0 and Working Capital in excess of $3,500,000.00, then the interest rate
otherwise stated for the Revolving Loan (but not the Term Loan) shall be reduced
by 0.75% for the subsequent calendar quarter.
3. For any calendar quarter, Borrower may elect that the applicable
interest rate under both the Revolving Loan and Term Loan for such calendar
quarter will be the Prime Rate or the Daily Fluctuating LIBO Rate plus 2.50% (as
such terms are defined in the Notes) by providing written notice of such
election to Lender at least fifteen (l5) days prior to the end of the preceding
calendar quarter; otherwise, the applicable interest rate for the preceding
calendar quarter shall continue to be the applicable interest rate for the
subsequent calendar quarter.
ARTICLE VII
DEFAULT
If any one or more of the following events (hereinafter referred to as
"Events of Default") shall occur:
A. If Borrower defaults in the payment of the Liabilities when due and
payable or declared due and payable; or
B. If Borrower defaults in the payment of principal or interest on any
other Liability, including any guarantee of indebtedness of another Person,
beyond any period of grace provided with respect thereto or in the performance
of any other agreement, term or condition contained in any agreement under which
any such Indebtedness is created, if the effect of such default is to cause or
permit the holder or holders of such Indebtedness (or a trustee on behalf of
such holder or holders) to cause such Indebtedness to become due prior to its
stated maturity; or
C. If Borrower defaults in the performance or observance of any agreement
or covenant contained herein or contained in any of the Other Agreements; or
D. If any representation or warranty made by Borrower herein or in any
writing furnished in connection with or pursuant to this Loan Agreement or any
Other Agreements shall be false or misleading in any material respect on the
date as of which made; or
E. In the event of the liquidation or dissolution of Borrower, or
suspension of the business of Borrower or filing by Borrower of a voluntary
petition or an answer seeking reorganization, arrangement or readjustment of its
debts or for any other relief under the Bankruptcy Code, as amended or under any
other insolvency act or law, state or federal, now or hereafter existing, or any
other action of Borrower indicating its consent to, approval of, or acquiescence
in any such petition or proceeding the application by Borrower for, or the
appointment by consent or acquiescence of, a receiver, trustee or custodian of
Borrower, for all or substantial part of its property; the making by Borrower of
an assignment for the benefit of creditors; the inability of Borrower or the
admission by Borrower in writing of its ability to pay its debts as they mature;
or
<PAGE>
F. In the event of the filing of an involuntary petition against Borrower
in bankruptcy seeking reorganization, arrangement, readjustment of its debts or
for any other relief under the Bankruptcy Code, as amended, or under any other
insolvency act or law, state or federal, now or hereafter existing; or the
involuntary appointment of a receiver, a trustee or a custodian of Borrower for
all or a substantial part of its property; the issuance of a warrant of
attachment, execution or a similar process against any substantial part of the
property of Borrower and the continuance of any such foregoing events for sixty
(60) days undismissed or undischarged; or
G. If any order is entered in any proceeding against Borrower decreeing the
dissolution or split up of Borrower and such order remains in effect more than
sixty (60) days; or
H. If any report, certificate, financial statement or other instrument
delivered to the Lender by or in behalf of Borrower is false or misleading in
any material respect at the time given; or
I. If an uninsured final judgment, which with other outstanding uninsured
final judgments against Borrower exceeds an aggregate of $100,000 shall be
rendered against Borrower and within thirty (30) days after entry thereof such
judgment shall not have been discharged or executed thereof stayed pending
appeal, or if within thirty (30) days after the expiration of any such stay such
judgment shall not have been discharged;
then, at any time thereafter, the Lender may, at its option, declare the Notes
and all other Liabilities owing by the Borrower to the Lender to be forthwith
due and payable, whereupon the Notes and any other such Liabilities shall
forthwith become due and payable, without presentment, demand, protest or other
notice of any kind, all of which are expressly waived, anything contained herein
or in the Other Agreements to the contrary notwithstanding, and in addition the
Lender may immediately proceed to foreclose all or part of its liens on or
security interest in the Collateral in the proceeds of such foreclosure against
the Liabilities secured thereby in such manner as it shall elect and exercise
its rights under the Other Agreements and to do all other things provided for by
law or by this Agreement or by the Other Agreements.
ARTICLE VIII
GENERAL PROVISIONS
A. The Borrower further agrees to reimburse the Lender for all costs and
out-of-pocket expenses, including fees of the Lender's special counsel, incurred
in connection with the preparation, execution, delivery, modification, waiver
and amendments of this Loan Agreement, the Notes and the related documentation,
and also all reasonable expenses incurred by the Lender (including reasonable
attorneys' fees) in the collection of any Indebtedness incurred hereunder in the
event of default by Borrower.
<PAGE>
B. Borrower agrees to pay any and all documentary, intangible stamp or
excise taxes now or after payable in respect of the Loan, this Loan Agreement or
Other Agreements or any modifications thereof and hold the Lender harmless with
respect thereto. The Borrower further agrees that the Lender may deduct from any
advance the amount of any such documentary or intangible stamp tax payable with
respect to such advance, the decision of the Lender as to the amount thereof to
be conclusive, absent manifest error. Borrower gives the Lender the authority to
debit its accounts maintained with the Lender for any principal, interest, fees
or other Liabilities becoming due hereunder.
C. This Loan Agreement sets forth the entire understanding and agreement of
the parties hereto in relation to the subject matter hereof and supersedes any
prior negotiations and agreements among the parties relative to such subject
matter. No promise, condition, representation or warranty, express or implied,
not herein set forth shall bind any party hereto, and none of them has relied on
any such promise, condition, representation or warranty. Each of the parties
hereto acknowledges that, except as in this Loan Agreement otherwise expressly
stated, no representations, warranties or commitments, express or implied, have
been made by any other party to the other. None of the terms or conditions of
this Loan Agreement may be changed, modified, waived or canceled orally or
otherwise, except by writing, signed by all the parties hereto, specifying such
change, modification, waiver or cancellation of such terms or conditions, or of
any preceding or succeeding breach thereof.
D. Notwithstanding any other provision herein, the aggregate interest rate
charged under the Notes, including all charges or fees in connection therewith
deemed in the nature of interest under Florida law, shall not exceed the maximum
rate allowed by law. In the event the stated interest rate on the Notes together
with any other charge or fee deemed in the nature of interest exceeds the
maximum legal rate, then the Lender shall have the right to make such
adjustments as are necessary to reduce the aggregate interest rate to the
maximum legal rate. The Borrower waives any right to prior notice of such
adjustment and further agrees that such adjustment may be made by the Lender
subsequent to notification from Borrower that the aggregate interest charged
exceeds the maximum legal rate.
E. This Loan Agreement, the Security Agreement and the Notes issued
hereunder shall be governed in all respects by the laws of Florida.
F. Should any one or more of the provisions of this Loan Agreement be
determined to be illegal or unenforceable as to one or more of the parties, all
other provisions nevertheless shall remain effective and binding on the parties
hereto.
G. Borrower and Lender hereby consent and agree that, in any actions
predicated upon this Agreement, venue is properly laid in Brevard County,
Florida, and that the Circuit Court for Brevard County, Florida shall have full
jurisdiction to determine all issues arising out of or in connection with the
execution and enforcement of this Agreement. Borrower waives to the fullest
extent permitted under the laws of the State of Florida, any right, power or
privilege to demand a jury trial with respect to any and all issues arising out
of or in connection with the execution and/or enforcement of this Agreement.
<PAGE>
H. Borrower warrants and represents to and covenants with Lender that, on
and after the date of the Notes, so long as any of the indebtedness provided for
herein remains unpaid:
1. Borrower, on behalf of Borrower and any material subsidiaries of
Borrower (hereinafter referred to as the "Organization"), has: (a) undertaken a
reasonably detailed inventory, review, and assessment of all areas within and
affecting the Organization's business and operations that could be materially
and adversely affected by the failure of the Organization to be Year 2000
Compliant (as hereinafter defined) by April 15, 1999; (b) developed a reasonably
detailed plan and time line for becoming Year 2000 Compliant by June 30, 1999;
and (c) to date, implemented that plan in accordance with the specified
timetable in all material respects.
2. The Organization currently has and will maintain the human, financial
and other resources reasonably necessary to complete its Year 2000 plan by June
30, 1999 and reasonably anticipates that the Organization will be Year 2000
Compliant by September 30, l999.
3. The Organization has made written inquiry of each of the
Organization's key suppliers, vendors and customers (as hereinafter defined) as
to whether such persons will, by July 31, 1999, be Year 2000 Compliant in all
material respects and on the basis of such inquiry reasonably believes that all
such persons will be so compliant.
4. Borrower shall deliver to Lender: (a) within forty-five (45) days
after the end of each calendar quarter, a statement signed by the president or
chief financial officer of the Organization certifying that the Organization is
in compliance with terms, conditions and covenants of this Note; (b) immediately
upon becoming aware of the existence of any condition or event which constitutes
or will constitute, but for the passage of time or giving of notice or both, an
event of default, a written notice specifying the nature and period of existence
thereof and what action the Organization is taking or proposes to take with
respect thereto; (c) the Organization's Year 2000 plan and time line, (d) all
periodic internally and externally prepared evaluations and progress reports
concerning the Organization's Year 2000 plan and Year 2000 readiness, (e) any
management or other letters from the Organization's accountants addressing or
mentioning the Organization's Year 2000 Compliance, and (f) such other
information, documentation and materials as Lender may reasonably request form
time to time in order to confirm that the Organization is Year 2000 Compliant
and the method(s) used by the Organization to become Year 2000 Compliant.
<PAGE>
As used herein, "Year 2000 Compliant" shall mean that all software,
embedded microchips and other processing capabilities utilized by the
Organization or the Organization's key suppliers, vendors and customers will
correctly process, sequence, and calculate, without interruption, all date and
date related data for all dates to, through and after January 1, 2000, including
leap year calculations, and shall recognize, store and transmit date data in a
format which clearly indicates the correct century. As used herein, "key
suppliers, vendors and customers" means those suppliers, vendors, and customers
of the Organization whose business failure or material business disruption
would, in Lender's judgment, be reasonably likely to result in a material
adverse change in the business, properties, condition (financial or otherwise),
or prospects of the Organization.
IN WITNESS WHEREOF, Borrower and Lender have hereunto caused these presents
to be executed on the date first above written.
Signed, sealed and delivered "BORROWER"
in the presence of:
SOFTWARE TECHNOLOGY, INC., a
Florida corporation
/s/ Joel E. Boyd By: /s/ Sally H. Ball
- - ----------------------------- ---------------------------
/s/ Peter B. Rochester Treasurer
- - -----------------------------
Two witnesses as to Borrower
(CORPORATE SEAL)
Signed, sealed and delivered "GUARANTORS"
in the presence of:
EXIGENT INTERNATIONAL, INC., a
Delaware corporation
/s/ Joel E. Boyd By: /s/ Jeffery B. Weinress
- - ------------------------------ ----------------------------
/s/ Peter B. Rochester CFO, Senior Vice President
Two witnesses as to Exigent
International, Inc.
(CORPORATE SEAL)
FOTOTAG, INC., a
Delaware corporation
/s/ Joel E. Boyd By: /s/ Stuart P. Dawley
- - ------------------------------ ----------------------------
/s/ Peter B. Rochester Assistant Secretary
Two witnesses as to Fototag, Inc.
(CORPORATE SEAL)
"LENDER"
THE HUNTINGTON NATIONAL BANK
By:/s/ Peter B. Rochester
- - -------------------------------- ----------------------------
Name: Peter B. Rochester
/s/ Joel E. Boyd Title: Senior Vice President
- - --------------------------------
Two witnesses as to Lender
<PAGE>
EXHIBIT 1
Definitions
"Borrowing Base" will consist of up to 80% of "eligible" accounts
receivable plus up to 50% of "eligible" contract receivables plus the lesser of
$l,500,000.00 or up to 50% of "eligible" Costs in Excess of Billings.
"Eligible" is defined as: (l) Accounts receivable: amounts that are less
than 90 days from invoice date; (2) Contracts receivable: amounts that are fully
recoverable according to contract terms within one year. Contracts shall be
submitted to Lender prior to funding request being made. Eligibility shall be
determined by Lender in its sole discretion; (3) Costs in excess of billings:
amounts that are to be billed as of the end of the current month. No advance
will be made on accounts whose balance that is over 90 days from invoice date is
over 25% of the total account balance.
"Collateral" means all of the accounts, inventory, equipment and other
personal property of the Borrower described in the Security Agreement.
"Current Assets" means cash and all other assets or resources of the
Borrower and the Guarantors that are expected to be realized in cash, sold in
the ordinary course of business, or consumed within one year, all determined in
accordance with Generally Accepted Accounting Principles, including, but not
limited to, inventory supported by outstanding import letters of credit.
"Current Liabilities" means the amount of all liabilities of the Borrower
and the Guarantors that by their terms are payable within one year (including
all indebtedness payable on demand or maturing not more than one year from the
date of computation and the current portion of Indebtedness having a maturity
date in excess of one year), all determined in accordance with Generally
Accepted Accounting Principles, including, but not limited to, outstanding
letters of credit.
"Tangible Net Worth" means the depreciated book value of all assets of
Borrower and Guarantors less:
(i) intangible assets, such as (without limitation) goodwill (whether
representing the excess of cost over book value of assets acquired or
otherwise), capitalized expenses, patents, trademarks, trade names,
copyrights, franchises, licenses and deferred charges, such as (without
limitation) unamortized costs and costs of research and development.
(ii) Total Liabilities,
(iii) treasury stock, and
(iv) advances to stockholders or affiliates of the Borrower.
<PAGE>
"Total Liabilities" means the aggregate amount of all liabilities (i.e.,
claims of creditors of Borrower and Guarantors that are to be satisfied by the
disbursement or utilization of corporate resources), including, but not limited
to, all outstanding import letters of credit and negative goodwill of Borrower
and Guarantors.
"Current Ratio" means the ratio of Current Assets to Current Liabilities.
"Default" means any event that, with the giving of notice, lapse of time,
or both, would become an Event of Default.
"Fiscal Year" means the 12-month period of the Borrower ending on December
3l of each Calendar year and commencing on January lst of each calendar year.
"Generally Accepted Accounting Principles" means those principles of
accounting set forth in Opinions of the Financial Accounting Standards Board or
the American Institute of Certified Public Accountants or which have other
substantial authoritative support and are applicable in the circumstances as of
the date of a report, as such principles are from time to time supplemented and
amended.
"Indebtedness" means with respect to any Person, all indebtedness of such
Person for borrowed money, all indebtedness of such Person for the acquisition
of property other than purchases of products and merchandise in the ordinary
course of business, indebtedness secured by any lien, pledge or other
encumbrance on the property of such Person whether or not such indebtedness is
assumed, all liability of such Person by way of endorsements (other than for
collection or deposit in the ordinary course of business); all guarantees of
Indebtedness of any other Person by such Person (including any agreement,
contingent or otherwise, to purchase any obligation representing such
indebtedness or property constituting security therefor, or to advance or supply
funds for such purpose or to maintain working capital or other balance sheet or
income statement condition, or any other arrangement in substance effecting any
of the foregoing); all leases and other items which in accordance with Generally
Accepted Accounting Principles are classified as liabilities on a balance sheet;
provided that in no event shall the term Indebtedness include capital stock,
surplus and retained earnings, minority interest in the common stock of
Subsidiaries, reserves for deferred income taxes and investment credits, other
deferred credits and reserves, and deferred compensation obligations.
"Liabilities" mean all liabilities, obligations and indebtedness of any and
every kind and nature (including, without limitation, interest, charges,
expenses, attorneys' fees and other sums chargeable to Borrower by the Lender
and future advances made to or for the benefit of Borrower), whether arising
under this Loan Agreement, or arising under the Notes or arising under any of
the Other Agreements or acquired by the Lender and from any other source,
whether heretofore, now or hereafter owing, arising, due or payable from
Borrower to the Lender and howsoever evidenced, created, incurred, acquired or
owing, whether primary, secondary, direct, contingent, fixed or otherwise,
including obligations of performance.
<PAGE>
"Other Agreements" means the Notes, the Guaranty Agreement, the Security
Agreement and all agreements, instruments and documents, including, without
limitation, notes, guaranties, mortgages, deeds to secure debt, deeds of trust,
chattel mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, financing statements, certificates of
title, trust account agreements and all other Written matters whether
heretofore, now or hereafter executed by or on behalf of Borrower and delivered
to the Bank, with respect to this Loan Agreement, or with respect to the
transactions contemplated by this Loan Agreement.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture or a government agency
or political subdivision thereof.
All accounting terms not specifically defined herein shall be construed in
accordance with Generally Accepted Accounting Principles.
All of the terms defined in this Loan Agreement shall have such defined
meanings when used in the Other Agreements.
Exhibit 10.19
UNLIMITED CONTINUING AND UNCONDITIONAL GUARANTY
FOR VALUE RECEIVED, and to induce THE HUNTINGTON NATIONAL BANK, 685 South
Babcock Street, Melbourne, Florida 32901 (herein called "Lender"), to make loans
or advances or to extend credit or other financial accommodations or benefits,
with or without security, to or for the account of SOFTWARE TECHNOLOGY, INC., a
Florida corporation, (herein called "Borrower"), the undersigned, EXIGENT
INTERNATIONAL, INC., a Delaware corporation, hereby jointly and severally agree
as follows.
1. The undersigned hereby absolutely and unconditionally guarantees to
Lender and any transferee of this Guaranty or any Liability guaranteed hereby,
the prompt and full payment of the Liabilities. The undersigned agrees that if
Borrower fails to fully and timely perform any Liability, the undersigned will
fully and timely perform the Liability without resort by Lender to any other
person. Any obligation of the undersigned under this Guaranty is in addition to
any and shall not prejudice or be prejudiced by any other agreement (including
any other agreement signed by the undersigned) which Lender may now or hereafter
hold relative to any of the Liabilities. Any payment of the undersigned under
this Guaranty may be applied to any of the Liabilities as Lender may choose. Any
obligation of the undersigned to Lender hereunder is primary, absolute and
unconditional. The terms "Liability" or "Liabilities" as used herein shall
include, without limitation, all liabilities and obligations of Borrower to
Lender including, but not limited to, all liabilities and obligations of
Borrower arising out of, the $3,511,111.22 aggregate loan transaction of even
date herewith, however and whenever incurred or evidenced, whether primary,
secondary, direct, indirect, absolute, contingent, sole, joint or several, due
or to become due, or which may be herein or hereafter contracted or acquired, or
incurred directly or indirectly in respect thereof, and all extensions or
renewals thereof and all sums payable under or by virtue thereof including,
without limitation, all amounts of principal and interest and all expenses
(including attorneys' fees and costs of collection as specified therein)
incurred in the collection thereof or the enforcement of rights thereunder,
whether arising in the ordinary course of business or otherwise, and whether
held or to be held by Lender for its own account or as agent for another or
others.
2. The undersigned waives notice of acceptance of this guaranty and notice
of any Liability to which it may apply, and waives presentment, demand for
payment, protest, notice of dishonor or nonpayment of any Liabilities and any
suit or the taking of other action by Lender against, and any other notice to,
any party liable thereon (including the undersigned).
<PAGE>
3. Lender may at any time and from time to time without notice to the
undersigned (except as required by law), without incurring responsibility to the
undersigned, without impairing, releasing or otherwise affecting the obligations
of the undersigned in whole or in part and without the endorsement or execution
by the undersigned of any additional consent, waiver or guaranty (a) change the
manner, place or terms of payment, and change or extend the time of or renew or
alter, any Liability or installment thereof, or any security therefor, and may
loan additional monies or extend additional credit to Borrower, with or without
security, thereby creating new Liabilities the payment of which shall be
guaranteed hereunder, and the guaranty herein made shall apply to the
Liabilities as so changed, extended, renewed, increased or otherwise altered;
(b) sell, exchange, release, surrender, realize upon or otherwise deal with in
any manner and in any order any property at any time pledged, mortgaged or
otherwise encumbered to secure the Liabilities and any offset thereagainst; (c)
exercise or refrain from exercising any rights against Borrower or others
(including the undersigned) or act or refrain from acting in any other manner;
(d) settle or compromise any Liability or any security therefor and may
subordinate the payment of all or any part thereof to the payment of any
Liability (whether or not due) of Borrower to creditors of Borrower other than
Lender and the undersigned; and (e) apply any sums from any sources to any
Liability without regard to any Liabilities remaining unpaid.
4. No invalidity, irregularity or unenforceability of all or any part of
the Liabilities or of any security therefor shall affect, impair or be a defense
to this guaranty, and this guaranty is a primary and absolute obligation of the
undersigned.
5. This guaranty is an unconditional and continuing one, and all
Liabilities to which it applies or may apply under the terms hereof shall be
conclusively presumed to have been created in reliance hereon. This guaranty
shall continue in full force and effect notwithstanding the death of anyone
liable in any manner for the Liabilities and notwithstanding the sale, transfer,
relinquishment or abandonment of any beneficial interest therein or thereunder,
or the dissolution, death, incapacity or other disability of any beneficiary
thereof.
6. All notices provided to be given to Lender herein shall be sent by
registered or certified mail or express delivery service, return receipt
requested, to the address shown in the preamble to this agreement.
7. As security for the Liabilities and the obligation of the undersigned
under this Guaranty, Lender is hereby given a lien upon, security title to and a
security interest in all property of the undersigned now or at any time
hereafter in possession of Lender in any capacity whatsoever, and whether
individual, joint or by the entireties, including but not limited to any balance
or share in any deposits, funds, accounts, trusts, agency or special accounts,
items, securities, other property or monies of the undersigned now or hereafter
in the possession or control of or otherwise with Lender, to include all
dividends and distributions thereon or other rights in connection therewith, and
Lender shall have such right to such property as authorized by law. Without
limiting the generality of the foregoing, Lender shall have a prior perfected
security interest to secure the Liabilities and may, at any time or from time to
time at its option and without notice: (a) set off against such deposit
balances, funds, items, certificates of deposit, securities, other property and
monies and apply the same towards the payment of any of the Liabilities, and (b)
transfer into its own name or that of its nominee any such property in the
possession or custody of Lender.
<PAGE>
8. The undersigned shall be in default hereunder upon: (a) non-payment of
any Liability when due or before the expiration of applicable grace periods; (b)
failure of Borrower or the undersigned to perform any agreement creating or
otherwise affecting any Liability or any provision hereof, or to pay in full,
when due, any other obligation of Borrower or the undersigned, all within and
before the expiration of any applicable grace period; (c) the appointment of a
receiver of any part of the property of Borrower or of any material part of the
property of the undersigned, assignment for the benefit of creditors or the
commencement of any proceedings in bankruptcy or insolvency by Borrower or the
undersigned or the failure to timely contest, or to secure dismissal within
sixty days of filing, any involuntary proceeding seeking the adjudication of
Borrower or the undersigned as bankrupt or insolvent; (d) the entry of a final,
unappealable judgment having a material adverse affect against Borrower or the
undersigned; (e) the taking of possession of any substantial part of the
property of Borrower or the undersigned at the instance of any governmental
authority; (f) the insolvency of the undersigned; or (g) falsity in any material
respect of, or any material omission in, any representation or statement made to
Lender by or on behalf of Borrower or the undersigned in connection with any
Liability or other obligation of such parties.
9. Upon the occurrence of any default hereunder, Lender shall have all of
the remedies of a creditor and to the extent applicable, of a secured party,
under all applicable law, and, without limiting the generality of the foregoing,
Lender may, at its option and without notice or demand: (a) declare any
Liability accelerated and due and payable at once, and (b) take possession of
any collateral security wherever located, and sell, resell, assign, transfer and
deliver all or any part of said property of Borrower or the undersigned, for
cash or on credit or for future delivery, and, upon any such sale, Lender,
unless prohibited by law the provisions of which cannot be waived, may purchase
all or any part of said property to be sold, free from and discharged of all
trusts, claims, right of redemption and equities of the undersigned whatsoever;
and (c) set off against any or all Liabilities or other obligations of the
undersigned all money owed by Lender in any capacity to the undersigned whether
or not due, and also set off against all other Liabilities of Borrower or
obligations of the undersigned to Lender all money owed by Lender in any
capacity to Borrower or the undersigned, and Lender shall be deemed to have
exercised such right of set-off and to have made a charge against any such money
immediately upon the occurrence of such default although made or entered on the
books subsequent thereto. Until all of the obligations of Borrower to Lender
have been paid and performed in full, the undersigned shall have no right of
subrogation to the rights and remedies of Lender against Borrower, and the
undersigned hereby waive any rights to enforce any remedy which Lender may have
against Borrower and any rights to participate in any security for any
indebtedness hereby guaranteed.
<PAGE>
10. The undersigned shall pay all costs of collection and reasonable
attorneys' fees, including reasonable attorneys' fees before, after or during
suit and out of court, in trial, on appeal, in bankruptcy proceedings or
otherwise, incurred or paid by Lender in enforcing the payment of any Liability
or enforcing or preserving any right or interest of Lender, with respect to the
Liabilities or this Guaranty, including the collection, sale or delivery of any
collateral security from time to time pledged, and after deducting such fees,
costs and expenses from the proceeds of sale or collection, Lender may apply any
residue to pay any of the Liabilities and the undersigned shall continue to be
liable for any deficiency with interest, which shall remain a Liability.
11. If claim is ever made upon Lender for repayment or recovery of any
amount or amounts received by Lender in payment or on account of any of the
Liabilities and Lender repays all or part of said amount by reason of any
judgment, decree or order of any court or administrative body having
jurisdiction over Lender or any of its property or any settlement or compromise
of any such claim effected by Lender with any such claimant (including
Borrower), then the undersigned agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon the undersigned, notwithstanding
any revocation or cancellation of any note or other instrument evidencing any
Liability, and the undersigned shall be and remain liable to Lender hereunder
for the amount so repaid or recovered to the same extent as if such amount had
never originally been received by Lender.
12. Lender shall not be bound to take any steps necessary to preserve any
rights in any of the property of the undersigned against prior parties who may
be liable in connection therewith, and the undersigned hereby agrees to take any
such steps. Lender may nevertheless at any time after and during the continuance
of a default (a) take any action it may deem appropriate for the care or
preservation of such property or of any rights of the undersigned or Lender
therein (b) demand, sue for, collect or receive any money or property at any
time due, payable or receivable on account of or in exchange for any property of
the undersigned; (c) compromise and settle with any person liable on such
property, or (d) extend the time of payment or otherwise change the terms
thereof as to any party liable thereon, all without notice to, without incurring
responsibility to, and without affecting any of the obligations of the
undersigned.
13. No delay on the part of Lender in exercising any of its options, powers
or rights, or partial or single exercise thereof, shall constitute a waiver
thereof. No waiver of any of its rights hereunder, and no modification or
amendment of this guaranty, shall be deemed to be made by Lender unless the same
shall be in writing, duly signed on behalf of Lender by a duly authorized
officer of Lender, and each such waiver, if any, shall apply only with respect
to the specific instance involved, and shall in no way impair the rights of
Lender or the obligations of the undersigned to Lender in any other respect at
any other time.
14. Lender shall not be required to proceed first against Borrower, or any
other person, firm, partnership or corporation, whether primarily or secondarily
liable, or against any collateral security held by it, before resorting to the
undersigned for payment, and the undersigned shall not be entitled to assert as
a defense to the enforceability of the guaranty set forth herein any defense of
Borrower with respect to any Liability.
<PAGE>
15. Any and all rights and claims of the undersigned against Borrower or
any of Borrower's property shall be subordinate and subject in right of payment
to the prior payment in full of all Liabilities. The undersigned hereby
subordinates any and all indebtedness of Borrower now or hereafter owed to the
undersigned to all indebtedness of Borrower to Lender, and agrees with Lender
that the undersigned shall not demand or accept any payment of principal or
interest from Borrower, shall not claim any offset or other reduction of any of
the undersigned's obligations hereunder because of any such indebtedness and
shall not take any action to obtain any of the security described in and
encumbered by the security instruments securing any of the Liabilities;
provided, however, that, if Lender so requests, such indebtedness shall be
collected, enforced and received by the undersigned as trustee for Lender and be
paid over to Lender on account of the indebtedness of Borrower to Lender, but
without reducing or affecting in any manner the liability of the undersigned
under the other provisions of this Guaranty.
16. The undersigned warrants and represents to Lender that all financial
statements heretofore delivered by the undersigned to Lender are true and
correct in all respects as of the date hereof.
17. At the request of Lender, the undersigned shall, from time to time,
prepare and deliver to Lender a complete and current financial statement setting
forth all the assets and liabilities of the undersigned, signed by the
undersigned under oath as being true and correct.
18. This Guaranty may not be changed orally or by implication, and no
obligation of the undersigned can be released or waived by Lender or any officer
or agent of Lender, except by a writing, signed by a duly authorized officer of
Lender. This Guaranty shall be irrevocable by the undersigned until all
indebtedness guaranteed hereby has been completely repaid and all the
Liabilities, including but not limited to the obligations and undertakings of
Borrower under, by reason of, or pursuant to the note and loan documents
executed contemporaneously herewith, have been completely paid, performed and
discharged.
19. If from any circumstances whatsoever fulfillment of any provisions of
this Guaranty, at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by any applicable usury
statute or any other applicable law as of the date hereof, with regard to
obligations of like character and amount, then ipso facto the obligation to be
fulfilled shall be reduced to the limit of such validity, so that in no event
shall any exaction be possible under this Guaranty that is in excess of the
limit of such validity as of the date hereof, but such obligation shall be
fulfilled to the limit of such validity. The provisions of this paragraph shall
control over every other provision of this Guaranty.
20. This Guaranty is binding upon the undersigned, and its successors and
assigns, and shall inure to the benefit of Lender, its successors, endorsees and
assigns.
<PAGE>
21. This Guaranty has been delivered in the State of Florida and shall be
construed in accordance with the laws of Florida. Wherever possible, each
provision of this Guaranty shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Guaranty
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Guaranty. To the extent permitted by applicable law, the undersigned hereby
waives any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.
22. THE UNDERSIGNED HEREBY CONSENTS AND AGREES THAT, IN ANY ACTIONS
PREDICATED UPON THIS GUARANTY, VENUE IS PROPERLY LAID IN BREVARD COUNTY,
FLORIDA, AND THAT THE CIRCUIT COURT FOR BREVARD COUNTY, FLORIDA SHALL HAVE FULL
JURISDICTION TO DETERMINE ALL ISSUES ARISING OUT OF OR IN CONNECTION WITH THE
EXECUTION AND ENFORCEMENT OF THIS GUARANTY OR THE COLLECTION OF ANY OF THE
LIABILITIES. THE UNDERSIGNED WAIVE TO THE FULLEST EXTENT PERMITTED UNDER THE
LAWS OF THE STATE OF FLORIDA, ANY RIGHT, POWER OR PRIVILEGE TO DEMAND A JURY
TRIAL WITH RESPECT TO ANY AND ALL ISSUES ARISING OUT OF OR IN CONNECTION WITH
THE EXECUTION AND/OR ENFORCEMENT OF THIS GUARANTY OR THE COLLECTION OF ANY OF
THE LIABILITIES.
Dated as of December 31, 1998.
EXIGENT INTERNATIONAL, INC.,
a Delaware Corporation
By: /s/ Jeffery B. Weinress
------------------------
JEFFERY B. WEINRESS, CFO
Tax Identification No.: 59-3379927
Exhibit 10.20
DEED OF LEASE AGREEMENT
THIS DEED OF LEASE AGREEMENT (hereinafter referred to as "Lease"), made
this 4th day of September, by and between Massachusetts Mutual Life Insurance
Company, a corporation organized and existing under the laws of Massachusetts,
(hereinafter referred to as the "Landlord") and, Software Technology, Inc., a
corporation and existing under the laws of Florida, (hereinafter referred to as
the "Tenant").
WITNESSETH, THAT FOR AND IN CONSIDERATION of the mutual entry into this
Lease by the parties hereto, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged by each party hereto, the
Landlord hereby leases to the Tenant and the Tenant hereby leases from the
Landlord all of that real property, situated and lying in Fairfax County,
Virginia, which consists of the space (containing approximately 11,188 square
feet of floor area) outlined in Exhibit A attached hereto and made a part hereof
(hereinafter referred to as the "Premises") and located in a building
(hereinafter referred to as the "Building") at 14175 Sullyfield Circle, Suite G,
Virginia 20151 (the Premises, the remainder of the Building, such tract of land,
other buildings thereon, and any other buildings or improvements to be
constructed thereon being hereinafter referred to collectively as the
"Property").
SUBJECT TO THE OPERATION AND EFFECT of any and all instruments and
matters of record or in fact.
UPON THE TERMS AND SUBJECT TO THE CONDITIONS which are hereinafter set
forth:
SECTION 1. TERM.
1.1 Length. This Lease shall be for a term (hereinafter referred to as
the "Term") (a) commencing on the first day after the date on which the Landlord
substantially completes the improvements to be made to the Premises under the
provisions of Section 5 and tenders possession thereof to the Tenant
(herein-after referred to as the "Commencement Date", except that if the date of
such commencement is hereafter advanced or postponed by written agreement of the
parties hereto, the date to which it is advanced or postponed shall thereafter
be the "Commencement Date"), and (b) terminating at 12:01 A.M., local time, on
the fifth (5th) anniversary of the first (1st) day of the first (1st) full
calendar month during the Term (hereinafter referred to as the "Termination
Date", except that if the date of such termination is hereafter advanced or
postponed pursuant to any provision of this Lease, or by written agreement of
the parties hereto, the date to which it is advanced or postponed shall
thereafter be the Termination Date).(1)
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(1) Landlord shall give Tenant five (5) business days prior written notice of
the date of substantial completion.
<PAGE>
1.2 New Construction. Taking of possession by Tenant shall be deemed
conclusively to establish that said buildings and other improvements have been
completed in accordance with the plans and specifications and that the Premises
are in good and satisfactory condition, as of when possession was so taken.(2)
Tenant acknowledges that no representations as to the repair of the Premises
have been made by Landlord, unless such are expressly set forth in this Lease.
After such "Commencement Date" Tenant shall, upon demand, execute and deliver to
Landlord a letter of acceptance of delivery of the Premises. In the event of any
dispute as to substantial completion or work performed or required to be
performed by Landlord, the certificate of Landlord's architect or general
contractor shall be conclusive.
1.3 Surrender. The Tenant shall at its expense, at the expiration of
the Term or upon any earlier termination of this Lease, (a) promptly surrender
to the Landlord possession of the Premises (including any fixtures or other
improvements which, under the provisions of Section 5, are owned by the
Landlord) in good order and repair (ordinary wear and tear excepted) and broom
clean, (b) remove therefrom the Tenant's signs, goods and effects and any
machinery, trade fixtures and equipment used in conducting the Tenant's trade or
business and not owned by the Landlord, and (c) repair any damage to the
Premises or the Building caused by such removal. (3)
1.4 Holding Over.
1.4.1 If the Tenant continues to occupy the Premises after the
expiration of the Term or any earlier termination of this Lease after obtaining
the Landlord's express, written consent thereto,
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(2) , with the exception of minor punch list items and Tenant approved long
lead items that do not materially affect Tenant's use of the Premises for
Tenant's intended purpose, and Landlord has tendered possession for
Tenant's occupancy. And notwithstanding that such items shall not delay the
Commencement Date and Tenant's obligation to pay Rent.
(3) Tenant shall not be responsible for the removal of the SCIF space and/or
associated components.
<PAGE>
(a) such occupancy shall (unless the parties hereto otherwise agree in
writing) be deemed to be under a month-to-month tenancy, which shall continue
until either party hereto notifies the other in writing, by at least thirty (30)
days before the end of any calendar month, that the notifying party elects to
terminate such tenancy at the end of such calendar month, in which event such
tenancy shall so terminate;
(b) anything contained in the foregoing provisions of this Section to the
contrary notwithstanding, the rental payable for each such monthly period shall
equal one-twelfth (1/12) of the Base Rent and the Additional Rent payable under
the provisions of subsection 2.2 (calculated in accordance with such provisions
of subsection 2.2 as if this Lease had been renewed for a period of twelve (12)
full calendar months after such expiration or earlier termination of the Term or
such renewal); and
(c) such month-to-month tenancy shall be upon the same terms and subject to
the same conditions as those set forth in the provisions of this Lease;
provided, that if the Landlord gives the Tenant, by at least thirty (30) days
before the end of any calendar month during such month-to-month tenancy, written
notice that such terms and conditions (including any thereof relating to the
amount or payment of Rent) shall, after such month, be modified in any manner
specified in such notice, then such tenancy shall, after such month, be upon the
said terms and subject to the said conditions, as so modified.
1.4.2 If the Tenant continues to occupy the Premises after the
expiration of the Term or any earlier termination of this Lease without
obtaining the Landlord's express, written consent thereto, such occupancy shall
be on the same terms and subject to the same conditions as those set forth in
the provisions of paragraph 1.4.1., except that, anything contained in the
provisions of this Lease to the contrary notwithstanding, (a) the rental payable
during the period of such occupancy shall equal (4) of the rental which would be
payable during such period under the provisions of subparagraph 1.4.1. (b), had
the Tenant obtained the Landlord's express, written consent to such occupancy,
as aforesaid, and (b) nothing in the provisions of paragraph 1.4.1. or any other
provision of this Lease shall be deemed in any way to alter or impair the
Landlord's right immediately to evict the Tenant or exercise its other rights
and remedies under the provisions of this Lease or applicable law on account of
the Tenant's occupancy of the Premises without having obtained such consent.
- - --------
(4) 150% for the first two (2) months, and 200% each month thereafter
<PAGE>
SECTION 2. RENT
2.1 Amount. As rent for the Premises (all of which is hereinafter
referred to collectively as "Rent"), the Tenant shall pay to the Landlord in
advance, without demand, deduction or set off, for the entire Term hereof, all
of the following:
2.1.1. Base Rent. An annual rent in the amounts specified in
Exhibit D.
2.1.2. Additional Rent. Additional rent (hereinafter referred to
as "Additional Rent") in the amount of any payment referred to as such in any
provision of this Lease which accrues while this Lease is in effect.
2.1.3. Lease Year. As used in the provisions of this Lease, the
term "Lease Year" means (a) the period commencing on the Commencement Date and
terminating on the first (1st) anniversary of the last day of the calendar month
containing the Commencement Date, and (b) each successive period of twelve (12)
calendar months thereafter during the Term.
2.2 Annual Operating Costs.
2.2.1. Taxes
(a) [Deleted in entirety]
(b) Landlord agrees to pay, before they become delinquent, all
Taxes lawfully levied or assessed against such Building and the grounds, parking
areas, driveways and alleys around the Building, and Tenant agrees to pay to
Landlord, as Additional Rent,(5) the amount of Tenant's proportionate share of
such Taxes paid by Landlord. Tenant's proportionate share means the percentage
assigned to the Premises for purposes of allocating Taxes as set forth herein
and other Annual Operating Costs as set forth in Subsection 2.2.2. below and
represents the approximate and (for purposes of this Lease) hereby agreed upon
proportion which the floor area of the Premises bears to the aggregate net
rentable space within the Building and the Property shall be Thirty- three and
32/100 percent (33.32%) of the Building and Seven and 72/100 percent (7.72%) of
the Property.
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(5) in accordance with Section 2.3.2.
<PAGE>
2.2.2. Maintenance.
(a) Maintenance by Tenant. Tenant shall, at its own cost and
expense, keep and maintain all parts of the Premises in good condition, promptly
making all necessary repairs and replacements, interior, and non-structural,
ordinary and extraordinary, including but not limited to, glass and plate glass,
doors and office entry(s), walls and finish work, floors and floor covering, ,
heating and air conditioning systems, electrical systems, plumbing work and
fixtures, termite and pest extermination, regular removal of trash and debris,
and the whole of the Premises in a clean and sanitary condition. The cost of
maintenance and repair of any common party wall (any wall, divider, partition or
any other structure separating the premises from any adjacent premises occupied
by other tenants) shall be shared equally by Tenant and the tenant occupying
adjacent premises (6). Tenant shall not damage any party wall or disturb the
integrity and support provided by any party wall and shall, at its sole cost and
expense, promptly repair any damage or injury to any party wall caused by Tenant
or its employees, agents or invitees.
(b) Maintenance by Landlord. Tenant and its employees, customers
and licensees shall have the non-exclusive right to use the parking areas, if
any, as may be designated by Landlord in writing, subject to such reasonable
rules and regulations as Landlord may from time to time prescribe. Further, in
multiple occupancy buildings, Landlord shall perform the roof, paving, and
landscape maintenance, exterior painting and common sewage line plumbing which
are otherwise Tenant's obligations under Subsection 2.2.2(a) above, and Tenant
shall, in lieu of the obligations set forth under Subsection 2.2.2(a) above with
respect to such items, be liable for its proportionate share (as defined in
Subsection 2.2.1(b) above) of the cost and expense of Building maintenance and
the care for the grounds around the Building, including but not limited to, the
mowing of grass, care of shrubs, general landscaping, maintenance of parking
areas, driveways and alleys, roof maintenance, exterior repainting and common
sewage line plumbing; provided, however, that Landlord shall have the right to
require Tenant to pay such other reasonable proportion of said mowing, shrub
care and general landscaping costs as may be determined by Landlord in its sole
discretion; and further provided that if Tenant or any other particular tenant
of the Building can be clearly identified as being responsible for obstruction
or stoppage of the common sanitary sewage line then Tenant, if Tenant is
responsible, or such other responsible tenant, shall pay the entire cost
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(6) unless caused by the negligence of Tenant's employees, agents or invitees.
