<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CEMAX-ICON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3841 77-0103865
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
47281 MISSION FALLS COURT
FREMONT, CALIFORNIA 94539
(510) 770-8612
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
TERRY ROSS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CEMAX-ICON, INC.
47281 MISSION FALLS COURT
FREMONT, CALIFORNIA 94539
(510) 770-8612
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL J. O'DONNELL, ESQ. BRIAN C. CUNNINGHAM, ESQ.
MICHAEL J. DANAHER, ESQ. MATTHEW B. HEMINGTON, ESQ.
WILSON SONSINI GOODRICH & ROSATI COOLEY GODWARD CASTRO
PROFESSIONAL CORPORATION HUDDLESON & TATUM
650 PAGE MILL ROAD FIVE PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94304-1050 3000 EL CAMINO REAL
(415) 493-9300 PALO ALTO, CALIFORNIA 94306-2155
(415) 843-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ----------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value........ 3,220,000 shares $10.00 $32,200,000 $11,103.45
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</TABLE>
(1) Includes 420,000 shares which the Underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee in accordance with Rule 457(a) under the Securities Act of 1933, as
amended.
-----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A) MAY DETERMINE.
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<PAGE> 2
CEMAX-ICON, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(6) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
------------------------------------------ --------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Facing Page of Registration Statement,
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page and Outside Back
Cover Page
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges........ Prospectus Summary; Risk Factors
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution.................................. Dilution
7. Selling Security Holders.................. Not Applicable
8. Plan of Distribution...................... Outside Front Cover Page and Inside Front
Cover Page; Underwriting
9. Description of Securities to be
Registered................................ Outside Front Cover Page; Prospectus
Summary; Capitalization; Description of
Capital Stock
10. Interests of Named Experts and Counsel.... Legal Matters; Experts
11. Information with Respect to the
Registrant................................ Outside Front Cover Page and Inside Front
Cover Page; Prospectus Summary; Risk
Factors; Use of Proceeds; Dividend Policy;
Capitalization; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal Stockholders;
Description of Capital Stock; Shares
Eligible for Future Sale; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 19, 1996
2,800,000 SHARES
CEMAX-ICON, INC.
COMMON STOCK
------------------------
All of the 2,800,000 shares of Common Stock offered hereby are being
offered by CEMAX-ICON, Inc. ("CEMAX-ICON" or the "Company"). Prior to this
offering, there has been no public market for the Common Stock of the Company.
It is currently anticipated that the initial public offering price of the Common
Stock will be between $8.00 and $10.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the offering price.
Application has been made to have the Common Stock of the Company approved for
quotation on the Nasdaq National Market under the symbol "CMAX."
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGES 5 THROUGH 12.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<S> <C> <C> <C>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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Per Share............................... $ $ $
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Total(3)................................ $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses, payable by the Company, estimated at $800,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
420,000 additional shares of Common Stock on the same terms and conditions
as set forth above solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters as
stated herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that the certificates for the shares of Common Stock will be available
for delivery at the offices of Volpe, Welty & Company, One Maritime Plaza, San
Francisco, California, on or about , 1996.
------------------------
VOLPE, WELTY & COMPANY
PUNK, ZIEGEL & KNOELL
FURMAN SELZ
The date of this Prospectus is , 1996
<PAGE> 4
Archive Manager, AutoRad, Clinical View, Diagnostic View, ICON Medical
Systems, ImageCom, Image Server, LaserLink, Network Film Server, RadAccess,
ScanLink, TeleMax and VIP, among other marks, are trademarks of the Company.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus. Prospective investors should consider carefully the
information discussed under "Risk Factors." This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors."
THE COMPANY
CEMAX-ICON designs, manufactures and markets medical image information
systems which electronically acquire, archive, distribute and display medical
images throughout hospitals, outpatient facilities and integrated delivery
networks ("IDNs"). The Company's systems interface with virtually all
commercially available imaging modalities, including x-rays, computed tomography
("CT"), magnetic resonance imaging ("MRI"), computed radiography, ultrasound and
nuclear medicine. By automating and increasing the availability of medical
images within a healthcare facility or throughout an IDN, the Company's systems
reduce the cost and improve the management of medical care. CEMAX-ICON's systems
and modules are based on an open architecture and utilize standard hardware and
standard network protocols in order to facilitate integration with existing
image acquisition devices and healthcare information systems. CEMAX-ICON
provides complete turn-key systems as well as scalable software modules that
integrate with commercially available third party hardware.
Medical images, traditionally stored on film, are a critical component of
the patient's medical record as they are used in all stages of patient care,
including screening, diagnosis, treatment and post-treatment assessment.
Currently, film retrieval and distribution are primarily manual processes which
are inherently slow and labor-intensive. Furthermore, film is bulky, expensive
to store, frequently lost or misplaced and requires expensive chemical handling
and processing which produce environmentally hazardous by-products. Trends
toward lower cost and higher quality care in the healthcare industry are causing
changes in the management of medical images, including an emphasis on reducing
the operational costs of film management as well as the requirement that images
be accessible throughout the healthcare organization or IDN. Traditional
healthcare information systems are limited in their ability to provide
cost-effective, institution-wide access to medical images because many existing
image acquisition devices use a variety of proprietary platforms. Moreover,
digitized medical images contain enormous quantities of data which can exceed
the ability of current information systems to effectively store and transmit
such images.
Recent computing advances have made possible the creation of large-scale
networks, known as Picture Archiving and Communications Systems ("PACS"), that
digitize, transmit, store and retrieve medical images. The Company's systems,
designed in consultation with clinicians, enable healthcare providers to
reengineer the management of medical images to cost-effectively implement PACS
in order to increase the productivity of radiologists, other clinicians and
support staff, and to reduce film use and film-related expenses. In addition,
the Company's systems increase the accessibility of medical images to clinical
staff, both within an institution and at remote sites, and enable healthcare
providers to broaden their geographic service areas. The Company has developed a
large library of interfaces to provide connectivity with standard interfaces as
well as a large installed base of proprietary image acquisition devices. The
Company's systems utilize a distributed server and database architecture and
advanced image compression technology to cost-effectively store and transmit
large image data sets at clinically acceptable speeds.
CEMAX-ICON intends to maintain and enhance its position as a market leader
by leveraging its technology and its knowledge of radiology practice, increasing
its penetration of the PACS and teleradiology markets, maintaining and expanding
OEM relationships, and cross-selling its systems and services. The Company sells
its products directly to end-users as well as through OEMs, including several
leading suppliers of imaging and information systems to the healthcare industry,
including Minnesota Mining and Manufacturing Co. ("3M"), Toshiba Corporation
("Toshiba"), Lucent Technologies, Inc. (formerly a division of AT&T) ("Lucent"),
Hewlett-Packard Co.("Hewlett-Packard"), Sterling Diagnostics, Inc. (formerly a
division of DuPont) ("Sterling"), General Electric Co. ("General Electric") and
Eastman Kodak Co. ("Kodak"), as well as distributors. CEMAX-ICON's systems are
installed at over 1,500 sites worldwide.
3
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.................................... 2,800,000 Shares
Common Stock to be outstanding after the offering...................... 8,560,713 Shares(1)
Working capital and general corporate
Use of proceeds........................................................ purposes
Nasdaq National Market symbol.......................................... CMAX
</TABLE>
SUMMARY OF FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------- ------ ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues..................................... $ 4,637 $8,314 $12,114 $16,457 $17,030 $4,639 $5,118
Loss from operations............................... (1,141) (732) (1,141) (2,490) (6,842) (724) (515)
Net loss........................................... (1,271) (766) (1,198) (2,578) (6,815) (755) (518)
Pro forma net loss per share(2).................... $ (1.22) $(0.15) $(0.09)
Shares used to compute pro forma net loss per
share(2)......................................... 5,609 4,992 6,038
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................................................... $ 1,654 $ 24,290
Working capital (deficit).......................................................... (1,145) 21,491
Total assets....................................................................... 9,157 31,793
Long-term obligations, less current portion........................................ 552 552
Accumulated deficit................................................................ (32,099) (32,099)
Total stockholders' equity (deficit)............................................... (153) 22,483
</TABLE>
- ---------------
(1) Excludes as of March 31, 1996: (i) 1,009,339 shares of Common Stock issuable
upon exercise of outstanding stock options at a weighted average price of
$1.09 per share; (ii) warrants to purchase 202,383 shares of Common Stock at
a weighted average exercise price of $11.37 per share; and (iii) 950,000
shares reserved for future grants under the Company's 1996 Stock Plan, 1996
Employee Stock Purchase Plan, and 1996 Director Option Plan. See
"Management -- Director Compensation," "-- Stock Plans" and Notes 7 and 8 of
Notes to Financial Statements.