<PAGE>
thereof, upon demand, as Additional Rent. Tenant shall pay when due its share,
determined as aforesaid, of such costs and expenses along with the other tenants
of the Building to Landlord upon demand, as Additional Rent, for the amount of
its share of such costs and expenses in the event Landlord elects to perform or
cause to be performed such work. Such share shall include a management fee equal
to (7) of the Rent for each Lease Year, administrative and accounting costs, and
a reserve for asphalt, roof repairs and repainting. (8)
(c) Maintenance Contract. Tenant shall, at its own costs and
expenses, enter into a regularly scheduled preventative maintenance/service
contract with a maintenance contractor for servicing all heating and air
conditioning systems and equipment within the Premises and shall provide
Landlord with copies of all service reports. The maintenance contractor and
contract must be approved by Landlord. The service contract must include all
services suggested by the equipment manufacturer within the
operation/maintenance manual and must become effective (and a copy thereof
delivered to Landlord) within thirty (30) days of the date Tenant takes
possession of the Premises. Each Lease year Landlord will inspect the HVAC
system to determine that the aforementioned maintenance is being performed. If
the HVAC system is not being maintained pursuant to this Section Landlord will
send notice of such lack of maintenance to Tenant and Tenant shall thereafter
have thirty (30) days to perform the necessary maintenance. Failure by Tenant to
complete the necessary maintenance in such thirty (30) day period shall be a
material Event of Default and Landlord shall have the right to cure such Event
of Default pursuant to Section 13. Should the inspection demonstrate a lack of
maintenance of the HVAC system, Tenant shall pay for the cost of such
inspection. Thirty days before Tenant vacates the Premises (9), Landlord will
have the HVAC equipment inspected by a qualified HVAC mechanic at Landlord's
expense. If in the opinion of the HVAC mechanic, the equipment has not been
properly maintained, then Landlord may authorize necessary repairs to be made to
the system. Such repairs will be deducted from the Tenant's security deposit
(10). Tenant shall reimburse Landlord for any and all costs associated with such
repairs which exceed the amount of any security deposit. The remainder of the
security deposit, if any, shall be refunded to Tenant in accordance with the
terms of the Lease. (11)
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(7) four percent (4%)
(8) In no event shall Tenant's annual increase in controllable Annual Operating
Costs (not including taxes, insurance, utilities and snow removal) exceed
eight percent (8%) of the Tenant's previous year's costs.
(9) and no later than ten (10) days prior to occupancy
(10) , in the case of Tenant vacating the Premises
(11) In the case of Tenant occupying the Premises, Landlord shall bear all
costs, which costs shall not be charged against Tenant Improvement dollars.
Such repairs are to be completed prior to occupancy.
<PAGE>
2.2.3. Computation. After the end of each calendar year during
the Term, the Landlord shall compute the total of the Annual Operating Costs
incurred for all of the Property during such calendar year, and shall allocate
them to the net rentable space within the Property in proportion to the
respective operating costs percentages assigned to such spaces; provided, that
anything contained in the foregoing provisions of this subsection 2.2 to the
contrary notwithstanding, wherever the Tenant and/or any other tenant of space
within the Property has agreed in its lease or otherwise to provide any item of
such services partially or entirely at its own expense, or wherever in the
Landlord's judgment any such significant item of expense is not incurred with
respect to or for the benefit of all of the net rentable space within the
Property, in allocating the Annual Operating Costs pursuant to the foregoing
provisions of this subsection the Landlord shall make an appropriate adjustment,
using generally accepted accounting principles, as aforesaid, so as to avoid
allocating to the Tenant or to such other tenant (as the case may be) those
Annual Operating Costs covering such services already being provided by the
Tenant or by such other tenant at its own expense, or to avoid allocating to all
of the net rentable space within the Property those Annual Operating Costs
incurred only with respect to a portion thereof, as aforesaid.
2.2.4 Payment as Additional Rent. The Tenant shall, within
(12) days after demand therefor by the Landlord (with respect to each calendar
year during the Term), accompanied by a statement setting forth in reasonable
detail the Annual Operating Costs for such calendar year, pay to the Landlord as
Additional Rent the amount of the Tenant's operating costs percentage of the
Annual Operating Costs for such calendar year (as derived and allocated under
the provisions of paragraph 2.2.3).
2.2.5. Proration. If only part of any calendar year falls
within the Term, the amount computed as Additional Rent for such calendar year
under the foregoing provisions of this subsection shall be prorated in
proportion to the portion of such calendar year falling within the Term (but the
expiration of the Term before the end of a calendar year shall not impair the
Tenant's obligation hereunder to pay such prorated portion of such Additional
Rent for that portion of such calendar year falling within the Term, which shall
be paid on demand, as aforesaid).
2.2.6. Landlord's right to estimate. Anything contained in the
foregoing provisions of this subsection to the contrary notwithstanding, the
Landlord may, at its discretion, (a) make from time to time during the Term a
reasonable estimate of the Additional Rent which may become due under such
provisions for any calendar year, (b) require the Tenant to pay to the Landlord
for each calendar month during such year one twelfth (1/12) of such Additional
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(12) thirty (30)
<PAGE>
Rent, at the time and in the manner that the Tenant is required hereunder to pay
the monthly installment of the Base Rent for such month, and (c) at the
Landlord's reasonable discretion, increase or decrease from time to time during
such calendar year the amount initially so estimated for such calendar year, all
by giving the Tenant written notice thereof, accompanied by a schedule setting
forth in reasonable detail the expenses comprising the Annual Operating Costs,
as so estimated. In such event, the Landlord shall cause the actual amount of
such Additional Rent to be computed and certified to the Tenant within 120 days
after the end of such calendar year, and the Tenant or the Landlord, as the case
may be, shall promptly thereafter pay to the other the amount of any deficiency
or overpayment therein, as the case may be.
2.3 When due and payable.
2.3.1. The Base Rent for any Lease Year shall be due and
payable in twelve (12) consecutive, equal monthly installments, in advance, on
the first (1st) day of each calendar month during such Lease Year; provided,
that the first monthly installment of the Base Rent will be due and payable upon
lease execution.
2.3.2. (13) accruing to the Landlord under any provision of
this Lease shall, except as is otherwise set forth herein, be due and payable
when the installment of the Base Rent next falling due. (14)
2.3.3. Each such payment shall be made promptly when due,
without any deduction or set off whatsoever, and without demand, failing which
the Tenant shall pay to the Landlord as Additional Rent, a late charge equaling
(15) of the sum of the Base Rent and Additional Rent outstanding. (16)
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(13) Annual Operating Costs
(14) Any Additional Rent not included in Section 2.2 herein, shall be due and
payable within thirty (30) days after demand therefor by Landlord.
(15) twelve percent (12%)
(16) Such sum shall be due within five (5) days of Tenant's receipt of written
notice from Landlord that it has not paid Rent when due and that a late
charge is due; however, Landlord shall only be obligated to provide written
notice to Tenant twice in each Lease Year; thereafter, no notice shall be
due from Landlord to Tenant and Tenant shall be in an Event of Default if
it fails to pay such amounts when due.
<PAGE>
2.4 Where payable. The Tenant shall pay the Rent, in lawful currency of the
United States of America, to the Landlord by delivering or mailing it (postage
prepaid) to the Landlord's address which is set forth in Section 16, or to such
other address or in such other manner as the Landlord from time to time
specifies by written notice to the Tenant. Any payment made by the Tenant to the
Landlord on account of Rent may be credited by the Landlord to the payment of
any Rent then past due, including late fees, interest and penalties, before
being credited to Rent currently falling due. Any such payment which is less
than the amount of Rent then due shall constitute a payment made on account
thereof, the parties hereto hereby agreeing that the Landlord's acceptance of
such payment (whether or not with or accompanied by an endorsement or statement
that such lesser amount or the Landlord's acceptance thereof constitutes payment
in full of the amount of Rent then due) shall not alter or impair the Landlord's
right hereunder to be paid all of such amount then due, or in any other respect.
2.5 Tax on Lease. If federal, state or local law now or hereafter imposes
any tax, assessment, levy or other charge (other than any income, (17)
inheritance or estate tax) directly or indirectly upon (a) the Landlord with
respect to this Lease or the value thereof, (b) the Tenant's use or occupancy of
the Premises, (c) the Base Rent, Additional Rent or any other sum payable under
this Lease, or (d) this transaction, then (except if and to the extent that such
tax, assessment, levy or other charge is included in the Annual Operating Costs)
the Tenant shall pay the amount thereof as Additional Rent to the Landlord upon
demand, unless the Tenant is prohibited by law from doing so, in which event the
Landlord may, at its election, terminate this Lease by giving written notice
thereof to the Tenant.
2.6 Security deposit.
2.6.1. Simultaneously with the entry into this Lease by the
parties hereto, the Tenant shall deposit with the Landlord the sum of Eleven
Thousand One Hundred Eighty-eight and 00/100 Dollars ($11,188.00), which shall
be retained by the Landlord as security for the Tenant's payment of the Rent and
performance of all of its other obligations under the provisions of this Lease.
2.6.2. On the occurrence of an Event of Default, the Landlord
shall be entitled, at its sole discretion,
(a) to apply or all of such sum in payment of (i) any
Rent then due and unpaid, (ii) any expenses incurred by the Landlord in curing
any such Event of Default, and/or (iii) any damages incurred by the Landlord by
reason of such Event of Default (including, by way of example rather than of
limitation, that of reasonable attorneys' fees); and/or
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(17) franchise, gift, transfer,
<PAGE>
(b) to retain any or all such sum to reimburse for
any or all damages suffered by the Landlord by reason of event of such default.
If at any time Landlord draws upon the security deposit in accordance with this
section Tenant upon demand agrees to immediately pay to Landlord an amount
sufficient to return the security deposit to the amount stated above.
2.6.3. On the termination of this Lease, any of such sum
which is not so applied or retained shall be returned to the Tenant within (18)
days of the Lease termination date.
2.6.4. Such sum shall not bear interest while being held by
the Landlord hereunder. (19)
2.6.5. No Mortgagee (as that term is defined by the
provisions of Section 12) or purchaser of any or all of the Property at any
foreclosure proceeding brought under the provisions of any Mortgage (as that
term is defined by the provisions of Section 12) shall (regardless of whether
the Lease is at the time in question subordinate to the lien of any Mortgage
under the provisions of Section 12 or otherwise) be liable to the Tenant or any
other person for any or all of such sum (or any other or additional security
deposit or other payment made by the Tenant under the provisions of this Lease),
unless both (a) the Landlord has actually delivered it in cash to such Mortgagee
or purchaser, as the case may be, and (b) it has been specifically identified,
and accepted by the Lender or such purchaser, as the case may be, as such and
for such purpose, then Landlord will have no further liability for return of the
security deposit.
SECTION 3. USE OF PREMISES.
3.1 The Tenant shall, continuously throughout the Term occupy and use
the Premises for and only for general office purposes.
3.2 In its use of the Premises and the remainder of the Property, the
Tenant shall not violate any applicable law, ordinance or regulation.
3.3 License.
3.3.1. The Landlord hereby grants to the Tenant a
non-exclusive license to use (and to permit its officers, directors, agents,
employees and invitees to use in the course of conducting business at the
Premises),
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(18) thirty (30)
(19) In the case of a sale, Tenant's Security Deposit will transfer to the new
ownership, to the extent the Security Deposit has not been applied by
Landlord.
<PAGE>
(a) any and all portions of the said tract of land on which
the Building is located (excluding that portion thereof which is improved by any
other building) which, by their nature, are manifestly designed and intended for
common use by the occupants of the Building and of any other improvements on
such tract, for pedestrians ingress and egress to and from the Premises and for
any other such manifest purposes; and
(b) any and all portions of such tract of land as from time
to time are designated (by striping or otherwise) by the Landlord for such
purpose, for the parking of automobiles.
3.3.2. Such license shall be exercised in common with the
exercise thereof by the Landlord, any tenant or owner of the building or any
other building located on such tract, and their respective officers, directors,
agents, employees and invitees, and in accordance with the Rules and Regulations
promulgated from time to time pursuant to the provisions of Section 11.
3.4. Signs. The Tenant shall have the right to erect from time to time
within the Premises such (20) signs as it desires, in accordance with applicable
law, except that the Tenant shall not erect any sign within the Premises in any
place where such sign is visible from the exterior of the Premises, unless the
Landlord has given its express, written consent thereto. (21)(22)(23)
3.5 Relocation of Tenant.
.
SECTION 4. INSURANCE AND INDEMNIFICATION
4.1 Increase in risk. The Tenant
4.1.1. shall not do or permit to be done any act or thing as a
result of which either (a) any policy of insurance of any kind covering (i) any
or all of the Property or (ii) any liability of the Landlord in connection
therewith may become void or suspended, or (b) the insurance risk under any such
policy would (in the opinion of the insurer thereunder) be made greater; and
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(20) Building standard
(21) which consent shall not be unreasonably withheld, conditioned or delayed.
(22) Landlord consents to Tenant's right to erect an exterior sign replacing,
and of like size to the existing "Logicon" signage affixed to exterior of
the Building.
(23) Subsection 3.3 Compliance with ADA. Notwithstanding anything to the
contrary contained in this Lease, Landlord and Tenant agree that
responsibility for compliance with the Americans With Disabilities Act of
1990 (the "ADA") shall be allocated as follows: (i) Landlord shall be
responsible for compliance with the provisions of Title III of the ADA for
all Common Areas, including exterior and interior areas of the Building not
included within the Premises or the premises of other tenants; (ii)
Landlord shall be responsible for compliance with the provisions of Title
III of the ADA for any construction, renovations, alterations and repairs
are made by Landlord at Landlord's request and sole expense for the purpose
of improving the Building generally and not for tenant improvements; and
(iii) Tenant shall be responsible for compliance with the provisions of the
ADA for any construction, renovations, alterations, and repairs are made by
Tenant, its employees, agents or contractors, at Tenant's expense or at the
direction of Tenant except that Landlord shall be responsible for
compliance with the provisions of the ADA in effect as of the date of this
Lease for the improvements to be rendered by Landlord in accordance with
Section 5.1 of the Lease as more specifically set forth in Exhibit B
attached hereto.
<PAGE>
4.1.2. shall pay as Additional Rent the amount of any increase in
any premium for such insurance resulting from any breach of such covenant.(24)
4.2 Insurance to be maintain by Tenant.
4.2.1. The Tenant shall maintain at its expense, throughout the
Term, insurance against loss or liability in connection with bodily injury,
death, property damage or destruction, occurring within the Premises or arising
out of the use thereof by the Tenant or its agents, employees, officers or
invitees, visitors and guests, under one or more policies of general public
liability insurance having such limits as to each as are reasonably required by
the Landlord from time to time, but in any event of not less than a total of Two
Million Dollars ($2,000,000.00) for bodily injury to or death of all persons or
property damage or destruction in any one occurrence, and (b) Fifty Thousand
Dollars ($50,000.00) Fire Legal Liability.(25) Each such policy shall (a) name
as the insured thereunder the Tenant and the Landlord (and, at the Landlord's
request, may Mortgagee) as additional insureds, (b) by its terms, not be
cancelable without at least (30) days' prior written notice to the Landlord's
(and, at the Landlord's request, any such Mortgagee), and (c) be issued by any
insurer of recognized responsibility licensed to issue such policy in the
Commonwealth of Virginia.
4.2.2. (a) At least five (5) before the Commencement Date, the
Tenant shall deliver to the Landlord a certificate of each such policy, and (b)
at least thirty (30) days before any such policy expires, the Tenant shall
deliver to the Landlord an original or a signed duplicate copy of a replacement
policy therefor; provided, that so long as such insurance is otherwise in
accordance with the provisions of this Section, the Tenant may carry any such
insurance under a blanket policy covering the Premises for the risks and in the
minimum amounts specified in paragraph 4.2.1, in which event the Tenant shall
deliver to the Landlord two (2) insurer's certificates therefor in lieu of an
original or a copy thereof, as aforesaid.
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(24) To the extent and so long as such increase is attributable to such breach
or act of the Tenant
(25) Such policies may be provided under Tenants' "Umbrella" insurance policy.
<PAGE>
4.3 Insurance to be maintained by Landlord.
Insurance to be maintained by Landlord. (26)
4.4 Waiver of subrogation. If either party hereto is paid any proceeds
under any policy of insurance naming such party as an insured, on account of any
loss, damage or liability, then such party hereby releases the other party
hereto, to and only to the extent of the amount such proceeds, from any and all
liability for such loss, damage or liability, notwithstanding that such loss,
damage or liability may arise out of the negligent or intentionally tortious act
or omission of the other party, its agents or employees; provided, that such
release shall be effective only as to a loss, damage or liability occurring
while the appropriate policy of insurance of the releasing party provides that
such release shall not impair the effectiveness of such policy or the insured's
ability to recover thereunder. Each party hereto shall use reasonable efforts to
have a clause to such effect included in its said policies, and shall promptly
notify the other in writing if such clause cannot be included in any such
policy.
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(26) Insurance to be maintained by Landlord. Landlord shall maintain, during the
Term of this Lease, property and comprehensive general liability insurance
covering the Building. The Property insurance shall include fire and
extended coverage insurance, with All Risk rider, covering all structures
and improvements for full replacement value, with replacement cost
endorsement, above foundation walls. The comprehensive general liability
insurance shall insure against claims for bodily injury and property damage
occurring in or about the Building. Such insurance may be blanketed with
other insurance carried by Landlord so long as such blanketing with other
insurance does not reduce the amount of insurance available to pay any
claim with respect to the Building.
<PAGE>
4.5 Liability of parties. Except if and to the extent that such party is
released from liability to the other party hereto pursuant to the provision of
subsection 4.4.
4.5.1. the Landlord (a) shall be responsible for, and shall
indemnify and hold harmless the Tenant against and from any and all liability
arising out of, any injury to or death of any person or damage to any property,
occurring anywhere upon the Property, if, only if and to the extent that such
injury, death or damage is proximately caused by the grossly negligent or
intentionally tortious act or omission of the Landlord or its agents, officers
or employees, but (b) shall not be responsible for or be obligated to indemnify
or hold harmless the Tenant against or from any liability for any such injury,
death or damage occurring anywhere upon the Property (including the Premises),
(i) by reason of the Tenant's occupancy or use of the Premises or any other
portion of the Property, or (ii) because of fire, windstorm, act of God or other
cause unless solely caused by such gross negligence or intentionally tortious
act or omission of the Landlord, as aforesaid; and
4.5.2. subject to the operation and effect of the foregoing provisions of
this subsection (27), the Tenant shall be responsible for, and shall defend,
indemnify and hold harmless the Landlord against and from, any and all liability
or claim of liability (including without limitation reasonable attorney's fees)
arising out of any injury to or death of any person or damage to any property,
occurring within the Premises, or, if caused by Tenant, its employees, agents or
invitees, on the Property.
SECTION 5. IMPROVEMENTS TO PREMISES.
5.1. By Landlord. (28)
5.1.1. The Landlord shall make the improvements to the Premises
which are set forth in the plans and specifications attached hereto as Exhibit
B. (29)
5.1.2. [Deleted in entirety]
5.1.3. the Landlord shall use reasonable efforts to complete such
improvements by the date on which the Tenant is entitled to occupy the Premises
pursuant to this Lease, but shall have no liability to the Tenant hereunder if
prevented from doing so by reason of any (a) strike, lock-out or other labor
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(27) and except to the extent covered by Landlord's insurance hereunder
(28) The Landlord, at Landlord's, expense, will construct Tenant's Premises with
a "turnkey" buildout as indicated on Tenant's final approved plans attached
hereto as Exhibit B. In the event said buildout exceeds Eight and 00/100
Dollars ($8.00) per rentable square foot, the Tenant shall be responsible
for any costs above such amount. All Building, IIVAC, fire and life safety
code requirements (including, but not limited to, sprinklers, exit signs,
heat pumps and VAV boxes) shall be installed and/or relocated as required
by Tenant's final plans, at Landlord's expense.
(29) Landlord shall warrant all construction against latent defects for thirty
(30) days after the Commencement Date.
<PAGE>
labor troubles, (b) governmental restrictions or limitations, (c) failure or
shortage of electrical power, gas, water, fuel oil, or other utility or service,
(d) riot, war, insurrection or other national or local emergency (e) accident,
flood, fire or other casualty, (f) adverse weather condition, (g) other act of
God, (h) inability to obtain a building permit or a certificate of occupancy, or
(i) shortage of materials or labor, or (j) other cause similar or dissimilar to
any of the foregoing and beyond the Landlord's reasonable control. In such
event, (a) the Commencement Date shall be postponed for a period equaling the
length of such delay, (b) the Termination Date shall be determined pursuant to
the provisions of subsection 1.1 by reference to the Commencement Date as so
postponed, and (c) the Tenant shall accept possession of the Premises within
three (3) days after such completion. If Tenant does not submit drawings or
approvals in a timely manner and, as a result, the Landlord cannot deliver the
Premises timely, the Lease Commencement Date shall not be postponed. (30)
5.2. By Tenant. The Tenant shall not make any (31) alteration, addition or
improvement to the Premises without first obtaining the Landlord's written
consent thereto (32). If the Landlord consents to any such proposed alteration,
addition or improvement, it shall be made at the Tenant's sole expense (and the
Tenant shall hold the Landlord harmless from any cost incurred on account
thereof), and at such time and in such manner as not unreasonably to interfere
with the use and enjoyment of the remainder of the Property by any tenant
thereof or other person.
5.3. Mechanics' lien. The Tenant shall (a) immediately after it is filed or
claimed, bond or have released any mechanics' , materialman's or other lien
filed or claimed against any or all of the Premises, the Property, or any other
property owned or leased by the Landlord, by reason of labor or materials
provided for the Tenant or any of its contractors or subcontractors (other than
labor or materials provided by the Landlord pursuant to the provisions of
subsection 5.1), or otherwise arising out of the Tenant's use or occupancy of
the Premises or any other portion of the Property, and (b) defend, indemnify and
hold harmless the Landlord against and from any and all liability, claim of
liability or expense (including, by way of example rather than of limitation,
that of reasonable attorneys' fees) incurred by the Landlord on account of any
such lien or claim.
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(30) If the Premises is not substantially completed (as defined herein) by
November 30, 1998, then the Tenant at its option may cancel this Lease
without further liability to Landlord and Landlord shall return forthwith
any sums which Tenant had furnished to Landlord.
(31) non-structural
(32) which consent shall not be unreasonably withheld, conditioned or denied
<PAGE>
5.4. Fixtures. Any and all improvements, repairs, alterations and all other
property attached to, used in connection with or otherwise installed within the
Premises by the Landlord or the Tenant shall, immediately on the completion of
their installation, become the Landlord's property without payment therefor by
the Landlord, except that any machinery, equipment or fixtures installed by the
Tenant and used in the conduct of the Tenant's trade or business (rather than to
service the Premises or any of the remainder of the Building or the Property
generally) shall remain the Tenant's property.
SECTION 6. UTILITIES AND SERVICES.
6.1. Utilities. Landlord agrees to provide at its cost water and
electricity service connections into the Premises and telephone service
connections to the Building, but Tenant shall pay for all water, gas, heat,
light, power, telephone, sewer, and other utilities and services used on or from
the Premises, together with any taxes, penalties, surcharges or the like
pertaining thereto and any maintenance charges for utilities and shall furnish
all electric light bulbs and tubes. If any such services are not separately
metered to Tenant, Tenant shall pay its proportionate share as determined by
Landlord of all charges jointly metered within the Building.
6.2. Interruption. The Landlord shall have no liability to the Tenant for
any compensation or reduction of rent on account of any failure, modification or
interruption of any such service which either (a) arises out of any of the
causes enumerated in the provisions of subsection 5.1, or (b) is required by
applicable law (including, by way of example rather than of limitation, any
federal law or regulation relating to the furnishing or consumption of energy or
the temperature of buildings) (33).
SECTION 7. LANDLORD'S RIGHT OF ENTRY. (34)
The Landlord and its agents shall be entitled to enter the Premises (35) at
any reasonable time (a) to inspect the Premises, (b) to exhibit the Premises to
any existing or prospective purchaser, tenant or Mortgagee thereof, (c) to make
any alteration, improvement or repair to the Building or the Premises, or (d)
for any other purpose relating to the operation or maintenance of the Property;
provided that the Landlord shall (a) (unless doing so is impractical or
unreasonable because of emergency) give the Tenant at least (36) hours' prior
notice of its intention to enter the Premises, and (b) use reasonable efforts to
avoid thereby interfering more than is reasonably necessary with the Tenant's
use and enjoyment thereof.
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(33) Except in the case of an emergency, Landlord will use commercially
reasonable efforts to give Tenant at least four (4) days prior written
notice if Landlord intends to interrupt any services required to be
furnished by Landlord.
(34) 6.3 Landlord failure to furnish services. If, for any reason, there is a
failure to furnish the facilities, utilities or services specified in this
Lease or a condition exists which interferes substantially with or prevents
Tenant's normal use of the Demised Premises or any part thereof and
Landlord does not immediately commence action to restore same or if so
commenced, does not continue such action with reasonable diligence until
same are restored, then, in any such event, and upon the giving of five (5)
days written notice to Landlord, Tenant shall have the option to furnish
such facilities, utilities, or services for its own account as may
reasonably, under the circumstances, be obtained by Tenant, and Landlord
shall reimburse Tenant the reasonable costs thereby within thirty (30) days
of receipt of an invoice therefor. If such interruption of service shall
continue for five (5) consecutive days, the Basic Monthly Rental and
Additional Rental shall abate, based upon the portion or portions of the
Demised Premises affected by such interruption of service and the degree of
adverse affect of the interruption upon the normal conduct of Tenant's
business at the Demised Premises, until such interruption is remedied. If
any such interruption of service shall continue for more than sixty (60)
consecutive days, Tenant may, by written notice to Landlord given at any
time prior to the resumption of service to a reasonable level, terminate
this Lease, and, upon the giving of such notice, this Leas shall terminate
and expire on the date set forth in such notice, which date shall be not
more than ninety (90) days after the date of such notice.
6.4 Services If Not Provided by Landlord. Notwithstanding anything
contained herein, if Tenant cannot reasonably use all, or any portion of
the Premises for Tenant's normal business operations by reason of any
interruption in services and such condition exists for five (5) consecutive
business days, then Tenant's rent shall be equitably abated for that
portion of the Premises that Tenant is unable to occupy until such service
is restored and Tenant is able to use the Premises.
(35) with a representative of Tenant
(36) forty-eight (48)
<PAGE>
SECTION 8. FIRE AND OTHER CASUALTIES.
8.1. General. If the Premises are damaged by fire or other casualty during
the term,
8.1.1. the Landlord shall, with reasonable promptness (taking
into account the time required by the Landlord to effect a settlement with, and
to procure any insurance proceeds from, any insurer against such casualty, but
in any event within two hundred twenty (220) days after the date of such
casualty), substantially restore the premises to their condition immediately
before such casualty, and may temporarily enter and possess any or all of the
Premises for such purpose (provided, that the Landlord shall not be obligated to
repair, restore or replace any fixture, improvement, alteration, furniture, or
other property owned, installed or made by the Tenant), but
8.1.2. the times for commencement and completion of any such
restoration shall be extended for the period of any delay occasioned by the
Landlord in doing so arising out of any of the causes enumerated in the
provisions of subsection 5.1. If the Landlord undertakes to restore the Premises
and such restoration is not accomplished within the said period of two hundred
twenty (220) days plus the period of any extension thereof, as aforesaid, the
Tenant may terminate this Lease by giving written notice thereof to the Landlord
within thirty (30) days after the expiration of such period, as so extended; and
8.1.3. so long as the Tenant is deprived of the use of any or all
of the Premises on account of such casualty, the Base Rent and any Additional
Rent payable under the provisions of subsection 2.2. shall be abated in
proportion to the number of square feet of the Premises rendered substantially
unfit for occupancy by such casualty, unless, because of any such damage, the
undamaged portion of the Premises is made materially unsuitable for use by the
Tenant for the purposes set forth in the provisions of Section 3, in which event
the Base Rent and any such Additional Rent shall be abated entirely during such
period of deprivation.
8.2. Substantial destruction. Anything contained in the foregoing
provisions of this Section to the contrary notwithstanding,
8.2.1. if during the Term the Building is so damaged by fire
or other casualty that (a) either the Premises or (whether or not the Premises
are damaged) the Building is rendered substantially unfit for occupancy, as
reasonably determined by the Landlord, or (b) the Building is damaged to the
extent that the Landlord reasonably elects to demolish the Building, or if any
Mortgagee requires that any or all of such insurance proceeds be used to retire
any or all of the debt secured by its Mortgage, then in any such case the
Landlord may elect to terminate this Lease, as of the date of such casualty by
giving written notice thereof to the Tenant within thirty (30) days as of the
date of such casualty; and
<PAGE>
8.2.2. in such event, (a) the Tenant shall pay to the Landlord
the Base Rent and any Additional Rent payable by the Tenant hereunder and
accrued through the date of such termination, (b) the Landlord shall repay to
the Tenant any and all prepaid Rent for periods beyond such termination, and (c)
the Landlord may enter upon and repossess the Premises without further notice.
8.3. Tenant's negligence. Anything contained in any provision of this Lease
to the contrary notwithstanding (37), if any such damage to the Premises, the
Building or both are caused by or result from the negligent or intentionally
tortious act or omission of the Tenant, those claiming under the Tenant or any
of their respective officers, employees, agents or invitees,
8.3.1. the Rent shall not be suspended or apportioned as aforesaid, and
8.3.2. except if and to the extent that the Tenant is released
from liability therefor pursuant to the provisions of subsection 4.4, the Tenant
shall pay to the Landlord upon demand, as Additional Rent, the cost of (a) any
repairs and restoration made or to be made as a result of such damage, or (b)
(if the Landlord elects not to restore the Building) any damage or loss which
the Landlord incurs as a result of such damage.
SECTION 9. CONDEMNATION.
9.1. Right to award.
9.1.1. If any or all of the Premises are taken by the exercise of
any power of eminent domain or are conveyed to or at the direction of any
governmental entity under a threat of any such taking (each of which is
hereinafter referred to as a "Condemnation"), the Landlord shall be entitled to
collect from the condemning authority thereunder the entire amount of any award
made in any such proceeding or as consideration for such conveyance, without
deduction therefrom for any leasehold or other estate held by the Tenant under
this Lease.
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(37) except to the extent Landlord receives insurance proceeds for any of the
following,
<PAGE>
9.1.2. The Tenant hereby (a) assigns to the Landlord all of the
Tenant's right, title and interest, if any, in and to any such award; (b) waives
any right which it may otherwise have in connection with such Condemnation,
against the Landlord or such condemning authority, to any payment for (i) the
value of the then-unexpired portion of the Term, (ii) leasehold damages, and
(iii) any damage to or diminution of the value of the Tenant's leasehold
interest hereunder or any portion of the Premises not covered by such
Condemnation; and (c) agrees to execute any and all further documents which may
be required to facilitate the Landlord's collection of any and all such awards.
9.1.3. Subject to the operation and effect of the foregoing
provisions of this Section, the Tenant may seek, in a separate proceeding, a
separate award on account of any damages or costs incurred by the Tenant as a
result of such Condemnation, so long as such separate award in no way diminishes
any award or payment which the Landlord would otherwise receive as a result of
such Condemnation and Tenants right of recovery is limited to moving expenses
and the cost of trade fixtures.
9.2. Effect of Condemnation.
9.2.1. If (a) all the Premises are covered by a Condemnation, or
(b) any part of the Premises is covered by a Condemnation and the remainder
thereof is insufficient for the reasonable operation therein of the Tenant's
business, or (c) any of the Building is covered by a Condemnation and, in the
Landlord's reasonable opinion, it would be impractical to restore the remainder
thereof, or (d) any of the rest of the Property is covered by a Condemnation
and, in the Landlord's reasonable opinion, it would be impractical to continue
to operate the remainder of the Property thereafter, then, in any such event,
the Term shall terminate on the date on which possession of so much of the
Premises, the Building or the rest of the Property, as the case may be, as is
covered by such Condemnation is taken by the condemning authority thereunder,
and all Rent (including, by way of example rather than of limitation, any
Additional Rent payable under the provision of subsection 2.2), taxes and other
charges payable hereunder shall be apportioned and paid to such date.
9.2.2. If there is a Condemnation and the Term does not terminate
pursuant to the foregoing provision of this subsection, the operation and effect
of this Lease shall be unaffected by such Condemnation, except that the Base
Rent shall be reduced in proportion to the square footage of floor area, if any,
of the Premises covered by such Condemnation.
<PAGE>
9.3. If there is a Condemnation, the Landlord shall have no liability
to the Tenant on account of any (a) interruption of the Tenant's business upon
the Premises, (b) diminution in the Tenant's ability to use the Premises, or (c)
other injury or damage sustained by the Tenant as a result of such Condemnation.
9.4. Except for any separate proceeding brought by the Tenant under the
provisions of paragraph 9.1.3., the Landlord shall be entitled to conduct any
such condemnation proceeding and any settlement thereof free of interference
from the Tenant, and the Tenant hereby waives any right which it otherwise has
to participate therein.
SECTION 10. ASSIGNMENT AND SUBLETTING. (38)
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(38) 10.1 Landlord's Consent. Tenant shall not assign its interests hereunder,
sublease all or any portion of the Premises (for purposes of this Lease, a
license shall be deemed to be a sublease), or allow any other person to use
or occupy any portion of the Premises, without the prior written consent of
Landlord, which shall not be unreasonably withheld, conditioned or delayed,
except that Landlord shall not, under any circumstances, be obligated to
consent to any assignment or subletting by Tenant (i) to any other tenant
of the Building, (ii) by operation of law, or (iii) to any person who fails
to meet any of the other reasonable criteria of Landlord that Tenant was
required to meet prior to the execution of this Lease, including, without
limitation, the following:
(a) With the exception of a transfer pursuant to Paragraph 10.2, the
financial strength of the proposed assignee or subtenant, both in
terms of net worth and in terms of reasonably anticipated cash flow
over the Lease Term, meets or exceeds the reasonable criteria of
Landlord that Tenant was required to meet prior to the execution of
this Lease, and such proposed transferee can demonstrate, to
Landlord's reasonable satisfaction, that it is capable of meeting the
financial obligations under this Lease.
(b) The proposed assignee or subtenant will not burden the Premises and/or
Common Areas to an extent substantially disproportionate to typical
tenants of the Building, whether through disproportionate demand for
landlord services or utilities, disproportionate bearing weights on
floor areas, disproportionate parking requirements, deterioration of
floors or other elements of the Building, or otherwise.
(c) Any substantial alterations must be mutually agreed upon, in which
event Tenant is responsible for repairing any such alterations and
will return the Premises to Landlord in it's original condition.
(d) The proposed assignee's or subtenants use of the Premises will, in
Landlord's reasonable judgment, be compatible with the uses of the
other tenants in the Building or will be appropriate for comparable
office building.
(e) Any failure of the proposed assignee or subtenant to meet any of the
reasonable criteria of Landlord that Tenant was required to meet prior
to the execution of this Lease.
With respect to any proposed assignment or subleasing requiring Landlord's
consent, Tenant shall submit to Landlord in writing, at least thirty (30) days
prior to the effective date of the assignment date of the assignment or
sublease, (i) a notice of application to assign or sublease, setting forth the
proposed effective date, which shall be not less than thirty (30) or more than
ninety (90) days after the delivery of such notice; (ii) the name of the
proposed transferee; (iii) the nature of the proposed transferee's business to
be carried on in the Premises; (iv) the terms of the proposed sublease or
assignment; and (v) a current financial statement of the proposed transferee.
Tenant shall not submit any such application to Landlord until Tenant has
received a bona fide offer from the proposed transferee, and Tenant shall
furnish Landlord, in addition to the foregoing, with all other information
reasonably required by Landlord with respect to such transfer and transferee.
Any transfer (or sequence of transfers resulting, in the aggregate, in the
transfer) of 50% or more of the beneficial ownership of Tenant shall constitute
an assignment for purposes of this Article.
10.2 Transfers Not Requiring Consent. Notwithstanding the foregoing, Landlord's
consent shall not be required with respect to (i) any assignment resulting from
a consolidation, merger or purchase of substantially all of Tenant's assets; or
(ii) any assignment or sublease to a person (a) who wholly owns Tenant or who
wholly owns the person who wholly owns Tenant (in either case, a "Parent"), or
who is wholly owned by Tenant or a Parent, or is wholly owned by a person who is
wholly owned by Tenant or a Parent, and (b) with the exception of a transfer
pursuant to Paragraph 10.2, the financial strength of the proposed assignee or
subtenant, both in terms of net worth and in terms of reasonably anticipated
cash flow over the Lease Term, meets or exceeds the reasonable criteria of
Landlord that Tenant was required to meet prior to the execution of this Lease,
and such proposed transferee can demonstrate, to Landlord's reasonable
satisfaction, that it is capable of meeting the financial obligations under this
Lease. With respect to any assignment or subletting to which Landlord's consent
is not required, the following provisions shall apply:
1. Tenant shall give Landlord written notice of the assignment or
subletting no less than thirty (30) days prior to the effective date thereof,
which notice shall set forth the identity of the proposed transferee, the
reason(s) why Landlord's consent is not required, and the nature of the proposed
transferee's business to be carried on in the Premises.
2. Tenant shall furnish Landlord (a) no less than 30 days prior to the
effective date of the assignment or subletting with a current financial
statement of the proposed transferee reasonably acceptable to Landlord; and (b)
within three (3) days following Landlord's demand, with all other information
reasonably requested by Landlord with respect to such transferee.
Any assignment or subletting to which Landlord's consent is not required and
with respect to which the provisions of this paragraph are not complied with
shall, at Landlord's option, be void.
10.3 Recapture. Except for transfers under Paragraph 10.2, Landlord shall have
the option to be exercised within thirty (30) days from the submission of the
aforesaid information to cancel this Lease with respect to the space to be
assigned or the space to be sublet for the duration of the proposed sublease.
10.4 Net Revenues.
1. Sublease Revenues. In the event that Tenant subleases all or any portion
of the Premises and the total of all amounts payable to Tenant for any month
under such sublease exceeds the total of all amounts payable to Landlord
hereunder for such month for the same space, fifty percent (50%) of such net
sublease revenues ("Net Sublease Revenues") received by Tenant for any month
shall be paid to Landlord within 10 business days thereafter.
2. Sublease and Assignment Revenues. In the event that Tenant assigns this
Lease with respect to all or any portion of the Premises (the "assigned
premises"), Tenant shall pay to Landlord fifty percent (50%) of the amount, if
any, by which all amounts paid to Tenant in consideration of such assignment
exceed the sum of (a) all Monthly Rent and Additional Rent paid by Tenant for
the assigned premises for the period from the date Tenant vacated the same (and
provided Landlord with written notice of such vacation) until the effective date
of the assignment and (b) all brokerage commissions reasonably incurred by the
assigning tenant in connection with such assignment.
10.5 Continuing Liability; Voidable Transfers. No assignment of this Lease
(other than an assignment to Landlord resulting from Landlord's right of
recapture), and no subletting of all or any portion of the Premises, shall
release Tenant or any guarantor with respect to any post-transfer obligations,
unless Landlord agrees otherwise in writing in its absolute discretion and any
such assignment or sublease shall, at Landlord's option, be void in the event
that Tenant and each such guarantor, if any, does not expressly acknowledge and
affirm its continuing liability in form and substance reasonably satisfactory to
Landlord. The continuing liability of the assigning Tenant shall be primary, and
Landlord shall be entitled to exercise its rights and remedies against any such
assignor with respect to any Tenant Default without exhausting its rights and
remedies against any successor of such assignor. In the event that it is ever
held, notwithstanding the contrary intention of the parties hereto, that any
such assignor's continuing liability is that of a guarantor (rather than
primary), Tenant hereby waives any and all suretyship rights and defenses to
which it would otherwise be entitled in connection with such continuing
liability. Notwithstanding the foregoing, in the event that, following any
assignment (other than an assignment described in Section B, above) Landlord and
such assignee modify this Lease in such a way as to increase Tenant's total
obligations hereunder, neither the assigning Tenant nor any guarantor whose
guaranty pre-dated such assignment shall be liable for the incremental portion
of Tenant's obligations corresponding to such increase. The acceptance of any
assignment by an assignee shall automatically constitute the assumption by such
assignee of all obligations of Tenant with respect to the assigned premises that
accrue following the assignment; provided, however, that any assignment of this
Lease shall, at Landlord's option, be void in the event the assignee does not
expressly acknowledge and affirm the effectiveness of the foregoing assumption
in form and substance reasonably satisfactory to Landlord. Any assignment or
subletting by Tenant to which Landlord's consent is required but not obtained
shall, at Landlord's option, be void. Following Landlord's consent, or refusal
to consent, to any assignment or sublease, Tenant shall pay Landlord, upon
demand, a reasonable charge (not to exceed $250.00) to cover Landlord's
administrative and out-of-pocket costs in connection therewith.
10.6 Other Provisions Applicable to Transfers. No assignment or subletting shall
be deemed to modify any provision of this Lease, with respect to permitted or
restricted uses of the Premises or otherwise, unless Landlord then agrees
otherwise in writing in its absolute discretion. Tenant shall promptly furnish
Landlord with a copy of each executed assignment or sublease, and with copies of
any supplements or modifications thereto which may be executed from time to
time.
10.7 Assignment of Sublease Revenues. Tenant hereby absolutely assigns to
Landlord all of Tenant's right, title and interest in and to all revenues, with
the exception of those addressed in Paragraph 10.4.2, from each sublease of all
or any portion of the Premises; provided, however, that Landlord hereby grants
Tenant a license, which shall remain in effect so long as no Tenant default
remains uncured, to collect all such revenues (subject to Tenant's obligation to
deliver certain of such revenues to Landlord under this Article). Upon the
occurrence of any Tenant default, Landlord may revoke such license by written
notice to Tenant and may, by written notice to any subtenant of Tenant, demand
that such subtenant pay all such revenues directly to Landlord. In such event,
Tenant irrevocably authorizes and directs any such subtenant to pay such
revenues to Landlord, and further agrees (a) that any such subtenant shall be
obligated and entitled to pay such revenues to Landlord notwithstanding any
contrary contentions or instruction later received from Tenant and (b) that no
such subtenant shall have any liability to Tenant for any such revenues paid to
Landlord in accordance with the foregoing. Landlord shall not be entitled to use
or enjoy any such revenues except for the purpose applying such revenues against
unfulfilled obligations of Tenant hereunder with respect to which the applicable
cure periods have expired, or to reimburse Landlord for other losses suffered by
Landlord as a result of any Tenant default, or to compensate Landlord for other
losses suffered by Landlord as a result of any Tenant default. Any such revenues
remaining in landlord's possession following the cure of all Tenant defaults and
the reimbursement of all such costs and losses shall be delivered to Tenant upon
demand. No such notice to any subtenant or receipt of revenues from any
subtenant shall be deemed to constitute either (i) Landlord's consent to such
sublease or (ii) the assumption by Landlord of any obligation of Tenant under
such sublease, nor shall any such notice or receipt create privity of contract
between Landlord and the applicable subtenant or be construed as a
nondisturbance or similar agreement between Landlord and such subtenant.
10.8 Transfers by Subtenants. The provisions of this Article shall also apply to
assignments and subleases by subtenants, sub- subtenants and so on.
10.9 Assignment of Options. Without limiting the generality of any provisions of
this Lease which states that any option or other right of Tenant is personal to
the original Tenant hereunder or may only be assigned under certain conditions,
except for transfers under Paragraph 10.2, no option or similar right of Tenant
hereunder, including without limitation any option to extend or renew, option
the expand, first offer or first refusal right, or first right to lease, may be
assigned , and any attempt to assign such right shall be null and void.
10.10 Encumbrance. Tenant shall not assign its interests hereunder as security
for any obligation without Landlord's prior written consent, which may be
withheld in Landlord's absolute discretion, and any such assignment without such
consent shall, at Landlord's option, be void.
<PAGE>
10.1 [Deleted in its entirety]
SECTION 11. RULES AND REGULATIONS.
The Landlord shall have the right to prescribe, at its sole discretion,
reasonable rules and regulations (hereafter referred to as the "Rules and
Regulations") having uniform applicability to all tenants of the Building
(subject to the provisions of their respective leases) and governing their use
and enjoyment of the Building and the remainder of the Property; provided, that
the Rules and Regulations shall not materially interfere with the Tenant's use
and enjoyment of the Premises, in accordance with the provisions of this Lease,
for the purposes enumerated in the provisions of Section 3. The Tenant shall
adhere to the Rules and Regulations and shall cause its agents, employees,
invitees, visitors and guests to do so. A copy of the Rules and Regulations in
effect on the date hereof is attached hereto as Exhibit C.
SECTION 12. SUBORDINATION; ATTORNMENT AND NON-DISTUBANCE.
12.1. Subordination. This Lease shall be subject and subordinate to the
lien, operation and effect of each mortgage, deed of trust, ground lease and/or
other, similar instrument of encumbrance heretofore or hereafter covering any or
all of the Premises or the remainder of the Property (and each renewal,
modification, consolidation, replacement or extension thereof), (each of which
is herein referred to as a "Mortgage"), all automatically and without the
necessity of any action by either party hereto.
(39) 12.2. Attornment and non-disturbance. The Tenant shall, promptly at
the request of the Landlord or the holder of any Mortgage (herein referred to as
a "Mortgagee"), execute, enseal, acknowledge and deliver such further instrument
or instruments
12.2.1. evidencing such subordination as the Landlord or such
Mortgagee deems necessary or desirable, and
12.2.2. [deleted in entirety]
12.3. Anything contained in the provisions of this Section to the
contrary notwithstanding, any Mortgagee may at any time subordinate the lien of
its Mortgage to the operation and effect of this Lease without obtaining the
Tenant's consent thereto, by giving the Tenant written notice thereof, in which
event this Lease shall be deemed to be senior to such Mortgage without regard to
their respective dates of execution, delivery and/or recordation among the Land
Records of the said County, and thereafter such Mortgagee shall have the same
rights as to the Lease as it would have had, were this Lease executed and
delivered before the execution of such Mortgage. (40)
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(39) 12.1.2 Subordination Clause. Notwithstanding any other provision to the
contrary, Landlord shall use commercially reasonable efforts to obtain from
any future lender as a condition to Tenant's agreement to subordinate this
Lease, a mutually satisfactory non-disturbance agreement.
(40) Landlord covenants and warrants that it has lawful title to the Property
and the right to make this Lease, that Tenant shall have full and exclusive
possession of the Premises, and that, if Tenant shall pay the Rent and
perform all the agreements, covenants, and conditions required by this
Lease to be performed by it, Tenant may freely, peaceably, and quietly
occupy and enjoy the Premises.
<PAGE>
SECTION 13. DEFAULT.
13.1. Definition: As used in the provisions of this Lease, each of the
following events shall constitute, and is hereinafter referred to as, an "Event
of Default":
13.1.1. If the Tenant fails to (a) pay any Rent or any other
sum which it is obligated to pay by any provision of this Lease, when and as due
and payable hereunder and without demand therefor, or (b) perform any of its
other obligations under the provisions of this Lease; or
13.1.2. If the Tenant (a) applies for or consents to the
appointment of a receiver, trustee or liquidator of the Tenant or of all or a
substantial part of its assets, (b) files a voluntary petition in bankruptcy or
admits in writing its inability to pay its debts as they come due, (c) makes an
assignment for the benefit of its creditors, (d) files a petition or an answer
seeking a reorganization or an arrangement with creditors, or seeks to take
advantage of any insolvency law, (e) performs any other act of bankruptcy, or
(f) files an answer admitting the material allegations of a petition filed
against the Tenant in any bankruptcy, reorganization or insolvency proceeding;
or
13.1.3. if (a) an order, judgment or decree is entered by any
court of competent jurisdiction adjudicating the Tenant a bankrupt or insolvent,
approving a petition seeking such a reorganization, or appointing a receiver,
trustee or liquidator of the Tenant or of all or a substantial part of its
assets, or (b) there otherwise commences as to the Tenant or any of its assets
any proceeding under any bankruptcy, reorganization, arrangement, insolvency,
readjustment, receivership or similar law, and if such order, judgment, decree
or proceeding continues unstayed for more than sixty (60) (41) consecutive days;
13.1.4. if the Tenant fails to occupy and assume possession
of the Premises within fifteen (15) (42) days after the Commencement Date;
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(41) ninety (90)
(42) thirty (30)
<PAGE>
13.1.5. if the Tenant generally fails to pay its debts as they
become due; or
13.1.6. if the Tenant abandons the Premises, whether or not Rent
or other sums are due and unpaid hereunder. (43)
13.2. Notice to Tenant; grace period. Anything contained in the
provisions of this Section to the contrary notwithstanding, on the occurrence of
an Event of Default the Landlord shall not exercise any right or remedy which it
holds under any provision of this Lease or applicable law unless and until
13.2.1. the Landlord has given written notice thereof to the
Tenant, if written notice is required by this Section for the Event of Default
which has occurred, and
13.2.2. the Tenant has failed, (a) if such Event of Default
consists of a failure to pay money, within five (5) (44) days (45), (46) or (b)
if such Event of Default consists of something other than a failure to pay
money, within thirty (30) days thereafter actively, diligently and in good faith
to begin to cure such Event of Default and to continue thereafter to do so until
it is fully cured; provided, that
13.2.3. no such notice shall be required, and the Tenant shall be
entitled to no such grace period, (a) in an emergency situation in which the
Landlord acts to cure such Event of Default pursuant to the provisions of
paragraph 13.3.5.; or (b) more than twice during any twelve (12) month period,
or (c) if the Tenant has substantially terminated or is in the process of
substantially terminating its continuous occupancy and use of the Premises for
the purpose set forth in the provisions of Section 3, or (d) in the case of any
Event of Default enumerated in the provisions of paragraphs 13.1.2., 13.1.3.,
13.1.4. and 13.1.6.
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(43) In the event Tenant should cease to continue to operate its business at the
Premises for a period of sixty (60) consecutive days for any reason other
than Tenant's alterations, casualty or other reason beyond Tenant's
reasonable control, or temporary (i.e., no more than 6 months) relocation
of Tenant's business as a result of a contract requirement, Landlord shall
have the right at any time thereafter to terminate the Lease and recapture
the Premises upon thirty (30) days prior written notice to Tenant. Landlord
shall also have the option to recapture the Premises upon thirty (30) days
prior written notice to Tenant without terminating the Lease. In such
event, Tenant shall remain liable for the Rent until such time as Landlord
leases the Premises to another party. In such event, Landlord will use
economically reasonable efforts to relet the Premises if Landlord
recaptures the Premises without terminating the Lease.
(44) business
(45) after written notice is received
(46) , however, Landlord shall only be obligated to provide written notice to
Tenant twice in each Lease Year; thereafter, no notice shall be due from
Landlord to Tenant and Tenant shall be in an Event of Default if it fails
to pay such amounts when due, or
<PAGE>
13.3. Landlord's rights on Event of Default. On the occurrence of any
Event of Default, the Landlord may (subject to the operation and effect of the
provisions of subsection 13.2) take any or all of the following actions:
13.3.1. re-enter and repossess the Premises and any and all
improvements thereon and additions thereto;
13.3.2. declare the entire balance of the Rent for the
remainder of the Term to be due and payable, and collect such balance in any
manner not inconsistent with applicable law;
13.3.3. terminate this Lease;
13.3.4. relet any or all of the Premises for the Tenant's
account for any or all of the remainder of the Term as hereinabove defined, or
for a period exceeding such remainder, in which event the Tenant shall pay to
the Landlord, at the times and in the manner specified by the provisions of
Section 2, the Base Rent and any Additional Rent accruing during such remainder,
less any monies received by the Landlord of any (47) attorneys' fees or of any
repairs or other action (including those taken in exercising the Landlord's
rights under any provision of this Lease) taken by the Landlord on account of
such Event of Default;
13.3.5. cure such Event of Default in any other manner (after
giving the Tenant written notice of the Landlord's intention to do so except as
provided in paragraph 13.2.3.), in which event the Tenant shall reimburse the
Landlord for all expenses incurred by the Landlord in doing so, plus interest
thereon at the lesser of the rate of (48) per annum , which expenses and
interest shall be Additional Rent and shall be payable by the Tenant immediately
on demand therefor by the Landlord; and/or
13.3.6. pursue any combination of such remedies and/or any
other remedy available to the Landlord on account of such Event of Default under
applicable law.
13.4. No waiver. No action taken by the Landlord under the provisions of
this Section shall operate as a waiver of any right which the Landlord would
otherwise have against the Tenant for the Rent hereby reserved or otherwise, and
the Tenant shall remain responsible to the Landlord for any loss and/or damage
suffered by the Landlord by reason of any Event of Default.
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(47) reasonable
(48) twelve percent (12%)
<PAGE>
13.5. Default by Landlord. In the event of any default by Landlord,
Tenant's exclusive remedy shall be an action for actual direct damages (Tenant
hereby waiving the benefit of any laws granting it a lien upon the property of
Landlord and/or upon rent due Landlord), but prior to any such action Tenant
will give Landlord written notice specifying such default with particularity,
and Landlord shall thereupon have thirty (30) days in which to cure any such
default. Unless and until Landlord fails to so cure any default after such
notice, Tenant shall not have any remedy or cause of action by reason thereof.
All obligations of Landlord hereunder will be construed as covenants, not
conditions, and all such obligations will be binding upon Landlord only during
the period of its possession of the Premises and not thereafter. The term
"Landlord" shall mean only the owner, for the time being of the Premises, and in
the event of the transfer by such owner of its interest in the Premises, such
owner shall thereupon be released and discharged from all covenants and
obligations of the Landlord thereafter accruing, but such covenants and
obligations shall be binding during the lease term upon each new owner for the
duration of such owner's ownership. Notwithstanding any other provision hereof,
Landlord shall not have any personal liability hereunder. In the event of any
breach or default by Landlord in any term or provision of this Lease, Tenant
agrees to look solely to the equity or interest then owned by Landlord in the
Property, however, in no event, shall any deficiency judgment or any money
judgment of any kind be sought or obtained against any Landlord.
SECTION 14. ESTOPPEL CERTIFICATE.
The Tenant shall time to time, within five (5) days (49) after being
requested to do so by the Landlord or any Mortgagee, execute, enseal,
acknowledge and deliver to the Landlord (or, at the Landlord's request, to any
existing or prospective purchaser, transferee, assignee or Mortgagee of any or
all of the Premises, the Property, any interest therein or any of the Landlord's
rights under this Lease) an instrument in recordable form,
14.1. certifying (a) that this Lease is unmodified and in full force and
effect (or, if there has been any modification thereof, that it is in full force
and effect as so modified, stating therein the nature of such modification); (b)
as to the dates to which the Base Rent and any Additional Rent and other charges
arising hereunder have been paid; (c) as to the amount of any prepaid Rent or
any credit due to the Tenant hereunder; (d) that the Tenant has accepted
possession of the Premises, and the date on which the Term commenced; (e) as to
whether, to the best knowledge, information and belief of the signer of such
certificate, the Landlord or the Tenant is then in default in performing any of
its obligations hereunder (and, if so, specifying the nature of each such
default); and (f) as to any other fact or condition reasonably requested by the
Landlord or such other addressee; and
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(49) ten (10) days
<PAGE>
14.2. acknowledging and agreeing that any statement contained in such
certificate may be relied upon by the Landlord and any such other addressee.
14.3. In the event that Tenant fails to deliver in a timely manner the
estoppel certificate described in Section 14, Landlord may complete such a
certificate on behalf of Tenant, which certificate shall be binding against
Tenant as if Tenant itself signed such certificate. For such purpose, Tenant
hereby irrevocably constitutes and appoints Landlord as Tenant's
attorney-in-fact (which appointment shall be deemed coupled with an interest)
for and in its name to prepare and sign on Tenant's behalf such an estoppel
certificate, Tenant hereby ratifying and confirming all the said attorney shall
lawfully do or choose to do or be done by virtue hereof, it being understood and
agreed that the aforesaid provisions impose no burden or obligation on the
Landlord to do or perform any act whatsoever. After said estoppel certificate
has been prepared by Landlord, Landlord shall provide Tenant a copy thereof.
Unless Tenant modifies such certificate as may be appropriate to make the
certificate fully accurate, and signs and returns to Landlord the certificate
within three (3) days after receipt from Landlord, Landlord shall be entitled
and authorized to sign such estoppel certificate and deliver to any Mortgagee or
other person such estoppel certificate in the name and on behalf of Tenant.
SECTION 15. QUIET ENJOYMENT.
The Landlord hereby covenants that the Tenant, on paying the Rent and
performing the covenants set forth herein, shall peaceably and quietly hold and
enjoy, throughout the Term, (a) the Premises, and (b) such rights as the Tenant
may hold hereunder with respect to the remainder of the Property.
SECTION 16. NOTICES.
Any notice, demand, consent, approval, request or other communication or
document to be provided hereunder to a party hereto shall be (a) given in
writing, and (b) deemed to have been given (i) forty-eight (48) hours after
being sent as certified or registered mail in the United States mails, postage
prepaid, return receipt requested, upon its hand delivery to such party, (50)
addressed as follows:
If to Landlord: Massachusetts Mutual Life Insurance Company
c/o Cambridge Asset Advisors Limited Partnership
560 Herndon Parkway,
Suite 210
Herndon, VA 20170
- - --------
(50) (ii) or by recognized overnight delivery service
<PAGE>
With a Copy to: Cornerstone Real Estate Advisors, Inc.
300 Two Premier Plaza
5605 Glenridge Drive
Atlanta, GA 30342
If to Tenant: Software Technology, Inc.
5904 Richmond Hwy., Suite 610
Alexandria, VA 22303
Attn: James Campbell
Stuart P. Dawley
General Counsel
Exigent International, Inc.
1225 Evans Road
Melbourne, Florida 32904-2314
Fax # (407) 952-7555
Each party may change its notice address by giving written notice of such
change to the other party in accordance with the terms of this Section 16.
<PAGE>
SECTION 17. LANDLORD'S LIEN. (51)
SECTION 18. GENERAL.
18.1. Effectiveness. This Lease shall become effective upon and only upon
its execution by each party hereto.
18.2. Complete understanding. This Lease represents the complete
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior written or oral negotiations, representations, warranties,
statements or agreements between the parties hereto as to the same.
- - --------
(51) Notwithstanding anything contained herein to the contrary, Landlord agrees
to delete Section 17, but expressly reserves any statutory liens for the
Rent in Landlord's favor as well as all rights and remedies granted under
the Uniform Commercial Code.
<PAGE>
18.3. Amendment. This Lease may be amended by and only by an instrument
executed and delivered by each party hereto.
18.4. Applicable law. This Lease shall be given effect and construed by
application of the laws of the Commonwealth of Virginia, and any action or
proceeding arising hereunder shall be brought in the Circuit Court for the
County of Fairfax of the Commonwealth of Virginia provided, that if such action
or proceeding arises under the Constitution, laws or treaties of the United
States of America, or if there is a diversity of citizenship between the parties
thereto so that it is to be brought in a United States District Court, it shall
be brought in the United States District Court for the Eastern District of the
Commonwealth of Virginia.
18.5. Waiver. This Landlord shall not be deemed to have waived the exercise
of any right which it holds hereunder unless such waiver is made expressly and
in writing (and no delay or omission by the Landlord in exercising any such
right shall be deemed to be a waiver of its future exercise). No such waiver as
to any instance involving the exercise of any such right shall be deemed a
waiver as to any other such instance, or any other such right.
18.6. Time of essence. Time shall be of the essence of this Lease.
18.7. Headings. The headings of the Sections, subsections, paragraphs and
subparagraphs hereof are provided herein for and only for convenience of
reference, and shall not be considered in construing their contents.
18.8. Construction. As used herein,
18.8.1. the term "person" means a natural person, a trustee, a
corporation, a partnership and any other form of legal entity; and
18.8.2. all references made (a) in the neuter, masculine or
feminine gender shall be deemed to have been made in all such genders, (b) in
the singular or plural number shall be deemed to have been made, respectively,
in the plural or singular number as well, and (c) to any Section, subsection,
paragraph or subparagraph shall, unless therein expressly indicated to the
contrary, be deemed to have been made to such Section, subsection, paragraph or
subparagraph of this Lease.
18.9. Exhibits. Each writing referred to herein as being attached
hereto as an exhibit or otherwise designated herein as an exhibit hereto made a
part hereof.
18.10. Severability. No determination by any court, governmental body
or otherwise that any provision of this Lease or any amendment hereof is invalid
or unenforceable in any instance shall affect the validity or enforceability of
(a) any other such provision, or (b) such provision in any circumstance not
controlled by such determination. Each such provision shall be valid and
enforceable to the fullest extent allowed by, and shall be construed wherever
possible as being consistent with, applicable law.
<PAGE>
18.11. Definition of the "Landlord".
18.11.1. As used herein, the term the "Landlord" means the
person hereinabove named as such, and its heirs, personal representatives,
successors and assigns (each of whom shall have the same rights, remedies,
powers, authorities and privileges as it would have had, had it originally
signed this lease as the Landlord).
18.11.2. No person holding the Landlord's interest hereunder
(whether or not such person is named as the "Landlord" herein) shall have any
liability hereunder after such person ceases to hold such interest, except for
any such liability accruing while such person holds such interest.
18.11.3. Neither the Landlord nor any principal of the
Landlord, whether disclosed or undisclosed, shall have any personal liability
under any provision of this Lease.
18.12. Definition of the "Tenant". As used herein, the term the
"Tenant" means each person hereinabove named as such and such person's heirs,
personal representatives, successors and assigns, each of whom shall have the
same obligations, liabilities, rights and privileges as it would have possessed
had it originally executed this Lease as the Tenant; provided, that no such
right or privilege shall inure to the benefit of any assignee of the Tenant,
immediate or remote, unless the assignment to such assignee is made in
accordance with the provisions of Section 10. Whenever two or more persons
constitute the Tenant, all such persons shall be jointly and severally liable
for performing the Tenant's obligations hereunder.
18.13. Commissions. Each party hereto hereby represents and warrants to
the other that, in connection with the leasing of the Premises hereunder, the
party so representing and warranting has not dealt with any real estate broker,
agent or finder, other than The Fred Ezra Company and Cambridge Property Group
L.P., and there is no other commission, charge or other compensation due on
account thereof. Each party hereto shall indemnify and hold harmless the other
against and from any inaccuracy in such party's representation.
18.14. Recordation. This Lease may not be recorded among the Land Records
of the said County or among any other public records, without the Landlord's
prior express, written consent thereto, and any attempt by the Tenant to do so
without having obtained the Landlord's consent thereto shall constitute an Event
of Default hereunder. If this Lease is recorded by either party hereto, such
party shall bear the full expense of any transfer, documentary stamp or other
tax, and any recording fee, assessed in connection with such recordation;
provided, that if under applicable law the recordation of this Lease hereafter
becomes necessary in order for this Lease to be or remain effective, the Tenant
shall bear the full expense of any and all such taxes and fees incurred in
connection therewith.
<PAGE>
18.15. Approval by Mortgages. Anything contained in the provisions of this
Lease to the contrary notwithstanding, the Landlord shall be entitled at any
time hereafter but before the Landlord delivers possession of the Premises to
the Tenant hereunder, to terminate this Lease by giving written notice thereof
to the Tenant, if any Mortgagee fails to approve this Lease for purposes of the
provisions of its Mortgage, and in the manner set forth therein.
18.16. Waiver of Trial by Jury. The Tenant hereby waives trial by jury in
any action or proceeding to which the Tenant and the Landlord may be parties,
arising out of or in any way pertaining to (a) this Lease, or (b) the Property.
It is agreed and understood that this waiver constitutes a waiver of trial by
jury of all claims against all parties to such actions or proceedings, including
claims against parties who are not parties to this Lease.
This waiver is knowingly, willingly and voluntarily made by the Tenant, and
the Tenant hereby represents that no representations of fact or opinion have
been made by any individual to induce this waiver of trial by jury or to in any
way modify or nullify its effect. The Tenant further represents that it has been
represented in the signing of this Lease and in the making of this waiver by
independent legal counsel, selected of its own free will, and that it has had
the opportunity to discuss this waiver with counsel.
18.17. Financial Information. At Landlord's request, Tenant shall deliver
certified copies of Tenant's most recent and historical financial statements.
Such statements shall include Balance Sheets, Income and Expense Statements as
well as any other supporting documents required by Landlord or any person or
institution providing financing to the Property or relating to the Property.
18.18. Authority. The person executing and delivering this Lease on behalf
of Landlord represents and warrants that he has full power, authority and right
to do so pursuant to the ownership and of Landlord. The person executing and
delivering this Lease on behalf of Tenant represents and warrants that he has
full power, authority and right to do so on behalf of Tenant. (52)
- - --------
(52) 19.1. Building Directory. The Building shall have a directory displayed in
the entrance lobby, setting forth Tenant's name and suite number.
19.2. Access. Tenant shall have access to the Premises and the Building
twenty-four (24) hours per day each day of the year.
19.3. Key Access. The Landlord, as of the Commencement Date, and at
Landlord's expense, will provide key access to the Building, and shall
supply keys for the above in a reasonable quantity as required by Tenant.
Thereafter, Tenant shall pay for any additional keys.
19.4. Telephone and Electric Room Access. Tenant shall have access to the
Common Area Telephone and Electric Rooms of the Building twenty-four (24)
hours a day, seven (7) days a week, except in the case of an emergency, in
which case Tenant shall not have access to said Rooms. Tenant shall have
access to said Rooms for inspection of their telephone lines and electric
meters only, and shall not perform any work in said Rooms.
<PAGE>
By signing below, the undersigned individuals represent and warrant
that they have all requisite authority to sign this Lease Agreement and to bind
the entity on behalf of which they sign this Lease.
IN WITNESS WHEREOF, each party hereto has executed and ensealed this
Lease or caused it to be executed and ensealed on its behalf by its duly
authorized representatives, the day and year first above written.
WITNESS: Landlord: Massachusetts Mutual Life Insurance Company
By: Cornerstone Real Estate Advisors, Inc.,
its duly authorized agent
By: /s/ Robert R. Villeneuve, Vice President
-------------------------------------------
Date: September 4, 1998
-----------------------------------------
WITNESS: TENANT: Software Technology, Inc.
/s/ Patricia A. Frank By: /s/ B.R. Smedley
- - --------------------------- -------------------------------------------
Name: B.R. Smedley
------------------------------------
Title: President
------------------------------------
Date: September 1, 1998
------------------------------------
<PAGE>
AGREEMENT OF LEASE
by and between
Massachusetts Mutual Life Insurance Company
and
Software Technology, Inc.
EXHIBIT A
PREMISES
The Premises consists of approximately 11,188 rentable square feet in
Chantilly Plaza, a 144,875 square foot, office/warehouse project located at
Chantilly, Fairfax County, Virginia; to be located in the approximate location
shown on the plan attached hereto as Exhibit A-1.
<PAGE>
AGREEMENT OF LEASE
by and between
Massachusetts Mutual Life Insurance Company
and
Software Technology, Inc.
EXHIBIT A-1
SITE PLAN
<PAGE>
AGREEMENT OF LEASE
by and between
Massachusetts Mutual Life Insurance Company
and
Software Technology, Inc.
EXHIBIT B
TENANT IMPROVEMENTS
A. DEMISING PARTITIONS
1. Sound insulated separation between tenants as required.
2. Walls to be drywall (to conform with local code) painted with
latex flat paint and 2 1/2" vinyl cove base (office areas only).
3. Walls to be built to underside of roof deck or ceiling as
required by code.
B. INTERIOR OFFICE PARTITIONS
1. Walls to be1/2" drywall painted with latex flat paint and 21/2"
vinyl cove base.
2. Walls to be built to underside of finished ceiling.
C. DOORS, HARDWARE AND FRAMES
1. Doors will be 3'0" x 7'0" hollow core finished with latex
semi-gloss paint.
2. Finished hardware will include 11/2pair of butts per door,
passage set on all doors.
3. Door frames to be punched for silencers, furnished with finish
hardware and painted with latex semi-gloss paint.
D. PERIMETER WALLS
1. Walls to be 1/2" drywall painted with latex flat paint and 2 1/2"
vinyl cove base insulated as per construction drawings.
<PAGE>
E. VINYL TILE FLOORS
1. Vinyl tile floors to be 12" x 12" x 1/8" Armstrong Excellon or
equal.
F. CARPET
1. Carpet will be 26 oz. level loop carpet.
G. ACOUSTICAL CEILINGS
1. Ceilings to be 2' x 4' white lay in 5/8" mineral fiberboard tiles
with exposed suspended white grid system.
EXHIBIT B-TENANT IMPROVEMENTS
H. BLINDS
1. Blinds to be 1" Levelor Series or equal (by tenant).
I. PLUMBING
1. Each tenant area shall be serviced by a toilet room(s) equipped
to conform to all local handicapped requirements and all
miscellaneous accessories.
2. Plumbing fixtures shall be as follows;
a. Water Closet - Porcelain elongated bowl/tank type/white in
color.
b. Lavatory.
c. Hot Water Heater - "Rheem" or equal, glass lined unit 6-20
gallon capacity as required.
J. MECHANICAL
1. Office Areas - Electric/Gas roof top unit HVAC system.
a. Cooling - Outside temperature 95 degrees dry bulb. Interior
temperature 78 degrees dry bulb with approximately 50% R.H.
b. Heating - Outside temperature 0 degree/interior temperature
65 degrees.
2. Warehouse Areas - Unit heaters.
a. Heating - Outside temperature 0 degree/interior temperature
50 degrees.
<PAGE>
3. All sheet metal to conform to S.M.A.C.N.A. standards.
4. Supply Air Ducts to be insulated with 1/2" foil-faced fiberglass
blankets if required.
K. ELECTRICAL
1. Electrical service shall be 100 AMP - standard.
2. Office light fixtures to be 2' x 4' four tube fluorescent lay-in,
in sufficient quantity to maintain 70 foot candles at desk height
(one per 85 square feet typical).
3. Warehouse light fixtures to be 8' two tube fluorescent surface
mount in sufficient quantity to maintain 25 foot candles.
4. One duplex electrical outlet per 150 square feet (office area).
5. One electrical switch per 250 square feet (office area).
6. All areas will receive emergency lighting systems as required by
local codes.
7. Each toilet room to receive one (1) exhaust fan.
L. SPRINKLER
1. Sprinkler heads will be dropped into each office area as required
by local codes.
<PAGE>
AGREEMENT OF LEASE
by and between
Massachusetts Mutual Life Insurance Company
and
Software Technology, Inc.
EXHIBIT B-1
SPACE PLAN
<PAGE>
AGREEMENT OF LEASE
by and between
Massachusetts Mutual Life Insurance Company
and
Software Technology, Inc.
EXHIBIT B-2
TENANT IMPROVEMENTS
1. In accordance with Section 5.1 of the Agreement of Lease, Landlord shall
make the improvements to the Premises as herein specified. Landlord shall
bear the costs of the buildout only to the extent provided for in the
Lease. Tenant shall bear the responsibility for costs above such amount.
Prior to the date construction commences certain of these specifications
may be modified (with Landlord consent, which consent shall not be
unreasonably conditioned, withheld, delayed or denied) or deleted by Tenant
in order to control the cost above that provided by Landlord. Any such
modification or deletions must be made within 5 business days of Tenant's
receipt of the final bids from Landlord's contractor. Additionally, Tenant
may directly contract for the modification, installation and/or repair of
the Premises alarm system, as herein provided, and submit to Landlord
application for reimbursement of the costs therefor (which amount will not
be subject to any additional costs or fees and will be deducted from the
buildout allowance provided in Section 5 of the Lease).
2. All Walls repaired and painted;
3. All Carpets replaced with commercial grade carpet, unclassified area use
similar grade carpet;
4. Remove all room number holders;
5. Replace all damaged ceiling tiles, to include stained;
6. Determine and fix suspected leak in room 123. This room has visible water
stain areas;
7. Fix all emergency lights;
<PAGE>
8. Install red flashing ceiling lights in every hall, light must be visible
from each office;
9. Emergency Lighting in room 128 and individual HVAC;
10. Close up interior door of office 116;
11. Close up left side door of room 122;
12. Remove frame of hallway doors (label "5" on diagram) and sheet rock in
where possible;
13. Room 104 - needs Power Challenge L Nema 6-20R which is a 220V 20A
receptable;
14. Doors:
All perimeter SCIF doors must be plumbed in their frames and the frame
firmly affixed to the surrounding wall. Door frames must be of sufficient
strength to preclude distortion that could cause improper alignment of door
alarm sensors, improper door closure or degradation of audio security.
Doors 7 and 8 must be equipped with an automatic door closer and a Unican
Simplex L-1000 cipher lock. If doors are equipped with hinge pins located
on the exterior side of the door, the hinges must be treated to prevent
removal of the door (e.g. welded, set screws, etc.)
All emergency doors must be fitted with automatic door closer.
Door 8 must also have a Sargeant & Greenleaf Model SM 183 (or comparable)
sliding dead bolt installed on the SCIF side of the door. Please have the
Sargeant & Greenleaf Model 8470R combination lock with anti-drill plate
currently on the door to Room 128 relocated and installed on door 7.
The Common Hallway Door into Room 130 must be treated with an automatic
door closure, treated hinge pins and a key lock. The door should allow easy
egress but require a key to enter. Install a metal plate over the locking
device portion of the lock to prevent a break-in.
The two Emergency Exit Doors (# 3) must be constructed of material
equivalent in strength and density to Doors 7 and 8. The door must be
secured with deadlocking panic hardware (Alarm Lock Model #70R or
comparable) on the inside and have no exterior hardware. Outside hinges to
be pinned or spot welded. They will be equipped with a local enunciator in
order to alert people working in the area that someone exited the facility
due to an emergency.
<PAGE>
Door construction of SCIF and/or Emergency Exit Doors should be either:
a. Solid wood core door, a minimum of 1 3/4 inches thick. OR
b. Metal fire or acoustical protection doors, a minimum of 1 3/4 inches
thick.
All SCIF exterior doors must be treated for sound protection (sound seals
with drop seal on bottom).
15. Any exterior wall penetrations must be patched, repaired and match existing
finishes.
16. Relocate current access control device on Room 128 to Room 145.
17. Install Unican Simplex L-1000 on Room 128.
18. Room 151 remove doors and both walls - open up area.
19. Replace existing lighting system with parabolic or para-wedge system.
20. Verify condition of HVAC systems prior to move in.
21. Install power sub panel (60 amp) box with 4 20-amp circuit in room 128.
Wall has been marked to indicate location of new sub panel power box.
o Sub Panel will include a shunt trip alarm, HONEYWELL T7075B, that will
provide both audible and visual alarms and be tied into the alarm
system. Alarm company will handle the alarm system component.
o Ground Bar
o Verify DeMarc in telephone room associated with T1 block in comms
room.
22. Remove old twist lock outlet box and quadplex outlet box from current power
panel in room 128.
23. Install a new 2' x 2' light in room 128 where ceiling tile is currently
missing.
24. Install a new 2' x 2' light in room 128 directly behind the A/C vent.
25. Install a commercial telephone in room 128 on wall just inside room.
Location of phone is marked with tape.
26. Alarm sensor in room 128 needs to be relocated to the ceiling tile just
inside the door.
27. Alarm requirements:
o Converting existing 3-4 zoned systems into one.
o Will utilize all existing sensors
o New Control panel will be a Focus 100 with serial printer interface
for alarm printouts
o Herisch access control system with serial printout
o Wiring the four separate alarm systems into one.
o Keypad controls for both entries
o Honeywell temperature control
28. 2 extra dual duplex outlet boxes in room 146 to be placed 6" apart from the
alarm control boxes. Exact location can be provided.
<PAGE>
AGREEMENT OF LEASE
by and between
Massachusetts Mutual Life Insurance Company
and
Software Technology, Inc.
EXHIBIT C
Current Rules and Regulations
1. The sidewalks, lobbies, passages, elevators and stairways shall not be
obstructed by the Tenant and used by the Tenant for any purposes other than
ingress and egress from and to the Tenant's offices. The Landlord shall in
all cases retain the right to control or prevent access thereto by any
person whose presence, in the Landlord's judgment, would be prejudicial to
the safety, peace, character or reputation of the Building or of any tenant
of the Property.
2. The toilet rooms, water closets, sinks, faucets, plumbing and other service
apparatus of any kind shall not be used by the Tenant for any purpose other
than those for which they were installed, and no sweepings, rubbish, rags,
ashes, chemicals or other refuse or injurious substances shall be placed
therein or used in connection therewith by the Tenant, or left by the
Tenant in the lobbies, passages, elevators or stairways of the Building.
3. No skylight, window, door or transom of the Building shall be covered or
obstructed by the Tenant, and no window shade, blind, curtain, screen,
storm window, awning or other material shall be installed or placed on any
window or in any window space, except as approved in writing by the
Landlord. If the Landlord has installed or hereafter installs any shade,
blind, or curtain in the Premises, the Tenant shall not remove it without
first obtaining the Landlord's written consent thereto.
4. No sign, lettering, insignia, advertisement, notice or other thing shall be
inscribed, painted, installed, erected or placed in any portion of the
Premises which may be seen from outside the Building, or on any window,
window space or other part of the exterior or interior of the Building,
unless first approved in writing by the Landlord. Names on suite entrances
shall be provided by and only by the Landlord and at the Tenant's expense,
using in each instance lettering of a design and in a form consistent with
the other lettering in the Building, and first approved in writing by the
Landlord. The Tenant shall/will not erect any stand, booth or showcase or
other article or matter in or upon the Premises and/or the Building without
first obtaining the Landlord's written consent thereto.
<PAGE>
5. The Tenant shall not place any additional lock or security devices upon any
door within the Premises or elsewhere upon the Property without Landlord's
consent (53), and shall surrender all keys for all such locks at the end of
the Term. The Landlord shall provide the Tenant with one set of keys to the
Premises when the Tenant assumes possession thereof.
6. The delivery of towels, ice, water, food, beverages, newspaper and other
supplies, equipment and furniture will be permitted only under the
Landlord's direction and control.
7. The Tenant shall not do or permit to be done anything which obstructs or
interferes with the rights of any other tenant of the Property. The Tenant
shall not keep anywhere within the Property any matter having an offensive
odor, or any kerosene, gasoline, benzine, camphene, fuel or other explosive
or highly flammable material. No bird, fish or other animal shall be
brought into or kept in or about the Premises.
8. The Tenant shall keep the Premises in a good state of preservation and
cleanliness while in possession of the Premises.
9. If the Tenant desires to install signaling, telegraphic, telephonic,
protective alarm or other wires, apparatus or devices within the Premises,
the Landlord shall direct where and how they are to be installed and,
except as so directed, no installation, boring or cutting shall be
permitted. The Landlord shall have the right (a) to prevent or interrupt
the transmission of excessive, dangerous or annoying current of electricity
or otherwise into or through the Building or the Premises, (b) to require
the changing of wiring connections or layout at the Tenant's expense, to
the extent that the Landlord may deem necessary, (c) to require compliance
with such reasonable rules as the Landlord may establish relating thereto,
and (d) in the event of noncompliance with such requirements or rules,
immediately to cut wiring or do whatever else it considers necessary to
remove the danger, annoyance or electrical interference with apparatus in
any part of the Building. Each wire installed by the Tenant must be clearly
tagged at each distributing board and junction box and elsewhere where
required by Landlord, with the number of the office to which such wire
leads and the purpose for which it is used, together with the name of the
tenant or other concern, if any, operating or using it.
10. No furniture, package, equipment, supplies or merchandise may be received
in the Building, or carried up or down in the elevators or stairways,
except during such hours as are designated for such purpose by the
Landlord, and only after Tenant gives notice thereof to the Landlord. The
Landlord shall have the exclusive right to prescribe the method and manner
in which any of the same is brought into or taken out of the Building, and
the right to exclude from the Building any heavy furniture, safe or other
article which may create a hazard and to require it to be located at a
designated place in the Premises. The Tenant shall not place any weight
anywhere beyond the safe carrying capacity of the Building. The cost of
repairing any damage to the Building or any other part of the Property
caused by taking any of the same in or out of the Premises, or any damage
caused while it is in the Premises or the rest of the Building, shall be
borne by the Tenant.
- - --------
(53) which consent shall not be unreasonably withheld, conditioned or denied
<PAGE>
11. Without the Landlord's prior written consent, (a) any wall or partition,
(b) no wall, or partition shall be painted, papered or otherwise covered or
moved in any way or marked or broken, (c) no connection shall be made to
any electrical wire for running any fan, motor or other apparatus, device
or equipment, (d) no machinery of any kind other than customary small
business machinery shall be allowed in the Premises, (e) no switchboard or
telephone wiring or equipment shall be placed anywhere other than where
designated by the Landlord, and (f) no mechanic shall be allowed to work in
or about the Building other than one employed by the Landlord, unless
approved in writing by Landlord.
12. The Tenant shall have access to the Premises at all reasonable times. The
Landlord shall in no event be responsible for admitting or excluding any
person from the Premises. In case of invasion, hostile attack,
insurrection, mob violence, riot, public excitement or other commotion,
explosion, fire or and casualty, the Landlord shall have the right to bar
or limit access to the Building to protect the safety of occupants of the
Property, or any property within the Property.
13. The Landlord shall have the right to rescind, suspend or modify the Rules
and Regulations and to promulgate such other Rules or Regulations as, in
the Landlord's reasonable judgment, are from time to time needed for the
safety, care, maintenance, operation and cleanliness of the Building, or
for the preservation of good order therein.(54) Upon the Tenant's having
been given notice of the taking of any such action, the Rules and
Regulations as so rescinded, suspended, modified or promulgated shall have
the same force and effect as if in effect at the time at which the Tenant's
lease was entered into (except that nothing in the Rules and Regulations
shall be deemed in any way to alter or impair any provision of such lease).
14. The use of any room within the Building as sleeping quarters is strictly
prohibited at all times.
- - --------
(54) , provided such changes do not materially affect Tenant's normal course of
business.
<PAGE>
15. The Tenant shall keep the windows and doors of the Premises (including
those opening on corridors and all doors between rooms entitled to receive
heating or air conditioning service and rooms not entitled to receive such
service), closed while the heating or air conditioning system is operating,
in order to minimize the energy used by, and to conserve the effectiveness
of, such systems. The Tenant shall comply with all reasonable Rules and
Regulations from time to time promulgated by the Landlord with respect to
such systems or their use.
16. Nothing in these Rules and Regulations shall give any Tenant any right or
claim against the Landlord or any other person if the Landlord does not
enforce any of them against any other tenant or person (whether or not the
Landlord has the right to enforce them against such tenant or person), and
no such nonenforcement with respect to any tenant shall constitute a waiver
of the right to enforce them as to the Tenant or any other tenant or
person. (55)
- - --------
(55) Notwithstanding the foregoing, Landlord shall not (a) discriminate against
Tenant in enforcing the Rules and Regulations; (b) unreasonably withhold,
condition or delay its consent from Tenant for any approval required under
the Rules and Regulations, except where otherwise permitted. Landlord shall
use its commercially reasonable efforts to secure compliance by all tenants
and other occupants with the Rules and Regulations, as applied to them, but
Landlord may permit reasonable waivers with respect to other parties so
long as such waivers do not materially adversely affect Tenant.
<PAGE>
AGREEMENT OF LEASE
by and between
Massachusetts Mutual Life Insurance Company
and
Software Technology, Inc.
EXHIBIT D
BASE RENT
<TABLE>
<CAPTION>
ANNUAL
LEASE YEAR RENTAL RATE SQUARE FEET BASE RENT MONTHLY BASE RENT
<S> <C> <C> <C> <C> <C>
1 $12.00 11,188 $134,256.00 $11,188.00
2 $12.36 11,188 $138,283.68 $11,523.64
3 $12.73 11,188 $142,432.19 $11,869.35
4 $13.11 11,188 $146,705.16 $12,225.43
5 $13.50 11,188 $151,106.31 $12,592.19
</TABLE>
<PAGE>
AGREEMENT OF LEASE
by and between
Massachusetts Mutual Life Insurance Company
and
Software Technology, Inc.