(2) See Note 1 of Notes to Financial Statements describing the shares used in
calculating pro forma net loss per share.
(3) Adjusted to give effect to the receipt of the estimated net proceeds from
the sale of 2,800,000 shares of Common Stock offered by the Company hereby
(at an assumed initial public offering price of $9.00 per share) and the
conversion of convertible preferred stock. See "Use of Proceeds" and
"Capitalization."
------------------------
Except as otherwise noted, all information contained in this Prospectus:
(i) assumes the reincorporation of the Company in Delaware; (ii) gives effect to
the conversion of all outstanding shares of convertible preferred stock into
845,054 shares of Common Stock upon the closing of this offering; and (iii)
reflects a 1-for-2.35 reverse stock split of the Company's Common Stock to be
effected in June 1996. See "Capitalization" and "Description of Capital Stock."
4
<PAGE> 7
RISK FACTORS
The Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including, but not limited to, those set forth in the following risk factors. In
addition to the other information in this Prospectus, the following risk factors
should be considered carefully in evaluating the Company and its business before
purchasing the shares of common stock offered hereby.
Lack of Profitable Operations. The Company has not been profitable since
inception and had an accumulated deficit of approximately $32.1 million as of
March 31, 1996. There can be no assurance that the Company will be profitable on
a quarterly or annual basis in the future. As a result there can be no assurance
that the net proceeds of this offering, together with any funds provided by
operations and present capital, will be sufficient to fund the Company's ongoing
operations. The Company believes its current operating funds, along with the
proceeds of this offering, will be sufficient to finance its cash requirements
at least through 1997. If the Company has insufficient funds, there can be no
assurance that additional financing can be obtained on acceptable terms, if at
all. The insufficiency of funds, together with the absence of such financing,
would have a material adverse effect on the Company's business, including a
possible reduction or cessation of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation."
New Product Development and Integration; Technological Change. The market
for the Company's systems is characterized by rapid technological advances,
changes in customer requirements and frequent new product introductions and
enhancements. The Company's future success will depend upon its ability to
enhance and integrate its current product line, to complete products currently
under development, to develop and introduce new products that keep pace with
technological developments, and to respond to evolving customer requirements.
Any failure by the Company to anticipate or respond adequately to technological
developments by its competitors or to changes in customer requirements, or any
significant delays in product integration, development or introduction could
result in a loss of competitiveness or revenues. In particular, orders for two
new software modules under development by the Company, AutoRad and Archive
Manager 2.0, constitute a substantial portion of the Company's backlog. There
can be no assurance that the Company will be able to complete development and
commence shipment of these modules and other products under development in a
reasonable time frame which will be acceptable to customers. In the past, the
Company has occasionally experienced delays in the development and introduction
of new products and product enhancements, and there can be no assurance that the
Company will not experience such delays in the future. Timeliness of delivery is
of critical importance to certain customers, and the Company's failure to
successfully develop and ship such products in a timely manner could result in
cancellation of customer orders which would have a material adverse effect on
the Company's business and results of operations. In addition, the Company is in
the process of integrating certain teleradiology systems acquired by the Company
pursuant to the merger with ICON Medical Systems, Inc. with the Company's other
systems, but to date such systems have not been fully integrated. The successful
completion of such integration is necessary for sales to certain customers and
potential customers of the Company. There can be no assurance that the Company
will be successful in completing its product integration efforts or in
developing and marketing new products or product enhancements on a timely or
cost-effective basis, and such failure could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- Products."
Variability in Quarterly Operating Results. The Company's results of
operations may fluctuate significantly from quarter to quarter as a result of a
number of factors, including: (i) the volume and timing of system sales and
customer acceptances; (ii) customer purchasing patterns, long sales cycles,
order cancellations and rescheduling of system installations; (iii) the mix of
direct and indirect sales; and (iv) the mix of higher-margin OEM software
license revenues and lower-margin system revenues. The Company typically does
not obtain long-term volume purchase contracts from its customers, and a
substantial portion of the Company's backlog is scheduled for delivery within 90
days or less. Customers may cancel or change the volume or timing of outstanding
purchase orders at any time without recourse. A significant portion of the
Company's operating expenses are fixed, and planned expenditures are based
primarily on sales forecasts and product development programs. If revenue does
not meet the Company's expectations in any given period, the adverse impact on
operating results may be magnified by the Company's inability to adjust
operating expenses
5
<PAGE> 8
sufficiently or quickly enough to compensate for such a shortfall. In addition,
the Company believes that revenue generated by its OEMs are likely to vary
significantly from quarter to quarter. Accordingly, the Company's future
operating results are likely to be subject to significant variability from
quarter to quarter and could be adversely affected in any particular quarter.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Dependence on Emerging PACS and Teleradiology Markets; Uncertainty of
Market Acceptance. The Company's success is dependent on the development of the
PACS and teleradiology markets and on market acceptance of its existing systems
and products under development. Substantially all of the Company's revenues are
derived from the sale of medical image information systems for the PACS and
teleradiology markets. The market for the Company's systems is still relatively
undeveloped and may not experience material expansion in the near future, if at
all. In the event that the PACS and teleradiology markets do not develop as
anticipated by the Company, the Company's business, financial condition and
results of operations would be adversely effected.
The commercial success of the Company's systems will depend upon their
acceptance by the medical community as useful, cost-effective components of
radiological procedures. There can be no assurance that sales of the Company's
systems will continue at historical rates or that the Company will introduce new
products that achieve significant market acceptance in the future. Furthermore,
new product introductions or enhancements by the Company's competitors or the
use of other technologies could cause a decline in sales or loss of market
acceptance of the Company's systems. In addition, third-party payors, such as
governmental programs and private insurance plans, can indirectly affect the
pricing or the relative attractiveness of the Company's systems by regulating
the maximum amount of reimbursement that they will provide for the taking,
storing and interpretation of medical images. A decrease in the reimbursement
amounts for radiological procedures may decrease the amount which physicians,
clinics and hospitals are able to charge patients for such services. As a
result, adoption of teleradiology and/or PACS systems may slow as capital
investment budgets are reduced, thereby significantly reducing the demand for
the Company's systems. In the event that the Company's existing systems and
products under development do not achieve market acceptance, the Company's
business, financial condition and results of operations would be adversely
effected. See "Business -- Products" and "-- Third-Party Reimbursement."
Reliance upon OEMs; Customer Concentration. The Company's success is
dependent on the success of its marketing and distribution strategy which
involves, to a significant degree, reliance on the Company's OEMs to sell the
Company's software modules as a component of the systems being marketed by such
OEMs. Sales through OEMs accounted for 18%, 35%, 35% and 63% of the Company's
total revenues in 1993, 1994, 1995 and the three months ended March 31, 1996,
respectively. The Company's OEM agreements are subject to cancellation by the
OEMs under certain circumstances. Kodak, one of the Company's OEMs, has alleged
that the Company is in breach of its obligations under the OEM agreement with
Kodak. The Company is currently in negotiations with Kodak with regard to an
amendment of such OEM agreement to attempt to resolve the dispute. Payments
received from Kodak pursuant to this agreement accounted for 12% of the
Company's total revenues in the three months ended March 31, 1996. If the
Company's current or future OEMs elect to terminate their agreements with the
Company or elect not to include the Company's software modules as components in
their systems or are unsuccessful in achieving significant sales of those
systems, the Company's business, financial condition and results of operations,
would be materially and adversely effected.
A significant portion of the Company's sales revenue is derived from a
small number of customers. In 1994 and 1995 Toshiba accounted for more than 10%
of total revenues; and in the three months ended March 31, 1996 3M, Toshiba and
Kodak each accounted for more than 10% of total revenues and in the aggregate
accounted for 53% of total revenues. Large customers also accounted for a
significant portion of the Company's backlog at March 31, 1996. The Company
expects to continue to depend upon its principal customers for a significant
portion of its sales, although there can be no assurance that the Company's
principal customers will continue to purchase systems and services from the
Company at current levels, if at all. The loss of one or more major customers or
a change in their buying pattern could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Marketing and Sales" and "-- Customers and Signed Sales Contracts."