EXHIBIT E
SPECIAL STIPULATIONS
1. Option to Terminate. Provided Tenant is not then in an Event of Default,
beyond any applicable cure period, under the terms of this Lease, Tenant
shall have the one-time right to terminate this Lease as of the end of the
thirty-sixth (36th) month of the Lease Term. Tenant must provide Landlord
at least ninety (90) days prior written notice (i.e., 90 days prior to the
end of the 36th month of the Lease Term) of its election to exercise this
Option to Terminate. If Tenant fails to provide Landlord with such written
notice on or before such ninety (90) day period, Tenant's Option to
Terminate shall become null and void and Tenant shall have no further
Option(s) to Terminate. In connection with said termination and as
liquidated damages to compensate Landlord for the damage it will incur in
connection with an early termination, Tenant shall pay a fee to Landlord
equal to all unamortized tenant improvement costs and leasing commissions
amortized over sixty (60) months at a per annum rate of ten percent (10%)
per annum plus four (4) months Base Rent and Annual Operating Costs and
Taxes as the then current rates. The parties acknowledge that it would be
difficult to calculate Landlord's damages in the event of an early
termination and that the above sum is a reasonable estimate of such
damages. Tenant shall pay such sum at the time of its giving the foregoing
notice or such notice shall be null and void and Tenant's Option to
Terminate shall thereupon be null and void. In addition, the parties shall
execute a termination agreement in connection with such early termination.
2. Option to Extend. As long as Tenant has not been in an Event of Default,
beyond any applicable cure period, during the initial Term of the Lease and
is not in an Event of Default, beyond any applicable cure period, under the
Lease at the time of its exercise of this option, Tenant shall have one (1)
Option to Extend the Term of this Lease in accordance with the provisions
of this paragraph for an additional term of five (5) years, on all the same
terms and conditions with the exception of Base Rent payable under Section
2 hereof, which shall be the-then prevailing base rent being charged for
reasonably comparable space in the Chantilly, Virginia market. In addition,
Landlord shall not provide Tenant any improvement allowance in connection
<PAGE>
with the extension, unless otherwise agreed to by the parties. If Tenant
elects to exercise the foregoing Option to Extend, it shall give Landlord
written notice of its election to do so on or before the date which is 180
days prior to the expiration of the then-current term of the Lease, time
being of the essence, which notice shall also request that Landlord furnish
Tenant with the Base Rent for the extended term which shall be derived as
aforesaid. Provided, however, in the event Landlord and Tenant have not
signed an amendment to this Lease, using good faith efforts, for any reason
confirming the extended term of the Lease and setting forth the Base Rent
for that term of the Lease, time being of the essence, then Tenant's
extension of the Lease shall be deemed null and void and this Lease shall
expire on the expiration date as if the above extension option had not been
exercised. This Option to Extend is personal to Tenant only, and is not
assignable. Tenant has no Option(s) to Extend this Lease except as set
forth in this paragraph.
3. Right of First Offer. During the first two (2) Lease years, as long as
Tenant has not been in an Event of Default, beyond any applicable cure
period, during the Term of the Lease and is not in an Event of Default,
beyond any applicable cure period, under the Lease at the time of its
exercise of this right, and so long as this right is exercised in
connection with an expansion of Tenant's Premises and for no other purpose,
and subject to the prior rights of any other tenant in the Building,
Landlord thereby grants to Tenant a one-time Right of First Offer on the
terms and conditions contained in this paragraph to Lease any space in
Building 3 which becomes available and is not subject to the rights of any
other tenant (the "Offer Space"). Once this right is offered one time on a
space, such offer shall be deemed terminated in all aspects with respect to
such space and Tenant shall have no further rights thereto. The rent for
such Space shall be at the greater of (i) the then-prevailing rate for
similar space in the Chantilly, Virginia market, or (ii) the same rate
Tenant is then paying for the Premises, as escalated. Such Lease shall be
coterminous with the Lease for the existing Premises and if such Term is
then less than three (3) Lease Years, the Term for the existing Premises
and the Offer Space shall be extended so that it will expire at least three
(3) Lease Years from the commencement date of Tenant's Lease of the Offer
Space. Landlord shall also provide Tenant with a tenant improvement
allowance in the amount of Three Dollars ($3.00) per rentable square foot
for improvements to the Offer Space. In the event any Offer Space becomes
available for Lease during the Term, Landlord shall give notice thereof to
Tenant which notice shall contain the foregoing terms to Lease the Offer
Space. Within five (5) business days of such notice, time being of the
essence, Tenant shall give Landlord notice that it either does or does not
wish to Lease the Offer Space. In the event Tenant's notice provides that
it does not wish to Lease the Offer Space or if Tenant fails to give
Landlord notice of its desires respecting the Offer Space within the
foregoing required five (5) business day period, then Landlord shall be
entitled to proceed to market and/or Lease the Offer Space to a third party
free and clear of Tenant's Right to First Offer and such right shall be
deemed terminated in all respects and Tenant shall have no further Rights
to First Offer.
<PAGE>
In the event Tenant gives Landlord a notice as required in the preceding
paragraph that it wishes to lease the Offer Space, then Landlord and Tenant
shall have twenty (20) days from the date of the notice within which to
amend this Lease by adding the Offer Space on the terms and conditions
contained in Landlord's notice. In the event Landlord and Tenant fail to
sign such amendment to this Lease, using good faith efforts, within said
twenty (20) day period, time being of the essence, then Landlord shall be
entitled to proceed to market and/or lease the Offer Space to a third party
free and clear of such right and such right shall be deemed terminated in
all respects. Once Landlord has made the off the to Tenant to lease any
Offer Space during the Term, whether or not Tenant leases such space, this
Right of First Offer shall automatically terminate in all respects and
Tenant shall have no further Rights of First Offer with respect to any
other Offer Space. In the event Tenant expands in the Building per the
Right of First Offer and Tenant has a duly authorized broker, in writing,
and said broker materially and constructively is engaged in Tenant's
expansion negotiations, then Landlord shall pay said broker a commission
for such expansion. Landlord shall not pay any broker of Tenant a
commission for any future renewals of this Lease.
4. Designation of Agent. Landlord's resident agent for the purpose of service
of any process, notice, order, or demand required or permitted by law to be
served upon Landlord and the agent's office address is R. Harvey Chappell,
Jr., 909 E. Main Street, Suite 1200, Richmond, Virginia 23219.
<PAGE>
AGREEMENT OF LEASE
by and between
Massachusetts Mutual Life Insurance Company
and
Software Technology, Inc.
EXHIBIT F
ANNUAL OPERATING COST EXCLUSIONS
1. Principal or interest payments on and any other charges paid by Landlord in
connection with any mortgage, deeds of trust or other financing
encumbrances.
2. Rental payments (including percentage rent and any increases in base rent)
made under any ground Lease, except to the extent such rental payments
represent payment of Real Estate Taxes (as hereinafter defined).
3. Leasing commissions payable by Landlord and advertising and promotional
expenditures associated with marketing vacant space in the Building.
4. Deductions for depreciation for the Building.
5. Capital improvements that are not deducted by Landlord in computing its
federal income tax liability, except to the extent permissible. Capital
improvements or expenditures incurred to reduce Operating Expenses shall be
included in Operating Expenses in the amount of the actual annual savings.
6. All costs of insurance premiums, special services, tenant improvements and
concessions, repairs, maintenance items or utilities separately chargeable
to, or specifically provided for, individual tenants of the Building
(including Tenant), including, without limitation, the cost of preparing,
repainting, decorating, planning and designing spaces for any tenant in the
Building in connection with the renewal of its Lease and/or costs of
preparing or renovating any vacant space for Lease in the Building.
7. Any costs or expenses related exclusively to retail space which are in
excess of normal office use; it being understood that any cost or expense
related to the Building exterior (except for store windows), the lobby
elevators, do not relate to retail space at the Building and are fully
permissible in Operating Expenses to the extent otherwise permitted
hereunder.
<PAGE>
8. Wages, salaries and all other compensation (including fringe benefits and
other direct and indirect personnel costs) of partners, officers and
executives above the grade of superintendent or building manager of
Landlord or the managing agent.
9. Costs and expenses incurred by Landlord in connection with damage, casualty
or condemnation of all or a portion of the Building; provided, however,
that with respect to the cost to repair damage, Landlord may include in
Operating Expenses (1) the amount of a commercially reasonable deductible
applied to each such occurrence and (2) if Landlord determines, in its
reasonable judgment, that the effect of making a claim under Landlord's
insurance policy or policies would be to increase, in the aggregate, the
future cost of insurance premiums and repair and maintenance expenses
relating to the Building, Landlord may include in Operating Expenses in the
cost to repair such damage to the extent such cost does not exceed two
hundred percent (200%) of the deductible amount applicable under Landlord's
insurance policy or policies to such occurrence; provided, however, that
Landlord may only include such cost in Operating Expenses, if Landlord
actually makes such repair and does not submit an insurance claim in
connection therewith.
10. Costs and expenses of administration and management of partnership
activities of Landlord and corporate activities of the managing agent of
the Building.
11. Costs and expenses incurred by Landlord in curing, repairing and replacing
any structural portion of the Building made necessary as a result of
defects in design, workmanship or materials.
12. Any costs and expenses incurred by Landlord in connection with causing the
common and public area of the Building which are within Landlord's sole and
exclusive control to comply with applicable Legal Requirements, including,
without limitation, the Americans with Disabilities Act of 1990.
13. Reserves established by Landlord for bad debts or rent losses attributable
to tenants of the Building and/or for repairs, maintenance and
replacements. Reserves or set-asides for future asphalt, roof repairs,
repainting and replacements.
14. Costs and expenses incurred by Landlord to abate, to encapsulate, to
investigate, to remove and to respond to any hazardous materials
contamination, exposure or release.
<PAGE>
15. Costs and expenses incurred by Landlord for services which are duplicate of
or any normally included in any management fees paid by Landlord.
16. That portion of any Operating Expenses which is paid to any entity
affiliated with Landlord which is in excess of the amount which would
otherwise be paid to an entity which is not affiliated with Landlord for
the provision of the same service.
17. Sums paid by Landlord for any indemnity, damages, fines, late charges,
penalties or interest for any late payment of Real Estate Taxes or any
Operating Expenses or to correct violations of Legal Requires applicable to
the Building, except for expenditures for repairs, maintenance and
replacement or other items that would otherwise reasonably constitute
Operating Expenses.
18. Attorney's fees and disbursements, brokerage commissions, transfer taxes,
recording costs, and taxes, title insurance premiums, title closer's fees
and gratuities and other similar costs incurred in connection with the sale
or transfer of an interest in Landlord or the Building or with the
refinancing of any debt secured by the Building.
19. Costs and expenses directly resulting from the gross negligence or willful
misconduct of Landlord or its employees.
20. Rental for personal property leased to Landlord except for rent for
personal property leased to Landlord the purchase price for which, if
purchased, would be fully included in Operating Expenses in the year of
purchase.
21. Expenses incurred in painting, decorating or renovating any noncommon areas
of the Building, specifically as it relates to other Tenant's in the
Building.
22. Legal expenses (as they relate to Landlord/Tenant issues) and accounting
expenses, except as reasonably permissible.
23. Any costs reimbursed by insurance or the warranty of any general
contractor, subcontractor or supplier.
24. Fees, costs and expenses incurred by Landlord in connection with or
relating to claims against or disputes with Tenants of the Building or the
negotiation of leases with tenants or prospective tenants, including,
without limitation, legal fees and disbursements.
25. Costs and expenses attributable to charitable contributions of Landlord.
<PAGE>
26. Any sums paid by Landlord for any fines, late charges, penalties or
interest for any late payment.
27. Costs or expenses incurred in connection with any Bankruptcy proceedings.
28. The cost of overtime or other expense to Landlord in curing its defaults or
performing work expressly provided in this Lease.
In the calculation of any Operating Expenses hereunder, it is understood
that no expense shall be charged more than once. Landlord shall use its
good faith efforts to effect an equitable proration of bills for services
rendered to the Building.
Subject to the provisions of 2.5, Real Estate Taxes shall not include (1)
any rental or other charges or fee imposed upon Landlord in connection with
the Lease or use of any vault space or (2) any income taxes, excess profits
taxes,, excise taxes,, franchise taxes, estate taxes, succession taxes,
gains taxes, inheritance taxes and transfer taxes, except to the extent any
of such taxes are in the nature of or are in substitution for a
recharacterization or replacement of Real Estate Taxes or (3) any fines,
interest or penalties imposed upon Landlord for failure to make timely
payments of Real Estate Taxes.
<PAGE>
Exhibit 10.21
AMENDMENT TO EMPLOYMENT AGREEMENT
This amendment ("Amendment") to the Employment Agreement ("Agreement") executed
between Exigent International, Inc. and Bernie R. Smedley dated 11 June 1997 is
entered into as of 13 May 1998 between Exigent International, Inc. ("Exigent"),
a corporation duly authorized and existing under the laws of the State of
Delaware with a principal place of business at 1225 Evans Road, Melbourne,
Florida 32904 and Bernie R. Smedley ("Employee"), an individual domiciled at 295
A1A, #205, Satellite Beach, FL 32937.
NOW, THEREFORE, for one dollar and other good and valuable consideration, the
receipt and sufficiency of which is hereby mutually acknowledged, Exigent and
Employee hereby agree as follows:
1. Option Price in Agreement. Section 3(c) in the Agreement is hereby deleted
and replaced with the following:
"Provided that Employee has not been terminated for due cause (as that term
is defined below in Section 8, in addition to the compensation provided for
in Section 3(a) above, Company shall grant to Employee options to purchase
an additional 125,000 shares of Common Stock at an exercise price of $2.25
per share provided the Company shall achieve:
(i) earnings of at least 2.9 million dollars; or
(ii) new funding for the Company of at least 5 million dollars including
long term (at least 5 years) subordinated debt or equity, or a
combination of both.
The Board of Directors of the Company may, in its sole discretion, award
part or all of the options to purchase such 125,000 shares of Common Stock
even if the foregoing conditions are partially achieved on or prior to
February 1, 1998 in accordance with the Executive Incentive Plan for 1998.
If and to the extent any such options are awarded pursuant to this Section
3(c), they shall be awarded in accordance with the prevailing terms and
conditions described in Executive Incentive Plan and the governing Stock
Option Plan (6NQ) adjusted to reflect the amount which the Employee is
actually awarded by the Compensation Committee for the Board of Directors
of the Company."
<PAGE>
2. Ratification and Approval. In all other respects the Agreement is hereby
ratified by Exigent and Employee and remains in full force and effect, as
previously amended.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date set
forth above and is retroactively effective from April 16, 1998.
For Exigent: For Employee:
Exigent International, Inc. Bernie R. Smedley
By: /s/ Don F. Riordan, Jr. By: /s/ B.R. Smedley
------------------------ ------------------------
(signature) (signature)
Name: Don F. Riordan, Jr.
---------------------
Title: CFO
Exhibit 10.22
AMENDMENT TO EMPLOYMENT AGREEMENT
Modified FY98(a) Bonus Plan
This amendment ("Amendment") to the Employment Agreement ("Agreement") executed
between Exigent International, Inc. and Bernard R. Smedley dated June 11, 1997
is entered into as of September 14, 1998 between Exigent International, Inc.
("Exigent"), a corporation duly authorized and existing under the laws of the
State of Delaware with a principal place of business at 1225 Evans Road,
Melbourne, Florida 32904 and Bernard R. Smedley ("Employee"), an individual
domiciled at 295 Hwy A1A, #205, Satellite Beach, FL 32937.
NOW, THEREFORE, for one dollar and other good and valuable consideration, the
receipt and sufficiency of which is hereby mutually acknowledged, Exigent and
Employee hereby agree as follows:
1. Modified FY98(a) Bonus Plan. Notwithstanding anything to the contrary in
the Agreement and subject to the terms and conditions of this Amendment,
Exigent hereby agrees to provide and Employee hereby agrees to accept the
following bonus compensation for Employee's performance in fiscal year
1998(a) (i.e., February 1, 1997 through January 31, 1998): Bernard R.
Smedley stock options from plan 6NQ. This bonus shall supersede and replace
any bonus to which Employee may be entitled under the Agreement. The
Agreement shall be deemed modified and amended to the extent necessary to
implement the terms and conditions of this Amendment.
2. Option Price. The option exercise price shall be $3.375 per share.
3. Grant. The granting of the options shall be in accordance with the terms
and conditions of the stock option agreement for Plan 6NQ which is
incorporated herein by this reference.
4. Dollar Amounts. Any dollar amounts included in the Modified FY98(a) Bonus
Plan described in Section 1 above are subject to all applicable withholding
taxes and any other deductions required by law.
5. Satisfaction. Employee hereby acknowledges and agrees that the foregoing
Modified FY98(a) Bonus Plan described in Section 1 above is fair,
reasonable and satisfactory. As such, Employee hereby agrees to release
Exigent (and all of its subsidiary companies) and its respective officers,
directors and agents from any and all claims, right, or demands that
Employee, or Employee's successors and assigns, has or may have as a result
of or arising from the Modified FY98(a) Bonus Plan.
<PAGE>
6. Ratification and Approval. In all other respects the Agreement is hereby
ratified by Exigent and Employee and remains in full force and effect, as
previously amended.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date set
forth above and is retroactively effective from January 31, 1998.
For Exigent: For Employee:
Exigent International, Inc. Bernard R. Smedley
By: /s/ Arthur H. Collier By: /s/ B.R. Smedley
------------------------- ----------------------
(signature) (signature)
Name: Arthur H. Collier
----------------------
Title: Chairman, Compensation Committee
---------------------------------
Exhibit 10.23
AMENDMENT TO EMPLOYMENT AGREEMENT
This amendment ("Amendment") to the Employment Agreement ("Agreement") executed
between Exigent International, Inc. and Bernard R. Smedley dated June 11, 1997
is entered into as of October 27, 1998 between Exigent International, Inc.
("Exigent"), a corporation duly authorized and existing under the laws of the
State of Delaware with a principal place of business at 1225 Evans Road,
Melbourne, Florida 32904 and Bernard R. Smedley ("Employee"), an individual
domiciled at 295 Hwy A1A, #205, Satellite Beach, FL 32937.
NOW, THEREFORE, for one dollar and other good and valuable consideration, the
receipt and sufficiency of which is hereby mutually acknowledged, Exigent and
Employee hereby agree as follows:
1. Executive Incentive Program for FY98(b). Exigent and Employee agree that
the Executive Incentive Plan Summary for fiscal year 1998(b) (i.e.,
February 1, 1998 through December 31, 1998) attached hereto as Attachment
"1" of this Amendment shall form an integral part of Exhibit "B" to the
Agreement and shall contain the parameters for any incentive compensation
to be awarded to Employee in the fiscal year of 1998(b).
2. Corporate Goals. Exigent and Employee agree that the incentive compensation
tied to the financial performance of Exigent as identified in Attachment
"1" hereto is subject to the attainment of Employee's corporate goals
described in Attachment "2", attached hereto and incorporated herein by
this reference. One hundred (100) percent of the incentive compensation set
forth in Attachment "1" shall be earned if and only if one hundred percent
of the corporate goals set forth in Attachment "2" are fulfilled. An
internal compensation committee shall be established by the CEO for Exigent
to determine whether the corporate goals have been fulfilled. In the event
less than one hundred (100) percent of the corporate goals are fulfilled,
the compensation committee may make a pro-rata award of incentive
compensation. All determinations by said compensation committee shall be
final and binding.
3. Ratification and Approval. In all other respects the Agreement is hereby
ratified by Exigent and Employee and remains in full force and effect, as
previously amended. The FY1998(b) executive compensation program supersedes
any and all prior compensation plans in effect for FY1998(b).
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date set
forth above and is retroactively effective from February 1, 1998.
For Exigent: For Employee:
Exigent International, Inc. Bernard R. Smedley
By: /s/ Arthur H. Collier By: /s/ B. R. Smedley
-------------------------- ------------------------------
Arthur H. Collier, Chairman
Compensation Committee
<PAGE>
Attachment 1
Annual Executive Incentive Plan Summary
Chief Executive Officer
I. Executive Target Incentive Payments
Target incentive payments are based on market competitive incentive levels.
The target incentive payment for this position is:
o CEO: 50% of base salary
II. Incentive Plan Financial Goals and Plan Effectivity
Corporate and Business Unit financial goals for 1998(b) are as follows:
Corporate
Revenue Earnings
$36 Million $2.0 Million
The Annual Incentive Plan will be implemented only if the following earning
goal is met for 1998(b) o 80% of 1998(b) corporate earnings target is
met, i.e., $1.6 Million
III. Executive Incentive Plan Performance Measures and Weights
o The following table summarizes the performance measures applicable to
the plan participant:
<TABLE>
<CAPTION>
Employee Title Corporate Financial Goals Percentage Business Unit Financial Goals Individual
Percentage Goals
Percentage
Revenue Earnings Share EPS Revenue Operating Profit
Price (after tax)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bernie Smedley CEO 20% 60% 10% 10% N/A N/A 0%
</TABLE>
IV. Payout Calculation
The following matrix will be used to establish the payout a participant
will receive for Corporate, Business Unit, or individual performance for
each goal:
Level of Corporate, Business Unit,
or Individual Performance Incentive Payout
- - ------------------------------------ --------------------------------------
Less than 80% of target performance 0% of target incentive
80% of target performance 20% of target incentive
80% - 100% of target performance 20% - 100% of target incentive
(straight line interpolation)
100% of target performance 100% of target incentive
100% - 125% of target performance 100% - 125% of target incentive
(straight line interpolation)
125% of target performance 200% of target incentive
<PAGE>
VI. Payout Method
o Bonuses will be paid in a combination of 50% cash, and 50% stock
grants. Participants may elect for all or part of the cash portion of
their bonus paid in stock instead of cash. The number of shares will
be calculated based on the closing stock price on the last day of the
fiscal year
o For example, if a $10,000 incentive payment was earned, and the stock
price is $5.00, the participant would receive $5,000 cash (less
withholding tax) and would be granted 1,000 shares of stock.
<PAGE>
Attachment 2
Corporate Goals
FY'98(b) Bonus Award Program
Bernie Smedley
FY98(b) Goals CEO Achieved Comments
CORPORATE MEASURES
o Meet Corporate financial 100% Bonus amount determined
objectives (based on 11 by Company performance
11 month fiscal year) to the 1998(b) Executive
- Revenue 36M (20%) 20 Incentive Program Payout
- Earnings 2M (60%) 60 Matrix
o Increase Share Price from Points will be prorated
$3.125 (2/1/98) to for the percent of
$5.00 (12/31/98) 10 achieved goal
o Increase Earnings Per Points will be prorated
Share (EPS) to $.39 for the percent of
(12/31/98) 10 achieved goal
TOTAL 100%
Exhibit 10.24
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into by and between
Exigent International, Inc. (the "Company" or "We/Our/Us") and Jeffery B.
Weinress ("You").
IN CONSIDERATION of...
(i) your employment or continued employment by the Company,
(ii) the compensation and benefits to be provided to you by the
Company,
(iii) the confidential business information, trade secrets,
specialized knowledge, training, experience and customer relationships that you
have or will acquire as a result of your employment with the Company,
(iv) and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged,...the Company and You agree as
follows:
1. Employment. We agree to employ You, and You accept such employment,
in accordance with the terms and conditions of this Agreement.
2. Duties and Responsibilities. You shall assist Us in finance,
administration, human resources and/or information technology with such titles
and responsibilities as We may from time to time assign to You. You agree to
devote your full time, attention, energy and skills to the business and good
will of the Company and its affiliates and to perform all services and duties as
may be assigned by the Company in a competent, conscientious and timely manner.
You agree to comply with all Company policies, procedures and directives. You
will not engage in any outside employment or business activities (except passive
investments) without Our express written permission.
3. Compensation and Benefits. You shall receive base compensation of
$140,000 per year, payable at the Company's normal payroll intervals and subject
to withholdings for taxes and other normal payroll deductions. Your base
compensation may be adjusted from time to time as approved by Us. In addition to
base compensation, You shall be entitled to participate in such standard
benefits as may be provided from time to time generally to other full time
employees of the Company, including vacation, medical sick/personal leave,
401(k), Money Purchase Pension Plan and ESOP. Your participation in such
benefits shall be governed by the normal requirements, terms and conditions of
any applicable plans or policies, as may from time to time be amended, changed
or terminated by the Company in its sole discretion.
4. Term and Termination.
4.1 Term. This Agreement shall extend from December 17, 1998
through December 17, 2000 (hereinafter the "Term"). Any extension or renewal of
this Agreement must be in writing signed by You and the Company.
4.2 Termination. During the Term, this Agreement and Your
employment hereunder may be terminated by either You or the Company at any time,
with or without cause or notice.
5. Special Pay. Pursuant to the Incentive Stock Option Agreement
attached hereto as Exhibit "A", the Company will provide you with 20,000
incentive stock options which shall vest 50% on the one year anniversary of this
Agreement provided you are still employed. The exercise price of the options
shall be fair market value as determined by the Compensation Committee for the
Company on the day granted.
6. Restrictions on Competition.
6.1 Noncompetition. During your employment with the Company and for
a period of one year thereafter, commencing on the date of termination, whether
such termination is voluntary or involuntary, with or without good cause shown,
You agree that You will not, on Your own behalf or on behalf of any other
person, business or entity:
(a) directly or indirectly engage in any business that competes
with the Company's products and services anywhere in the
world,
(b) sell or attempt to sell products or services of the same
general character provided by the Company to or seek or obtain
employment with any existing or prospective customer of the
Company, regardless of location.
(c) hire, solicit, induce or attempt to hire, solicit or induce
away any employee/subcontractor or former
employee/subcontractor of the Company. The previous
restrictions are not intended to prevent you from working in
your fields of expertise. The restrictions in 6.1(a)/(b) are
only intended to apply to any company that is a competitor or
customer of the Company and only insofar as is necessary to
protect Our legitimate business interests.
6.2 Confidentiality. Except in connection with the performance of
Your duties and responsibilities under this Agreement, You will not at anytime
during or after Your employment with the Company use, disclose or furnish to any
other person, business or entity any confidential information belonging to the
Company. Such information includes, but is not limited to the Company's customer
lists, customer contact persons, price lists, trade secrets, intellectual
property, inventions, innovations, discoveries, designs, know-how, methods,
software, and any other confidential information, knowledge or intelligence
relating to the Company's markets, customers, products, pricing, procedures,
strategies, formulas, plans, assets, liabilities, costs, revenues, profits,
organization, employees and business in general.
6.3 Inventions. You shall promptly disclose to the Company all
products, designs, styles, processes, discoveries, materials, ideas, creations,
inventions and technical or business innovations, whether or not such items are
patentable or copyrightable, that You have made or conceived or may hereafter
make or conceive, either solely or jointly with others during the period of Your
employment with the Company that (a) relate to that business, work or
investigations of the Company to which Your employment relates or as to which
You may receive information due to Your employment, or (b) that result from or
are suggested by any work that You may do for the Company, or (c) that are
otherwise made through the use of the Company's time, facilities or materials.
You hereby forever assign, and hereby agree to do all such acts and execute,
acknowledge and deliver all such documents and provide other assistance, both
during and subsequent to Your employment, as may be necessary to vest in the
Company the entire right, title and interest in and to all said inventions and
innovations, including all conceivable intellectual property rights and software
and related documentation, derivative works, copyrights, trade marks, service
marks, trade dress, patents, patent applications, know-how, discoveries,
proprietary and confidential information. Any written work, such as computer
software or "firm ware" and related documentation shall be considered a work
made for hire and all right, title and interest shall vest solely in the
Company.
6.4 Injunctive Relief. You recognize that the foregoing provisions
concerning noncompetition, confidentiality and inventions are reasonable and
necessary for the protection of legitimate interests of the Company and that the
Company will be irreparably harmed if these provisions are not specifically
enforced. Accordingly, in addition to other remedies available at law and loss
or termination of Special Pay, the foregoing provisions may be enforced by the
Company by means of a temporary or permanent injunction, without prejudice to
such damage rights as may exist.
6.5 Survive Term. The provisions of this Section shall survive any
termination or expiration of this Agreement.
7. Dispute Resolution. If a legally cognizable dispute arises out of
or relates to this Agreement or the breach, termination or validity thereof, or
the compensation, promotion, demotion, discipline, discharge or terms and
conditions of employment of the Employee, and if said dispute cannot be resolved
through direct discussions, the parties agree to try in good faith to settle the
dispute by mediation administered by the American Arbitration Association under
its National Rules for the Resolution of Employment Disputes.
8. Governing Law. This Agreement shall be governed by the law of the
State of Florida.
9. Severability. If any provision or part of any provision of this
Agreement shall not be valid for any reason, such provision shall be entirely
severable from, and shall have no effect upon, the remainder of this Agreement.
10. Company's Assignees and Successors. The Company has the right to
assign this Agreement to its successors and assigns and any such successors and
assigns shall be entitled to all of the Company's rights hereunder.
11. Entire Agreement. This Agreement constitutes the sole and entire
agreement between You and the Company. Except for the offer letter dated Decembe
3, 1998, all prior contracts, agreements, or promises of any kind relating to
the employment relationship of the parties are hereby canceled and discharged
and have no further effect whatsoever. Except as specifically provided herein,
this Agreement can be modified only by a written agreement duly executed by both
of us.
12. No Restrictions. You certify that You have not entered into a
non-compete agreement or any other agreement with any party which would in any
way prohibit or restrict your performance under this Agreement.
13. Plain Meaning. This Agreement shall be interpreted in accordance
with the plain meaning of its terms and not for or against the drafter.
IN WITNESS WHEREOF, the parties have voluntarily and with knowledge of
their rights executed this Agreement retroactively effective as of the 17th day
of December, 1998.
WITNESS: EMPLOYEE:
/s/ Sally H. Ball Signature: /s/ Jeffery B. Weinress
- - ------------------------- ---------------------------
Jeffery B. Weinress
Employee #703
Date: 3/10/99
EXIGENT INTERNATIONAL, INC.
Signature: /s/ B.R. Smedley
---------------------------
B.R. "Bernie" Smedley
President
<PAGE>
EXHIBIT "A" TO EMPLOYMENT AGREEMENT
EXIGENT INTERNATIONAL, INC.
OMNIBUS STOCK OPTION AND INCENTIVE PLAN
Incentive Stock Option Agreement
This Agreement is by and between Exigent International, Inc. (the
"Company") and Jeffery B. Weinress, (the "Optionee").
W I T N E S S E T H:
1. Grant of Option. Pursuant to the provisions of the Exigent
International, Inc. Omnibus Stock Option and Incentive Plan (the "Plan"),
effective December 17th, 1998 (the "Grant Date"), the Company awarded to the
Optionee, subject to the terms and conditions of the Plan and the terms and
conditions contained herein, and subject further to approval of the Plan by the
stockholders of the Company at the 1999 Annual Meeting of Stockholders (the
"1999 Annual Meeting"), the right and option to purchase from the Company all or
any part of an aggregate of 20,000 shares of the common stock ($.01 par value)
of the Company ("Stock"), at a purchase price equal to $3.00 per share, such
option to be exercised as hereinafter provided. It is intended that the option
evidenced hereby constitute an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
Notwithstanding the foregoing, or any other provision contained herein, in the
event the Plan is not approved by the Company's stockholders at the FY 1998(b)
Annual Meeting, this option shall be null and void.
2. Terms and Conditions. In addition to the terms and conditions
contained in the Plan, it is understood and agreed that the option evidenced
hereby is subject to the following additional terms and conditions:
(a) Expiration Date. The option shall expire on the tenth
anniversary of the Grant Date.
(b) Period of Exercise. Subject to the other terms of this
Agreement regarding the exercisability of this option, this option shall become
exercisable in cumulative installments in accordance with the following
schedule:
Percentage of Options
On or after Exercisable
1/1/00 (one (1) Year After Date of 50%
Execution of Employment Agreement Provided
Optionee Remains Employed)
1/1/01 50%
Notwithstanding the foregoing, this option may not be exercised prior
to the approval of the Plan by the Company's stockholders at the FY 1998(b)
Annual Meeting.
(c) Exercise of Option. This option shall be exercised by
submitting a written notice to the Administrator appointed pursuant to Section 3
of the Plan (the "Administrator") signed by the Optionee and specifying the
number of shares of Stock as to which the option is being exercised. Such notice
shall be accompanied by the payment of the full option price for the shares
being purchased. Payment shall be made in (i) in United States dollars in cash
or by check in a form satisfactory to the Company, (ii) subject to the approval
of the Board, already-owned shares of Stock (to the extent permitted by law),
which shall be valued for this purpose at the fair market value (as determined
in accordance with the Plan) on the date immediately preceding the day notice of
exercise is received by the Company, (iii) in accordance with a so-called
cashless exercise plan established with a securities brokerage firm, or (iv) any
combination of the above. A certificate or certificates for the shares of Stock
purchased shall be issued by the Company after the exercise of the option and
payment therefor, including provision for any federal and state withholding
taxes, and other applicable employment taxes.
In lieu of delivering all or a portion of the shares of Stock as to
which an option has been exercised, the Administrator may elect to pay the
Optionee an amount in cash or Stock, or a combination of cash or Stock, equal to
the excess of the fair market value over the exercise price on the date of
exercise, as determined in accordance with the Plan, of the shares of Stock the
Optionee would have received upon exercise over the aggregate exercise price.
(d) Termination of Option upon Termination of Employment, Death or
Disability.
(i) Unless the Administrator in its discretion determines
otherwise, upon the termination of Optionee's employment with the Company (and
all Participating Companies as defined in the Plan) for any reason other Breach
of Conduct (as defined below), death or Disability (as defined in the Plan), any
portion of this option that is not exercisable by reason of Paragraph 2(b)
hereof shall immediately terminate. Any portion of this option that is
exercisable on the employment termination date shall continue to be exercisable
for three months following such termination date, unless sooner terminated by
reason of Paragraph 2(a) hereof. "Breach of Conduct" shall mean activities which
constitute a serious breach of conduct as determined by the Committee in its
sole discretion, including, but not limited to: (i) the disclosure or misuse of
confidential information or trade secrets; (ii) activities in violation of the
policies of any Participating Company, including without limitation, the
Company's insider trading policy; (iii) the violation or breach of any material
provision in any applicable employment contract or agreement; (iv) engaging in
conduct relating to the Grantee's employment for which either criminal or civil
penalties may be sought; (v) engaging in activities which adversely affect or
which are contrary or harmful to the interests of a Participating Company, or
(vi) engaging in competition with a Participating Company during employment or
within one (1) year following termination of employment with a Participating
Company. The determination of Breach of Conduct shall be determined by the
Committee in good faith and in its sole discretion.
(ii) If termination of employment is by reason of death or
Disability, any portion of this option which is not exercisable on the date of
death or Disability by reason of Paragraph 2(b) hereof shall immediately
terminate, and any remaining portion of this option shall terminate if not
exercised within one year following the date of death or commencement of
Disability, unless sooner terminated by reason of Paragraph 2(a) hereof.
(iii) In the event of a Breach in Conduct by Optionee at any
time while employed by the Company or a Participating Company or within two
years of termination of employment, (i) any unexercised portion of this Option,
whether exercisable pursuant to Paragraph 2(b) hereof or not exercisable, shall
become null and void upon action by the Committee. The Committee's action shall
be communicated in writing to the Optionee as soon as practicable. In addition,
the Committee may, in its sole discretion, by written notice demand that any or
all stock certificates for Stock acquired pursuant to the exercise of this
Option, or any profit realized from the sale of such or transfer of such Stock,
be returned to the Company within five (5) days of receipt of such notice. Any
exercise price paid by the Optionee shall be returned to Optionee by the Company
immediately thereafter, without interest. The Company shall be entitled to
reimbursement of reasonable attorney fees and expenses incurred in seeking to
enforce it rights under this Paragraph 2(e)(iii) and Section 17 of the Plan.
(f) Non-transferability. This option and all rights hereunder shall
be exercisable during the Optionee's lifetime only by the Optionee and shall be
non-assignable and non-transferable by the Optionee except, in the event of the
Optionee's death, by will or by the laws of descent and distribution. In the
event the death of the Optionee occurs, the representative or representatives of
the Optionee's estate, or the person or persons who acquire (by bequest or
inheritance) the rights to exercise this option in whole or in part, may
exercise this option prior to the expiration of the applicable exercise period,
as specified in Paragraph 2(e) above.
(g) Mergers, Etc. Unless the Board determines otherwise, this
option shall accelerate and become immediately exercisable for a period of
fifteen days (or such longer or shorter period as the Board may prescribe)
immediately prior to the scheduled consummation of a Terminating Transaction (as
defined below), which exercise shall be (i) conditioned upon the consummation of
the Terminating Transaction and (ii) effective only immediately before the
consummation of such Terminating Transaction.
Upon consummation of any such Terminating Transaction, the Plan and
any unexercised portion of this option shall terminate. Notwithstanding the
foregoing, to the extent provision is made in writing in connection with such
Terminating Transaction for the continuation of the Plan and the assumption of
this option, or for the substitution for this option of new options covering the
stock of a successor company, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares or units and
exercise prices, then the Plan and this option shall continue in the manner and
under the terms contained herein, and the acceleration and termination
provisions set forth in the first two sentences of this subparagraph (g) shall
be of no effect. The Company shall send written notice of a Terminating
Transaction to Optionee not later than the time at which the Company gives
notice thereof to its stockholders.
"Terminating Transaction" means any of the following events: (a) the
dissolution or liquidation of the Company; (b) a reorganization, merger or
consolidation of the Company with one or more other persons in which the Company
is not the surviving corporation or becomes a subsidiary of another corporation
other than a corporation that was a Participating Company immediately prior to
such event; (c) a sale of substantially all the Company's assets to a person or
entity other than a corporation that was a Participating Company immediately
prior to such event; or (d) the acquisition by a person or persons acting as a
group or otherwise in concert (other than a stockholder or employee of a
Participating Company as of the Effective Date or an employee benefit plan of a
Participating Company) of equity securities of the Company that represent a
majority or more of the aggregate voting power of all outstanding equity
securities of the Company. The word "person" as used herein shall mean an
individual, corporation, partnership, association or other person or entity, or
any group of two or more of the foregoing that have agreed to act together.
(h) Modification or cancellation of option. The Administrator shall
have the authority to effect, at any time and from time to time, with the
consent of the Optionee, the modification of the terms of this option agreement
(subject to the limitations contained in the Plan).
(i) No Rights as Stockholder. The Optionee shall have no rights as
a stockholder with respect to any Common Shares subject to this option prior to
the date of issuance to Optionee of a certificate or certificates for such
shares.
(j) No Right to Continued Employment. This option shall not confer
upon the Optionee any right with respect to continuance of employment by the
Company, nor shall it interfere in any way with the right of the Company to
terminate the Optionee's employment at any time.
(k) Compliance with Law and Regulations. This option and the
obligation of the Company to sell and deliver shares hereunder shall be subject
to all applicable federal and state laws, rules and regulations and to such
approvals by any government or regulatory agency as may be required. The Company
shall not be required to issue or deliver any certificates for shares of Stock
prior to (i) the listing of such shares of Stock on any stock exchange on which
the Stock may then be listed, and (ii) the completion of any registration or
qualification of such shares of Stock under any federal or state law, or any
rule or regulation of any government body which the Company shall, in its sole
discretion, determine to be necessary or advisable. Moreover, this option may
not be exercised if its exercise, or the receipt of Stock pursuant thereto,
would be contrary to applicable law.
3. Disqualifying Disposition of Shares. This option shall not qualify
as an incentive stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, if the shares of Stock acquired pursuant to
the exercise of the option are transferred, other than by will or by the laws of
descent and distribution, within two years of the Grant Date or within one year
after the transfer of the shares of Stock to the Optionee pursuant to such
exercise.
4. Optionee Bound by Plan. The Optionee hereby agrees to be bound by
all of the terms and provisions of the Plan. In the event of any inconsistency
between this Agreement and the terms of the Plan, the terms of the Plan shall
govern.
5. Withholding Taxes. Optionee acknowledges and agrees that the
Company has the right to deduct from payments of any kind otherwise due to
Optionee any federal, state or local taxes of any kind required by law to be
withheld with respect to the exercise of this option hereunder.
6. Notices. Any notice hereunder to the Company shall be addressed to
it at its principal business office, and any notice hereunder to the Optionee
shall be sent to the address reflected on the payroll records of the Company,
subject to the right of either party to designate at any time hereafter in
writing some other address.
7. Delaware Law to Govern. This Agreement shall be construed and
administered in accordance with and governed by the laws of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Optionee has executed this
Agreement retroactively effective on the 17th day of December, 1998.
EXIGENT INTERNATIONAL, INC.:
By: /s/ B.R. Smedley
-------------------------
B. R. "Bernie" Smedley
Chairman & CEO
OPTIONEE:
/s/ Jeffery B. Weinress
-------------------------
Jeffery B. Weinress
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into by and between
(CompName) (the "Company" or "We/Our/Us") and (FullName)("You").
IN CONSIDERATION of...
(i) your employment or continued employment by the Company,
(ii) the compensation and benefits to be provided to you by the Company,
(iii)the confidential business information, trade secrets, specialized
knowledge, training, experience and customer relationships that you have or
will acquire as a result of your employment with the Company,
(iv) and for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, ...the Company and You agree as follows:
1. Employment. We agree to employ You, and You accept such employment, in
accordance with the terms and conditions of this Agreement.
2. Duties and Responsibilities. You shall assist Us in developing
commercial and custom software solutions and applications, with such titles and
responsibilities as We may from time to time assign to You. You agree to devote
your full time, attention, energy and skills to the business and good will of
the Company and its affiliates and to perform all services and duties as may be
assigned by the Company in a competent, conscientious and timely manner. You
agree to comply with all Company policies, procedures and directives. You will
not engage in any outside employment or business activities (except passive
investments) without Our express written permission.
3. Compensation and Benefits. You shall receive base compensation of
$(Compensastion) per year, payable at the Company's normal payroll intervals
and subject to withholdings for taxes and other normal payroll deductions. Your
base compensation may be adjusted from time to time as approved by Us. In
addition to base compensation, You shall be entitled to participate in such
standard benefits as may be provided from time to time generally to other full
time employees of the Company, including vacation, medical sick/personal leave,
401(k), Money Purchase Pension Plan and ESOP. Your participation in such
benefits shall be governed by the normal requirements, terms and conditions of
any applicable plans or policies, as may from time to time be amended, changed
or terminated by the Company in its sole discretion.
4. Term and Termination.
4.1 Term. This Agreement shall extend from December 17, 1998 through
December 17, 2000 (hereinafter the "Term"). Any extension or renewal of this
Agreement must be in writing signed by You and the Company.
4.2 Termination. During the Term, this Agreement and Your employment
hereunder may be terminated by either You or the Company at any time, with or
without cause or notice.
5. Special Pay.
5.1 Stock Options. Pursuant to the Incentive Stock Option Agreement
attached hereto as Exhibit "A", the Company will provide you with (Options)
incentive stock options which shall vest on the one year anniversary of this
Agreement provided you are still employed. The exercise price of the options
shall be fair market value as determined by the Compensation Committee for the
Company on the day granted.
5.2 Severance and Special Pay. If, during the Term, the Company terminates
Your employment pursuant to a reduction in workforce, the Company agrees to pay
You special severance pay equal to $(SpecialPay)(less withholdings for taxes and
other applicable deductions) payable in twelve equal monthly installments
commencing on the last day of the month in which Your employment was terminated
(as noted above), and that your stock options described in Subsection 5.1 above
shall become immediately vested. This pay ("Special Pay") shall be instead of
any severance pay You may be granted pursuant to Our typical severance pay plan.
The Company will determine in its discretion whether the termination is a
reduction in workforce. Generally, the Company will consider a termination to be
a reduction in workforce if Your job is eliminated and You have not refused a
transfer to another position commensurate with your skills and within fifty
miles of your then current work location (i.e., ALX, CHY, MLB, COS, DEN, LAP,
etc.). You will not be eligible for severance pay under this Agreement if (1)
Your employment is terminated for any other reason, or (2) if You lose Your job
as a result of a merger or acquisition or the sale of any or all of the assets
of the Company but Your employment is continued or reinstated by the new
organization.
6. Restrictions on Competition.
6.1 Noncompetition. During your employment with the Company and for a
period of one year thereafter, commencing on the date of termination, whether
such termination is voluntary or involuntary, with or without good cause shown,
You agree that You will not, on Your own behalf or on behalf of any other
person, business or entity:
(a) directly or indirectly engage in any business that competes with
the Company's products and services anywhere in the world,
(b) sell or attempt to sell products or services of the same general
character provided by the Company to or seek or obtain employment with any
existing or prospective customer of the Company, regardless of location.
(c) hire, solicit, induce or attempt to hire, solicit or induce away
any employee/subcontractor or former employee/subcontractor of the Company.
The previous restrictions are not intended to prevent you from working as
an engineer with software companies. The restrictions in 6.1(a)/(b) are
only intended to apply to any company that is a competitor or customer of
the Company and only insofar as is necessary to protect Our legitimate
business interests.
6.2 Confidentiality. Except in connection with the performance of Your
duties and responsibilities under this Agreement, You will not at anytime during
or after Your employment with the Company use, disclose or furnish to any other
person, business or entity any confidential information belonging to the
Company. Such information includes, but is not limited to the Company's customer
lists, customer contact persons, price lists, trade secrets, intellectual
property, inventions, innovations, discoveries, designs, know-how, methods,
software, and any other confidential information, knowledge or intelligence
relating to the Company's markets, customers, products, pricing, procedures,
strategies, formulas, plans, assets, liabilities, costs, revenues, profits,
organization, employees and business in general.
6.3 Inventions. You shall promptly disclose to the Company all products,
designs, styles, processes, discoveries, materials, ideas, creations, inventions
and technical or business innovations, whether or not such items are patentable
or copyrightable, that You have made or conceived or may hereafter make or
conceive, either solely or jointly with others during the period of Your
employment with the Company that (a) relate to that business, work or
investigations of the Company to which Your employment relates or as to which
You may receive information due to Your employment, or (b) that result from or
are suggested by any work that You may do for the Company, or (c) that are
otherwise made through the use of the Company's time, facilities or materials.
You hereby forever assign, and hereby agree to do all such acts and execute,
acknowledge and deliver all such documents and provide other assistance, both
during and subsequent to Your employment, as may be necessary to vest in the
Company the entire right, title and interest in and to all said inventions and
innovations, including all conceivable intellectual property rights and software
and related documentation, derivative works, copyrights, trade marks, service
marks, trade dress, patents, patent applications, know-how, discoveries,
proprietary and confidential information. Any written work, such as computer
software or "firm ware" and related documentation shall be considered a work
made for hire and all right, title and interest shall vest solely in the
Company.
6.4 Injunctive Relief. You recognize that the foregoing provisions
concerning noncompetition, confidentiality and inventions are reasonable and
necessary for the protection of legitimate interests of the Company and that the
Company will be irreparably harmed if these provisions are not specifically
enforced. Accordingly, in addition to other remedies available at law and loss
or termination of Special Pay, the foregoing provisions may be enforced by the
Company by means of a temporary or permanent injunction, without prejudice to
such damage rights as may exist.
6.5 Survive Term. The provisions of this Section shall survive any
termination or expiration of this Agreement.
7. Dispute Resolution. If a legally cognizable dispute arises out of or
relates to this Agreement or the breach, termination or validity thereof, or the
compensation, promotion, demotion, discipline, discharge or terms and conditions
of employment of the Employee, and if said dispute cannot be resolved through
direct discussions, the parties agree to try in good faith to settle the dispute
by mediation administered by the American Arbitration Association under its
National Rules for the Resolution of Employment Disputes.
8. Governing Law. This Agreement shall be governed by the law of the State
of Florida.
9. Severability. If any provision or part of any provision of this
Agreement shall not be valid for any reason, such provision shall be entirely
severable from, and shall have no effect upon, the remainder of this Agreement.
10. Company's Assignees and Successors. The Company has the right to assign
this Agreement to its successors and assigns and any such successors and assigns
shall be entitled to all of the Company's rights hereunder.
11. Entire Agreement. This Agreement constitutes the sole and entire
Agreement between You and the Company. All prior contracts, agreements, or
promises of any kind relating to the employment relationship of the parties are
hereby canceled and discharged and have no further effect whatsoever. Except as
specifically provided herein, this Agreement can be modified only by a written
agreement duly executed by both of us.
12. No Restrictions. You certify that You have not entered into a
non-compete agreement or any other agreement with any party which would in any
way prohibit or restrict your performance under this Agreement.
13. Plain Meaning. This Agreement shall be interpreted in accordance with
the plain meaning of its terms and not for or against the drafter.
IN WITNESS WHEREOF, the parties have voluntarily and with knowledge of
their rights executed this Agreement retroactively effective as of the 17th day
of December, 1998.
WITNESS: EMPLOYEE:
Signature:/s/
- - -------------------------- -------------------------
(FullName)
Employee #(EmployeeID)
Date:
------------------------------
WITNESS: (CompName)
Signature:/s/ B.R. "Bernie" Smedley
- - --------------------------- -------------------------
B.R. "Bernie" Smedley
President
Exhibit 10.26
AMENDMENT TO EMPLOYMENT AGREEMENT
This amendment ("Amendment") to the Employment Agreement ("Agreement") executed
between Exigent International, Inc. and Don F. Riordan dated 11 June 1997 is
entered into as of 13 May 1998 between Exigent International, Inc. ("Exigent"),
a corporation duly authorized and existing under the laws of the State of
Delaware with a principal place of business at 1225 Evans Road, Melbourne,
Florida 32904 and Don F. Riordan ("Employee"), an individual domiciled at 414 La
Costa Street, Melbourne Beach, FL 32951.
NOW, THEREFORE, for one dollar and other good and valuable consideration, the
receipt and sufficiency of which is hereby mutually acknowledged, Exigent and
Employee hereby agree as follows:
1. Option Price in Agreement. Section 3(c) in the Agreement is hereby
deleted and replaced with the following:
"Provided that Employee has not been terminated for due cause (as that
term is defined below in Section 8, in addition to the compensation
provided for in Section 3(a) above, Company shall grant to Employee
options to purchase an additional 46,000 shares of Common Stock at an
exercise price of $2.25 per share provided the Company shall achieve:
(i) earnings of at least 2.9 million dollars; or
(ii) new funding for the Company of at least 5 million dollars
including long term (at least 5 years) subordinated debt or
equity, or a combination of both.
The Board of Directors of the Company may, in its sole discretion,
award part or all of the options to purchase such 46,000 shares of
Common Stock even if the foregoing conditions are partially achieved on
or prior to February 1, 1998 in accordance with the Executive Incentive
Plan for 1998. If and to the extent any such options are awarded
pursuant to this Section 3(c), they shall be awarded in accordance with
the prevailing terms and conditions described in Executive Incentive
Plan and the governing Stock Option Plan (6NQ) adjusted to reflect the
amount which the Employee is actually awarded by the Compensation
Committee for the Board of Directors of the Company."
<PAGE>
2. Ratification and Approval. In all other respects the Agreement is
hereby ratified by Exigent and Employee and remains in full force and
effect, as previously amended.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date set
forth above and is retroactively effective from April 16, 1998.
For Exigent: For Employee:
Exigent International, Inc. Don F. Riordan
By: /s/ B.R. Smedley By: /s/ Don F. Riordan, Jr.
---------------- -------------------------
(signature) (signature)
Name: B.R. Smedley
--------------
Title: CEO
------------
Exhibit 10.27
AMENDMENT TO EMPLOYMENT AGREEMENT
Modified FY98(a) Bonus Plan
This amendment ("Amendment") to the Employment Agreement ("Agreement") executed
between Exigent International, Inc. and Don F. Riordan, Jr. dated June 11, 1997
is entered into as of September 14, 1998 between Exigent International, Inc.
("Exigent"), a corporation duly authorized and existing under the laws of the
State of Delaware with a principal place of business at 1225 Evans Road,
Melbourne, Florida 32904 and Don F. Riordan, Jr. ("Employee"), an individual
domiciled at 414 La Costa Street, Melbourne Beach, FL 32951.
NOW, THEREFORE, for one dollar and other good and valuable consideration, the
receipt and sufficiency of which is hereby mutually acknowledged, Exigent and
Employee hereby agree as follows:
1. Modified FY98(a) Bonus Plan. Notwithstanding anything to the contrary
in the Agreement and subject to the terms and conditions of this
Amendment, Exigent hereby agrees to provide and Employee hereby agrees
to accept the following bonus compensation for Employee's performance
in fiscal year 1998(a) (i.e., February 1, 1997 through January 31,
1998): $0 + 24,533 stock options from plan 6NQ. This bonus shall
supersede and replace any bonus to which Employee may be entitled under
the Agreement. The Agreement shall be deemed modified and amended to
the extent necessary to implement the terms and conditions of this
Amendment.
2. Option Price. The option exercise price shall be $3.375 per share.
3. Grant. The granting of the options shall be in accordance with the
terms and conditions of the stock option agreement for Plan 6NQ which
is incorporated herein by this reference.
4. Dollar Amounts. Any dollar amounts included in the Modified FY98(a)
Bonus Plan described in Section 1 above are subject to all applicable
withholding taxes and any other deductions required by law.
5. Satisfaction. Employee hereby acknowledges and agrees that the
foregoing Modified FY98(a) Bonus Plan described in Section 1 above is
fair, reasonable and satisfactory. As such, Employee hereby agrees to
release Exigent (and all of its subsidiary companies) and its
respective officers, directors and agents from any and all claims,
right, or demands that Employee, or Employee's successors and assigns,
has or may have as a result of or arising from the Modified FY98(a)
Bonus Plan.
6. Ratification and Approval. In all other respects the Agreement is
hereby ratified by Exigent and Employee and remains in full force and
effect, as previously amended.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date set
forth above and is retroactively effective from January 31, 1998.
For Exigent: For Employee:
Exigent International, Inc. Don F. Riordan, Jr.
By: /s/ B.R. Smedley By: /s/ Don F. Riordan, Jr.
---------------------------- -------------------------
(signature) (signature)
Name: B.R. "Bernie Smedley
--------------------------
Title: Chief Executive Officer
------------------------
Exhibit 10.28
AMENDMENT TO EMPLOYMENT AGREEMENT
This amendment ("Amendment") to the Employment Agreement ("Agreement") executed
between Exigent International, Inc. and Don F. Riordan, Jr. dated June 11, 1997
is entered into as of October 27, 1998 between Exigent International, Inc.
("Exigent"), a corporation duly authorized and existing under the laws of the
State of Delaware with a principal place of business at 1225 Evans Road,
Melbourne, Florida 32904 and Don F. Riordan, Jr. ("Employee"), an individual
domiciled at 414 La Costa Street, Melbourne Beach, FL 32951.
NOW, THEREFORE, for one dollar and other good and valuable consideration, the
receipt and sufficiency of which is hereby mutually acknowledged, Exigent and
Employee hereby agree as follows:
1. Executive Incentive Program for FY98(b). Exigent and Employee agree that
the Executive Incentive Plan Summary for fiscal year 1998(b) (i.e.,
February 1, 1998 through December 31, 1998) attached hereto as Attachment
"1" of this Amendment shall form an integral part of Exhibit "B" to the
Agreement and shall contain the parameters for any incentive compensation
to be awarded to Employee in the fiscal year of 1998(b).
2. Corporate Goals. Exigent and Employee agree that the incentive compensation
tied to the financial performance of Exigent as identified in Attachment
"1" hereto is subject to the attainment of Employee's corporate goals
described in Attachment "2", attached hereto and incorporated herein by
this reference. One hundred (100) percent of the incentive compensation set
forth in Attachment "1" shall be earned if and only if one hundred percent
of the corporate goals set forth in Attachment "2" are fulfilled. An
internal compensation committee shall be established by the CEO for Exigent
to determine whether the corporate goals have been fulfilled. In the event
less than one hundred (100) percent of the corporate goals are fulfilled,
the compensation committee may make a pro-rata award of incentive
compensation. All determinations by said compensation committee shall be
final and binding.
3. Ratification and Approval. In all other respects the Agreement is hereby
ratified by Exigent and Employee and remains in full force and effect, as
previously amended. The FY1998(b) executive compensation program supersedes
any and all prior compensation plans in effect for FY1998(b).
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date set
forth above and is retroactively effective from February 1, 1998.
For Exigent: For Employee:
Exigent International, Inc. Don F. Riordan, Jr.
By: /s/ B.R. Smedley By: /s/ Don F. Riordan, Jr.
----------------------- ------------------------
B.R. "Bernie" Smedley,
Chief Executive Officer
<PAGE>
Attachment 1
Annual Executive Incentive Plan Summary
Chief Financial Officer
I. Executive Target Incentive Payments
Target incentive payments are based on market competitive incentive levels.
The target incentive payment for this position is:
|X| CFO: 40% of base salary
II. Incentive Plan Financial Goals and Plan Effectivity
Corporate and Business Unit financial goals for 1998(b) are as follows:
Corporate
Revenue Earnings
$36 Million $2.0 Million
The Annual Incentive Plan will be implemented only if the following
earning goal is met for 1998(b)
|X| 80% of 1998(b) corporate earnings target is met, i.e., $1.6 Million
III. Executive Incentive Plan Performance Measures and Weights
|X| The following table summarizes the performance measures applicable to
the plan participant:
<TABLE>
<CAPTION>
Employee Title Corporate Financial Goals Percentage Business Unit Financial Goals Individual
Percentage Goals
Percentage
Revenue Earnings Share EPS Revenue Operating Profit
Price (after tax)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Don Riordan CFO 15% 60% 10% 10% N/A N/A 5%
</TABLE>
IV. Payout Calculation
The following matrix will be used to establish the payout a participant
will receive for Corporate, Business Unit, or individual performance for
each goal:
Level of Corporate, Business Unit,
or Individual Performance Incentive Payout
- - --------------------------------------- ------------------------------------
Less than 80% of target performance 0% of target incentive
80% of target performance 20% of target incentive
80% - 100% of target performance 20% - 100% of target incentive
(straight line interpolation)
100% of target performance 100% of target incentive
100% - 125% of target performance 100% - 125% of target incentive
(straight line interpolation)
125% of target performance 200% of target incentive
VI. Payout Method
|X| Bonuses will be paid in a combination of 50% cash, and 50% stock
grants. Participants may elect for all or part of the cash portion of
their bonus paid in stock instead of cash. The number of shares will
be calculated based on the closing stock price on the last day of the
fiscal year
|X| For example, if a $10,000 incentive payment was earned, and the stock
price is $5.00, the participant would receive $5,000 cash (less
withholding tax) and would be granted 1,000 shares of stock.
<PAGE>
Attachment 2
Corporate Goals
FY'98(b) Bonus Award Program
Don Riordan
FY98(b) Goals CFO Achieved Comments
CORPORATE MEASURES
o Meet Corporate financial Bonus amount determined by
objectives (based on 11 by Company performance
month fiscal year) 1998(b) Exeuctive Incentive
- Revenue 36M (20%) 15 Incentive Program Payout
- Earnings 2M (60%) 60 Matrix
o Increase Share Price Points will be prorated for
from $3.125 (2/1/98) the percent of achieved goal
to $5.00 (12/31/98) 10
o Increase Earnings Per Points will be prorated for
Share (EPS) to $.39 the percent of achieved goal
(12/31/98) 10
CORPORATE TOTAL 95%
Individual Goals
FY'98(b) Bonus Award Program
Don Riordan
FY98(b) Individual Goals CFO Achieved Comments
QUALITY
- - - On-Time SEC filings Points will be prorated
- - - Forms 3, 4, 5 2.5 for the percent of
- - - Annual Reports achieved goal
- - - Quarterly Reports
QUALITY TOTAL 2.5
NEW BUSINESS DEVELOPMENT
- - - Acquisitions Points will be prorated
- - - Complete Due Diligence & 2.5 for the percent of
management recommendations of achieved goal
for acquisition candidates
- - - Review of potential acquisition
candidates
- - - Integration of acquired entities
NEW BUSINESS DEV. TOTAL 2.5
INDIVIDUAL TOTAL 5%
GRAND TOTAL 100%
Exhibit 10.29
AMENDMENT TO EMPLOYMENT AGREEMENT
This amendment ("Amendment") to the Employment Agreement ("Agreement") executed
between Exigent International, Inc. and William K. Presley dated 11 June 1997 is
entered into as of 13 May 1998 between Exigent International, Inc. ("Exigent"),
a corporation duly authorized and existing under the laws of the State of
Delaware with a principal place of business at 1225 Evans Road, Melbourne,
Florida 32904 and William K. Presley ("Employee"), an individual domiciled at
10710 S. Tropical Trail, Merrit Island, FL 32952-6930.
NOW, THEREFORE, for one dollar and other good and valuable consideration, the
receipt and sufficiency of which is hereby mutually acknowledged, Exigent and
Employee hereby agree as follows:
1. Option Price in Agreement. Section 3(c) in the Agreement is hereby
deleted and replaced with the following:
"Provided that Employee has not been terminated for due cause (as that
term is defined below in Section 8, in addition to the compensation
provided for in Section 3(a) above, Company shall grant to Employee
options to purchase an additional 65,500 shares of Common Stock at an
exercise price of $2.25 per share provided the Company shall achieve:
(i) earnings of at least 2.9 million dollars; or
(ii) new funding for the Company of at least 5 million dollars
including long term (at least 5 years) subordinated debt or
equity, or a combination of both.
The Board of Directors of the Company may, in its sole discretion,
award part or all of the options to purchase such 65,500 shares of
Common Stock even if the foregoing conditions are partially achieved on
or prior to February 1, 1998 in accordance with the Executive Incentive
Plan for 1998. If and to the extent any such options are awarded
pursuant to this Section 3(c), they shall be awarded in accordance with
the prevailing terms and conditions described in Executive Incentive
Plan and the governing Stock Option Plan (6NQ) adjusted to reflect the
amount which the Employee is actually awarded by the Compensation
Committee for the Board of Directors of the Company."
<PAGE>
2. Ratification and Approval. In all other respects the Agreement is
hereby ratified by Exigent and Employee and remains in full force and
effect, as previously amended.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date set
forth above and is retroactively effective from April 16, 1998.
For Exigent: For Employee:
Exigent International, Inc. William K. Presley
By: /s/ B.R. Smedley By: /s/ William K. Presley
------------------ ----------------------
(signature) (signature)
Name: B.R. Smedley
-------------
Title: CEO
-------------
Exhibit 10.30
AMENDMENT TO EMPLOYMENT AGREEMENT
Modified FY98(a) Bonus Plan
This amendment ("Amendment") to the Employment Agreement ("Agreement") executed
between Exigent International, Inc. and William K. Presley dated June 11, 1997
is entered into as of September 14, 1998 between Exigent International, Inc.
("Exigent"), a corporation duly authorized and existing under the laws of the
State of Delaware with a principal place of business at 1225 Evans Road,
Melbourne, Florida 32904 and William K. Presley ("Employee"), an individual
domiciled at 10710 S. Tropical Trail, Merritt Island, FL 32952-6930.
NOW, THEREFORE, for one dollar and other good and valuable consideration, the
receipt and sufficiency of which is hereby mutually acknowledged, Exigent and
Employee hereby agree as follows:
1. Modified FY98(a) Bonus Plan. Notwithstanding anything to the contrary
in the Agreement and subject to the terms and conditions of this
Amendment, Exigent hereby agrees to provide and Employee hereby agrees
to accept the following bonus compensation for Employee's performance
in fiscal year 1998(a) (i.e., February 1, 1997 through January 31,
1998): $13,100 + 17,466 stock options from plan 6NQ. This bonus shall
supersede and replace any bonus to which Employee may be entitled under
the Agreement. The Agreement shall be deemed modified and amended to
the extent necessary to implement the terms and conditions of this
Amendment.
2. Option Price. The option exercise price shall be $3.375 per share.
3. Grant. The granting of the options shall be in accordance with the
terms and conditions of the stock option agreement for Plan 6NQ which
is incorporated herein by this reference.
4. Dollar Amounts. Any dollar amounts included in the Modified FY98(a)
Bonus Plan described in Section 1 above are subject to all applicable
withholding taxes and any other deductions required by law.
5. Satisfaction. Employee hereby acknowledges and agrees that the
foregoing Modified FY98(a) Bonus Plan described in Section 1 above is
fair, reasonable and satisfactory. As such, Employee hereby agrees to
release Exigent (and all of its subsidiary companies) and its
respective officers, directors and agents from any and all claims,
right, or demands that Employee, or Employee's successors and assigns,
has or may have as a result of or arising from the Modified FY98(a)
Bonus Plan.
<PAGE>
6. Ratification and Approval. In all other respects the Agreement is
hereby ratified by Exigent and Employee and remains in full force and
effect, as previously amended.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date set
forth above and is retroactively effective from January 31, 1998.
For Exigent: For Employee:
Exigent International, Inc. William K. Presley
By: /s/ B.R. Smedley By: /s/ William K. Presley
-------------------------- -----------------------
(signature) (signature)
Name: B.R. "Bernie Smedley
------------------------
Title: Chief Executive Officer
-----------------------
<PAGE>
Exhibit 10.31
AMENDMENT TO EMPLOYMENT AGREEMENT
This amendment ("Amendment") to the Employment Agreement ("Agreement") executed
between Exigent International, Inc. and William K. Presley dated June 11, 1997
is entered into as of October 27, 1998 between Exigent International, Inc.
("Exigent"), a corporation duly authorized and existing under the laws of the
State of Delaware with a principal place of business at 1225 Evans Road,
Melbourne, Florida 32904 and William K. Presley ("Employee"), an individual
domiciled at 220 Columbia Dr., Apt. 19, Cape Canaveral, FL 32920.
NOW, THEREFORE, for one dollar and other good and valuable consideration, the
receipt and sufficiency of which is hereby mutually acknowledged, Exigent and
Employee hereby agree as follows:
1. Executive Incentive Program for FY98(b). Exigent and Employee agree
that the Executive Incentive Plan Summary for fiscal year 1998(b)
(i.e., February 1, 1998 through December 31, 1998) attached hereto as
Attachment "1" of this Amendment shall form an integral part of Exhibit
"B" to the Agreement and shall contain the parameters for any incentive
compensation to be awarded to Employee in the fiscal year of 1998(b).
2. Corporate Goals. Exigent and Employee agree that the incentive
compensation tied to the financial performance of Exigent as
identified in Attachment "1" hereto is subject to the attainment of
Employee's corporate goals described in Attachment "2", attached
hereto and incorporated herein by this reference. One hundred (100)
percent of the incentive compensation set forth in Attachment "1"
shall be earned if and only if one hundred percent of the corporate
goals set forth in Attachment "2" are fulfilled. An internal
compensation committee shall be established by the CEO for Exigent to
determine whether the corporate goals have been fulfilled. In the
event less than one hundred (100) percent of the corporate goals are
fulfilled, the compensation committee may make a pro-rata award of
incentive compensation. All determinations by said compensation
committee shall be final and binding.
3. Ratification and Approval. In all other respects the Agreement is
hereby ratified by Exigent and Employee and remains in full force and
effect, as previously amended. The FY1998(b) executive compensation
program supersedes any and all prior compensation plans in effect for
FY1998(b).
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date set
forth above and is retroactively effective from February 1, 1998.
For Exigent: For Employee:
Exigent International, Inc. William K. Presley
By: /s/ B.R. Smedley By: /s/ William K. Presley
----------------------- ----------------------
B.R. "Bernie" Smedley,
Chief Executive Officer
<PAGE>
Attachment 1
Annual Executive Incentive Plan Summary
Chief Technical Officer
I. Executive Target Incentive Payments
Target incentive payments are based on market competitive incentive
levels. The target incentive payment for this position is:
|X| CTO: 30% of base salary
II. Incentive Plan Financial Goals and Plan Effectivity Corporate and
Business Unit financial goals for 1998(b) are as follows:
Corporate
Revenue Earnings
$36 Million $2.0 Million
The Annual Incentive Plan will be implemented only if the following
earning goal is met for 1998(b) |X| 80% of 1998(b) corporate earnings target is
met, i.e., $1.6 Million
III. Executive Incentive Plan Performance Measures and Weights |X| The
following table summarizes the performance measures applicable to the
plan participant:
<TABLE>
<CAPTION>
Employee Title Corporate Financial Goals Percentage Business Unit Financial Goals Individual
Percentage Goals
Percentage
Revenue Earnings Share EPS Revenue Operating Profit
Price (after tax)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bill Presley CTO 20% 60% N/A N/A N/A N/A 20%
</TABLE>
IV. Payout Calculation
The following matrix will be used to establish the payout a participant
will receive for Corporate, Business Unit, or individual performance
for each goal:
Level of Corporate, Business Unit,
or Individual Performance Incentive Payout
- - --------------------------------------------- ----------------------------
Less than 80% of target performance 0% of target incentive
80% of target performance 20% of target incentive
80% - 100% of target performance 20% - 100% of target incentive
(straight line interpolation)
100% of target performance 100% of target incentive
100% - 125% of target performance 100% - 125% of target incentive
(straight line interpolation)
125% of target performance 200% of target incentive
<PAGE>
VI. Payout Method
|X| Bonuses will be paid in a combination of 50% cash, and 50% stock grants.
Participants may elect for all or part of the cash portion of their bonus
paid in stock instead of cash. The number of shares will be calculated
based on the closing stock price on the last day of the fiscal year
|X| For example, if a $10,000 incentive payment was earned, and the stock price
is $5.00, the participant would receive $5,000 cash (less withholding tax)
and would be granted 1,000 shares of stock.
<PAGE>
Attachment 2
Corporate Goals
FY'98(b) Bonus Award Program
Bill Presley
FY98(b) Goals CTO Achieved Comments
CORPORATE MEASURES
o Meet Corporate financial Bonus amount determined
objectives (based on 11 month Company performance to the
fiscal year) 1998(b) Executive Incentive
- Revenue 36M (20%) 20 Program Payout Matrix
- Earnings 2M (60%) 60
CORPORATE TOTAL 80%
Individual Goals
FY'98(b) Bonus Award Program
Bill Presley
FY98(b) Individual Goals CTO Achieved Comments
NEW BUSINESS DEVELOPMENT
o Secure Teledesic/Celestri 10 Points will be prorated for
and INX Business the percent of achieved
goal
o Support Other Initiatives, 5 Points will be prorated for
i.e., Hughes, Loral, Harris, the percent of achieved
NRL, Government, etc. goal
o Introduce new products for 5 Points will be prorated for
development of X-Labs 5 the percent of achieved
goal
NEW BUSINESS DEV. TOTAL 20%
GRAND TOTAL 100%
Exhibit 10.35
SOFTWARE TECHNOLOGY, INC.
RESTATED EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST AGREEMENT
EMPLOYER IDENTIFICATION NO.: 59-1826393
PLAN NO.: 002
<PAGE>
TABLE OF CONTENTS
ALPHABETICAL LISTING OF DEFINITIONS
ARTICLE I - DEFINITIONS........................................................1
1.01 "Plan........................................................1
1.02 "Employer....................................................1
1.03 "Trustee.....................................................1
1.04 "Plan Administrator..........................................1
1.05 "Advisory Committee..........................................1
1.06 "Employee....................................................1
1.07 "Highly Compensated Employee.................................2
1.08 "Participant.................................................2
1.09 "Beneficiary.................................................2
1.10 "Compensation................................................2
1.11 "Account.....................................................4
1.12 "Accrued Benefit.............................................4
1.13 "Nonforfeitable..............................................4
1.14 "Plan Year...................................................4
1.15 "Effective Date..............................................4
1.16 "Plan Entry Date.............................................4
1.17 "Accounting Date.............................................4
1.18 "Trust.......................................................4
1.19 "Trust Fund..................................................4
1.20 "Nontransferable Annuity.....................................4
1.21 "ERISA.......................................................4
1.22 "Code........................................................5
1.23 "Service.....................................................5
1.24 "Hour of Service.............................................5
1.25 "Disability..................................................6
1.26 "Service for Predecessor Employer"...........................6
1.27 "Related Employers"..........................................6
1.28 "Leased Employees"...........................................7
1.29 "Determination of Top Heavy Status"..........................7
1.30 "Disqualified Person.........................................9
1.31 "Employer Securities.........................................9
1.32 "Exempt Loan................................................10
1.33 "Leveraged Employer Securities..............................10
1.34 "Qualified Military Service.................................10
ARTICLE II - EMPLOYEE PARTICIPANTS............................................11
2.01 Eligibility.................................................11
2.02 Year of Service - Participation.............................11
2.03 Break in Service - Participation........................11
2.04 Participation upon Re-employment............................11
ARTICLE III - EMPLOYER CONTRIBUTIONS AND FORFEITURES..........................12
3.01 Amount......................................................12
3.02 Determination of Contribution...............................12
3.03 Time of Payment of Contribution.............................12
3.04 Contribution Allocation.....................................12
3.05 Forfeiture Allocation......................................14
3.06 Accrual of Benefit..........................................14
3.07 Limitations on Allocations to Participants' Accounts........15
3.08 Definitions - Article III...................................16
ARTICLE IV - PARTICIPANT CONTRIBUTIONS........................................19
4.01 Participant Voluntary Contributions.........................19
4.02 Participant Rollover Contribution..........................19
ARTICLE V - TERMINATION OF SERVICE - PARTICIPANT VESTING......................20
5.01 Normal Retirement Age.......................................20
5.02 Participant Disability or Death.............................20
5.03 Vesting Schedule............................................20
5.04 Cash-out Distributions to Partially-vested Participants/
Restoration of Forfeited Accrued Benefit..................21
5.05 Segregated Account for Repaid Amount........................22
5.06 Year of Service - Vesting...................................22
5.07 Break in Service - Vesting..................................22
5.08 Included Years of Service - Vesting.........................22
5.09 Forfeiture Occurs...........................................23
<PAGE>
ARTICLE VI - TIME AND METHOD OF PAYMENT OF BENEFITS...........................24
6.01 Time of Payment of Accrued Benefit..........................24
6.02 Method of Payment of Accrued Benefit........................25
6.03 Benefit Payment Elections...................................28
6.04 Annuity Distributions to Participants and Surviving
Spouses..................................................29
6.05 Special Distribution and Payment Requirements...............29
6.06 Direct Rollover of Eligible Rollover Distributions..........30
6.07 Distributions under Domestic Relations Orders...............30
ARTICLE VII - EMPLOYER ADMINISTRATIVE PROVISIONS..............................32
7.01 Information to Committee....................................32
7.02 No Liability................................................32
7.03 Indemnity of Certain Fiduciaries............................32
7.04 Employer Direction of Investment............................32
7.05 Amendment to Vesting Schedule...............................32
ARTICLE VIII - PARTICIPANT ADMINISTRATIVE PROVISIONS..........................34
8.01 Beneficiary Designation.....................................34
8.02 No Beneficiary Designation/death of Beneficiary.............34
8.03 Personal Data to Committee..................................34
8.04 Address for Notification....................................35
8.05 Assignment or Alienation....................................35
8.06 Notice of Change in Terms...............................35
8.07 Litigation Against the Trust................................35
8.08 Information Available.......................................35
8.09 Appeal Procedure for Denial of Benefits.....................35
8.10 Participant Direction of Investment.........................36
ARTICLE IX - ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANTS' ACCOUNTS 38
9.01 Members' Compensation, Expenses.............................38
9.02 Term........................................................38
9.03 Powers......................................................38
9.04 General.....................................................38
9.05 Funding Policy..............................................39
9.06 Manner of Action............................................39
9.07 Authorized Representative...................................39
9.08 Interested Member...........................................39
9.09 Individual Accounts.........................................39
9.10 Value of Participant's Accrued Benefit......................40
9.11 Allocation to Participant's Accrued Benefit.................40
9.12 Individual Statement........................................41
9.13 Account Charged.............................................42
9.14 Unclaimed Account Procedure.................................42
ARTICLE X - TRUSTEE, POWERS AND DUTIES........................................43
10.01 Acceptance..................................................43
10.02 Receipt of Contributions....................................43
10.03 Full Investment Powers......................................43
10.04 Records and Statements......................................47
10.05 Fees and Expenses from Fund.................................47
10.06 Parties to Litigation.......................................47
10.07 Professional Agents.........................................47
10.08 Distribution of Trust Fund..................................47
10.09 Distribution Directions.....................................48
10.10 Third Party/multiple Trustees...............................48
10.11 Resignation.................................................48
10.12 Removal.....................................................48
10.13 Interim Duties and Successor Trustee........................48
10.14 Valuation of Trust..........................................49
10.15 Limitation on Liability -- If Investment
Manager Appointed...........................................49
10.16 Investment in Group Trust Fund..............................49
10.17 Participant Voting Rights -- Employer Securities............49
<PAGE>
ARTICLE XI - MISCELLANEOUS....................................................51
11.01 Evidence....................................................51
11.02 No Responsibility for Employer Action.......................51
11.03 Fiduciaries Not Insurers....................................51
11.04 Waiver of Notice............................................51
11.05 Successors..................................................51
11.06 Word Usage..................................................51
11.07 State Law...................................................51
11.08 Employment Not Guaranteed...................................52
ARTICLE XII - EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION.......................53
12.01 Exclusive Benefit...........................................53
12.02 Amendment by Employer.......................................53
12.03 Discontinuance..............................................54
12.04 Full Vesting on Termination.................................54
12.05 Merger/direct Transfer......................................54
12.06 Termination.................................................55
<PAGE>
ALPHABETICAL LISTING OF DEFINITIONS
Section Reference
Plan Definition (Page Number)
Account ............................................................... 1.11 (4)
Accounting Date ....................................................... 1.17 (4)
Accrued Benefit ....................................................... 1.12 (4)
Advisory Committee .................................................... 1.05 (1)
Annual Addition ................................................... 3.08(a) (16)
Beneficiary ........................................................... 1.09 (2)
Beneficiary for Article XI Purposes ................................. 11.06 (52)
Break in Service for Eligibility Purposes ............................. 2.03 (1)
Break in Service for Vesting Purpose.................................. 5.07 (22)
Cash-out Distribution ................................................ 5.04 (21)
Closing ............................................................. 11.06 (52)
Code .................................................................. 1.22 (4)
Code ss.411(d)(6) Protected Benefits ................................. 13.02 (1)
Compensation .......................................................... 1.10 (2)
Compensation for Code ss.415 Purposes .............................. 3.08(b)(16)
Compensation for Top Heavy Purposes ................................. 1.29(b)(8)
Contract(s) ....................................................... 11.03(c)(52)
Defined Benefit Plan ............................................... 3.08(h)(16)
Defined Contribution Plan .......................................... 3.08(g)(16)
Determination Date .................................................. 1.29(g)(8)
Disability ............................................................. 1.25(5)
Disqualified Person..................................................... 1.30(8)
Distribution Date ..................................................... 6.01(24)
Effective Date ......................................................... 1.15(4)
Elective Contributions ................................................. 1.10(3)
Elective Transfer ...................................................13.05(A(52)
Employee ............................................................... 1.06(1)
Employer .............................................................. 1.02 (1)
Employer for Code ss.415 Purposes ................................. 3.08(d) (16)
Employer for Top Heavy Purposes .................................... 1.29(f) (8)
Employer Securities.................................................... 1.31 (8)
Employment Commencement Date ......................................... 2.02 (11)
ERISA ................................................................. 1.21 (4)
Excess Amount ......................................................3.08(e) (16)
Exempt Loan............................................................ 1.32 (8)
Exempt Participant ................................................ 8.01(B) (34)
Fair Market Value ................................................... 11.06 (52)
<PAGE>
Forfeiture Break in Service ....................................... 5.08(B) (22)
Group Trust Fund .................................................... 10.16 (50)
Highly Compensated Employee ........................................... 1.07 (1)
Hour of Service ....................................................... 1.24 (4)
Investment Manager ................................................ 9.04(i) (39)
Joint and Survivor Annuity ........................................... 6.04 (29)
Key Employee ....................................................... 1.29(a) (8)
Leased Employees ...................................................... 1.28 (6)
Leveraged Employer Securities.......................................... 1.33 (8)
Limitation Year ................................................... 3.08(f) (16)
Maximum Permissible Amount ........................................ 3.08(c) (16)
Minimum Distribution Incidental Benefit ........................... 6.02(A) (25)
Nonforfeitable ........................................................ 1.13 (4)
Non-Key Employee ................................................... 1.29(b) (8)
Nontransferable Annuity ............................................... 1.20 (4)
Normal Retirement Age ................................................ 5.01 (20)
Notice............................................................... 11.06(52)
Participant ........................................................... 1.08 (2)
Participant Forfeiture ................................................ 3.05 (14
Participant Voluntary Contributions .................................. 4.01 (19)
Permissive Aggregation Group ........................................1.29(e) (8)
Plan................................................................... 1.01 (1)
Plan Administrator .................................................... 1.04 (1)
Plan Entry Date ....................................................... 1.16 (4)
Plan Year ............................................................. 1.14 (4)
Policy .............................................................. 11.03 (52)
Predecessor Employer .................................................. 1.26 (6)
Qualified Domestic Relations Order ................................... 6.07 (30)
Qualified Election Period..........................................8.10(ii) (36)
Qualified Military Service.......................................... . 1.34 (10)
Qualifying Employer Securities ...................................... 10.03 (44)
Qualified Participant...............................................8.10(i) (36)
Related Employers ..................................................... 1.27 (6)
Required Aggregation Group ......................................... 1.29(d) (8)
Required Beginning Date ........................................... 6.01(B) (24)
Rollover Contributions ............................................... 4.02 (19)
Service ............................................................... 1.23 (5)
Top Heavy Minimum Allocation ...................................... 3.04(B) (12)
Top Heavy Ratio ....................................................... 1.29 (7)
Trust ................................................................. 1.18 (4)
Trustee ............................................................... 1.03 (1)
Trust Fund ............................................................ 1.19 (4)
Year of Service for Eligibility Purposes ............................. 2.02 (11)
Year of Service for Vesting Purposes ................................. 5.06 (22)
* * * * * * * * * * * * * *
<PAGE>
SOFTWARE TECHNOLOGY, INC.
RESTATED EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST AGREEMENT
SOFTWARE TECHNOLOGY, INC., a corporation organized under the laws of
the State of Florida, makes this Agreement with DON F. RIORDAN, as Trustee.
WITNESSETH:
SOFTWARE TECHNOLOGY, INC. continues, within this Trust Agreement, a Plan
for the administration and distribution of contributions made by the Employer
for the purpose of providing retirement benefits for eligible Employees. This
Plan is an amended plan, in restated form, the original plan being established
on January 31, 1986. The provisions of this Plan, as amended, apply solely to an
Employee whose employment with the Employer terminates on or after the restated
Effective Date of the Employer's Plan. If an Employee's employment with the
Employer terminates prior to the restated Effective Date, that Employee is
entitled to benefits under the Plan as the Plan existed on the date of the
Employee's termination of employment.
Now, therefore, in consideration of their mutual covenants, the Employer
and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
1.01 "Plan" means the retirement plan established and continued by the
Employer in the form of this Agreement, designated as the SOFTWARE TECHNOLOGY,
INC. Restated Employee Stock Ownership Plan. The Employer has designed this Plan
to invest primarily in Employer Securities.
1.02 "Employer" means SOFTWARE TECHNOLOGY, INC. and any Related Employer
which elects to become a party to the Plan, with the approval of the Employer,
by adopting the Plan for the benefit of its eligible Employees.
1.03 "Trustee" means DON F. RIORDAN or any successor in office who in
writing accepts the position of Trustee.
1.04 "Plan Administrator" is the Employer unless the Employer designates
another person to hold the position of Plan Administrator. In addition to his
other duties, the Plan Administrator has full responsibility for compliance with
the reporting and disclosure rules under ERISA as respects this Agreement.
1.05 "Advisory Committee" means the Employer's Advisory Committee as from
time to time constituted.
1.06 "Employee" means any employee of the Employer.
<PAGE>
1.07 "Highly Compensated Employee" means an Employee who:
(a) during the Plan Year or during the preceding Plan Year is a 5% or
more owner of the Employer (applying the constructive ownership rules
of Code ss.318, and applying the principles of Code ss.318, for an
unincorporated entity);
(b) during the preceding Plan Year has Compensation in excess of
$80,000 (as adjusted by the Commissioner of Internal Revenue for the
relevant year) and, if the Employer so elects, is part of the top-paid
20% group of employees (based on Compensation for the relevant year).