6
<PAGE> 9
Long Sales and Delivery Cycle; Dependence on Future System Sales. The
decision by a healthcare provider to replace or substantially upgrade its image
information systems typically involves a major commitment of capital and an
extended review and approval process. Accordingly, the sales and delivery cycle
for the Company's systems is typically two to 12 months from initial contact to
delivery and acceptance. The time required from initial contact to contract
execution is typically one to six months. During these periods, the Company may
expend substantial time, effort and funds preparing a contract proposal and
negotiating the contract. The Company does not record revenues on systems until
they have been delivered to the customer. The length of time between contract
execution and delivery typically ranges from three to 12 months depending on the
size of the systems ordered, the products ordered and the delivery terms. At
March 31, 1996, the Company had approximately $8.8 million of signed sales
contracts for systems and services which had not yet been delivered, including
software modules still under development by the Company. This amount includes
contracts for system sales and services that may include cancellation
provisions, and contracts that are expected to result in revenues over periods
of as much as one year. Any significant or ongoing failure to identify
appropriate potential customers, to achieve signed contracts, to successfully
complete software modules under development, or to obtain customer acceptance
after expending time, effort and funds could have a material adverse effect on
the Company's business, financial conditions and results of operations. See
"Business -- Marketing and Sales" and "-- Customers and Signed Sales Contracts."
Risks Associated with Acquisitions. As part of the Company's strategy to
enhance and maintain its competitive position, the Company may from time to time
consider potential acquisitions of complementary products, technologies and
other businesses. The evaluation, negotiation and integration of any such
acquisitions may divert significant time and resources of the Company,
particularly management. There can be no assurance that any acquired product,
technology or business can be successfully integrated into the Company's
operations. The Company believes that its acquisition of ICON Medical Systems,
Inc. in June 1995 had a material adverse effect on the Company's operating
results in 1995 due to operational disruptions arising from the integration of
such business into the Company. There can be no assurance that future
acquisitions, if any, will not have a material adverse effect upon the Company,
due to operational disruptions, unexpected expenses and accounting charges which
may be associated with the integration of such acquisitions. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Competition. Competition in the market for the Company's systems is
intense. A large number of companies offer teleradiology systems which are
competitive with those of the Company. Many of the Company's competitors are
larger and more established and have substantially more financial, technical,
research and development and marketing resources than the Company. Several large
multi-national corporations, including Philips Electronics N.V. ("Philips"),
Agfa-Gevaert N.V. and Siemens Medical Systems Inc., offer competitive products
in the PACS market. Other large corporations have the technical and financial
ability to design and market competitive products, and some of them have
produced and marketed such products in the past. There can be no assurance that
such large potential competitors will not elect to reenter the market for the
Company's systems, which could have a material adverse effect on the Company's
ability to sell its systems. In the past, certain competitors have from time to
time offered PACS systems for sale at substantial discounts to prevailing
prices, or offered PACS systems to customers at no additional charge in
connection with the sale of complementary products, which has had and could have
a material adverse effect on the Company's ability to sell its systems.
The Company's ability to compete successfully in the sale of its systems
will depend in large part upon its ability to implement successfully its
strategy of selling systems as a total solution as well as its ability to
attract new customers, sell new products, deliver and support product
enhancements to its existing customers, and respond effectively to continuing
technological change by developing new products. There can be no assurance that
the Company will be able to compete successfully in the future, or that future
competition for product sales will not have a material adverse effect on the
business, financial condition and results of operations of the Company. See
"Business -- Competition."
Ability to Manage Projected Growth. As a result of both internal
development and planned expansion into additional applications and markets, the
Company expects a period of rapid growth. Such growth would place a significant
strain on the Company's customer service and support operations, sales,
administrative
7
<PAGE> 10
personnel and other resources. The Company's ability to manage future growth, if
any, effectively will require the Company to continue to improve its
operational, management and financial systems and controls and to train,
motivate and manage its employees. In particular, the Company will be required
in the near future to recruit a significant number of technically qualified
personnel to expand its direct sales force and customer support group. As a
result, the Company is subject to certain growth-related risks, including the
risk that it will be unable to retain the necessary personnel or acquire other
resources necessary to service such growth adequately. Further revenue growth,
if any, depends in part on the Company's ability to rapidly grow its direct
sales force and distribution channels. There can be no assurance that the
Company can expand those resources as rapidly as necessary. If the Company's
management is unable to manage future growth, if any, effectively, the Company's
business, financial condition and results of operations could be materially
adversely effected.
Dependence on Key Employees. The Company is highly dependent on certain
members of its sales and engineering staff, the loss of services of one or more
of whom could have a material adverse effect on the Company's business and
results of operations. Furthermore, recruiting and retaining qualified sales and
technical personnel will also be critical to the Company's success. There can be
no assurance that the Company will be successful in attracting and retaining
skilled technical personnel who generally are in high demand in the Company's
geographic area. The loss of certain key employees, including the Company's
Chief Technical Officer, or the Company's inability to attract and retain other
qualified employees could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Employees" and "Management -- Directors and Executive Officers."
Dependence on Single-Source Suppliers. Although the Company generally uses
standard components and materials in integrating its systems, certain
components, including the film digitizer used with the Company's systems, are
currently obtained from single sources. The Company is not aware of a short-term
alternative source of supply of this film digitizer. The loss of the supply of
such film digitizer for an extended period of time would have a material adverse
effect on the Company's business, financial condition and results of operations.
International Operations. Foreign markets may be influenced by factors
that are different from those prevailing in the United States. The Company has
limited experience in business operations outside the United States, and there
can be no assurance that the Company's systems products will be accepted in
international markets or that the Company can compete successfully in such
markets. International operations and sales are also subject to certain
political and economic risks, including political instability, currency
controls, trade restrictions, regulatory requirements, exchange rate
fluctuations and changes in import and export regulations, any of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Marketing and Sales."
FDA and Other Government Regulation. The manufacturing and marketing of
the Company's systems are subject to extensive government regulation as medical
devices in the United States by the Food and Drug Administration ("FDA") and in
other countries by corresponding foreign regulatory authorities. The process of
obtaining and maintaining required regulatory clearances and approvals is
lengthy, expensive and uncertain. The Company believes that its success depends
upon commercial sales of improved versions of its systems, certain of which
cannot be marketed in the United States and other regulated markets unless and
until the Company obtains clearance or approval from the FDA and its foreign
counterparts.
The FDA requires that a manufacturer seeking to market a new medical device
or an existing medical device for a new indication obtain either a premarket
notification clearance under Section 510(k) of the Federal Food, Drug and
Cosmetic Act or the approval of a premarket approval application under this Act
("PMA") prior to the introduction of such product into the market. Material
changes to existing medical devices are also subject to FDA review and clearance
or approval prior to commercialization in the United States. The Company is
currently relying on the Section 510(k) premarket notification method to obtain
governmental clearance ("510(k) clearance") to market its medical devices in the
United States. Although it is believed to be a shorter, less costly regulatory
plan than the process to obtain a PMA, the process of obtaining a 510(k)
clearance generally requires supporting data, which can be extensive and extend
the regulatory review process for a considerable length of time. All models of
the Company's systems that are
8
<PAGE> 11
commercially available have received 510(k) clearance by the FDA. In addition,
the Company recently received 510(k) clearance for Archive Manager 2.0 and for
its DICOM and AutoRad modules currently under development. There can be no
assurance that 510(k) clearance for any future product or modifications of
existing products will be granted by the FDA within a reasonable time frame, if
at all. Furthermore, the FDA may require that a request for 510(k) clearance be
supported by data from clinical trials demonstrating substantial equivalence and
the safety and effectiveness of the device, which may prolong the Section 510(k)
notification review period for a particular device or may result in a finding
that the product is not substantially equivalent, so that a full PMA could be
required.
Failure to comply with applicable regulatory requirements could result,
among other things, in warning letters, seizures of products, total or partial
suspension of production, refusal of the government to grant market clearance or
pre-market approval, withdrawal of approvals or criminal prosecution.