For purposes of this Section 1.07, "Compensation" means Compensation as
defined in Section 1.10, except no exclusions from Compensation apply other than
the exclusions described in paragraphs (a), (b), (c) and (d) of Section 1.10.
The Advisory Committee must make the determination of who is a Highly
Compensated Employee consistent with Code ss.414(q) and regulations issued under
that Code section. The Employer may make a calendar year election to determine
the Highly Compensated Employees for the Plan Year, as prescribed by Treasury
regulations. A calendar year election must apply to all plans and arrangements
of the Employer.
The term "Highly Compensated Employee" also includes any former Employee
who separated from Service (or has a deemed Separation from Service, as
determined under Treasury regulations) prior to the Plan Year, performs no
Service for the Employer during the Plan Year, and was a Highly Compensated
Employee either for the separation year or any Plan Year ending on or after his
55th birthday. If the former Employee's Separation from Service occurred prior
to January 1, 1987, he is a Highly Compensated Employee only if he satisfied
clause (a) of this Section 1.07 or received Compensation in excess of $50,000
during: (1) the year of his Separation from Service (or the prior year); or (2)
any year ending after his 54th birthday.
1.08 "Participant" is an Employee who is eligible to be and becomes a
Participant in accordance with the provisions of Section 2.01.
1.09 "Beneficiary" is a person designated by a Participant who is or may
become entitled to a benefit under the Plan. A Beneficiary who becomes entitled
to a benefit under the Plan remains a Beneficiary under the Plan until the
Trustee has fully distributed his benefit to him. A Beneficiary's right to (and
the Plan Administrator's, the Advisory Committee's or a Trustee's duty to
provide to the Beneficiary) information or data concerning the Plan does not
arise until he first becomes entitled to receive a benefit under the Plan.
<PAGE>
1.10 "Compensation" means W-2 wages as defined under Code ss.3121(a) for
purposes of calculating Social Security taxes, determined without regard to the
taxable wage base limitation, except Compensation does not include
reimbursements or other expense allowances, fringe benefits (cash and noncash),
moving expenses, deferred compensation, and welfare benefits. Compensation
includes elective contributions made by the Employer on the Employee's behalf.
Compensation for the profit sharing portion of the Plan is limited to an amount
that includes 2,080 hours of service per year multiplied by the appropriate
hourly wage for each Participant unless the limitation results in a
discriminatory effect in favor of the highly compensated group of Participants.
The definition of Compensation for the 401(k) portion of the Plan shall have no
modification. "Elective contributions" are amounts excludible from the
Employee's gross income under Code ss.ss.125, 402(e)(3), 402(h) or 403(b), and
contributed by the Employer, at the Employee's election, to a Code ss.401(k)
arrangement, a Simplified Employee Pension, cafeteria plan or tax-sheltered
annuity. A Compensation payment includes Compensation paid by the Employer to an
Employee through another person under the common paymaster provisions of Code
ss.ss.3121(s) and 3306(p). The term "Compensation" does not include:
(a) Employer contributions (other than "elective contributions") to a
plan of deferred compensation to the extent the contributions are not
included in the gross income of the Employee for the taxable year in
which contributed, on behalf of an Employee to a Simplified Employee
Pension Plan to the extent such contributions are excludible from the
Employee's gross income, and any distributions from a plan of deferred
compensation, regardless of whether such amounts are includible in the
gross income of the Employee when distributed.
(b) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by an Employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture.
(c) Amounts realized from the sale, exchange or other disposition of
stock acquired under a stock option described in Part II, Subchapter
D, Chapter 1 of the Code.
(d) Other amounts which receive special tax benefits, such as premiums
for group term life insurance (but only to the extent that the
premiums are not includible in the gross income of the Employee), or
contributions made by an Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Code ss.403(b) (whether or not the contributions are
excludible from the gross income of the Employee), other than
"elective contributions."
Any reference in this Plan to Compensation is a reference to the definition
in this Section 1.10, unless the Plan reference specifies a modification to this
definition. The Advisory Committee will take into account only Compensation
actually paid for the relevant period.
(A) Limitations on Compensation.
(1) Compensation dollar limitation. The Advisory Committee must take into
account only the first $150,000 (or such larger amount as the Commissioner of
Internal Revenue may prescribe) of any Participant's Compensation.
(2) Reserved.
<PAGE>
(B) Nondiscrimination. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees, Compensation means
Compensation as defined in this Section 1.10 except any exclusions from
Compensation, other than the exclusions described in paragraphs (a), (b), (c)
and (d), do not apply. The Employer also may elect to use an alternate
nondiscriminatory definition, in accordance with the requirements of Code
ss.414(s) and the regulations issued under that ode section. In determining
Compensation under this Section 1.10(B), the Employer may elect to include all
elective contributions made by the Employer on behalf of the Employees. The
Employer's election to include elective contributions must be consistent and
uniform with respect to Employees. The Employer may make this election to
include elective contributions for nondiscrimination testing purposes,
irrespective of whether this Section 1.10 includes elective contributions in the
general Compensation definition applicable to the Plan.
1.11 "Account" means the separate account(s) which the Advisory Committee
or the Trustee maintains for a Participant under the Plan.
1.12 "Accrued Benefit" means the amount standing in a Participant's
Account(s) as of any date derived from Employer contributions.
1.13 "Nonforfeitable" means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan, to the Participant's Accrued
Benefit.
1.14 "Plan Year" means the fiscal year of the Plan, a consecutive 12 month
period ending every December 31, with a short plan year beginning on February 1,
1998 and ending on December 31, 1998. Prior to this short plan year, the plan
year was the 12-month period ending each January 31.
1.15 "Effective Date" of this Plan, as restated, is February 1, 1998.
1.16 "Plan Entry Date" means the dates prescribed by Section 2.01.
1.17 "Accounting Date" is the last day of the Plan Year. Unless otherwise
specified in the Plan, the Advisory Committee will make all Plan allocations for
a particular Plan Year as of the Accounting Date of that Plan Year.
1.18 "Trust" means the separate Trust created under the Plan.
1.19 "Trust Fund" means all property of every kind held or acquired by the
Trustee under the Plan.
1.20 "Nontransferable Annuity" means an annuity which by its terms provides
that it may not be sold, assigned, discounted, pledged as collateral for a loan
or security for the performance of an obligation or for any purpose to any
person other than the insurance company. If the Plan distributes an annuity
contract, the contract must be a Nontransferable Annuity.
1.21 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
<PAGE>
1.22 "Code" means the Internal Revenue Code of 1986, as amended.
1.23 "Service" means any period of time the Employee is in the employ of
the Employer, including any period the Employee is on an unpaid leave of absence
authorized by the Employer under a uniform, nondiscriminatory policy applicable
to all Employees. Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credit with respect to Qualified Military
Service will be provided in accordance with Code ss.414(u). "Separation from
Service" means the Employee no longer has an employment relationship with the
Employer maintaining this Plan.
1.24 "Hour of Service" means:
(a) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment, for the performance of duties. The Advisory Committee credits
Hours of Service under this paragraph (a) to the Employee for the
computation period in which the Employee performs the duties,
irrespective of when paid;
(b) Each Hour of Service for back pay, irrespective of mitigation of
damages, to which the Employer has agreed or for which the Employee
has received an award. The Advisory Committee credits Hours of Service
under this paragraph (b) to the Employee for the computation period(s)
to which the award or the agreement pertains rather than for the
computation period in which the award, agreement or payment is made;
and
(c) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment (irrespective of whether the employment relationship is
terminated), for reasons other than for the performance of duties
during a computation period, such as leave of absence, vacation,
holiday, sick leave, illness, incapacity (including disability),
layoff, jury duty or military duty. The Advisory Committee will credit
no more than 501 Hours of Service under this paragraph (c) to an
Employee on account of any single continuous period during which the
Employee does not perform any duties (whether or not such period
occurs during a single computation period). The Advisory Committee
credits Hours of Service under this paragraph (c) in accordance with
the rules of paragraphs (b) and (c) of Labor Reg. ss.2530.200b-2,
which the Plan, by this reference, specifically incorporates in full
within this paragraph (c).
The Advisory Committee will not credit an Hour of Service under more than
one of the above paragraphs. A computation period for purposes of this Section
1.24 is the Plan Year, Year of Service period, Break in Service period or other
period, as determined under the Plan provision for which the Advisory Committee
is measuring an Employee's Hours of Service. The Advisory Committee will resolve
any ambiguity with respect to the crediting of an Hour of Service in favor of
the Employee.
<PAGE>
(A) Method of crediting Hours of Service. The Employer will credit every
Employee with Hours of Service on the basis of the "actual" method. For purposes
of the Plan, "actual" method means the determination of Hours of Service from
records of hours worked and hours for which the Employer makes payment or for
which payment is due from the Employer.
(B) Maternity/paternity leave. Solely for purposes of determining whether the
Employee incurs a Break in Service under any provision of this Plan, the
Advisory Committee must credit Hours of Service during an Employee's unpaid
absence period due to maternity or paternity leave. The Advisory Committee
considers an Employee on maternity or paternity leave if the Employee's absence
is due to the Employee's pregnancy, the birth of the Employee's child, the
placement with the Employee of an adopted child, or the care of the Employee's
child immediately following the child's birth or placement. The Advisory
Committee credits Hours of Service under this paragraph on the basis of the
number of Hours of Service the Employee would receive if he were paid during the
absence period or, if the Advisory Committee cannot determine the number of
Hours of Service the Employee would receive, on the basis of 8 hours per day
during the absence period. The Advisory Committee will credit only the number
(not exceeding 501) of Hours of Service necessary to prevent an Employee's Break
in Service. The Advisory Committee credits all Hours of Service described in
this paragraph to the computation period in which the absence period begins or,
if the Employee does not need these Hours of Service to prevent a Break in
Service in the computation period in which his absence period begins, the
Advisory Committee credits these Hours of Service to the immediately following
computation period.
1.25 "Disability" means the Participant, because of a physical or mental
disability, will be unable to perform the duties of his customary position of
employment (or is unable to engage in any substantial gainful activity) for an
indefinite period which the Advisory Committee considers will be of long
continued duration. A Participant also is disabled if he incurs the permanent
loss or loss of use of a member or function of the body, or is permanently
disfigured, and incurs a Separation from Service. The Plan considers a
Participant disabled on the date the Advisory Committee determines the
Participant satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to confirm
disability. The Advisory Committee will apply the provisions of this Section
1.25 in a nondiscriminatory, consistent and uniform manner.
1.26 "Service for Predecessor Employer". If the Employer maintains the plan
of a predecessor employer, the Plan treats service of the Employee with the
predecessor employer as service with the Employer. In addition to credit with a
predecessor employer as set forth in the preceding sentence, the Plan credits
service for participation purposes under Section 2.01 only with the following
predecessor employers: those employers in the same industry sector as the
Employer or any related Employer.
<PAGE>
1.27 "Related Employers". A related group is a controlled group of
corporations (as defined in Code ss.414(b)), trades or businesses (whether or
not incorporated) which are under common control (as defined in Code ss.414(c))
or an affiliated service group (as defined in Code ss.414(m) or in Code
ss.414(o)). If the Employer is a member of a related group, the term "Employer"
includes the related group members for purposes of crediting Hours of Service,
determining Years of Service and Breaks in Service under Articles II and V,
applying the limitations on allocations in Part 2 of Article III, applying the
top heavy rules and the minimum allocation requirements of Article III, the
definitions of Employee, Highly Compensated Employee, Compensation and Leased
Employee, and for any other purpose required by the applicable Code section or
by a Plan provision. However, only an Employer described in Section 1.02 may
contribute to the Plan and only an Employee employed by an Employer described in
Section 1.02 is eligible to participate in this Plan. For Plan allocation
purposes, "Compensation" does not include Compensation received from a related
employer not participating in this Plan.
1.28 "Leased Employees". The Plan treats a Leased Employee as an Employee
of the Employer. A Leased Employee is an individual (who otherwise is not an
Employee of the Employer) who, pursuant to a leasing agreement between the
Employer and any other person, has performed services for the Employer (or for
the Employer and any persons related to the Employer within the meaning of Code
ss.144(a)(3)) on a substantially full time basis for at least one year, and such
services are performed under the primary direction or control of the Employer.
If a Leased Employee is treated as an Employee by reason of this Section 1.28,
"Compensation" includes Compensation from the leasing organization which is
attributable to services performed for the Employer.
(A) Safe harbor plan exception. The Plan does not treat a Leased Employee as an
Employee if the leasing organization covers the employee in a safe harbor plan
and, prior to application of this safe harbor plan exception, 20% or less of the
Employer's Employees (other than Highly Compensated Employees) are Leased
Employees. A safe harbor plan is a money purchase pension plan providing
immediate participation, full and immediate vesting, and a nonintegrated
contribution formula equal to at least 10% of the employee's compensation
without regard to employment by the leasing organization on a specified date.
The safe harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code ss.415(c)(3) plus elective contributions (as
defined in Section 1.10).
(B) Other requirements. The Advisory Committee must apply this Section 1.28 in a
manner consistent with Code ss.ss.414(n) and 414(o) and the regulations issued
under those Code sections. The Advisory Committee will reduce a Leased
Employee's allocation of Employer contributions under this Plan by the Leased
Employee's allocation under the leasing organization's plan, but only to the
extent that allocation is attributable to the Leased Employee's service provided
to the Employer.
<PAGE>
1.29 "Determination of Top Heavy Status". If this Plan is the only
qualified plan maintained by the Employer, the Plan is top heavy for a Plan Year
if the top heavy ratio as of the Determination Date exceeds 60%. The top heavy
ratio is a fraction, the numerator of which is the sum of the present value of
Accrued Benefits of all Key Employees as of the Determination Date and the
denominator of which is a similar sum determined for all Employees. The Advisory
Committee must include in the top heavy ratio, as part of the present value of
Accrued Benefits, any contribution not made as of the Determination Date but
includible under Code ss.416 and the applicable Treasury regulations, and
distributions made within the Determination Period. The Advisory Committee must
calculate the top heavy ratio by disregarding the Accrued Benefit (and
distributions, if any, of the Accrued Benefit) of any Non-Key Employee who was
formerly a Key Employee, and by disregarding the Accrued Benefit (including
distributions, if any, of the Accrued Benefit) of an individual who has not
received credit for at least one Hour of Service with the Employer during the
Determination Period. The Advisory Committee must calculate the top heavy ratio,
including the extent to which it must take into account distributions, rollovers
and transfers, in accordance with Code ss.416 and the regulations under that
Code section.
If the Employer maintains other qualified plans (including a simplified
employee pension plan), or maintained another such plan which now is terminated,
this Plan is top heavy only if it is part of the Required Aggregation Group, and
the top heavy ratio for the Required Aggregation Group and for the Permissive
Aggregation Group, if any, each exceeds 60%. The Advisory Committee will
calculate the top heavy ratio in the same manner as required by the first
paragraph of this Section 1.29, taking into account all plans within the
Aggregation Group. To the extent the Advisory Committee must take into account
distributions to a Participant, the Advisory Committee must include
distributions from a terminated plan which would have been part of the Required
Aggregation Group if it were in existence on the Determination Date. The
Advisory Committee will calculate the present value of Accrued Benefits under
defined benefit plans or simplified employee pension plans included within the
group in accordance with the terms of those plans, Code ss.416 and the
regulations under that Code section. If a Participant in a defined benefit plan
is a Non-Key Employee, the Advisory Committee will determine his Accrued Benefit
under the accrual method, if any, which is applicable uniformly to all defined
benefit plans maintained by the Employer or, if there is no uniform method, in
accordance with the slowest accrual rate permitted under the fractional rule
accrual method described in Code ss.411(b)(1)(C). To calculate the present value
of benefits from a defined benefit plan, the Advisory Committee will use the
actuarial assumptions (interest and mortality only) prescribed by the defined
benefit plan(s) to value benefits for top heavy purposes. If an aggregated plan
does not have a valuation date coinciding with the Determination Date, the
Advisory Committee must value the Accrued Benefits in the aggregated plan as of
the most recent valuation date falling within the twelve-month period ending on
the Determination Date, except as Code ss.416 and applicable Treasury
regulations require for the first and second plan year of a defined benefit
plan. The Advisory Committee will calculate the top heavy ratio with reference
to the Determination Dates that fall within the same calendar year.
<PAGE>
Definitions. For purposes of applying the provisions of this Section 1.29:
(a) "Key Employee" means, as of any Determination Date, any Employee
or former Employee (or Beneficiary of such Employee) who, for any Plan
Year in the Determination Period: (i) has Compensation in excess of
50% of the dollar amount prescribed in Code ss.415(b)(1)(A) (relating
to defined benefit plans) and is an officer of the Employer; (ii) has
Compensation in excess of the dollar amount prescribed in Code
ss.415(c)(1)(A) (relating to defined contribution plans) and is one of
the Employees owning the ten largest interests in the Employer; (iii)
is a more than 5% owner of the Employer; or (iv) is a more than 1%
owner of the Employer and has Compensation of more than $150,000. The
constructive ownership rules of Code ss.318 (or the principles of that
section, in the case of an unincorporated Employer,) will apply to
determine ownership in the Employer. The number of officers taken into
account under clause (i) will not exceed the greater of 3 or 10% of
the total number (after application of the Code ss.414(q) exclusions)
of Employees, but no more than 50 officers. The Advisory Committee
will make the determination of who is a Key Employee in accordance
with Code ss.416(i)(1) and the regulations under that Code section.
(b) "Non-Key Employee" is an employee who does not meet the definition
of Key Employee.
(c) "Compensation" means Compensation as determined under Section 1.07
for purposes of identifying Highly Compensated Employees.
(d) "Required Aggregation Group" means: (1) each qualified plan of the
Employer in which at least one Key Employee participates at any time
during the Determination Period; and (2) any other qualified plan of
the Employer which enables a plan described in clause (1) to meet the
requirements of Code ss.401(a)(4) or of Code ss.410.
(e) "Permissive Aggregation Group" is the Required Aggregation Group
plus any other qualified plans maintained by the Employer, but only if
such group would satisfy in the aggregate the requirements of Code
ss.401(a)(4) and of Code ss.410. The Advisory Committee will determine
the Permissive Aggregation Group.
(f) "Employer" means the Employer that adopts this Plan and any
related employers described in Section 1.27.
(g) "Determination Date" for any Plan Year is the Accounting Date of
the preceding Plan Year or, in the case of the first Plan Year of the
Plan, the Accounting Date of that Plan Year. The "Determination
Period" is the 5 year period ending on the Determination Date.
1.30 "Disqualified Person" shall have the meaning ascribed to that term
under Code ss.4975(e)(2).
1.31 "Employer Securities" means (a) common stock issued by the Employer,
or by a corporation which is a member of the same controlled group of
corporations, readily tradable on an established securities market. If there is
no common stock which meets the requirement of (a), above, the term "Employer
Securities" means (b) common stock issued by the Employer, or by a corporation
which is a member of the same controlled group, having a combination of voting
power and dividend rights equal to or in excess of --
(i) that class of common stock of the Employer (or of any other such
corporation) having the greatest voting power; and
<PAGE>
(ii) that class of common stock of the Employer (or of any other such
corporation) having the greatest dividend rights.
Noncallable preferred stock shall be treated as Employer Securities if such
stock is convertible at any time into stock which meets the requirements of (a)
or (b), above, whichever is applicable, and if such conversion is at a
conversion price which is reasonable. For purposes of the preceding sentence,
under regulations prescribed by the Secretary, preferred stock shall be treated
as noncallable if after the call there will be a reasonable opportunity for a
conversion which meets the requirements of the preceding sentence.
1.32 "Exempt Loan" means a loan made to this Plan by a Disqualified Person,
or a loan to this Plan which a Disqualified Person guarantees, provided the loan
satisfies the requirements of Treas. Reg.ss.54.4975-7(b).
1.33 "Leveraged Employer Securities" mean Employer Securities acquired by
the Trust with the proceeds of an Exempt Loan and which satisfy the definition
of "qualifying employer securities" under Code ss.4975(e)(8).
1.34 "Qualified Military Service" means any service in the uniformed
services (as defined in Chapter 43 of Title 38, United States Code) by any
individual if such individual is entitled to reemployment rights under such
chapter with respect to such service.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY. Each Employee (other than an Excluded Employee) becomes a
Participant in the Plan on the Plan Entry Date (if employed on that date)
immediately following the later of his Employment Commencement Date or the date
he attains age 21. Plan Entry Date means the Effective Date and the first
business day of each month. Each Employee who was a Participant in the Plan on
the day before the Effective Date of this amendment continues as a Participant
in the Plan.
An Employee is an Excluded Employee if he is a Leased Employee.
If a Participant has not incurred a Separation from Service but becomes an
Excluded Employee, then during the period such a Participant is an Excluded
Employee, the Advisory Committee will limit that Participant's sharing in the
allocation of Employer contributions and Participant forfeitures, if any, under
the Plan by disregarding his Compensation paid by the Employer for services
rendered in his capacity as an Excluded Employee. However, during such period of
exclusion, the Participant, without regard to employment classification,
continues to receive credit for vesting under Article V for each included Year
of Service and the Participant's Account continues to share fully in Trust Fund
allocations under Section 9.11.
2.02 YEAR OF SERVICE - PARTICIPATION. Effective for the Plan Year beginning
February 1, 1998, the Plan no longer requires a Year of Service for
participation.
2.03 BREAK IN SERVICE - PARTICIPATION. For purposes of participation in the
Plan, the Plan does not apply any Break in Service rule.
2.04 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment with
the Employer terminates will re-enter the Plan as a Participant on the date of
his reemployment. An Employee who satisfies the Plan's eligibility conditions
but who terminates employment with the Employer prior to becoming a Participant
will become a Participant on the later of the Plan Entry Date on which he would
have entered the Plan had he not terminated employment or the date of his
reemployment. Any Employee who terminates employment prior to satisfying the
Plan's eligibility conditions becomes a Participant in accordance with the
provisions of Section 2.01.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
Part 1. Amount of Employer Contributions and Plan Allocations: Sections 3.01
through 3.06
3.01 AMOUNT. For each Plan Year, the Employer will contribute to the Trust
the amount which the Employer may from time to time deem advisable. The Employer
may contribute to this Plan irrespective of whether it has net profits. The
Employer intends the Plan to be an employee stock ownership plan for all
purposes of the Code. The Employer may not make a contribution to the Trust for
any Plan Year to the extent the contribution would exceed the Participants'
Maximum Permissible Amounts. See Part 2 of this Article III.
The Employer contributes to this Plan on the condition its contribution is
not due to a mistake of fact and the Revenue Service will not disallow the
deduction for its contribution. The Trustee, upon written request from the
Employer, must return to the Employer the amount of the Employer's contribution
made by the Employer by mistake of fact or the amount of the Employer's
contribution disallowed as a deduction under Code ss.404. The Trustee will not
return any portion of the Employer's contribution under the provisions of this
paragraph more than one year after:
(a) The Employer made the contribution by mistake of fact; or
(b) The disallowance of the contribution as a deduction, and then, only to
the extent of the disallowance.
The Trustee will not increase the amount of the Employer contribution
returnable under this Section 3.01 for any earnings attributable to the
contribution, but the Trustee will decrease the Employer contribution returnable
for any losses attributable to it. The Trustee may require the Employer to
furnish it whatever evidence the Trustee deems necessary to enable the Trustee
to confirm the amount the Employer has requested be returned is properly
returnable under ERISA.
3.02 DETERMINATION OF CONTRIBUTION. The Employer, from its records,
determines the amount of any contributions to be made by it to the Trust under
the terms of the Plan.
3.03 TIME OF PAYMENT OF CONTRIBUTION. The Employer may pay its contribution
for each Plan Year in one or more installments without interest. The Employer
must make its contribution to the Plan within the time prescribed by the Code or
applicable Treasury regulations. Subject to the consent of the Trustee, the
Employer may make its contribution in property (including Employer Securities)
rather than cash, provided the contribution of property is not a prohibited
transaction under the Code or under ERISA.
<PAGE>
3.04 CONTRIBUTION ALLOCATION.
(A) Method of Allocation. The Advisory Committee will allocate and credit each
annual Employer contribution (and Participant forfeitures, if any) to the
Account of each Participant who satisfies the conditions of Section 3.06. The
Advisory Committee will allocate the annual Employer contributions (and
Participant forfeitures) in the same ratio that each Participant's Compensation
for the Plan Year bears to the total Compensation of all Participants for the
Plan Year.
(B) Top Heavy Minimum Allocation.
(1) Minimum Allocation. If the Plan is top heavy in any Plan Year:
(a) Each Non-Key Employee who is a Participant and by the
Employer on the last day of the Plan Year will receive a top
heavy minimum allocation for that Plan Year, irrespective of
whether he satisfies the Hours of Service condition under
Section 3.06; and
(b) The top heavy minimum allocation is the lesser of 3% of
the Non-Key Employee's Compensation for the Plan Year or the
highest contribution rate for the Plan Year made on behalf of
any Key Employee.
(2) Special Definitions. Effective for Plan Years beginning before February
1, 1998, for purposes of clause (1)(b), "Compensation" means Compensation
as defined in Section 1.10, except: (i) Compensation does not include
elective contributions; (ii) any exclusions from Compensation (other than
the exclusion of elective contributions and the exclusions described in
paragraphs (a), (b), (c) and (d) of Section 1.10) do not apply; and (iii)
the Advisory Committee must take into account Compensation for the entire
Plan Year. Effective for Plan Years beginning on or after February 1, 1998,
for purposes of clause (1)(b), "Compensation" means Compensation as defined
in Section 1.10, except: (i) any exclusions from Compensation (other than
the exclusions described in paragraphs (a), (b), (c) and (d) of Section
1.10) do not apply; and (ii) the Advisory Committee must take into account
Compensation for the entire Plan Year.
(3) Determining Contribution Rates. For purposes of this Section 3.04(B), a
Participant's contribution rate is the sum of Employer contributions (not
including Employer contributions to Social Security) and forfeitures
allocated to the Participant's Account for the Plan Year divided by his
Compensation for the entire Plan Year. However, for purposes of satisfying
a Participant's top heavy minimum allocation in Plan Years beginning after
December 31, 1988, a Participant's contribution rate does not include any
elective contributions under a Code ss.401(k) arrangement nor any Employer
matching contributions necessary to satisfy the nondiscrimination
requirements of Code ss.401(k) or of Code ss.401(m). To determine a
Participant's contribution rate, the Advisory Committee must treat all
qualified top heavy defined contribution plans maintained by the Employer
(or by any related Employers described in Section 1.27) as a single plan.
<PAGE>
(4) No Allocations. If, for a Plan Year, there are no allocations of
Employer contributions or forfeitures for any Key Employee, the Plan does
not require any top heavy minimum allocation for the Plan Year, unless a
top heavy minimum allocation applies because of the maintenance by the
Employer of more than one plan.
(5) Method of Compliance. The Plan will satisfy the top heavy minimum
allocation in accordance with this Section 3.04(B)(5). The Advisory
Committee first will allocate the Employer contributions (and Participant
forfeitures, if any) for the Plan Year in accordance with the allocation
formula under Section 3.04(A). The Employer then will contribute an
additional amount for the Account of any Participant entitled under this
Section 3.04(B) to a top heavy minimum allocation and whose contribution
rate for the Plan Year, under this Plan and any other plan aggregated under
paragraph (3), is less than the top heavy minimum allocation. The
additional amount is the amount necessary to increase the Participant's
contribution rate to the top heavy minimum allocation. The Advisory
Committee will allocate the additional contribution to the Account of the
Participant on whose behalf the Employer makes the contribution.
3.05 FORFEITURE ALLOCATION. The amount of a Participant's Accrued
Benefit forfeited under the Plan is a Participant forfeiture. Subject to
any restoration allocation required under Section 9.14, the Advisory
Committee will allocate a Participant forfeiture in accordance with Section
3.04, as an Employer contribution for the Plan Year in which the forfeiture
occurs, as if the Participant forfeiture were an additional Employer
contribution for that Plan Year. The Advisory Committee will continue to
hold the undistributed, non-vested portion of a terminated Participant's
Accrued Benefit in his Account solely for his benefit until a forfeiture
occurs at the time specified in Section 5.09, or, if applicable, until the
time specified in Section 9.14. Except as provided under Section 5.04, a
Participant will not share in the allocation of a forfeiture of any portion
of his Accrued Benefit. In making a forfeiture allocation under this
Section 3.05, the Advisory Committee, must base forfeitures of Employer
Securities upon the fair market value of the Employer Securities as of the
Accounting Date of the forfeitures.
3.06 ACCRUAL OF BENEFIT. The Advisory Committee will determine the accrual
of benefit (Employer contributions and Participant forfeitures) on the basis of
the Plan Year.
(A) Compensation Taken Into Account. In allocating an Employer contribution to a
Participant's Account, the Advisory Committee, except for purposes of
determining the top heavy minimum contribution under Section 3.04(B), will take
into account only the Compensation determined for the portion of the Plan Year
in which the Employee actually is a Participant.
(B) Hours of Service Requirement. Effective for the Plan Year beginning February
1, 1998, a Participant no longer has to meet a service requirement to be
eligible to share in the allocation of Employer contributions and Participant
forfeitures.
<PAGE>
(C) Suspension of Accrual Requirements. Reserved.
Part 2. Limitations on Allocations: Sections 3.07 and 3.08
3.07 LIMITATIONS ON ALLOCATIONS TO PARTICIPANTS' ACCOUNTS. The amount of
Annual Additions which the Advisory Committee may allocate under this Plan on a
Participant's behalf for a Limitation Year may not exceed the Maximum
Permissible Amount. If the amount the Employer otherwise would contribute to the
Participant's Account would cause the Annual Additions for the Limitation Year
to exceed the Maximum Permissible Amount, the Employer will reduce the amount of
its contribution so the Annual Additions for the Limitation Year will equal the
Maximum Permissible Amount. If an allocation of Employer contributions, pursuant
to Section 3.04, would result in an Excess Amount (other than an Excess Amount
resulting from the circumstances described in Section 3.07(B)) to the
Participant's Account, the Advisory Committee will reallocate the Excess Amount
to the remaining Participants who are eligible for an allocation of Employer
contributions for the Plan Year in which the Limitation Year ends. The Advisory
Committee will make this reallocation on the basis of the allocation method
under the Plan as if the Participant whose Account otherwise would receive the
Excess Amount is not eligible for an allocation of Employer contributions.
(A) Estimation of Compensation. Prior to the determination of the Participant's
actual Compensation for a Limitation Year, the Advisory Committee may determine
the Maximum Permissible Amount on the basis of the Participant's estimated
annual Compensation for such Limitation Year. The Advisory Committee must make
this determination on a reasonable and uniform basis for all Participants
similarly situated. The Advisory Committee must reduce any Employer
contributions (including any allocation of forfeitures) based on estimated
annual Compensation by any Excess Amount carried over from prior years. As soon
as is administratively feasible after the end of the Limitation Year, the
Advisory Committee will determine the Maximum Permissible Amount for such
Limitation Year on the basis of the Participant's actual Compensation for such
Limitation Year.
(B) More Than One Plan. If the Advisory Committee allocated an Excess Amount to
a Participant's Account on an allocation date of this Plan which coincides with
an allocation date of another defined contribution plan maintained by the
Employer, the Excess Amount attributed to this Plan will be the product of:
(a) The total Excess Amount allocated as of such date (including any amount
which the Advisory Committee would have allocated but for the limitations
of Codess.415); times
(b) The ratio of (i) the amount allocated to the Participant as of such
date under this Plan divided by (ii) the total amount allocated as of such
date under all qualified defined contribution plans (determined without
regard to the limitations of Codess.415).
(C) Disposition of Excess Amount. If, pursuant to Section 3.07(A), or because of
the allocation of forfeitures, there is an Excess Amount with respect to a
Participant for a Limitation Year, the Advisory Committee will dispose of such
Excess Amount as follows:
<PAGE>
(a) The Advisory Committee will return any nondeductible voluntary Employee
contributions to the Participant to the extent the return would reduce the
Excess Amount.
(b) If, after the application of paragraph (a), an Excess Amount still
exists, and the Plan covers the Participant at the end of the Limitation
Year, then the Advisory Committee will use the Excess Amount(s) to reduce
future Employer contributions (including any allocation of forfeitures)
under the Plan for the next Limitation Year and for each succeeding
Limitation Year, as is necessary, for the Participant. The Participant may
elect to limit his Compensation for allocation purposes to the extent
necessary to reduce his allocation for the Limitation Year to the Maximum
Permissible Amount and eliminate the Excess Amount.
(c) If, after the application of paragraph (a), an Excess Amount still
exists, and the Plan does not cover the Participant at the end of the
Limitation Year, then the Advisory Committee will hold the Excess Amount
unallocated in a suspense account. The Advisory Committee will apply the
suspense account to reduce Employer Contributions (including allocation of
forfeitures) for all remaining Participants in the next Limitation Year,
and in each succeeding Limitation Year if necessary. Neither the Employer
nor any Employee may contribute to the Plan for any Limitation Year in
which the Plan is unable to allocate fully a suspense account maintained
pursuant to this paragraph (c).
(d) The Advisory Committee will not distribute any Excess Amount(s) to
Participants or to former Participants.
3.08 DEFINITIONS - ARTICLE III. For purposes of Article III, the following
terms mean:
(a) "Annual Addition" - The sum of the following amounts allocated on
behalf of a Participant for a Limitation Year: (i) all Employer
contributions; (ii) all forfeitures; and (iii) all Employee contributions.
Except to the extent provided in Treasury regulations, Annual Additions
include excess contributions described in Code ss.401(k), excess aggregate
contributions described in Code ss.401(m) and excess deferrals described in
Code ss.402(g), irrespective of whether the plan distributes or forfeits
such excess amounts. Annual Additions also include Excess Amounts reapplied
to reduce Employer contributions under Section 3.07. Amounts allocated
after March 31, 1984, to an individual medical account (as defined in Code
ss.415(l)(2)) included as part of a defined benefit plan maintained by the
Employer are Annual Additions. Furthermore, Annual Additions include
contributions paid or accrued after December 31, 1985, for taxable years
ending after December 31, 1985, attributable to post-retirement medical
benefits allocated to the separate account of a key employee (as defined in
Code ss.419A(d)(3)) under a welfare benefit fund (as defined in Code
ss.419(e)) maintained by the Employer, but only for purposes of the dollar
limitation applicable to the Maximum Permissible Amount.
<PAGE>
"Annual Additions" do not include any Employer contributions applied by the
Advisory Committee (not later than the due date, including extensions, for
filing the Employer's Federal income tax return for the Plan Year) to pay
interest (charged to a Participant's Account) on an Exempt Loan, and any
Leveraged Employer Securities the Advisory Committee allocates as
forfeitures; provided however, the provisions of this sentence do not apply
in a Limitation Year for which the Advisory Committee allocates more than
one-third (1/3) of the Employer contributions applied to pay principal and
interest on an Exempt Loan to Highly Compensated Employee-Participants. The
Advisory Committee may reallocate the Employer contributions in accordance
with Section 3.04 to the Accounts of non-Highly Compensated
Employee-Participants to the extent necessary in order to satisfy this
special limitation.
(b) "Compensation" -
(1) For Plan Years beginning before February 1, 1998, for purposes of
applying the limitations of Part 2 of this Article III, "Compensation"
means Compensation as defined in Section 1.10, except Compensation does not
include elective contributions and any exclusion from Compensation (other
than the exclusion of elective contributions and the exclusions described
in paragraphs (a), (b), (c) and (d) of Section 1.10) does not apply.
(2) For Plan Years beginning on or after February 1, 1998, for
purposes of applying the limitations of Part 2 with this Article III,
"Compensation" means Compensation as defined in Section 1.10, except any
exclusion from Compensation (such as the exclusions described in paragraphs
(a), (b), (c) and (d) of Section 1.10) does not apply.
(c) "Maximum Permissible Amount" - The lesser of (i) $30,000 (or such
larger amount as may be determined by the Secretary of Treasury pursuant to
Code ss.415(d)), or (ii) 25% of the Participant's Compensation for the
Limitation Year. If there is a short Limitation Year because of a change in
Limitation Year, the Advisory Committee will multiply the $30,000
limitation (or larger limitation) by the following fraction:
Number of months in the short Limitation Year
12
(d) "Employer" - The Employer that adopts this Plan and any related
employers described in Section 1.27. Solely for purposes of applying the
limitations of Part 2 of this Article III, the Advisory Committee will
determine related employers described in Section 1.27 by modifying Code
ss.ss.414(b) and (c) in accordance with Code ss.415(h).
(e) "Excess Amount" - The excess of the Participant's Annual Additions for
the Limitation Year over the Maximum Permissible Amount.
<PAGE>
(f) "Limitation Year" - The Plan Year. If the Employer amends the
Limitation Year to a different 12 consecutive month period, the new
Limitation Year must begin on a date within the Limitation Year for which
the Employer makes the amendment, creating a short Limitation Year.
(g) "Defined Contribution plan" - A retirement plan which provides for an
individual account for each participant and for benefits based solely on
the amount contributed to the participant's account, and any income,
expenses, gains and losses, and any forfeitures of accounts of other
participants which the plan may allocate to such participant's account. The
Advisory Committee must treat all defined contribution plans (whether or
not terminated) maintained by the Employer as a single plan.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT VOLUNTARY CONTRIBUTIONS. The Plan does not permit nor
require Participant voluntary contributions.
4.02 PARTICIPANT ROLLOVER CONTRIBUTION. The Plan does not permit
Participant rollover contributions.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT AGE. A Participant's Normal Retirement Age is 55
years of age. A Participant's Accrued Benefit derived from Employer
contributions is 100% Nonforfeitable upon and after his attaining Normal
Retirement Age (if employed by the Employer on or after that date).
5.02 PARTICIPANT DISABILITY OR DEATH. If a Participant's employment with
the Employer terminates as a result of death or disability, the Participant's
Accrued Benefit derived from Employer contributions will be 100% Nonforfeitable.
5.03 VESTING SCHEDULE.
(A) Vesting Schedule. Except as provided in Sections 5.01 and 5.02, for each
Year of Service, a Participant's Nonforfeitable percentage of his Accrued
Benefit derived from Employer contributions equals the percentage in the
following vesting schedule:
Percent of
Years of Service Nonforfeitable
With the Employer Accrued Benefit
Less than 3.......................................None
3.............................................20%
4.............................................40%
5.............................................60%
6.............................................80%
7 or more....................................100%
(B) Special Vesting Schedule. If the Trustee makes a distribution (other than a
cash-out distribution described in Section 5.04) to a partially-vested
Participant, and the Participant has not incurred a Forfeiture Break in Service
at the relevant time, the Advisory Committee will establish a separate Account
for the Participant's Accrued Benefit. At any relevant time following the
distribution, the Advisory Committee will determine the Participant's
Nonforfeitable Accrued Benefit derived from Employer contributions in accordance
with the following formula: P(AB + (R x D)) - (R x D).
<PAGE>
To apply this formula, "P" is the Participant's current vesting percentage
at the relevant time, "AB" is the Participant's Employer-derived Accrued Benefit
at the relevant time, "R" is the ratio of "AB" to the Participant's
Employer-derived Accrued Benefit immediately following the earlier distribution
and "D" is the amount of the earlier distribution. If, under a restated Plan,
the Plan has made distribution to a partially-vested Participant prior to its
restated Effective Date and is unable to apply the cash-out provisions of
Section 5.04 to that prior distribution, this special vesting formula also
applies to that Participant's remaining Account.
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION OF
FORFEITED ACCRUED BENEFIT. If, pursuant to Article VI, a partially-vested
Participant receives a cash-out distribution before he incurs a Forfeiture Break
in Service (as defined in Section 5.08), the cash-out distribution will result
in an immediate forfeiture of the nonvested portion of the Participant's Accrued
Benefit derived from Employer contributions. See Section 5.09. A
partially-vested Participant is a Participant whose Nonforfeitable Percentage
determined under Section 5.03 is less than 100%. A cash-out distribution is a
distribution of the entire present value of the Participant's Nonforfeitable
Accrued Benefit.
(A) Restoration and Conditions upon Restoration. A partially-vested Participant
who is re-employed by the Employer after receiving a cash-out distribution of
the Nonforfeitable percentage of his Accrued Benefit may repay the Trustee the
amount of the cash-out distribution attributable to Employer contributions,
unless the Participant no longer has a right to restoration by reason of the
conditions of this Section 5.04(A). If a partially-vested Participant makes the
cash-out distribution repayment, the Advisory Committee, subject to the
conditions of this Section 5.04(A), must restore his Accrued Benefit
attributable to Employer contributions to the same dollar amount as the dollar
amount of his Accrued Benefit on the Accounting Date, or other valuation date,
immediately preceding the date of the cash-out distribution, unadjusted for any
gains or losses occurring subsequent to that Accounting Date, or other valuation
date. Restoration of the Participant's Accrued Benefit includes restoration of
all Code ss.411(d)(6) protected benefits with respect to that restored Accrued
Benefit, in accordance with applicable Treasury regulations. The Advisory
Committee will not restore a re-employed Participant's Accrued Benefit under
this paragraph if:
(1) 5 years have elapsed since the Participant's first re-employment
date with the Employer following the cash-out distribution; or
(2) The Participant incurred a Forfeiture Break in Service (as defined
in Section 5.08). This condition also applies if the Participant makes
repayment within the Plan Year in which he incurs the Forfeiture Break
in Service and that Forfeiture Break in Service would result in a
complete forfeiture of the amount the Advisory Committee otherwise
would restore.
(B) Time and Method of Restoration. If neither of the two conditions preventing
restoration of the Participant's Accrued Benefit applies, the Advisory Committee
will restore the Participant's Accrued Benefit as of the Plan Year Accounting
Date coincident with or immediately following the repayment. To restore the
Participant's Accrued Benefit, the Advisory Committee, to the extent necessary,
will allocate to the Participant's Account:
(1) First, the amount, if any, of Participant forfeitures the Advisory
Committee would otherwise allocate under Section 3.05;
<PAGE>
(2) Second, the amount, if any, of the Trust Fund net income or gain
for the Plan Year; and
(3) Third, the Employer contribution for the Plan Year to the extent
made under a discretionary formula.