The Company is also required to register as a medical device manufacturer
with the FDA and the Food and Drug Branch of the California Department of Health
Services ("CDHS"). The Company will be inspected on a routine basis by both the
FDA and CDHS for compliance with the FDA's Good Manufacturing Practices ("GMP")
and other applicable regulations.
The Company is also subject to other federal, state and local laws and
regulations relating to safe working conditions and manufacturing practices. The
extent of government regulation that might result from any future legislation or
administrative action cannot be predicted. Failure to comply with regulatory
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations.
Sales of the Company's systems outside the United States are subject to
foreign regulatory requirements that vary from country to country. Additional
approvals from foreign regulatory authorities may be required, and there can be
no assurance that the Company will be able to obtain foreign marketing approvals
on a timely basis or at all, or that it will not be required to incur
significant costs in obtaining or maintaining its foreign regulatory approvals.
In Europe, the Company will be required to obtain the certificates necessary to
enable the CE Mark, an international symbol of adherence to quality assurance
standards and compliance with applicable European Union Medical Device
Directives, to be affixed to the Company's systems for sales in member
countries. Failure to obtain such certifications, any necessary foreign
regulatory approvals or any other failure to comply with regulatory requirements
outside the United States could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Products" and "-- Government Regulation."
Uncertain Protection for Intellectual Property; Possible Claims of
Others. The Company generally does not rely on patent protection with respect
to its products. Instead, the Company relies on a combination of copyright and
trade secret law, employee and third-party nondisclosure agreements, and other
protective measures to protect intellectual property rights pertaining to its
products and technology. There can be no assurance, however, that applicable
copyright or trade secret law or these agreements will provide meaningful
protection of the Company's copyrights, trade secrets, know-how or other
proprietary information in the event of any unauthorized use, misappropriation
or disclosure of such copyrights, trade secrets, know-how or other proprietary
information. In addition, the laws of certain foreign countries do not protect
the Company's intellectual property rights to the same extent as do the laws of
the United States. There can be no assurance that the Company will be able to
protect its intellectual property successfully.
The Company's systems and technology incorporate subject matter that the
Company believes is in the public domain or that it otherwise has the right to
use. There can be no assurance that third parties will not assert patent,
copyright or other intellectual property infringement claims against the Company
with respect to its systems or technology or other matters. There may be
third-party patents, copyrights and other intellectual property relevant to the
Company's systems and technology which are not known to the Company. Although no
third party has asserted that the Company is infringing such third party's
patent rights, copyrights or other intellectual property, there can be no
assurance that litigation asserting such claims will not be initiated, that the
Company would prevail in any such litigation, or that the Company would be able
to obtain any necessary licenses on reasonable terms if at all. Any such claims
against the Company, with or without merit, as well as
9
<PAGE> 12
claims initiated by the Company against third parties, can be time-consuming and
expensive to defend or prosecute and to resolve. See "Business -- Patents and
Intellectual Property."
Uncertainty in Healthcare Industry; Government Healthcare Reform
Proposals. The healthcare industry is subject to changing political, economic,
and regulatory influences that may affect the procurement practices and
operations of healthcare providers. Many lawmakers have announced that they
intend to propose programs to reform the United States healthcare system. These
programs may contain proposals to increase governmental involvement in
healthcare, lower reimbursement rates and otherwise change the operating
environment. Healthcare providers may react to these proposals and the
uncertainty surrounding such proposals by curtailing or deferring investments,
including those for the Company's systems and services. Cost containment
measures instituted by healthcare providers as a result of regulatory reform or
otherwise could result in greater selectivity in the allocation of capital
funds. Such selectivity could have a material adverse effect on the Company's
ability to sell its systems and services. See "Business -- Third Party
Reimbursement."
Product Liability Risk; Limited Insurance Coverage. The manufacture and
sale of medical image information systems entail significant risk of product
liability claims. There can be no assurance that the Company's existing
insurance coverage limits are adequate to protect the Company from any
liabilities it might incur in connection with the sale of the Company's systems.
In addition, the Company may require increased product liability coverage as
additional products are commercialized. Such insurance is expensive and in the
future may not be available on acceptable terms, if at all. A successful product
liability claim or series of claims brought against the Company in excess of its
insurance coverage could have a material adverse effect on the Company's
business, financial condition and results of operations.
Shares Eligible for Future Sale. Sales of a substantial number of shares
of Common Stock in the public market or the prospect of such sales could
adversely affect its market price of the Company and could impair the ability of
the Company to raise capital through an offering of its equity securities. Upon
completion of this offering and assuming no exercise of the Underwriters'
over-allotment option, the Company will have 8,560,713 shares of Common Stock
outstanding, of which the 2,800,000 shares offered hereby will be freely
tradeable, except that shares purchased by "affiliates" of the Company, as that
term is defined in Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), may generally only be resold in compliance with
the conditions of Rule 144. In addition to the 2,800,000 shares offered hereby,
in the absence of the restrictions contained in the agreements not to sell
described below, approximately 206,179 shares will be freely tradeable
immediately following the date of this offering and 147,254 shares will be
eligible for sale in the public market beginning 90 days following the date of
this offering, subject to compliance with Rule 144 or Rule 701. Holders of
approximately 5,391,451 shares of Common Stock of the Company outstanding prior
to this offering are subject to lock-up agreements under which each of the
holders of such shares has agreed with the Underwriters that it will not sell,
offer, contract or grant any option or other right to sell or otherwise dispose
of any of the Company's equity securities, or securities exchangeable or
exercisable for or convertible into the Company's equity securities, or publicly
announce an intention to do any of the foregoing, until 180 days after the date
of this Prospectus, without the prior written consent of Volpe, Welty & Company.
In its sole discretion and without any prior notice, Volpe, Welty & Company may
release all or any portion of the shares subject to lock-up agreements. In
recent offerings in which it has served as lead manager of underwriters, Volpe,
Welty & Company has consented to early releases from lock-up agreements only in
a limited number of instances, after considering all circumstances that it
deemed to be relevant. Volpe, Welty & Company will, however, have complete
discretion in determining whether to consent to early releases from the lock-up
agreements delivered in connection with this offering, and no assurance can be
given that it will not consent to the early release of all or a portion of the
shares of Common Stock offered hereby and options covered by such lock-up
agreements. As soon as practicable after the closing of this offering, the
Company intends to file a registration statement on Form S-8 to register under
the Securities Act the outstanding options exercisable for 1,009,339 shares of
Common Stock as of March 31, 1996, 700,000 shares of Common Stock of the Company
reserved for issuance under the Company's 1996 Stock Plan, 150,000 shares of
Common Stock reserved for issuance under the Company's 1996 Employee Stock
Purchase Plan, and 100,000 shares of Common Stock reserved for issuance under
the Company's Director Option Plan. See "Management -- Stock Plans," "Shares
Eligible for Future Sale" and "Underwriting."
10
<PAGE> 13
The holders of 4,237,623 shares of the Company's Common Stock are entitled
to certain demand and piggyback registration rights with respect to such shares.
If such holders, by exercising their demand registration rights, cause a large
number of shares to be registered and sold in the public market, such sales may
have an adverse effect on the market price of the Company's Common Stock. If the
Company is required to include in a Company-initiated registration shares held
by such holders pursuant to the exercise of the piggyback registration rights,
such sales may have an adverse effect on the Company's ability to raise needed
capital. See "Management -- Stock Plans," "Description of Capital Stock" and
"Shares Eligible for Future Sale."
No Prior Trading Market; Potential Volatility of Stock Price. Prior to
this offering, there has been no public market for the Company's Common stock.
Each of Volpe, Welty & Company, Punk, Ziegel & Knoell, L.P., and Furman Selz LLC
has advised the Company that it currently intends to make a market in the Common
Stock. No such firm is obligated to do so, however, and any market-making
activities with respect to the Company's Common Stock may be discontinued at any
time without notice. In addition, such market-making activities will be subject
to the limits imposed by the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Accordingly, there can be no assurance
that an active trading market will develop or be sustained after this offering.
The initial public offering price of the shares of Common Stock offered hereby
will be determined by negotiations between the Company and the Representatives
of the Underwriters and may not be indicative of the price at which the Common
Stock will trade after this offering. See "Underwriting" for the factors to be
considered in determining the initial public offering price.
In recent years, the stock market in general, and the shares of software
technology companies in particular, have experienced extreme price fluctuations
that are often unrelated to the operating performance of such companies. These
broad market and industry fluctuations may adversely affect the market price of
the Company's Common Stock. The Company also believes that factors such as
quarterly fluctuations in its revenues or results of operations, general
conditions in the information technology service industry and announcements of
new products or services by the Company or its competitors may cause the market
price of its Common Stock to fluctuate significantly.
Concentration of Ownership. Upon completion of this offering, the
Company's executive officers and current members of the Board of Directors, and
their affiliates, will beneficially own approximately 40.7% of the Company's
outstanding Common Stock (assuming no exercise of the Underwriters'
over-allotment option). In particular, upon completion of this offering, Jeremy
B. Rubin, Vice President, Chief Technical Officer and a member of the Board of
Directors of the Company, will beneficially own approximately 20.4% of the
Company's outstanding Common Stock. As a result, certain existing stockholders,
if acting together, will have the ability to elect a majority of the Company's
Board of Directors and to determine the outcome of corporate actions requiring
stockholder approval, irrespective of how other stockholders of the Company may
vote. This concentration of ownership and voting control may have the effect of
delaying or preventing a change in control of the Company, or causing a change
in control of the Company which may not be favored by the Company's other
stockholders. There can be no assurance that these individuals' ability to
prevent or cause a change in control of the Company will not have a material
adverse effect on the market price of the Company's Common Stock. See
"Management," "Certain Transactions" and "Principal Stockholders."
Broad Management Discretion in Use of Proceeds. The Company intends to use
the net proceeds from this offering for working capital and general corporate
purposes, including expansion of its operations. Pending such uses, the Company
intends to invest the net proceeds from this offering in short-term,
investment-grade, interest-bearing securities. The Company has no other specific
uses for the proceeds of this offering, and the exact uses of such proceeds will
be subject to the discretion of management. See "Use of Proceeds."
Anti-Takeover Effects of Certificate of Incorporation, Bylaws and Delaware
Law. The Company's Board of Directors will have the authority to issue up to
5,000,000 shares of preferred stock and to determine the price, rights,
preferences and privileges of those shares without any further vote or action by
the stockholders. The rights of the holders of the Company's Common Stock will
be subject to, and may be adversely affected by, the rights of the holders of
any preferred stock that may be issued in the future. The
11
<PAGE> 14
issuance of preferred stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. The Company's Certificate of
Incorporation provides for staggered elections for members of the Board of
Directors and does not provide for cumulative voting. These provisions may have
the effect of delaying or preventing changes in control of management of the
Company, which could adversely affect the market price of the Company's Common
Stock. In addition, the Company will become subject to the provisions of Section
203 of the Delaware General Corporation Law, an anti-takeover law. See
"Description of Capital Stock."
Immediate and Substantial Dilution. The initial public offering price of
the Common Stock offered hereby will be substantially higher than the book value
per share of the Company's outstanding Common Stock. Investors purchasing shares
of Common Stock in this offering will therefore incur immediate and substantial
dilution of $6.37 per share. To the extent that outstanding options to purchase
the Company's Common Stock are exercised, there will be further dilution. See
"Dilution."
12
<PAGE> 15
THE COMPANY
CEMAX-ICON was incorporated in California in 1982 and will be
reincorporated in Delaware prior to the completion of this offering. Unless the
context otherwise requires, "CEMAX-ICON" and the "Company" refer to CEMAX-ICON,
Inc., a Delaware corporation, and the Delaware corporation's predecessor. The
Company's executive offices are located at 47281 Mission Falls Court, Fremont,
California 94539 and its telephone number is (510) 770-8612.
USE OF PROCEEDS
The net proceeds to the Company from the sale of 2,800,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $9.00 per
share are estimated to be approximately $22.6 million, after deducting
underwriting discounts and commissions and estimated expenses.
The Company intends to use the net proceeds of this offering as working
capital to finance the Company's planned growth, including hiring additional
personnel for customer support, direct sales and engineering, purchasing
additional capital equipment, and other general corporate purposes. The primary
purposes of this offering are to: (i) make available funds for such uses, as
well as additional funds to be held in reserve; (ii) create a public market for
the Company's Common Stock; (iii) facilitate future access to public markets;
and (iv) make available publicly traded shares in the event the Company desires
to utilize its shares in connection with acquisitions of complementary products,
technologies or businesses. Although the Company from time to time evaluates
potential acquisitions, the Company currently has no agreements or commitments
with respect to any acquisition. The Company also anticipates that, as a result
of this offering, it will receive increased name recognition and overall
acceptance in the marketplace. Pending such uses, the Company intends to invest
the net proceeds from this offering in short-term, investment-grade,
interest-bearing securities. The Company believes that the net proceeds from the
sale of the Common Stock offered hereby, together with its current cash balances
and cash flow from future operations, will be sufficient to meet its working
capital and capital expenditure requirements at least through 1997.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain its earnings to finance the
growth and development of its business and therefore does not anticipate paying
any cash dividends in the foreseeable future.
13
<PAGE> 16
CAPITALIZATION
The following table sets forth the Company's capitalization at March 31,
1996: (i) on an actual basis; (ii) on a pro forma basis after giving effect to
the conversion of all outstanding shares of convertible preferred stock into
845,054 shares of Common Stock upon the closing of this offering; and (iii) on a
pro forma as adjusted basis to give effect to the sale by the Company of
2,800,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $9.00 per share and after deducting estimated underwriters
discounts and commissions and estimated offering expenses. This table should be
read in conjunction with the Financial Statements and Notes thereto included
elsewhere in this Prospectus:
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term obligations..................................... $ 552 $ 552 $ 552
Preferred stock, $0.001 par value: 30,000,000 shares
authorized, issuable in series: 1,985,878 shares issued
and outstanding actual; 5,000,000 shares authorized, no
shares issued or outstanding, pro forma and as
adjusted................................................ 2 -- --
Common stock, $0.001 par value: 50,000,000 shares
authorized: 4,915,659 shares issued and outstanding
actual; 5,760,713 shares issued and outstanding, pro
forma; 8,560,713 shares issued and outstanding, as
adjusted(1)............................................. 5 6 9
Additional paid in capital................................ 32,038 32,039 54,672
Notes receivable from stockholders........................ (42) (42) (42)
Deferred compensation..................................... (57) (57) (57)
Accumulated deficit....................................... (32,099) (32,099) (32,099)
---------- --- ---
Total stockholders' equity (deficit).................... (153) (153) 22,483
---------- --- ---
Total capitalization.................................... $ 399 $ 399 $ 23,035
========== === ===
</TABLE>
- ---------------
(1) Excludes as of March 31, 1996: (i) 1,009,339 shares of Common Stock issuable
upon exercise of outstanding stock options at a weighted average exercise
price of $1.09 per share; (ii) warrants to purchase 202,383 shares of Common
Stock at a weighted average exercise price of $11.37 per share; and (iii)
950,000 shares reserved and available for future issuance under the 1996
Stock Plan, the 1996 Employee Stock Purchase Plan, and the 1996 Director
Option Plan. See "Management -- Director Compensation," "-- Stock Plans" and
Notes 7 and 8 of Notes to Financial Statements.
14
<PAGE> 17
DILUTION
The net tangible book value of the Company at March 31, 1996 was
approximately ($153,000) or $(0.03) per share of Common Stock. Net tangible book
value per share is determined by dividing the amount of total tangible assets of
the Company less total liabilities by the number of shares of Common Stock
outstanding at that date, assuming the conversion of all outstanding shares of
convertible preferred stock into 845,054 shares of Common Stock upon the closing
of this offering. After giving effect to the sale of the 2,800,000 shares of
Common Stock offered hereby (after deducting underwriting discounts and
commissions and estimated offering expenses), the pro forma net tangible book
value of the Company as of March 31, 1996 would have been approximately
$22,483,000, or $2.63 per share. This represents an immediate increase in net
tangible book value of $2.66 per share to existing stockholders and an immediate
dilution in net tangible book value of $6.37 per share to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $9.00
-----
Pro forma net tangible book value per share before the offering... $(0.03)
Increase per share attributable to new investors.................. 2.66
-----
Pro forma net tangible book value per share after the offering...... 2.63
-----
Dilution per share to new investors................................. $6.37
=====
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by existing stockholders
and by the new investors at the assumed initial public offering price of $9.00
per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).... 5,760,713 67.3% $32,320,000 56.2% $5.61
New investors............... 2,800,000 32.7 25,200,000 43.8 $9.00
--------- ------- ----------- ------- ------
Total..................... 8,560,713 100.0% $57,520,000 100.0%
======== ===== ========== =====
</TABLE>
- ---------------
(1) The foregoing computations as of March 31, 1996 exclude: (i) 1,009,339
shares of Common Stock issuable upon exercise of outstanding stock options
at a weighted average exercise price of $1.09 per share; (ii) warrants to
purchase 202,383 shares of Common Stock at a weighted average exercise price
of $11.37 per share; and (iii) 950,000 shares reserved for future grants
under the Company's 1996 Stock Plan, the 1996 Employee Stock Purchase Plan,
and the 1996 Director Option Plan. To the extent that these options are
exercised and these shares of Common Stock are issued, there will be further
dilution to new investors. See "Management -- Director Compensation,"
"-- Stock Plans," "Description of Capital Stock" and Notes 7 and 8 of Notes
to Financial Statements.