To the extent the amounts described in clauses (1), (2) and (3) are
insufficient to enable the Advisory Committee to make the required restoration,
the Employer must contribute, without regard to any requirement or condition of
Section 3.01, the additional amount necessary to enable the Advisory Committee
to make the required restoration. If, for a particular Plan Year, the Advisory
Committee must restore the Accrued Benefit of more than one re-employed
Participant, then the Advisory Committee will make the restoration allocation(s)
to each such Participant's Account in the same proportion that a Participant's
restored amount for the Plan Year bears to the restored amount for the Plan Year
of all re-employed Participants. The Advisory Committee will not take into
account the allocation under this Section 5.04 in applying the limitation on
allocations under Part 2 of Article III.
5.05 SEGREGATED ACCOUNT FOR REPAID AMOUNT. The Trustee shall invest the
cash-out amount the Participant has repaid in a segregated Account maintained
solely for that Participant. The Trustee must invest the amount in the
Participant's segregated Account in Federally insured interest bearing savings
account(s) or time deposit(s) (or a combination of both), or in other fixed
income investments. Until commingled with the balance of the Trust Fund on the
date the Advisory Committee directs, the Participant's segregated Account
remains a part of the Trust, but it alone shares in any income it earns and it
alone bears any expense or loss it incurs. The Advisory Committee will direct
the Trustee to repay to the Participant as soon as is administratively
practicable the full amount of the Participant's segregated Account if the
Advisory Committee determines either of the conditions of Section 5.04(A)
prevents restoration as of the applicable Accounting Date, notwithstanding the
Participant's repayment. The Advisory Committee shall direct the Trustee to
commingle the Participant's segregated account with the balance of the Trust
Fund as of the second Accounting Date immediately following the date of the
Participant's repayment.
5.06 YEAR OF SERVICE - VESTING. For purposes of vesting under Section 5.03,
Year of Service means any Plan Year during which an Employee completes not less
than 1,000 Hours of Service with the Employer.
5.07 BREAK IN SERVICE - VESTING. For purposes of this Article V, a
Participant incurs a "Break in Service" if during any Plan Year he does not
complete more than 500 Hours of Service with the Employer.
5.08 INCLUDED YEARS OF SERVICE - VESTING.
(A) Included Years of Service. For purposes of determining "Years of Service"
under Section 5.06, the Plan takes into account all Years of Service an Employee
completes with the Employer.
<PAGE>
(B) Forfeiture Break in Service. For the sole purpose of determining a
Participant's Nonforfeitable percentage of his Accrued Benefit derived from
Employer contributions which accrued for his benefit prior to a Forfeiture Break
in Service, the Plan disregards any Year of Service after the Participant first
incurs a Forfeiture Break in Service. The Participant incurs a Forfeiture Break
in Service when he incurs 5 consecutive Breaks in Service.
5.09 FORFEITURE OCCURS. A Participant's forfeiture, if any, of his Accrued
Benefit derived from Employer contributions occurs under the Plan on the earlier
of:
(a) The last day of the Plan Year in which the Participant first
incurs a Forfeiture Break in Service; or
(b) The date the Participant receives a cash-out distribution.
The Advisory Committee determines the percentage of a Participant's Accrued
Benefit forfeiture, if any, under this Section 5.09 solely by reference to the
vesting schedule of Section 5.03. A Participant will not forfeit any portion of
his Accrued Benefit for any other reason or cause except as expressly provided
by this Section 5.09 or as provided under Section 9.14.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT. Unless, pursuant to Section 6.03,
the Participant or the Beneficiary elects in writing to a different time or
method of payment, the Advisory Committee will direct the Trustee to commence
distribution of a Participant's Nonforfeitable Accrued Benefit in accordance
with this Section 6.01. A Participant must consent, in writing, to any
distribution required under this Section 6.01 if the present value of the
Participant's Nonforfeitable Accrued Benefit, at the time of the distribution to
the Participant, exceeds $5,000 and the Participant has not attained Normal
Retirement Age. A distribution date under this Article VI, unless otherwise
specified within the Plan, is the 60th day after the close of the Plan Year or
as soon as administratively practicable following a distribution date. For
purposes of the consent requirements under this Article VI, if the present value
of the Participant's Nonforfeitable Accrued Benefit, at the time of any
distribution, exceeds $5,000, the Advisory Committee must treat that present
value as exceeding $5,000 for purposes of all subsequent Plan distributions to
the Participant.
(A) Separation from Service for a Reason Other Than Death.
(1) Participant's Nonforfeitable Accrued Benefit Not Exceeding $5,000. If
the Participant's Separation from Service is for any reason other than death,
the Advisory Committee will direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in lump sum, as soon as administratively
practicable following the close of the Plan Year during which the Participant's
Separation from Service occurs, but in no event later than the 60th day
following the close of the Plan Year in which the Participant attains Normal
Retirement Age. If the Participant has attained Normal Retirement Age when he
separates from Service, the distribution under this paragraph will occur no
later than the 60th day following the close of the Plan Year in which the
Participant's Separation from Service occurs.
(2) Participant's Nonforfeitable Accrued Benefit Exceeds $5,000. If the
Participant's Separation from Service is for any reason other than death, the
Advisory Committee will direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit at the time elected by the Participant, pursuant
to Section 6.03. In the absence of an election by the Participant, the Advisory
Committee will direct the Trustee to distribute the Participant's Nonforfeitable
Accrued Benefit in lump sum on the 60th day following the close of the Plan Year
in which the later of the following events occurs: (a) the Participant attains
Normal Retirement Age; or (b) the Participant separates from Service.
(3) Disability. If the Participant's Separation from Service is because of
disability, the Advisory Committee will direct the Trustee to pay the
Participant's Nonforfeitable Accrued Benefit in lump sum, on the first
administratively practicable distribution date of the first Plan Year beginning
after the Participant's Separation from Service, subject to the notice and
consent requirements of this Article VI and to the applicable mandatory
commencement dates described in Paragraph (1) or in Paragraph (2).
<PAGE>
(B) Required Beginning Date. If any distribution commencement date described
under Paragraph (A) of this Section 6.01, either by Plan provision or by
Participant election (or nonelection), is later than the Participant's Required
Beginning Date, the Advisory Committee instead must direct the Trustee to make
distribution on the Participant's Required Beginning Date. A Participant's
Required Beginning Date is the later of the April 1 following the close of the
calendar year in which (i) the Participant attains age 70 1/2 or (ii) the
Participant separates from service; provided, however, if the Participant is a
5% or more owner, the Required Beginning Date is the April 1 following the close
of the calendar year in which the said Participant attains age 70 1/2. However,
Participants, who are not 5% owners and who attain age 70 1/2 prior to or on
December 31, 1998 while still employed by the Employer, may elect to commence
their required minimum distribution pursuant to Code ss.401(a)(9). A mandatory
distribution at the Participant's Required Beginning Date will be in lump sum
unless the Participant, pursuant to the provisions of this Article VI, makes a
valid election to receive an alternative form of payment.
(C) Death of the Participant. The Advisory Committee will direct the Trustee, in
accordance with this Section 6.01(C), to distribute to the Participant's
Beneficiary the Participant's Nonforfeitable Accrued Benefit remaining in the
Trust at the time of the Participant's death.
(1) Deceased Participant's Nonforfeitable Accrued Benefit Does Not Exceed
$5,000. The Advisory Committee must direct the Trustee to distribute the
deceased Participant's Nonforfeitable Accrued Benefit in lump sum, as soon as
administratively practicable following the Participant's death or, if later, the
date on which the Advisory Committee receives notification of or otherwise
confirms the Participant's death.
(2) Deceased Participant's Nonforfeitable Accrued Benefit Exceeds $5,000.
The Advisory Committee will direct the Trustee to distribute the deceased
Participant's Nonforfeitable Accrued Benefit at the time and in the method
elected by the Participant or, if applicable by the Beneficiary, as permitted
under this Article VI. In the absence of an election the Advisory Committee will
direct the Trustee to distribute the Participant's undistributed Nonforfeitable
Accrued Benefit in lump sum on the first distribution date following the close
of the Plan Year in which the Participant's death occurs or, if later, the first
distribution date following the date the Advisory Committee receives
notification of or otherwise confirms the Participant's death.
If the death benefit is payable in full to the Participant's surviving
spouse, the surviving spouse, in addition to the distribution options provided
in this Section 6.01(C), may elect distribution at any time or in any form this
Article VI would permit for a Participant.
<PAGE>
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. Subject to any restrictions
prescribed by Section 6.03, a Participant or Beneficiary may elect distribution
under one, or any combination, of the following methods: (a) by payment in lump
sum; or (b) by payment in monthly, quarterly, or annual installments over a
fixed reasonable period of time, not exceeding the life expectancy of the
Participant, or the joint life and last survivor expectancy of the Participant
and his Beneficiary. See Section 11.04. The Participant's Accrued Benefit in his
Employer Securities Account will be distributed in whole shares of Employer
Securities; the Participant's Accrued Benefit in his General Investments Account
or in fractional shares of Employer Securities will be distributed in cash.
The distribution options permitted under this Section 6.02 are available
only if the present value of the Participant Nonforfeitable Accrued Benefit, at
the time of the distribution to the Participant, exceeds $5,000. To facilitate
installment payments under this Article VI, the Advisory Committee may direct
the Trustee to segregate all or any part of the Participant's Accrued Benefit in
a separate Account. The Trustee will invest the Participant's segregated Account
in Federally insured interest bearing savings account(s) or time deposit(s) (or
a combination of both), or in other fixed income investments. A segregated
Account remains a part of the Trust, but it alone shares in any income it earns,
and it alone bears any expense or loss it incurs. Subject to Section 10.08, a
Participant or Beneficiary may elect to receive an installment distribution in
the form of a Nontransferable Annuity Contract. Under an installment
distribution, the Participant or Beneficiary, at any time, may elect to
accelerate the payment of all, or any portion, of the Participant's unpaid
Nonforfeitable Accrued Benefit.
(A) Minimum Distribution Requirements for Participants. The Advisory Committee
may not direct the Trustee to distribute the Participant's Nonforfeitable
Accrued Benefit, nor may the Participant elect to have the Trustee distribute
his Nonforfeitable Accrued Benefit, under a method of payment which, as of the
Required Beginning Date, does not satisfy the minimum distribution requirements
under Code ss.401(a)(9) and the applicable Treasury regulations. The minimum
distribution for a calendar year equals the Participant's Nonforfeitable Accrued
Benefit as of the latest valuation date preceding the beginning of the calendar
year divided by the Participant's life expectancy or, if applicable, the joint
and last survivor expectancy of the Participant and his designated Beneficiary
(as determined under Article VIII, subject to the requirements of the Code
ss.401(a)(9) regulations). The Advisory Committee will increase the
Participant's Nonforfeitable Accrued Benefit, as determined on the relevant
valuation date, for contributions or forfeitures allocated after the valuation
date and by December 31 of the valuation calendar year, and will decrease the
valuation by distributions made after the valuation date and by December 31 of
the valuation calendar year. For purposes of this valuation, the Advisory
Committee will treat any portion of the minimum distribution for the first
distribution calendar year made after the close of that year as a distribution
occurring in that first distribution calendar year. In computing a minimum
distribution, the Advisory Committee must use the unisex life expectancy
multiples under Treas. Reg. ss.1.72-9. The Advisory Committee, only upon the
Participant's written request, will compute the minimum distribution for a
calendar year subsequent to the first calendar year for which the Plan requires
a minimum distribution by redetermining the applicable life expectancy. However,
the Advisory Committee may not redetermine the joint life and last survivor
expectancy of the Participant and a nonspouse designated Beneficiary in a manner
which takes into account any adjustment to a life expectancy other than the
Participant's life expectancy.
<PAGE>
If the Participant's spouse is not his designated Beneficiary, a method of
payment to the Participant (whether by Participant election or by Advisory
Committee direction) may not provide more than incidental benefits to the
Beneficiary. For Plan Years beginning after December 31, 1988, the Plan must
satisfy the minimum distribution incidental benefit ("MDIB") requirement in the
Treasury regulations issued under Code ss.401(a)(9) for distributions made on or
after the Participant's Required Beginning Date and before the Participant's
death. To satisfy the MDIB requirement, the Advisory Committee will compute the
minimum distribution required by this Section 6.02(A) by substituting the
applicable MDIB divisor for the applicable life expectancy factor, if the MDIB
divisor is a lesser number. Following the Participant's death, the Advisory
Committee will compute the minimum distribution required by this Section 6.02(A)
solely on the basis of the applicable life expectancy factor and will disregard
the MDIB factor. For Plan Years beginning prior to January 1, 1989, the Plan
satisfies the incidental benefits requirement if the distributions to the
Participant satisfied the MDIB requirement or if the present value of the
retirement benefits payable solely to the Participant is greater than 50% of the
present value of the total benefits payable to the Participant and his
Beneficiaries. The Advisory Committee must determine whether benefits to the
Beneficiary are incidental as of the date the Trustee is to commence payment of
the retirement benefits to the Participant, or as of any date the Trustee
redetermines the payment period to the Participant.
The minimum distribution for the first distribution calendar year is due by
the Participant's Required Beginning Date. The minimum distribution for each
subsequent distribution calendar year, including the calendar year in which the
Participant's Required Beginning Date falls, is due by December 31 of that
calendar year. If the Participant receives distribution in the form of a
Nontransferable Annuity Contract, the distribution satisfies this Section
6.02(A) if the contract complies with the requirements of Code ss.401(a)(9) and
the applicable Treasury regulations.
<PAGE>
(B) Minimum Distribution Requirements for Beneficiaries. The method of
distribution to the Participant's Beneficiary must satisfy Code ss.401(a)(9) and
the applicable Treasury regulations. If the Participant's death occurs after his
Required Beginning Date, the method of payment to the Beneficiary must provide
for completion of payment over a period which does not exceed the payment period
which had commenced for the Participant. If the Participant's death occurs prior
to his Required Beginning Date, the method of payment to the Beneficiary must
provide for completion of payment to the Beneficiary over a period not
exceeding: (i) 5 years after the date of the Participant's death; or (ii) if the
Beneficiary is a designated Beneficiary, the designated Beneficiary's life
expectancy. The Advisory Committee may not direct payment of the Participant's
Nonforfeitable Accrued Benefit over a period described in clause (ii) unless the
Trustee will commence payment to the designated Beneficiary no later than the
December 31 following the close of the calendar year in which the Participant's
death occurred or, if later, and the designated Beneficiary is the Participant's
surviving spouse, December 31 of the calendar year in which the Participant
would have attained age 70 1/2. If the Trustee will make distribution in
accordance with clause (ii), the minimum distribution for a calendar year equals
the Participant's Nonforfeitable Accrued Benefit as of the latest valuation date
preceding the beginning of the calendar year divided by the designated
Beneficiary's life expectancy. The Advisory Committee must use the unisex life
expectancy multiples under Treas. Reg. ss.1.72-9 for purposes of applying this
paragraph. The Advisory Committee will not recalculate the life expectancy of
any Beneficiary, including the Participant's surviving spouse. The Advisory
Committee will apply this paragraph by treating any amount paid to the
Participant's child, which becomes payable to the Participant's surviving spouse
upon the child's attaining the age of majority, as paid to the Participant's
surviving spouse. Upon the Beneficiary's written request, the Advisory Committee
must direct the Trustee to accelerate payment of all, or any portion, of the
Participant's unpaid Accrued Benefit, as soon as administratively practicable
following the effective date of that request.
6.03 BENEFIT PAYMENT ELECTIONS. Not earlier than 90 days, but not later
than 30 days, before the Participant's distribution date, the Advisory Committee
must provide a benefit notice to a Participant who is eligible to make an
election under this Section 6.03. The benefit notice must explain the optional
forms of benefit in the Plan, including the material features and relative
values of those options, and the Participant's right to defer distribution until
he attains Normal Retirement Age.
If a Participant or Beneficiary makes an election prescribed by this
Section 6.03, the Advisory Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with that election.
Any election under this Section 6.03 is subject to the requirements of Section
6.02. The Participant or Beneficiary must make an election under this Section
6.03 by filing his election form with the Advisory Committee at any time before
the Trustee otherwise would commence to pay a Participant's Accrued Benefit in
accordance with the requirements of Article VI.
(A) Participant Elections After Separation from Service. If the present value of
a Participant's Nonforfeitable Accrued Benefit exceeds $5,000, the Advisory
Committee will direct the Trustee to distribute the Participant's Nonforfeitable
Accrued Benefit as soon as administratively practicable following the close of
the Plan Year during which the Participant's separation from service occurs, but
in no event later than the 60th day following the close of the Plan Year in
which the Participant attains Normal Retirement Age. Following his attainment of
Normal Retirement Age, a Participant who has separated from Service may elect
distribution as of any distribution date, irrespective of the restrictions
otherwise applicable under this Section 6.03(A). If the Participant is partially
vested in his Accrued Benefit, an election under this Paragraph (A) to
distribute prior to the Participant's incurring a Forfeiture Break in Service
(as defined in Section 5.08), must be in the form of a cash-out distribution (as
defined in Article V). A Participant may not receive a distribution if, prior to
the time the Trustee actually makes the distribution, the Participant returns to
employment with the Employer.
<PAGE>
(B) Participant Elections Prior to Separation from Service. After a Participant
attains Normal Retirement Age, the Participant, until he retires, has a
continuing election to receive all or any portion of his Accrued Benefit. A
Participant must make an election under this Section 6.03(B) on a form
prescribed by the Advisory Committee at any time during the Plan Year for which
his election is to be effective. In his written election, the Participant must
specify the percentage or dollar amount he wishes the Trustee to distribute to
him. The Participant's election relates solely to the percentage or dollar
amount specified in his election form and his right to elect to receive an
amount, if any, for a particular Plan Year greater than the dollar amount or
percentage specified in his election form terminates on the Accounting Date. The
Trustee must make a distribution to a Participant in accordance with his
election under this Section 6.03(B) within the 90 day period (or as soon as
administratively practicable) after the Participant files his written election
with the Trustee. The Trustee will distribute the balance of the Participant's
Accrued Benefit not distributed pursuant to his election(s) in accordance with
the other distribution provisions of this Plan.
(C) Death Benefit Elections. If the present value of the deceased Participant's
Nonforfeitable Accrued Benefit exceeds $5,000, the Participant's Beneficiary may
elect to have the Trustee distribute the Participant's Nonforfeitable Accrued
Benefit in a method and within a period permitted under Section 6.02. The
Beneficiary's election is subject to any restrictions designated in writing by
the Participant and not revoked as of his date of death.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The joint
and survivor annuity requirements of the Code do not apply to this Plan. The
Plan does not provide any life annuity distributions to Participants. A transfer
agreement described in Section 13.05 may not permit a plan which is subject to
the provisions of Code ss.417 to transfer assets to this Plan.
6.05 SPECIAL DISTRIBUTION AND PAYMENT REQUIREMENTS. Unless the Participant
elects in writing to have the Trustee apply other distribution provisions of the
Plan, or unless other distribution provisions of the Plan require earlier
distribution of the Participant's Accrued Benefit, the Trustee must distribute
the portion of the Participant's Accrued Benefit attributable to Employer
Securities (the "Eligible Portion") no later than the time prescribed by this
Section 6.05, irrespective of any other provision of the Plan. The distribution
provisions of this Section 6.05 are subject to the consent and form of
distribution requirements of Articles V and VI of the Plan.
(a) If the Participant separates from Service by reason of the
attainment of Normal Retirement Age, death, or disability, the Advisory
Committee will direct the Trustee to commence distribution of the
Eligible Portion not later than one year after the close of the Plan
Year in which the applicable event occurs.
(b) If the Participant separates from Service for any reason other than
by reason of the attainment of Normal Retirement Age, death or
disability, the Advisory Committee will direct the Trustee to commence
distribution of the Eligible Portion not later than one year after the
close of the fifth Plan Year following the Plan Year in which the
Participant separated from Service. If the Participant resumes
employment with the Employer on or before the last day of the fifth
Plan Year following the Plan Year of his separation from Service, the
mandatory distribution provisions of this paragraph (b) do not apply.
For purposes of this Section 6.05, Employer Securities do not include any
Employer Securities acquired with the proceeds of an Exempt Loan until the close
of the Plan Year in which the borrower repays the Exempt Loan in full.
<PAGE>
Period of Payment. The Advisory Committee will direct the Trustee to make
distributions required under this Section 6.05 over a period not exceeding five
years unless the Participant otherwise elects under the other distributions
provisions of the Plan. If a Participant's Eligible Portion exceeds $500,000,
the maximum payment period, subject to a contrary election by the Participant,
is five years plus one additional year (but no more than five additional years)
for each $100,00 (or fraction of $100,000) by which the Eligible Portion exceeds
$500,000. The Advisory Committee will apply this Section 6.05 by adjusting the
$500,000 and $100,000 limitations by the adjustment factor prescribed by the
Secretary of the Treasury under Code ss.415(d). In no event will the
distribution period exceed the period permitted under Section 6.02 of the Plan.
6.06 DIRECT ROLLOVER OF ELIGIBLE ROLLOVER DISTRIBUTIONS. A Participant may
elect, at the time and in the manner prescribed by the Committee, to have any
portion of his eligible rollover distribution paid directly to an eligible
retirement plan specified by the Participant in a direct rollover designation.
For purposes of this Section 6.06, a Participant includes a Participant's
surviving spouse and the Participant's spouse or former spouse who is an
alternate payee under a qualified domestic relations order.
The following definitions apply to this Section 6.06:
(A) Eligible rollover distribution. An eligible rollover distribution is any
distribution of all or any portion of the balance to the credit of the
Participant, except an eligible rollover distribution does not include: any
distribution which is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the Participant or the joint lives (or joint life expectancies) of the
Participant and the Participant's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent required under Code
ss.401(a)(9); and the portion of any distribution which is not includible in
gross income (determined without regard to the exclusion of net unrealized
appreciation with respect to employer securities).
(B) Eligible retirement plan. An eligible retirement plan is an individual
retirement account described in Code ss.408(a), an individual retirement annuity
described in Code ss.408(b), an annuity plan described in Code ss.401(a), which
accepts the Participant's eligible rollover distribution. However, in the case
of an eligible rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual retirement
annuity.
(C) Direct rollover. A direct rollover is a payment by the Plan to the eligible
retirement plan specified by the distributee.
<PAGE>
6.07 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS. Nothing contained in
this Plan prevents the Trustee, in accordance with the direction of the Advisory
Committee, from complying with the provisions of a qualified domestic relations
order (as defined in Code ss.414(p)). This Plan specifically permits
distribution to an alternate payee under a qualified domestic relations order at
any time, irrespective of whether the Participant has attained his earliest
retirement age (as defined under Code ss.414(p)) under the Plan. A distribution
to an alternate payee prior to the Participant's attainment of earliest
retirement age is available only if: (1) the order specifies distribution at
that time or permits an agreement between the Plan and the alternate payee to
authorize an earlier distribution; and (2) if the present value of the alternate
payee's benefits under the Plan exceeds $5,000, and the order requires, the
alternate payee consents to any distribution occurring prior to the
Participant's attainment of earliest retirement age. Nothing in this Section
6.07 gives a Participant a right to receive distribution at a time otherwise not
permitted under the Plan nor does it permit the alternate payee to receive a
form of payment not otherwise permitted under the Plan.
The Advisory Committee must establish reasonable procedures to determine
the qualified status of a domestic relations order. Upon receiving a domestic
relations order, the Advisory Committee promptly will notify the Participant and
any alternate payee named in the order, in writing, of the receipt of the order
and the Plan's procedures for determining the qualified status of the order.
Within a reasonable period of time after receiving the domestic relations order,
the Advisory Committee must determine the qualified status of the order and must
notify the Participant and each alternate payee, in writing, of its
determination. The Advisory Committee must provide notice under this paragraph
by mailing to the individual's address specified in the domestic relations
order, or in a manner consistent with Department of Labor regulations.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the Advisory Committee is making its determination of
the qualified status of the domestic relations order, the Advisory Committee
must make a separate accounting of the amounts payable. If the Advisory
Committee determines the order is a qualified domestic relations order within 18
months of the date amounts first are payable following receipt of the order, the
Advisory Committee will direct the Trustee to distribute the payable amounts in
accordance with the order. If the Advisory Committee does not make its
determination of the qualified status of the order within the 18 month
determination period, the Advisory Committee will direct the Trustee to
distribute the payable amounts in the manner the Plan would distribute if the
order did not exist and will apply the order prospectively if the Advisory
Committee later determines the order is a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the qualified
domestic relations order, the Advisory Committee may direct the Trustee to
invest any partitioned amount in a segregated subaccount or separate account and
to invest the account in Federally insured, interest-bearing savings account(s)
or time deposit(s) (or a combination of both), or in other fixed income
investments. A segregated subaccount remains a part of the Trust, but it alone
shares in any income it earns, and it alone bears any expense or loss it incurs.
The Trustee will make any payments or distributions required under this Section
6.07 by separate benefit checks or other separate distribution to the alternate
payee(s).
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE VII
EMPLOYER ADMINISTRATIVE PROVISIONS
7.01 INFORMATION TO COMMITTEE. The Employer must supply current information
to the Advisory Committee as to the name, date of birth, date of employment,
annual compensation, leaves of absence, Years of Service and date of termination
of employment of each Employee who is, or who will be eligible to become, a
Participant under the Plan, together with any other information which the
Advisory Committee considers necessary. The Employer's records as to the current
information the Employer furnishes to the Advisory Committee are conclusive as
to all persons.
7.02 NO LIABILITY. The Employer assumes no obligation or responsibility to
any of its Employees, Participants or Beneficiaries for any act of, or failure
to act, on the part of its Advisory Committee (unless the Employer is the
Advisory Committee), the Trustee or the Plan Administrator (unless the Employer
is the Plan Administrator).
7.03 INDEMNITY OF CERTAIN FIDUCIARIES. The Employer indemnifies and saves
harmless the Plan Administrator and the members of the Advisory Committee, and
each of them, from and against any and all loss resulting from liability to
which the Plan Administrator and the Advisory Committee, or the members of the
Advisory Committee, may be subjected by reason of any act or conduct (except
willful misconduct or gross negligence) in their official capacities in the
administration of this Trust or Plan or both, including all expenses reasonably
incurred in their defense, in case the Employer fails to provide such defense.
The indemnification provisions of this Section 7.03 do not relieve the Plan
Administrator or any Advisory Committee member from any liability he may have
under ERISA for breach of a fiduciary duty. Furthermore, the Plan Administrator
and the Advisory Committee members and the Employer may execute a letter
agreement further delineating the indemnification agreement of this Section
7.03, provided the letter agreement must be consistent with and must not violate
ERISA. The indemnification provisions of this Section 7.03 extend to the Trustee
solely to the extent provided by a letter agreement executed by the Trustee and
the Employer.
7.04 EMPLOYER DIRECTION OF INVESTMENT. The Employer has the right to direct
the Trustee with respect to the investment and re-investment of assets
comprising the Trust Fund only if the Trustee consents in writing to permit such
direction. If the Trustee consents to Employer direction of investment, the
Trustee and the Employer must execute a letter agreement as a part of this Plan
containing such conditions, limitations and other provisions they deem
appropriate before the Trustee will follow any Employer direction as respects
the investment or re-investment of any part of the Trust Fund.
<PAGE>
7.05 AMENDMENT TO VESTING SCHEDULE. Though the Employer reserves the right
to amend the vesting schedule at any time, the Advisory Committee will not apply
the amended vesting schedule to reduce the Nonforfeitable percentage of any
Participant's Accrued Benefit derived from Employer contributions (determined as
of the later of the date the Employer adopts the amendment, or the date the
amendment becomes effective) to a percentage less than the Nonforfeitable
percentage computed under the Plan without regard to the amendment. An amended
vesting schedule will apply to a Participant only if the Participant receives
credit for at least one Hour of Service after the new schedule becomes
effective.
If the Employer makes a permissible amendment to the vesting schedule, each
Participant having at least 3 Years of Service with the Employer may elect to
have the percentage of his Nonforfeitable Accrued Benefit computed under the
Plan without regard to the amendment. For Plan Years beginning prior to January
1, 1989, the election described in the preceding sentence applies only to
Participants having at least 5 Years of Service with the Employer. The
Participant must file his election with the Advisory Committee within 60 days of
the latest of (a) the Employer's adoption of the amendment; (b) the effective
date of the amendment; or (c) his receipt of a copy of the amendment. The
Advisory Committee, as soon as practicable, must forward a true copy of any
amendment to the vesting schedule to each affected Participant, together with an
explanation of the effect of the amendment, the appropriate form upon which the
Participant may make an election to remain under the vesting schedule provided
under the Plan prior to the amendment and notice of the time within which the
Participant must make an election to remain under the prior vesting schedule.
The election described in this Section 7.05 does not apply to a Participant if
the amended vesting schedule provides for vesting at least as rapid at all times
as the vesting schedule in effect prior to the amendment. For purposes of this
Section 7.05, an amendment to the vesting schedule includes any Plan amendment
which directly or indirectly affects the computation of the Nonforfeitable
percentage of an Employee's rights to his Employer derived Accrued Benefit.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 BENEFICIARY DESIGNATION. Any Participant may from time to time
designate, in writing, any person or persons, contingently or successively, to
whom the Trustee will pay his Nonforfeitable Accrued Benefit in the event of his
death and the Participant may designate the form and method of payment. The
Advisory Committee will prescribe the form for the written designation of
Beneficiary and, upon the Participant's filing the form with the Advisory
Committee, the form effectively revokes all designations filed prior to that
date by the same Participant.
A married Participant's Beneficiary designation is not valid unless the
Participant's spouse consents, in writing, to the Beneficiary designation. The
spouse's consent must acknowledge the effect of that consent. The spousal
consent requirements of this paragraph do not apply if: (1) the Participant and
his spouse are not married throughout the one year period ending on the date of
the Participant's death; (2) the Participant's spouse is the Participant's sole
primary beneficiary; (3) the Plan Administrator is not able to locate the
Participant's spouse; (4) the Participant is legally separated or has been
abandoned (within the meaning of State law) and the Participant has a court
order to that effect; or (5) other circumstances exist under which the Secretary
of the Treasury will excuse the consent requirement. If the Participant's spouse
is legally incompetent to give consent, the spouse's legal guardian (even if the
guardian is the Participant) may give consent.
8.02 NO BENEFICIARY DESIGNATION/DEATH OF BENEFICIARY. If a Participant
fails to name a Beneficiary in accordance with Section 8.01, or if the
Beneficiary named by a Participant predeceases him, then the Trustee will pay
the Participant's Nonforfeitable Accrued Benefit in accordance with Section 6.02
in the following order of priority to:
(a) The Participant's surviving spouse;
(b) The Participant's surviving children, including adopted children,
in equal shares;
(c) The Participant's surviving parents, in equal shares; or
(d) The Participant's estate.
If the Beneficiary does not predecease the Participant, but dies prior to
distribution of the Participant's entire Nonforfeitable Accrued Benefit, the
Trustee will pay the remaining Nonforfeitable Accrued Benefit to the
Beneficiary's estate unless the Participant's Beneficiary designation provides
otherwise. The Advisory Committee will direct the Trustee as to the method and
to whom the Trustee will make payment under this Section 8.02.
<PAGE>
8.03 PERSONAL DATA TO COMMITTEE. Each Participant and each Beneficiary of a
deceased Participant must furnish to the Advisory Committee such evidence, data
or information as the Advisory Committee considers necessary or desirable for
the purpose of administering the Plan. The provisions of this Plan are effective
for the benefit of each Participant upon the condition precedent that each
Participant will furnish promptly full, true and complete evidence, data and
information when requested by the Advisory Committee, provided the Advisory
Committee advises each Participant of the effect of his failure to comply with
its request.
8.04 ADDRESS FOR NOTIFICATION. Each Participant and each Beneficiary of a
deceased Participant must file with the Advisory Committee from time to time, in
writing, his post office address and any change of post office address. Any
communication, statement or notice addressed to a Participant, or Beneficiary,
at his last post office address filed with the Advisory Committee, or as shown
on the records of the Employer, binds the Participant, or Beneficiary, for all
purposes of this Plan.
8.05 ASSIGNMENT OR ALIENATION. Subject to Code ss.414(p) relating to
qualified domestic relations orders or Code ss.401(a)(13)(C) relating to certain
judgments, orders, decrees and settlement agreements, which order or require the
Participant to pay the Plan for any unlawful acts committed by the Participant
against the Plan, neither a Participant nor a Beneficiary may anticipate, assign
or alienate (either at law or in equity) any benefit provided under the Plan,
and the Trustee will not recognize any such anticipation, assignment or
alienation. Furthermore, a benefit under the Plan is not subject to attachment,
garnishment, levy, execution or other legal or equitable process.
8.06 NOTICE OF CHANGE IN TERMS. The Plan Administrator, within the time
prescribed by ERISA and the applicable regulations, must furnish all
Participants and Beneficiaries a summary description of any material amendment
to the Plan or notice of discontinuance of the Plan and all other information
required by ERISA to be furnished without charge.
8.07 LITIGATION AGAINST THE TRUST. A court of competent jurisdiction may
authorize any appropriate equitable relief to redress violations of ERISA or to
enforce any provisions of ERISA or the terms of the Plan. A fiduciary may
receive reimbursement of expenses properly and actually incurred in the
performance of his duties with the Plan.
8.08 INFORMATION AVAILABLE. Any Participant in the Plan or any Beneficiary
may examine copies of the Plan description, latest annual report, any bargaining
agreement, this Plan and Trust, contract or any other instrument under which the
Plan was established or is operated. The Plan Administrator will maintain all of
the items listed in this Section 8.08 in his office, or in such other place or
places as he may designate from time to time in order to comply with the
regulations issued under ERISA, for examination during reasonable business
hours. Upon the written request of a Participant or Beneficiary the Plan
Administrator will furnish him with a copy of any item listed in this Section
8.08. The Plan Administrator may make a reasonable charge to the requesting
person for the copy so furnished.
<PAGE>
8.09 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. A Participant or a
Beneficiary ("Claimant") may file with the Advisory Committee a written claim
for benefits, if the Participant or Beneficiary determines the distribution
procedures of the Plan have not provided him his proper Nonforfeitable Accrued
Benefit. The Advisory Committee must render a decision on the claim within 60
days of the Claimant's written claim for benefits. The Plan Administrator must
provide adequate notice in writing to the Claimant whose claim for benefits
under the Plan the Advisory Committee has denied. The Plan Administrator's
notice to the Claimant must set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which the
Advisory Committee based its denial;
(c) A description of any additional material and information needed
for the Claimant to perfect his claim and an explanation of why the
material or information is needed; and
(d) Any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Advisory Committee within 75
days after receipt of the Plan Administrator's notice of denial of
benefits. The Plan Administrator's notice must further advise the
Claimant that his failure to appeal the action to the Advisory
Committee in writing within the 75 day period will render the Advisory
Committee's determination final, binding and conclusive.
If the Claimant should appeal to the Advisory Committee, he, or his duly
authorized representative, may submit, in writing, whatever issues and comments
he, or his duly authorized representative, feels are pertinent. The Claimant, or
his duly authorized representative, may review pertinent Plan documents. The
Advisory Committee will re-examine all facts related to the appeal and make a
final determination as to whether the denial of benefits is justified under the
circumstances. The Advisory Committee must advise the Claimant of its decision
within 60 days of the Claimant's written request for review, unless special
circumstances (such as a hearing) would make the rendering of a decision within
the 60-day limit unfeasible, but in no event may the Advisory Committee render a
decision respecting a denial for a claim for benefits later than 120 days after
its receipt of a request for review.
The Plan Administrator's notice of denial of benefits must identify the
name of each member of the Advisory Committee and the name and address of the
Advisory Committee member to whom the Claimant may forward his appeal.
<PAGE>
8.10 PARTICIPANT DIRECTION OF INVESTMENT. Except as provided in this
Section 8.10, a Participant does not have the right to direct the Trustee with
respect to the investment or re-investment of the assets comprising the
Participant's individual Account. Each Qualified Participant may direct the
Trustee as to the investment of 25% of the value of the Participant's Accrued
Benefit attributable to Employer Securities (the "Eligible Accrued Benefit")
within 90 days after the Accounting Date of each Plan Year (to the extent a
direction amount exceeds the amount to which a prior direction under this
Section 8.10 applies) during the Participant's Qualified Election Period. For
the last Plan Year in the Participant's Qualified Election Period, the Trustee
will substitute "50%" for "25%" in the immediately preceding sentence. The
Qualified Participant must make his direction to the Trustee in writing, the
direction may be effective no later than 180 days after the close of the Plan
Year to which the direction applies, and the direction must specify which, if
any, of the investment options the Participant selects.
A Qualified Participant may choose one of the following investment options:
(a) The distribution of the portion of his Eligible Accrued Benefit covered
by the election. The Trustee will make the distribution within 90 days
after the last day of the period during which the Qualified Participant may
make the election. The provisions of this Plan applicable to a distribution
of Employer Securities, including the put option requirements of Article
XI, apply to this investment option.
(b) The direct transfer of the portion of his Eligible Accrued Benefit
covered by the election to another qualified plan of the Employer which
accepts such transfers, but only if the transferee plan permits
employee-directed investment and does not invest in Employer Securities to
a substantial degree. The Trustee will make the direct transfer no later
than 90 days after the last day of the period during which the Qualified
Participant may make the election.
For purposes of this Section 8.10, the following definitions apply:
(i) "Qualified Participant" means a Participant who has attained age 55 and
who has completed at least 10 years of participation in the Plan. A "year
of participation" means a Plan Year in which the Participant was eligible
for an allocation of Employer contributions, irrespective of whether the
Employer actually contributed to the Plan for that Plan Year.
(ii) "Qualified Election Period" means the 6-Plan-Year period beginning
with the Plan Year in which the Participant first becomes a Qualified
Participant.
A Participant's right under this Section 8.10 to direct the investment of
his Account applies to all Employer Securities acquired by the Plan.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANTS' ACCOUNTS
9.01 MEMBERS' COMPENSATION, EXPENSES. The Employer must appoint an Advisory
Committee to administer the Plan, the members of which may or may not be
Participants in the Plan, or which may be the Plan Administrator acting alone.
In the absence of an Advisory Committee appointment, the Plan Administrator
assumes the powers, duties and responsibilities of the Advisory Committee. The
members of the Advisory Committee will serve without compensation for services
as such, but the Employer will pay all expenses of the Advisory Committee,
except to the extent the Trust properly pays for such expenses, pursuant to
Article X.
9.02 TERM. Each member of the Advisory Committee serves until the
appointment of his successor.
9.03 POWERS. In case of a vacancy in the membership of the Advisory
Committee, the remaining members of the Advisory Committee may exercise any and
all of the powers, authority, duties and discretion conferred upon the Advisory
Committee pending the filling of the vacancy.
9.04 GENERAL. The Advisory Committee has the following powers and duties:
(a) To select a Secretary, who need not be a member of the Advisory
Committee;
(b) To determine the rights of eligibility of an Employee to
participate in the Plan, the value of a Participant's Accrued Benefit
and the Nonforfeitable percentage of each Participant's Accrued
Benefit;
(c) To adopt rules of procedure and regulations necessary for the
proper and efficient administration of the Plan provided the rules are
not inconsistent with the terms of this Agreement;
(d) To construe and enforce the terms of the Plan and the rules and
regulations it adopts, including interpretation of the Plan documents
and documents related to the Plan's operation;
(e) To direct the Trustee as respects the crediting and distribution
of the Trust;
(f) To review and render decisions respecting a claim for (or denial
of a claim for) a benefit under the Plan;
(g) To furnish the Employer with information which the Employer may
require for tax or other purposes;
<PAGE>
(h) To engage the service of agents whom it may deem advisable to
assist it with the performance of its duties; and
(i) To engage the services of an Investment Manager or Managers (as
defined in ERISA ss.3(38)), each of whom will have full power and
authority to manage, acquire or dispose (or direct the Trustee with
respect to acquisition or disposition) of any Plan asset under its
control.
The Advisory Committee must exercise all of its powers, duties and
discretion under the Plan in a uniform and nondiscriminatory manner.
9.05 FUNDING POLICY. The Advisory Committee will review, not less often
than annually, all pertinent Employee information and Plan data in order to
establish the funding policy of the Plan and to determine the appropriate
methods of carrying out the Plan's objectives. The Advisory Committee must
communicate periodically, as it deems appropriate, to the Trustee and to any
Plan Investment Manager the Plan's short-term and long-term financial needs so
investment policy can be coordinated with Plan financial requirements.
9.06 MANNER OF ACTION. The decision of a majority of the members appointed
and qualified controls.
9.07 AUTHORIZED REPRESENTATIVE. The Advisory Committee may authorize any
one of its members, or its Secretary, to sign on its behalf any notices,
directions, applications, certificates, consents, approvals, waivers, letters or
other documents. The Advisory Committee must evidence this authority by an
instrument signed by all members and filed with the Trustee.
9.08 INTERESTED MEMBER. No member of the Advisory Committee may decide or
determine any matter concerning the distribution, nature or method of settlement
of his own benefits under the Plan, except in exercising an election available
to that member in his capacity as a Participant, unless the Plan Administrator
is acting alone in the capacity of the Advisory Committee.
9.09 INDIVIDUAL ACCOUNTS. The Advisory Committee will maintain, or direct
the Trustee to maintain, a separate Account, or multiple separate Accounts, in
the name of each Participant to reflect the Participant's Accrued Benefit under
the Plan. The Advisory Committee must maintain one Account designated as the
Employer Securities Account to reflect a Participant's interest in Employer
Securities held by the Trust and another Account designated as the General
Investments Account to reflect the Participant's interest in the Trust Fund
attributable to assets other than Employer Securities. If a Participant
re-enters the Plan subsequent to his having a Forfeiture Break in Service (as
defined in Section 5.08(B)), the Advisory Committee, or the Trustee, must
maintain a separate Account for the Participant's pre-Forfeiture Break in
Service Accrued Benefit and a separate Account for his post-Forfeiture Break in
Service Accrued Benefit unless the Participant's entire Accrued Benefit under
the Plan is 100% Nonforfeitable.