15
<PAGE> 18
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and the Notes thereto included
elsewhere in this Prospectus. The statements of operations data for the years
ended December 31, 1993, 1994 and 1995 and the balance sheet data at December
31, 1994 and 1995 are derived from, and should be read in conjunction with, the
Company's financial statements and Notes thereto audited by Ernst & Young LLP,
independent accountants, included elsewhere in the Prospectus. The statements of
operations data for the years ended December 31, 1991 and 1992 and the balance
sheet data at December 31, 1991, 1992 and 1993 are derived from the Company's
unaudited financial statements not included in this Prospectus. The statements
of operations data for the three months ended March 31, 1995 and 1996 and the
balance sheet data at March 31, 1996 have been derived from unaudited interim
financial statements and include, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary to present fairly the
results for such periods. The operating results for the three months ended March
31, 1996 are not necessarily indicative of the results to be expected for the
full year or any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Systems and licensing......................... $ 4,262 $ 7,564 $10,607 $15,017 $15,059 $ 4,322 $ 4,348
Service and maintenance....................... 375 750 1,507 1,440 1,971 317 770
------- ------ ------- ------- ------- ------ ------
Total revenues............................ 4,637 8,314 12,114 16,457 17,030 4,639 5,118
Cost of revenues:
Cost of systems and licensing................. 1,996 2,741 5,337 7,165 7,793 1,973 1,703
Cost of service and maintenance............... 180 360 722 1,638 2,719 515 802
------- ------ ------- ------- ------- ------ ------
Total cost of revenues.................... 2,176 3,101 6,059 8,803 10,512 2,488 2,505
------- ------ ------- ------- ------- ------ ------
Gross profit.................................... 2,461 5,213 6,055 7,654 6,518 2,151 2,613
Operating expenses:
Research and development...................... 1,709 2,094 3,249 4,134 6,501 1,362 1,622
Sales, general and administrative............. 1,893 3,851 3,947 6,010 6,235 1,513 1,506
Merger related expenses....................... -- -- -- -- 624 -- --
------- ------ ------- ------- ------- ------ ------
Total operating expenses.................. 3,602 5,945 7,196 10,144 13,360 2,875 3,128
------- ------ ------- ------- ------- ------ ------
Loss from operations............................ (1,141) (732) (1,141) (2,490) (6,842) (724) (515)
Interest and other income (expense) net......... (130) (34) (57) (88) 27 (31) (3)
------- ------ ------- ------- ------- ------ ------
Net loss........................................ $(1,271) $ (766) $(1,198) $(2,578) $(6,815) $ (755) $ (518)
======= ====== ======= ======= ======= ====== ======
Pro forma net loss per share(1)................. $ (1.22) $ (0.15) $ (0.09)
======= ====== ======
Shares used to compute pro forma net
loss per share(1)............................. 5,609 4,992 6,038
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 614 $ 1,439 $ 1,861 $ 2,503 $ 1,775 $ 1,654
Working capital (deficit)....................... (646) 1,114 584 (50) (573) (1,145)
Total assets.................................... 1,972 3,733 5,465 7,019 9,279 9,157
Long-term obligations, less current portion..... 1,663 414 570 891 604 552
Accumulated deficit............................. (20,114) (20,880) (22,188) (24,766) (31,581) (32,099)
Total stockholders' equity (deficit)............ (1,747) 1,594 1,098 235 370 (153)
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements for a description of the shares
used in calculating pro forma net loss per share.
16
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
OVERVIEW
CEMAX-ICON designs, manufactures and markets medical image information
systems for the acquisition, storage, distribution and use of medical images
throughout hospitals, outpatient facilities and emerging IDNs. The Company's
systems electronically acquire medical images produced by virtually all
commercially available imaging modalities, including x-ray, CT, MRI, computed
radiography, ultrasound and nuclear medicine. The Company was formed in 1982 and
subsequently changed its name to CEMAX-ICON in connection with the merger of
Cemax, Inc. and ICON Medical Systems, Inc. (the "Merger") in June 1995.
Revenues are derived from system sales, software licenses, development
contracts and fees from a range of services, including software maintenance,
support and training. Systems and licensing revenue is generated from software
licenses that grant the right to use the Company's software modules and hardware
products which are typically sold in conjunction with the Company's systems. In
addition to the software license typically sold as part of a system, the Company
generates revenue from sales of software licenses to its OEMs. Service and
maintenance revenue is generated from installation, training, documentation,
maintenance and support services. Fees for such services are generally charged
separately from the Company's software license fees.
Revenue from systems sales is recognized upon delivery of the system, which
typically occurs from one to six months after execution of a contract, depending
on the size and complexity of the system. Revenue from software licenses to OEMs
is recognized upon delivery, or upon completion of specific milestones, if so
stated. Revenue from services is recognized as these services are performed
while revenue from software maintenance is recognized ratably over the term of
the maintenance contracts. Software maintenance contracts are generally
renewable on an annual basis, although the Company occasionally negotiates
long-term maintenance contracts. Under customary system sales agreements, the
Company receives a partial payment upon the execution of a purchase agreement,
further payments upon completion of certain performance milestones, and final
payment upon completion of delivery of the system.
The Merger was accounted for as a pooling of interests, and, accordingly,
the recorded book values of the assets and liabilities and prior operating
results are combined retroactively. The purpose of the Merger was to expand the
Company's existing product lines to enable the Company to provide a broader
family of PACS and teleradiology products. The Merger resulted initially in a
charge to operations of $624,000, employee turnover, and other operational
inefficiencies. The Company may in the future consider the acquisition of
complementary products, technologies and businesses. Such acquisitions may
result in potentially dilutive issuances of equity securities, the incurrence of
debt, acquisition charges and amortization expenses related to goodwill and
intangible assets. There can be no assurance that any acquired product,
technology or business can be successfully integrated into the Company's
operations. In addition, there can be no assurance that any future acquisitions
will not have a material adverse effect upon the Company, due to operational
disruptions, unexpected expenses and accounting charges which may be associated
with the integration of such acquisitions.
The Company's revenue and results of operations may fluctuate significantly
from quarter to quarter as a result of a number of factors, including: (i) the
volume and timing of system sales; (ii) customer purchasing patterns, long sales
cycles, order cancellations and rescheduling of system installations; (iii) the
mix of direct and indirect sales; and (iv) the mix of higher-margin OEM software
license revenues and lower-margin system revenues. In addition, sales generated
by OEMs have in the past, and the Company believes will in the future, vary
significantly from quarter to quarter and, therefore, are difficult to predict
accurately on a quarterly basis. Accordingly, the Company's future operating
results are likely to be subject to significant
17
<PAGE> 20
variability from quarter to quarter and could be adversely affected in any
particular quarter. As a result, the Company believes that period-to-period
comparisons of its revenues and results of operations are not necessarily
meaningful and should not be relied upon as indicators of future performance.
Research and development expenditures are generally charged to operations
as incurred. Statement of Financial Accounting Standards No. 86, "Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,"
requires capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion of
a working model. Costs incurred by the Company between completion of the working
model and the point at which the product is ready for general release have been
insignificant. Through March 31, 1996, all research and development costs have
been expensed.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
operating data as a percentage of total revenues.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
----- ----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Systems and licensing............................... 91.9% 91.0% 87.6% 91.2% 88.4% 93.2% 85.0%
Service and maintenance............................. 8.1 9.0 12.4 8.8 11.6 6.8 15.0
----- ----- ----- ----- ----- ----- -----
Total revenues.................................. 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Cost of systems and licensing....................... 43.0 33.0 44.0 43.5 45.7 42.5 33.3
Cost of service and maintenance..................... 3.9 4.3 6.0 10.0 16.0 11.1 15.6
----- ----- ----- ----- ----- ----- -----
Total cost of revenues.......................... 46.9 37.3 50.0 53.5 61.7 53.6 48.9
----- ----- ----- ----- ----- ----- -----
Gross profit.......................................... 53.1 62.7 50.0 46.5 38.3 46.4 51.1
Operating expenses:
Research and development............................ 36.9 25.2 26.8 25.1 38.2 29.4 31.7
Sales, general and administrative................... 40.8 46.3 32.6 36.5 36.6 32.6 29.4
Merger related expenses............................. -- -- -- -- 3.7 -- --
----- ----- ----- ----- ----- ----- -----
Total operating expenses........................ 77.7 71.5 59.4 61.6 78.5 62.0 61.1
----- ----- ----- ----- ----- ----- -----
Loss from operations.................................. (24.6) (8.8) (9.4) (15.1) (40.2) (15.6) (10.0)
Interest and other income (expense) net............... (2.8) (0.4) (0.5) (0.6) 0.2 (0.7) (0.1)
----- ----- ----- ----- ----- ----- -----
Net loss.............................................. (27.4)% (9.2)% (9.9)% (15.7)% (40.0)% (16.3)% (10.1)%
===== ===== ===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
Revenues. The Company's total revenues were $5.1 million for the three
months ended March 31, 1996, compared to $4.6 million for the three months ended
March 31, 1995, an increase of $479,000 or 10.3%. Systems and licensing revenue
was $4.3 million for the three months ended March 31, 1996 and $4.3 million for
the three months ended March 31, 1995. As a percentage of total systems and
licensing revenue, systems revenue declined and licensing revenue increased
primarily due to the timing of systems deliveries and the receipt and
recognition of an initial payment related to an OEM agreement. In the three
months ended March 31, 1996, 3M, Toshiba and Kodak each accounted for more than
10% of the Company's total revenues. The Company expects systems revenue to
increase as a percentage of total systems and licensing revenues in future
periods. Revenue from service and maintenance was $770,000 for the three months
ended March 31, 1996, compared to $317,000 for the three months ended March 31,
1995, an increase of $453,000 or 143%. This increase was due to the expansion of
the Company's service and maintenance organization and increased marketing of
these services.
18
<PAGE> 21
Cost of revenues. Total cost of revenues were $2.5 million for the three
months ended March 31, 1996 and 1995. Total cost of revenues as a percentage of
total revenues was 48.9% for the first three months of 1996, compared to 53.6%
for the same period in 1995. Cost of systems and licensing revenue includes the
costs of computer hardware, software manuals, and overhead related to purchasing
and testing prior to shipment. Cost of systems and licensing revenue was $1.7
million for the three months ended March 31, 1996 compared to $2.0 million for
the three months ended March 31, 1995. Cost of systems and licensing revenue as
a percentage of systems and licensing revenue was 39.2% for the three months
ended March 31, 1996, compared to 45.7% for the three months ended March 31,
1995. This decrease results from the increase in licensing revenue as a
percentage of total systems and licensing revenue, which typically has a lower
cost of sales than systems revenue. The Company believes systems revenue as a
percentage of total systems and licensing revenue is likely to increase in the
future. Cost of service and maintenance revenue includes cost related to
pre-installation logistics, on-site installation, technical support and spare
parts. Cost of service and maintenance revenue for the three months ended March
31, 1996 was $802,000 compared to $515,000 for the three months ended March 31,
1995. This increase in total dollar spending relates directly to increased
staffing and service activities. Cost of service and maintenance revenue as a
percentage of service and maintenance revenue was 104.2% in the first three
months of 1996, compared to 162.5% for the same period in 1995. This decrease as
a percentage of total revenues reflects increased sales of service and
maintenance.
Research and development. Research and development expenses include
expenses associated with the development of new products, enhancements of
existing products and quality assurance activities, and consist principally of
personnel costs, overhead costs relating to occupancy, equipment depreciation
and supplies. Costs related to research, design and development of products are
charged to research and development expense as incurred. Research and
development expenses were $1.6 million in the three months ended March 31, 1996,
compared to $1.4 million for the three months ended March 31, 1995, an increase
of $260,000 or 19.1%. The increase was primarily due to increased engineering
personnel and activities related to development of new products. As a percentage
of total revenues, these expenses were 31.7% in the first three months of 1996,
compared to 29.4% for the three months ended March 31, 1995.
Sales, general and administrative. Sales, general and administrative
expenses consist of salaries, sales commissions, promotional expenses, legal and
travel for sales, marketing and finance staff. Sales, general and administrative
expenses were $1.5 million for each of the three months ended March 31, 1996 and
1995. As a percentage of total revenues, sales, general and administrative
represented 29.4% of total revenues for the first three months of 1996, compared
to 32.6% in the first three months of 1995.
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Revenues. The Company's total revenues were $17.0 million, $16.5 million
and $12.1 million in 1995, 1994 and 1993, respectively, increasing 3.5% from
1994 to 1995 and 35.9% from 1993 to 1994. Systems and licensing revenue was
$15.1 million, $15.0 million and $10.6 million in 1995, 1994 and 1993,
increasing 0.3% from 1994 to 1995 and increasing 41.6% from 1993 to 1994. This
increase from 1993 to 1994 primarily resulted from increases in licensing
revenue from OEMs. From 1994 to 1995, licensing revenue increased and systems
revenue decreased as a percentage of total systems and licensing revenue.
Systems revenue was adversely affected by the Merger and relating restructuring,
which temporarily disrupted the sales organization and sales activities. Service
and maintenance revenue was $2.0 million, $1.4 million and $1.5 million in 1995,
1994 and 1993, respectively, increasing 36.9% from 1994 to 1995 and decreasing
4.4% from 1993 to 1994. This increase from 1994 to 1995 in service and
maintenance revenue was due to increased staffing levels and management's focus
on providing increased service offerings to customers. This decrease from 1993
to 1994 relates to product transitions in 1994 whereby new customers were
initially covered by no-charge warranty. In the years ended December 31, 1994
and 1995 Toshiba accounted for more than 10% of the Company's total revenues.
International revenue represents revenue from customers located outside
North America, primarily Europe and Japan. International revenue, as a
percentage of total revenues, represented approximately 17%, 22% and 13% in
1995, 1994 and 1993, respectively. All sales are denominated in United States
dollars. In
19
<PAGE> 22
addition, many of the Company's domestic OEMs and distributors ship products
integrating the Company's products internationally through their own channels of
distribution.
Cost of revenues. Total cost of revenues were $10.5 million, $8.8 million,
and $6.1 million in 1995, 1994, and 1993, respectively. Cost of systems and
licensing revenue was $7.8 million, $7.2 million, and $5.3 million in 1995,
1994, and 1993, respectively. As a percentage of systems and licensing revenue,
these costs were 51.7%, 47.7% and 50.3% in 1995, 1994 and 1993, respectively.
This decrease in cost of systems and licensing revenue as a percentage of
systems and licensing revenue from 1993 to 1994 was due to an increase in OEM
licensing revenue. This increase in cost as a percentage of systems and
licensing revenue from 1994 to 1995 was due to price erosion on certain mature
products. Cost of service and maintenance revenue was $2.7 million, $1.6
million, and $722,000 in 1995, 1994, and 1993, respectively. Cost as a
percentage of service and maintenance revenue was 138.0%, 113.8%, and 47.9% in
1995, 1994, and 1993, respectively. This increase in the cost of service and
maintenance revenue across all three periods resulted from the Company's
increased investment in customer service and support.
Research and development. Research and development expenses were $6.5
million, $4.1 million and $3.2 million in 1995, 1994 and 1993, respectively,
increasing 57.3% from 1994 to 1995 and 27.2% from 1993 to 1994. This increase
from 1993 to 1994 was attributable to increased staffing to support software
development activities. Increased expenses from 1994 to 1995 were due to
increased investment associated with integrating the product lines of Cemax,
Inc. and ICON Medical Systems, Inc. following the Merger, as well as costs
associated with developing new products. Research and development expenses as a
percentage of total revenues were 38.2%, 25.1% and 26.8% in 1995, 1994 and 1993,
respectively.