<PAGE>
The Advisory Committee will make its allocations, or request the Trustee to
make its allocations, to the Accounts of the Participants in accordance with the
provisions of Section 9.11. The Advisory Committee may direct the Trustee to
maintain a temporary segregated investment Account in the name of a Participant
to prevent a distortion of income, gain or loss allocations under Section 9.11.
The Advisory Committee shall maintain records of its activities.
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. The value of each
Participant's Accrued Benefit consists of that proportion of the net worth (at
fair market value) of the Employer's Trust Fund which the net credit balance in
his Account bears to the total net credit balance in the Accounts of all
Participants. For purposes of a distribution under the Plan, the value of a
Participant's Accrued Benefit attributable to his General Investments Account is
its value as of the valuation date immediately preceding the date of the
distribution. The value of a Participant's Accrued Benefit attributable to his
Employer Securities Account is its value determined according to the market
price of the shares of Employer Securities on the date of valuation.
9.11 ALLOCATION TO PARTICIPANT'S ACCRUED BENEFIT. A "valuation date" under
this Plan is each Accounting Date and each interim valuation date determined
under Section 10.14. As of each valuation date, the Advisory Committee must
adjust General Investment Accounts to reflect net income, gain or loss since the
last valuation date. The valuation period is the period beginning the day after
the last valuation date and ending on the current valuation date.
[A] Employer Securities Account. As of the Accounting Date of each Plan Year,
the Advisory Committee first will reduce Employer Securities Accounts for any
forfeitures arising under Section 5.09 and then will credit the Employer
Securities Account maintained for each Participant with the Participant's
allocable share of Employer Securities (including fractional shares) purchased
and paid for by the Trust or contributed in kind to the Trust, with any
forfeitures of Employer Securities and with any stock dividends on Employer
Securities allocated to his Employer Securities Account. The Advisory Committee
will allocate Employer Securities acquired with an Exempt Loan under Section
10.03[B] in accordance with that Section, subject however, to the provisions of
paragraph [C] of this Section 9.11. Except as otherwise specifically provided in
Section 10.03[B], the Advisory Committee will base allocations to the
Participants' Accounts on dollar values expressed as shares of Employer
Securities or on the basis of actual shares where there is a single class of
Employer Securities. In making a forfeiture reduction under this Section 9.11,
the Advisory Committee, to the extent possible, first must forfeit from a
Participant's General Investments Account before making a forfeiture from his
Employer Securities Account.
<PAGE>
[B] General Investments Account. The allocation provisions of this paragraph
apply to all Participant General Investment Accounts other than segregated
investment Accounts. The Advisory Committee first will adjust the Participant
General Investment Accounts, as those Accounts stood at the beginning of the
current valuation period, by reducing the Accounts for any forfeitures arising
under section 5.09 or under Section 9.14, for amounts charged during the
valuation period to the Accounts in accordance with Section 9.13 (relating to
distributions) and for the amount of any General Investment Account which the
Trustee has fully distributed since the immediately preceding valuation date.
The Advisory Committee then, subject to the restoration allocation requirements
of Section 9.14, will allocate the net income, gain or loss pro rata to the
adjusted Participant General Investment Accounts. The allocable net income, gain
or loss is the net income (or net loss), including the increase or decrease in
the fair market value of assets, since the last valuation date. In making its
allocations under this Section 9.11[B], the Advisory Committee will exclude
Employer Securities and interest paid by the Trust on an Exempt Loan.
[C] Dividends on Employer Securities. The Advisory Committee will allocate any
cash dividends the Employer pays with respect to Employer Securities to the
General Investments Accounts of participants in the same ratio, determined on
the dividend declaration date, that Employer Securities allocated to a
Participant's Employer Securities Account bear to the Employer Securities
allocated to all Employer Securities Accounts. The Advisory Committee will not
allocate to the General Investments Accounts any cash dividends the Employer
directs the Trustee to apply to the payment of an Exempt Loan nor any cash
dividends the Advisory Committee directs the Trustee to distribute in accordance
with Section 10.08. If the Employer directs the Trustee to apply cash dividends
on Employer Securities to the payment of an Exempt Loan, the Advisory Committee
first will allocate the released Employer Securities to the Participants'
Employer Securities Accounts in the same ratio, determined on the dividend
declaration date, that Employer Securities allocated to a Participant's Employer
Securities Account bear to the Employer Securities allocated to all Employer
Securities Accounts. This first allocation of released Employer Securities must
equal the greater of: (1) the shares of released Employer Securities equal to
the fair market value of the cash dividends attributable to the allocated
Employer Securities; or (2) the number of shares of all released Employer
Securities attributable to the cash dividends on allocated Employer Securities.
If any released Employer Securities remain unallocated after the first
allocation, the Advisory Committee will allocate these remaining released
Employer Securities under Section 3.04(A) as if the Employer has made an
Employer contribution equal to the amount of the cash dividend attributable to
the unallocated Employer Securities.
[D] Segregated Investment Accounts. A segregated investment Account receives all
income it earns and bears all expense or loss it incurs. As of the valuation
date, the Advisory Committee must reduce a segregated Account for any forfeiture
arising under Section 5.09 after the Advisory Committee has made all other
allocations, changes or adjustments to the Account for the Plan Year.
[E] Additional rules. An excess Amount or suspense account described in Part 2
of Article III does not share in the allocation of net income, gain or loss
described in this Section 9.11. This Section 9.11 applies solely to the
allocation of net income, gain or loss of the Trust. The Advisory Committee will
allocate the Employer contributions and Participant forfeitures, if any, in
accordance with Article III.
<PAGE>
9.12 INDIVIDUAL STATEMENT. As soon as practicable after the Accounting Date
of each Plan Year, but within the time prescribed by ERISA and the regulations
under ERISA, the Plan Administrator will deliver to each Participant (and to
each Beneficiary) a statement reflecting the condition of his Accrued Benefit in
the Trust as of that date and such other information ERISA requires be furnished
the Participant or Beneficiary. No Participant, except a member of the Advisory
Committee, has the right to inspect the records reflecting the Account of any
other Participant.
9.13 ACCOUNT CHARGED. The Advisory Committee will charge a Participant's
Account for all distributions made from that Account to the Participant, or to
his Beneficiary or to an alternate payee. The Advisory Committee also will
charge a Participant's Account for any administrative expenses incurred by the
Plan directly related to that Account.
9.14 UNCLAIMED ACCOUNT PROCEDURE. The Plan does not require either the
Trustee or the Advisory Committee to search for, or to ascertain the whereabouts
of, any Participant or Beneficiary. At the time the Participant's or
Beneficiary's benefit becomes distributable under Article VI, the Advisory
Committee, by certified or registered mail addressed to his last known address
of record with the Advisory Committee or the Employer, must notify any
Participant, or Beneficiary, that he is entitled to a distribution under this
Plan. The notice must quote the provisions of this Section 9.14 and otherwise
must comply with the notice requirements of Article VI. If the Participant, or
Beneficiary, fails to claim his distributive share or make his whereabouts known
in writing to the Advisory Committee within 6 months from the date of mailing of
the notice, the Advisory Committee will treat the Participant's or Beneficiary's
unclaimed payable Accrued Benefit as forfeited and will reallocate the unclaimed
payable Accrued Benefit in accordance with Section 3.05. A forfeiture under this
paragraph will occur at the end of the notice period or, if later, the earliest
date applicable Treasury regulations would permit the forfeiture. Pending
forfeiture, the Advisory Committee, following the expiration of the notice
period, may direct the Trustee to segregate the Nonforfeitable Accrued Benefit
in a segregated Account and to invest that segregated Account in Federally
insured interest bearing savings accounts or time deposits (or in a combination
of both), or in other fixed income investments.
If a Participant or Beneficiary who has incurred a forfeiture of his
Accrued Benefit under the provisions of the first paragraph of this Section 9.14
makes a claim, at any time, for his forfeited Accrued Benefit, the Advisory
Committee must restore the Participant's or Beneficiary's forfeited Accrued
Benefit to the same dollar amount as the dollar amount of the Accrued Benefit
forfeited, unadjusted for any gains or losses occurring subsequent to the date
of the forfeiture. The Advisory Committee will make the restoration during the
Plan Year in which the Participant or Beneficiary makes the claim, first from
the amount, if any, of Participant forfeitures the Advisory Committee otherwise
would allocate for the Plan Year, then from the amount, if any, of the Trust
Fund net income or gain for the Plan Year and then from the amount, or
additional amount, the Employer contributes to enable the Advisory Committee to
make the required restoration. The Advisory Committee must direct the Trustee to
distribute the Participant's or Beneficiary's restored Accrued Benefit to him
not later than 60 days after the close of the Plan Year in which the Advisory
Committee restores the forfeited Accrued Benefit. The forfeiture provisions of
this Section 9.14 apply solely to the Participant's or to the Beneficiary's
Accrued Benefit derived from Employer contributions.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE X
TRUSTEE, POWERS AND DUTIES
10.01 ACCEPTANCE. The Trustee accepts the Trust created under the Plan and
agrees to perform the obligations imposed. The Trustee must provide bond for the
faithful performance of its duties under the Trust to the extent required by
ERISA.
10.02 RECEIPT OF CONTRIBUTIONS. The Trustee is accountable to the Employer
for the funds contributed to it by the Employer, but does not have any duty to
see that the contributions received comply with the provisions of the Plan. The
Trustee is not obliged to collect any contributions from the Employer, nor is
obliged to see that funds deposited with it are deposited according to the
provisions of the Plan.
10.03 FULL INVESTMENT POWERS.
[A] Trustee Powers. The Trustee has full discretion and authority with regard to
the investment of the Trust Fund, except with respect to a Plan asset under the
control or direction of a properly appointed Investment Manager or with respect
to a Plan asset subject to Employer, Participant or Advisory Committee direction
of investment. The Trustee must coordinate its investment policy with Plan
financial needs as communicated to it by the Advisory Committee. The Trustee is
authorized and empowered, but not by way of limitation, with the following
powers, rights and duties:
(a) To invest the Trust Fund primarily in Employer Securities
("primarily" meaning the authority to hold and to acquire not more
than 100% of the Trust Fund in Employer Securities) and to invest any
part or all of the Trust Fund in any common or preferred stocks,
open-end or closed-end mutual funds, put and call options traded on a
national exchange, United States retirement plan bonds, corporate
bonds, debentures, convertible debentures, commercial paper, U.S.
Treasury bills, U.S. Treasury notes and other direct or indirect
obligations of the United States Government or its agencies, improved
or unimproved real estate situated in the United States, limited
partnerships, insurance contracts of any type, mortgages, notes or
other property of any kind, real or personal, and to buy or sell
options on common stock on a nationally recognized exchange with or
without holding the underlying common stock, and to make any other
investments the Trustee deems appropriate, as a prudent man would do
under like circumstances with due regard for the purposes of this
Plan. Any investment made or retained by the Trustee in good faith is
proper but must be of a kind (with the exception of Employer
Securities) constituting a diversification considered by law suitable
for trust investments.
(b) To retain in cash so much of the Trust Fund as it may deem
advisable to satisfy liquidity needs of the Plan and to deposit any
cash held in the Trust Fund in a bank account at reasonable interest.
<PAGE>
(c) To invest, if the Trustee is a bank or similar financial
institution supervised by the United States or by a State, in any type
of deposit of the Trustee (or of a bank related to the Trustee within
the meaning of Code ss.414(b)) at a reasonable rate of interest or in
a common trust fund (the provisions of which govern the investment of
such assets and which the Plan incorporates by this reference) as
described in Code ss.584 which the Trustee (or its affiliate, as
defined in Code ss.1504) maintains exclusively for the collective
investment of money contributed by the bank (or the affiliate) in its
capacity as trustee and which conforms to the rules of the Comptroller
of the Currency.
(d) To manage, sell, contract to sell, grant options to purchase,
convey, exchange, transfer, abandon, improve, repair, insure, lease
for any term even though commencing in the future or extending beyond
the term of the Trust, and otherwise deal with all property, real or
personal, in such manner, for such considerations and on such terms
and conditions as the Trustee decides.
(e) To credit and distribute the Trust as directed by the Advisory
Committee. The Trustee is not obliged to inquire as to whether any
payee or distributee is entitled to any payment or whether the
distribution is proper or within the terms of the Plan, or as to the
manner of making any payment or distribution. The Trustee is
accountable only to the Advisory Committee for any payment or
distribution made by it in good faith on the order or direction of the
Advisory Committee.
(f) To borrow money, to assume indebtedness, extend mortgages and
encumber by mortgage or pledge.
(g) To compromise, contest, arbitrate or abandon claims and demands,
in its discretion.
(h) To vote, subject to Section 10.17, all voting stock held by the
Trust Fund;
(i) To lease for oil, gas and other mineral purposes and to create
mineral severances by grant or reservation; to pool or unitize
interests in oil, gas and other minerals; and to enter into operating
agreements and to execute division and transfer orders.
(j) To hold any securities or other property in the name of the
Trustee or its nominee, with depositories or agent depositories or in
another form as it may deem best, with or without disclosing the trust
relationship.
(k) To perform any and all other acts in its judgment necessary or
appropriate for the proper and advantageous management, investment and
distribution of the Trust.
(l) To retain any funds or property subject to any dispute without
liability for the payment of interest, and to decline to make payment
or delivery of the funds or property until final adjudication is made
by a court of competent jurisdiction.
<PAGE>
(m) To file all tax returns required of the Trustee.
(n) To furnish to the Employer, the Plan Administrator and the
Advisory Committee an annual statement of account showing the
condition of the Trust Fund and all investments, receipts,
disbursements and other transactions effected by the Trustee during
the Plan Year covered by the statement and also stating the assets of
the Trust held at the end of the Plan Year, which accounts are
conclusive on all persons, including the Employer, the Plan
Administrator and the Advisory Committee, except as to any act or
transaction concerning which the Employer, the Plan Administrator or
the Advisory Committee files with the Trustee written exceptions or
objections within 90 days after the receipt of the accounts or for
which ERISA authorizes a longer period within which to object.
(o) To begin, maintain or defend any litigation necessary in
connection with the administration of the Plan, except that the
Trustee is not obliged or required to do so unless indemnified to its
satisfaction.
The Trustee will allocate any insurance proceeds received from the purchase
of insurance contracts under paragraph (a) to Participants' Accounts in the same
manner as the allocation under Section 3.04(A) of the Employer contribution for
the Plan Year in which the death of the insured Participant occurs.
[B] Exempt Loan. This Section 10.03[B] specifically authorizes the Trustee to
enter into an Exempt Loan transaction. The following terms and conditions will
apply to any Exempt Loan:
(1) The Trustee will use the proceeds of the loan within a reasonable
time after receipt only for any or all of the following purposes: (i)
to acquire Employer Securities, (ii) to repay such loan, or (iii) to
repay a prior Exempt Loan. Except as provided under Article XI, no
Employer Security acquired with the proceeds of an Exempt Loan may be
subject to a put, call or other option, or buy-sell or similar
arrangement while held by and when distributed from this Plan, whether
or not this Plan is then an employee stock ownership plan.
(2) The interest rate of the Exempt Loan may not be more than a
reasonable rate of interest.
(3) Any collateral the Trustee pledges to the creditor must consist
only of the assets purchased by the borrowed funds and those assets
the Trust used as collateral on the prior Exempt Loan repaid with the
proceeds of the current Exempt Loan.
<PAGE>
(4) The creditor may have no recourse against the Trust under the
Exempt Loan except with respect to such collateral given for the
Exempt Loan, contributions (other than contributions of Employer
Securities) that the Employer makes to the Trust to meet its
obligations under the Exempt Loan, and earnings attributable to such
collateral and the investment of such contributions. The payment made
with respect to an Exempt Loan by the Plan during a Plan Year must not
exceed an amount equal to the sum of such contributions and earnings
received during or prior to the year less such payments in prior
years. The Advisory Committee and the Trustee must account separately
for such contributions and earnings in the books of account of the
Plan until the Trust repays the Exempt Loan.
(5) In the event of default upon the loan, the value of Plan assets
transferred in satisfaction of the Exempt Loan must not exceed the
amount of the default, and if the lender is a Disqualified Person, the
Exempt Loan must provide for transfer of Plan assets upon default only
upon and to the extent of the failure of the Plan to meet the payment
schedule of the Exempt Loan.
(6) The Trustee must add and maintain all assets acquired with the
proceeds of an Exempt Loan in a suspense Account. In withdrawing
assets from the suspense Account, the Trustee will apply the
provisions of Treas. Reg. ss.ss.54.4975-7(b)(8) and (15) as if all
securities in the suspense Account were encumbered. Upon the payment
of any portion of the loan, the Trustee will effect the release of
assets in the suspense Account from encumbrances. For each Plan Year
during the duration of the Exempt Loan, the number of Employer
Securities released must equal the number of encumbered Employer
Securities held immediately before release for the current Plan Year
multiplied by a fraction. The numerator of the fraction is the amount
of principal and interest paid for the Plan Year. The denominator of
the fraction is the sum of the numerator plus the principal and
interest to be paid for all future Plan Years. The number of future
Plan Years under the loan must be definitely ascertainable and must be
determined without taking into account any possible extension or
renewal periods. If the interest rate under the Exempt Loan is
variable, the interest to be paid in future Plan Years must be
computed by using the interest rate applicable as of the end of the
Plan Year. If collateral includes more than one class of Employer
Securities, the number of Employer Securities of each class to be
released for a Plan Year must be determined by applying the same
fraction to each such class. The Advisory Committee will allocate
assets withdrawn from the suspense Account to the Accounts of
Participants who otherwise share in the allocation of the Employer's
contribution for the Plan Year for which the Trustee has paid the
portion of the Exempt Loan resulting in the release of the assets. The
Advisory Committee consistently will make this allocation as of each
Accounting Date on the basis of non-monetary units, taking into
account the relative Compensation of all such Participants for such
Plan Year.
(7) The loan must be for a specific term and may not be payable at the
demand of any person except in the case of default.
<PAGE>
(8) Notwithstanding the fact this Plan ceases to be an employee stock
ownership plan, Employer Securities acquired with the proceeds of an
Exempt Loan will continue after the Trustee repays the loan to be
subject to the provisions of Treas. Reg. ss.ss.54.4975-7(b)(4), (10),
(11) and (12) relating to put, call or other options and to buy-sell
or similar arrangements, except to the extent these regulations are
inconsistent with Code ss.409(h).
10.04 RECORDS AND STATEMENTS. The records of the Trustee pertaining to the
Plan must be open to the inspection of the Plan Administrator, Advisory
Committee and the Employer at all reasonable times and may be audited from time
to time by any person or persons as the Employer, Plan Administrator or Advisory
Committee may specify in writing. The Trustee must furnish the Plan
Administrator or Advisory Committee with whatever information relating to the
Trust Fund the Plan Administrator or Advisory Committee considers necessary.
10.05 FEES AND EXPENSES FROM FUND. The Trustee will receive reasonable
annual compensation as may be agreed upon from time to time between the Employer
and the Trustee. The Trustee will pay all fees and expenses reasonably incurred
by it in its administration of the Plan from the Trust Fund, unless the Employer
pays the fees and expenses. The Advisory Committee will not treat any fee or
expense paid, directly or indirectly, by the Employer as an Employer
contribution, provided the fee or expense relates to the ordinary and necessary
administration of the Fund. No person who is receiving full pay from the
Employer may receive compensation for services as Trustee.
10.06 PARTIES TO LITIGATION. Except as otherwise provided by ERISA, only
the Employer, the Plan Administrator, the Advisory Committee, and the Trustee
are necessary parties to any court proceeding involving the Trustee or the Trust
Fund. No Participant, or Beneficiary, is entitled to any notice of process
unless required by ERISA. Any final judgment entered in any proceeding will be
conclusive upon the Employer, the Plan Administrator, the Advisory Committee,
the Trustee, Participants and Beneficiaries.
10.07 PROFESSIONAL AGENTS. The Trustee may employ and pay from the Trust
Fund reasonable compensation to agents, attorneys, accountants and other persons
to advise the Trustee as in its opinion may be necessary. The Trustee may
delegate to any agent, attorney, accountant or other person selected by it any
non-Trustee power or duty vested in it by the Plan, and the Trustee may act or
refrain from acting on the advice or opinion of any agent, attorney, accountant
or other person so selected.
10.08 DISTRIBUTION OF TRUST FUND. Subject to Section 13.06, the Trustee
will make all distributions of benefits under the Plan in Employer Securities
valued at fair market value at the time of distribution. The Trustee will pay in
cash any fractional security share to which a Participant or his Beneficiary is
entitled. In the event the Trustee is to make a distribution in shares of
Employer Securities, the Trustee may apply any balance in a Participant's
General Investments Account to provide whole shares of Employer Securities for
distribution at the then fair market value.
<PAGE>
If the Employer's charter or bylaws restrict ownership of substantially all
shares of Employer Securities to Employees, or to the Trust, as described in
Code ss.409(h)(2), the Trustee will make the distribution of a Participant's
Accrued Benefit entirely in cash.
Notwithstanding the preceding provisions of this Section 10.08, the
Trustee, if directed in writing by the Advisory Committee, will pay, in cash,
any cash dividends on Employer Securities allocated, or allocable to
Participants' Employer Securities Accounts, irrespective of whether a
Participant is fully vested in his Employer Securities Account. The Advisory
Committee's direction must state whether the Trustee is to pay the cash dividend
distributions currently, or within the 90 day period following the close of the
Plan Year in which the Employer pays the dividends to the Trust. The Advisory
Committee may request the Employer to pay dividends on Employer Securities
directly to Participants.
10.09 DISTRIBUTION DIRECTIONS. If no one claims a payment or distribution
made from the Trust, the Trustee must promptly notify the Advisory Committee and
then dispose of the payment in accordance with the subsequent direction of the
Advisory Committee.
10.10 THIRD PARTY/MULTIPLE TRUSTEES. No person dealing with the Trustee is
obligated to see to the proper application of any money paid or property
delivered to the Trustee, or to inquire whether the Trustee has acted pursuant
to any of the terms of the Plan. Each person dealing with the Trustee may act
upon any notice, request or representation in writing by the Trustee, or by the
Trustee's duly authorized agent, and is not liable to any person in so acting.
The certificate of the Trustee that it is acting in accordance with the Plan
will be conclusive in favor of any person relying on the certificate. If more
than two persons act as Trustee, a decision of the majority of such persons
controls with respect to any decision regarding the administration or investment
of the Trust Fund or any portion of the Trust Fund with respect to which such
persons act as Trustee. However, the signature of only one Trustee is necessary
to effect any transaction on behalf of the Trust.
10.11 RESIGNATION. The Trustee may resign at any time as Trustee of the
Plan by giving 30 days' written notice in advance to the Employer and to the
Advisory Committee. If the Employer fails to appoint a successor Trustee within
60 days of its receipt of the Trustee's written notice of resignation, the
Trustee will treat the Employer as having appointed itself as Trustee and as
having filed its acceptance of appointment with the former Trustee.
10.12 REMOVAL. The Employer, by giving 30 days' written notice in advance
to the Trustee, may remove any Trustee. In the event of the resignation or
removal of a Trustee, the Employer must appoint a successor Trustee if it
intends to continue the Plan. If two or more persons hold the position of
Trustee, in the event of the removal of one such person, during any period the
selection of a replacement is pending, or during any period such person is
unable to serve for any reason, the remaining person or persons will act as the
Trustee.
<PAGE>
10.13 INTERIM DUTIES AND SUCCESSOR TRUSTEE. Each successor Trustee succeeds
to the title to the Trust vested in his predecessor by accepting in writing his
appointment as successor Trustee and filing the acceptance with the former
Trustee and the Advisory Committee without the signing or filing of any further
statement. The resigning or removed Trustee, upon receipt of acceptance in
writing of the Trust by the successor Trustee, must execute all documents and do
all acts necessary to vest the title of record in any successor Trustee. Each
successor Trustee has and enjoys all of the powers, both discretionary and
ministerial, conferred under this Agreement upon his predecessor. A successor
Trustee is not personally liable for any act or failure to act of any
predecessor Trustee, except as required under ERISA. With the approval of the
Employer and the Advisory Committee, a successor Trustee, with respect to the
Plan, may accept the account rendered and the property delivered to it by a
predecessor Trustee without incurring any liability or responsibility for so
doing.
10.14 VALUATION OF TRUST. The Trustee must value the Trust Fund as of each
Accounting Date to determine the fair market value of each Participant's Accrued
Benefit in the Trust, and the Trustee also must value the Trust Fund on such
other dates, as directed by the Advisory Committee. With respect to activities
carried on by the Plan, an independent appraiser meeting requirements similar to
those prescribed by Treasury regulations under Code ss.170(a)(1) must perform
all valuations of Employer Securities which are not readily tradeable on an
established securities market. The valuation requirement of the immediately
preceding sentence applies to all Employer Securities acquired by the Plan.
10.15 LIMITATION ON LIABILITY -- IF INVESTMENT MANAGER APPOINTED. The
Trustee is not liable for the acts or omissions of any Investment Manager or
Managers the Advisory Committee may appoint, nor is the Trustee under any
obligation to invest or otherwise manage any asset of the Plan which is subject
to the management of a properly appointed Investment Manager. The Advisory
Committee, the Trustee and any properly appointed Investment Manager may execute
a letter agreement as a part of this Plan delineating the duties,
responsibilities and liabilities of the Investment Manager with respect to any
part of the Trust Fund under the control of the Investment Manager.
10.16 INVESTMENT IN GROUP TRUST FUND. The Trustee, for collective
investment purposes, may combine into one trust fund the Trust created under
this Plan with the Trust created under any other qualified retirement plan the
Employer maintains. However, the Trustee must maintain separate records of
account for the assets of each Trust in order to reflect properly each
Participant's Accrued Benefit under the plan(s) in which he is a Participant.
10.17 PARTICIPANT VOTING RIGHTS -- EMPLOYER SECURITIES. With respect to the
voting of Employer Securities which are not part of a registration-type class of
securities (as defined in Code ss.409(e)(4)), a Participant (or Beneficiary) has
the right to direct the Trustee regarding the voting of such Employer Securities
allocated to his Employer Securities Account with respect to any corporate
matter which involves the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business, or such similar
transaction as the Treasury may prescribe in regulations.
<PAGE>
The voting rights provided in this Section 10.17 extend to all corporate
matters requiring a vote of stockholders with respect to Employer Securities
allocated to the Participant's Employer Securities Account which are:
(a) part of a registration type class of securities; or
(b) Employer Securities acquired after July 10, 1989, pursuant to a
"securities acquisition loan" within the meaning of Code ss.133.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE XI
MISCELLANEOUS
11.01 EVIDENCE. Anyone required to give evidence under the terms of the
Plan may do so by certificate, affidavit, document or other information which
the person to act in reliance may consider pertinent, reliable and genuine, and
to have been signed, made or presented by the proper party or parties. Both the
Advisory Committee and the Trustee are fully protected in acting and relying
upon any evidence described under the immediately preceding sentence.
11.02 NO RESPONSIBILITY FOR EMPLOYER ACTION. Neither the Trustee nor the
Advisory Committee has any obligation or responsibility with respect to any
action required by the Plan to be taken by the Employer, any Participant or
eligible Employee, or for the failure of any of the above persons to act or make
any payment or contribution, or to otherwise provide any benefit contemplated
under this Plan. Furthermore, the Plan does not require the Trustee or the
Advisory Committee to collect any contribution required under the Plan, or to
determine the correctness of the amount of any Employer contribution. Neither
the Trustee nor the Advisory Committee need inquire into or be responsible for
any action or failure to act on the part of the others, or on the part of any
other person who has any responsibility regarding the management, administration
or operation of the Plan, whether by the express terms of the Plan or by a
separate agreement authorized by the Plan or by the applicable provisions of
ERISA. Any action required of a corporate Employer must be by its Board of
Directors or its designate.
11.03 FIDUCIARIES NOT INSURERS. The Trustee, the Advisory Committee, the
Plan Administrator and the Employer in no way guarantee the Trust Fund from loss
or depreciation. The Employer does not guarantee the payment of any money which
may be or becomes due to any person from the Trust Fund. The liability of the
Advisory Committee and the Trustee to make any payment from the Trust Fund at
any time and all times is limited to the then available assets of the Trust.
11.04 WAIVER OF NOTICE. Any person entitled to notice under the Plan may
waive the notice, unless the Code or Treasury regulations prescribe the notice
or ERISA specifically or impliedly prohibits such a waiver.
11.05 SUCCESSORS. The Plan is binding upon all persons entitled to benefits
under the Plan, their respective heirs and legal representatives, upon the
Employer, its successors and assigns, and upon the Trustee, the Advisory
Committee, the Plan Administrator and their successors.
11.06 WORD USAGE. Words used in the masculine also apply to the feminine
where applicable, and wherever the context of the Plan dictates, the plural
includes the singular and the singular includes the plural.
11.07 STATE LAW. Florida law will determine all questions arising with
respect to the provisions of this Agreement except to the extent superseded by
Federal law.
<PAGE>
11.08 EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan, or with
respect to the establishment of the Trust, or any modification or amendment to
the Plan or Trust, or in the creation of any Account, or the payment of any
benefit, gives any Employee, Employee-Participant or any Beneficiary any right
to continue employment, any legal or equitable right against the Employer, or
Employee of the Employer, or against the Trustee, or its agents or employees, or
against the Plan Administrator, except as expressly provided by the Plan, the
Trust, ERISA or by a separate agreement.
* * * * * * * * * * * * * * *
<PAGE>
ARTICLE XII
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
12.01 EXCLUSIVE BENEFIT. Except as provided under Article III, the Employer
has no beneficial interest in any asset of the Trust and no part of any asset in
the Trust may ever revert to or be repaid to an Employer, either directly or
indirectly; nor, prior to the satisfaction of all liabilities with respect to
the Participants and their Beneficiaries under the Plan, may any part of the
corpus or income of the Trust Fund, or any asset of the Trust, be (at any time)
used for, or diverted to, purposes other than the exclusive benefit of the
Participants or their Beneficiaries.
12.02 AMENDMENT BY EMPLOYER. The Employer has the right at any time and
from time to time:
(a) To amend this Agreement in any manner it deems necessary or
advisable in order to qualify (or maintain qualification of) this Plan
and the Trust created under it under the appropriate provisions of
Code ss.401(a); and
(b) To amend this Agreement in any other manner.
No amendment may authorize or permit any of the Trust Fund (other than the
part which is required to pay taxes and administration expenses) to be used for
or diverted to purposes other than for the exclusive benefit of the Participants
or their Beneficiaries or estates. No amendment may cause or permit any portion
of the Trust Fund to revert to or become a property of the Employer. The
Employer also may not make any amendment which affects the rights, duties or
responsibilities of the Trustee, the Plan Administrator or the Advisory
Committee without the written consent of the affected Trustee, the Plan
Administrator or the affected member of the Advisory Committee. The Employer
must make all amendments in writing. Each amendment must state the date to which
it is either retroactively or prospectively effective.
(A) Code section 411(d)(6) protected benefits. An amendment (including the
adoption of this Plan as a restatement of an existing plan) may not decrease a
Participant's Accrued Benefit, except to the extent permitted under Code
ss.412(c)(8), and may not reduce or eliminate Code ss.411(d)(6) protected
benefits determined immediately prior to the adoption date (or, if later, the
effective date) of the amendment. An amendment reduces or eliminates Code
ss.411(d)(6) protected benefits if the amendment has the effect of either (1)
eliminating or reducing an early retirement benefit or a retirement-type subsidy
(as defined in Treasury regulations), or (2) except as provided by Treasury
regulations, eliminating an optional form of benefit. The Advisory Committee
must disregard an amendment to the extent application of the amendment would
fail to satisfy this paragraph. If the Advisory Committee must disregard an
amendment because the amendment would violate clause (1) or clause (2), the
Advisory Committee must maintain a schedule of the early retirement option or
other optional forms of benefit the Plan must continue for the affected
Participants.
<PAGE>
12.03 DISCONTINUANCE. The Employer has the right, at any time, to suspend
or discontinue its contributions under the Plan, and to terminate, at any time,
this Plan and the Trust created under this Agreement. The Plan will terminate
upon the first to occur of the following:
(a) The date terminated by action of the Employer;
(b) The dissolution or merger of the Employer, unless the successor
makes provision to continue the Plan, in which event the successor must
substitute itself as the Employer under this Plan. Any termination of
the Plan resulting from this paragraph (b) is not effective until
compliance with any applicable notice requirements under ERISA.
12.04 FULL VESTING ON TERMINATION. Upon either full or partial termination
of the Plan, or, if applicable, upon complete discontinuance of profit sharing
plan contributions to the Plan, an affected Participant's right to his Accrued
Benefit is 100% Nonforfeitable, irrespective of the Nonforfeitable percentage
which otherwise would apply under Article V.
12.05 MERGER/DIRECT TRANSFER. The Trustee may not consent to, or be a party
to, any merger or consolidation with another plan, or to a transfer of assets or
liabilities to another plan, unless immediately after the merger, consolidation
or transfer, the surviving Plan provides each Participant a benefit equal to or
greater than the benefit each Participant would have received had the Plan
terminated immediately before the merger or consolidation or transfer. The
Trustee possesses the specific authority to enter into merger agreements or
direct transfer of assets agreements with the trustees of other retirement plans
described in Code ss.401(a), including an elective transfer, and to accept the
direct transfer of plan assets, or to transfer plan assets, as a party to any
such agreement.
The Trustee may accept a direct transfer of plan assets on behalf of an
Employee prior to the date the Employee satisfies the Plan's eligibility
conditions. If the Trustee accepts a direct transfer of plan assets, the
Advisory Committee and Trustee must treat the Employee as a Participant for all
purposes of the Plan except the Employee is not a Participant for purposes of
sharing in Employer contributions or Participant forfeitures under the Plan
until he actually becomes a Participant in the Plan.
<PAGE>
(A) Elective transfers. The Trustee may not consent to, or be a party to a
merger, consolidation or transfer of assets with a defined benefit plan, except
with respect to an elective transfer, or unless the transferred benefits are in
the form of paid-up individual annuity contracts guaranteeing the payment of the
transferred benefits in accordance with the terms of the transferor plan and in
a manner consistent with the Code and with ERISA. The Trustee will hold,
administer and distribute the transferred assets as a part of the Trust Fund and
the Trustee must maintain a separate Employer contribution Account for the
benefit of the Employee on whose behalf the Trustee accepted the transfer in
order to reflect the value of the transferred assets. Unless a transfer of
assets to this Plan is an elective transfer, the Plan will preserve all Code
ss.411(d)(6) protected benefits with respect to those transferred assets, in the
manner described in Section 13.02. A transfer is an elective transfer if: (1)
the transfer satisfies the first paragraph of this Section 13.05; (2) the
transfer is voluntary, under a fully informed election by the Participant; (3)
the Participant has an alternative that retains his Code ss.411(d)(6) protected
benefits (including an option to leave his benefit in the transferor plan, if
that plan is not terminating); (4) the transfer satisfies the applicable spousal
consent requirements of the Code; (5) the transferor plan satisfies the joint
and survivor notice requirements of the Code, if the Participant's transferred
benefit is subject to those requirements; (6) the Participant has a right to
immediate distribution from the transferor plan, in lieu of the elective
transfer; (7) the transferred benefit is at least the greater of the single sum
distribution provided by the transferor plan for which the Participant is
eligible or the present value of the Participant's accrued benefit under the
transferor plan payable at that plan's normal retirement age; (8) the
Participant has a 100% Nonforfeitable interest in the transferred benefit; and
(9) the transfer otherwise satisfies applicable Treasury regulations. An
elective transfer may occur between qualified plans of any type.
(B) Distribution restrictions under Code ss.401(k). If the Plan receives a
direct transfer (by merger or otherwise) of elective contributions (or amounts
treated as elective contributions) under a Plan with a Code ss.401(k)
arrangement, the distribution restrictions of Code ss.ss.401(k)(2) and (10)
continue to apply to those transferred elective contributions.
12.06 TERMINATION. Upon termination of the Plan, the distribution
provisions of Article VI remain operative, with the following exceptions:
(1) if the present value of the Participant's Nonforfeitable Accrued
Benefit does not exceed $5,000, the Advisory Committee will direct the
Trustee to distribute the Participant's Nonforfeitable Accrued Benefit
to him in lump sum as soon as administratively practicable after the
Plan terminates; and
(2) if the present value of the Participant's Nonforfeitable Accrued
Benefit exceeds $5,000, the Participant or the Beneficiary, in addition
to the distribution events permitted under Article VI, may elect to
have the Trustee commence distribution of his Nonforfeitable Accrued
Benefit as soon as administratively practicable after the Plan
terminates.
To liquidate the Trust, the Advisory Committee will purchase a deferred
annuity contract for each Participant which protects the Participant's
distribution rights under the Plan, if the Participant's Nonforfeitable Accrued
Benefit exceeds $5,000 and the Participant does not elect an immediate
distribution pursuant to paragraph (2).
<PAGE>
If this paragraph applies, in lieu of the preceding provisions of this
Section 13.06 and the distribution provisions of Article VI, the Advisory
Committee will direct the Trustee to distribute each Participant's
Nonforfeitable Accrued Benefit, in lump sum, as soon as administratively
practicable after the termination of the Plan, irrespective of the present value
of the Participant's Nonforfeitable Accrued Benefit and whether the Participant
consents to that distribution. This paragraph applies only if: (1) the Plan does
not provide an annuity option; (2) the Plan is a defined contribution plan at
the time of its termination date; and (3) as of the period between the Plan
termination date and the final distribution of assets, the Employer does not
maintain any other defined contribution plan (other than an ESOP).
The Trust will continue until the Trustee in accordance with the direction
of the Advisory Committee has distributed all of the benefits under the Plan. On
each valuation date, the Advisory Committee will credit any part of a
Participant's Accrued Benefit retained in the Trust with its proportionate share
of the Trust's income, expenses, gains and losses, both realized and unrealized.
Upon termination of the Plan, the amount, if any, in a suspense account under
Article III will revert to the Employer, subject to the conditions of the
Treasury regulations permitting such a reversion. A resolution or amendment to
freeze all future benefit accrual but otherwise to continue maintenance of this
Plan, is not a termination for purposes of this Section 13.06.
<PAGE>
IN WITNESS WHEREOF, the Employer and the Trustee have executed this Plan
and Trust in Melbourne, Florida this _____ day of __________________________,
1998.
SOFTWARE TECHNOLOGY, INC.
By: /s/
-------------------------------------
Officer
EXIGENT INTERNATIONAL
By: /s/
-------------------------------------
Officer
/s/ Don F. Riordan
---------------------------------------
DON F. RIORDAN
Trustee
<PAGE>
FIRST AMENDMENT
SOFTWARE TECHNOLOGY, INC.
RESTATED EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST AGREEMENT
A restated Employee Stock Ownership Plan effective February 1, 1998, was
adopted by Software Technology, Inc. The Plan provides in Article XII that the
Plan may be amended by an instrument in writing duly executed. It is advisable
to amend the Plan in certain respects.
IT IS THEREFORE AGREED:
Subsection (C) of Section 5.04 of Article V is hereby added as follows,
effective January 1, 1999:
(C) 0% Vested Participant. The deemed cash-out rule applies to a 0%
vested Participant. A 0% vested Participant is a Participant whose
Accrued Benefit derived from Employer contributions is entirely
forfeitable at the time of his Separation from Service. Under the
deemed cash-out rule, the Advisory Committee will treat the 0% vested
Participant as having received a cash-out distribution on the date of
the Participant's Separation from Service or, if the Participant's
Account is entitled to an allocation of Employer contributions for the
Plan Year in which he separates from Service, as soon as
administratively feasible following the allocation date for said
contribution. For purposes of applying the restoration provisions of
this Section 5.04, the Advisory Committee will treat the 0% vested
Participant as repaying his cash-out "distribution" on the first date
of his re-employment with the Employer.
In all other respects, the Software Technology, Inc. Restated Employee Stock
Ownership Plan and Trust Agreement as initially adopted and subsequently amended
shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the Employer has caused this First Amendment to the
Software Technology, Inc. Restated Employee Stock Ownership Plan and Trust
Agreement to be executed by its duly authorized officer this 24th day of
February, 1999, effective as set forth herein.
SOFTWARE TECHNOLOGY, INC.
By: /s/ Don F. Riordan, Jr.
---------------------------------
DON F. RIORDAN, JR.,
Executive Vice President
/s/ Don F. Riordan, Jr.
--------------------------------
DON F. RIORDAN, JR.,
Trustee
Exhibit 21
The Company has the following three subsidiaries:
1. Software Technology, Inc.
2. FotoTag, Inc.
3. Middleware Solutions, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Financial Statements of Exigent International, Inc. for the Year Ended December
31, 1998 and is qualified in its entirety by reference to such financial
statements.
<F1> Includes cost and estimated earnings in excess of billings on
uncompleted contracts.
</LEGEND>
<CIK> 0001015854
<NAME> Exigent International, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1998
<EXCHANGE-RATE> 1
<CASH> 430
<SECURITIES> 0
<RECEIVABLES> 6,947 <F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,826
<PP&E> 6,266
<DEPRECIATION> 3,982
<TOTAL-ASSETS> 15,664
<CURRENT-LIABILITIES> 5,253
<BONDS> 1,783
0
6
<COMMON> 41
<OTHER-SE> 8,581
<TOTAL-LIABILITY-AND-EQUITY> 15,664
<SALES> 0
<TOTAL-REVENUES> 31,139
<CGS> 0
<TOTAL-COSTS> 30,224
<OTHER-EXPENSES> 181
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 172
<INCOME-PRETAX> 598
<INCOME-TAX> (180)
<INCOME-CONTINUING> 598
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 418
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.08
</TABLE>