Sales, general and administrative. Sales, general and administrative
expenses were $6.2 million, $6.0 million and $3.9 million in 1995, 1994 and
1993, respectively. This increase from 1993 to 1994 was due to increased
staffing and marketing activities. This increase from 1994 to 1995 was due to
increased promotional expenses related to an industry trade show. Sales, general
and administrative expenses as a percentage of total revenues were 36.6%, 36.5%
and 32.6% in 1995, 1994 and 1993, respectively.
Income Tax. As of December 31, 1995, the Company had federal and state net
operating loss carryforwards of approximately $20.0 million and $3.8 million,
respectively. The Company also had federal research and development tax credit
carryforwards of approximately $680,000. The federal net operating loss
carryforwards will expire at various dates from 1996 through 2010, if not
utilized. The California net operating loss carryforwards will expire at various
dates from 1996 through 2000. Utilization of the net operating losses and
credits may be subject to a substantial annual limitation due to the ownership
change limitations provided by the Internal Revenue Code of 1986, as amended,
and similar state provisions. See Note 6 of Notes to Financial Statements.
QUARTERLY RESULTS
The following table sets forth a summary of the Company's quarterly
operations data for the nine quarters in the period ended March 31, 1996,
together with the percentage of total revenues represented by such data. This
information has been derived from the Company's unaudited quarterly financial
statements. In management's opinion, these quarterly results have been prepared
on a basis consistent with the audited Financial Statements contained elsewhere
herein, and include all adjustments, consisting only of normal recurring
adjustments, which the Company considers necessary for a fair presentation of
the information for the quarters presented. These data should be read in
conjunction with the Company's Financial Statements and Notes thereto appearing
elsewhere in this Prospectus. The operating results for any quarter are not
necessarily indicative of results for any future period.
20
<PAGE> 23
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1994 1994 1994 1995 1995 1995 1995 1996
-------- -------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Systems and licensing...... $ 3,160 $ 3,617 $ 4,380 $ 3,859 $4,322 $ 3,463 $ 3,416 $ 3,858 $ 4,348
Service and maintenance.... 397 350 353 341 317 498 589 567 770
------ ------- ------ ------- ------- ------- ------
Total revenues......... 3,557 3,967 4,733 4,200 4,639 3,961 4,005 4,425 5,118
Cost of revenues:
Cost of systems and
licensing................ 1,364 1,629 2,216 1,956 1,972 2,311 1,776 1,734 1,703
Cost of service and
maintenance.............. 301 426 438 473 517 580 808 814 802
------ ------- ------ ------- ------- ------- ------
Total cost of
revenues............. 1,665 2,055 2,654 2,429 2,489 2,891 2,584 2,548 2,505
------ ------- ------ ------- ------- ------- ------
Gross profit................. 1,892 1,912 2,079 1,771 2,150 1,070 1,421 1,877 2,613
Operating expenses
Research & development..... 886 846 858 1,544 1,361 1,386 1,579 2,175 1,622
Sales, general &
administrative........... 1,217 1,409 1,445 1,939 1,513 1521 1,739 1,460 1,506
Merger related expenses.... -- -- -- -- -- 624 -- -- --
------ ------- ------ ------- ------- ------- ------
Total operating
expenses............. 2,103 2,255 2,303 3,483 2,874 3,531 3,318 3,635 3,128
------ ------- ------ ------- ------- ------- ------
Loss from operations......... (211 ) (343 ) (224) (1,712 ) (724) (2,461 ) (1,897) (1,758 ) (515 )
Interest and other income (expense) net... (20 ) (14 ) (17) (37 ) (31) (16 ) 43 31 (3 )
------ ------- ------ ------- ------- ------- ------
Net loss..................... $ (231 ) $ (357 ) $ (241) $(1,749 ) $ (755) $(2,477 ) $(1,854) $(1,727 ) $ (518 )
====== ======= ====== ======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1994 1994 1994 1995 1995 1995 1995 1996
-------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Systems and licensing...... 88.8% 91.2% 92.5% 91.9% 93.2% 87.4% 85.3% 87.2% 85.0%
Service and maintenance.... 11.2 8.8 7.5 8.1 6.8 12.6 14.7 2.8 15.0
-------- -------- --------- -------- -------- -------- --------- -------- --------
Total revenues......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Cost of systems and
licensing................ 38.3 41.1 51.0 46.5 42.5 58.3 44.3 39.2 33.3
Cost of service and
maintenance.............. 8.5 10.7 5.1 11.3 11.1 14.7 20.2 18.4 15.7
-------- -------- --------- -------- -------- -------- --------- -------- --------
Total cost of
revenues............. 46.8 51.8 56.1 57.8 53.6 73.0 64.5 57.6 49.0
-------- -------- --------- -------- -------- -------- --------- -------- --------
Gross profit................. 53.2 48.2 43.9 42.2 46.4 27.0 35.5 42.4 51.0
Operating expenses
Research & development..... 24.9 21.3 18.1 36.8 29.4 35.0 39.5 49.2 31.7
Sales, general &
administrative........... 34.2 35.5 30.5 46.2 32.6 38.3 43.4 33.0 29.4
Merger related expenses.... 0.0 0.0 0.0 0.0 0.0 15.8 0.0 0.0 0.0
-------- -------- --------- -------- -------- -------- --------- -------- --------
Total operating
expenses............. 59.1 56.8 48.6 83.0 62.0 89.1 82.9 82.2 61.1
-------- -------- --------- -------- -------- -------- --------- -------- --------
Loss from operations......... (5.9) (8.6) (4.7) (40.8) (15.6) (62.1) (47.4) (39.8) (10.1)
-------- -------- --------- -------- -------- -------- --------- -------- --------
Interest and other income (expense) net... (0.6) (0.4) (0.4) (0.9) (0.7) (0.4) 1.1 0.7 (0.1)
-------- -------- --------- -------- -------- -------- --------- -------- --------
Net loss..................... (6.5)% (9.0)% (5.1)% (41.7)% (16.3)% (62.5)% (46.3)% (39.1)% (10.2)%
======== ======= ======== ======= ======== ======= ======== ======= ========
</TABLE>
The Company's quarterly revenues and results of operations have varied
significantly as a result of a number of factors, including: the volume and
timing of system sales and installations; the length and complexity of the
systems sales and installation cycles; seasonal buying trends as a result of
clients' annual purchasing and budgeting practices; and the Company's sales
commission practices. The Company expects that these variations will continue
for the foreseeable future. The timing of revenue recognition is difficult to
forecast because the Company's systems sales and installation cycles are
relatively long and frequently depend on factors such as the size and scope of
installations and general economic conditions. During the sales cycle, the
Company commits substantial time, effort and funds to prepare a contract
proposal and negotiate the contract. In addition, the Company recognizes
revenues from development contracts based upon the
21
<PAGE> 24
achievement of milestones. As a result, the timing of revenue recognition varies
considerably and could be impeded by a number of factors, including availability
of Company personnel, the Company's need to allocate system installation
resources to other installations or to research and development activities,
availability of client personnel and other resources, complexity of clients'
needs and delays imposed by clients. Any delays in progress toward completing a
system installation could reduce the revenues recognized in any given period and
could have a material adverse effect on the Company's business and results of
operations. The Company typically does not obtain long-term volume purchase
contracts from its customers, and a substantial portion of the Company's backlog
is scheduled for delivery within 90 days or less. Customers may cancel orders
and change volume levels or delivery times without penalty. Quarterly revenue
and operating results therefore depend on the volume and timing of the backlog
as well as bookings received during the quarter. A significant portion of the
Company's operating expenses are fixed, and planned expenditures are based
primarily on revenue forecasts and product development programs. If revenue does
not meet the Company's expectations in any given period, the adverse impact on
operating results may be magnified by the Company's inability to adjust
operating expenses sufficiently or quickly enough to compensate for such a
shortfall. Accordingly, the Company believes that period-to-period comparisons
of revenues and results of operations are not necessarily meaningful and should
not be relied upon as indicators of future performance.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations, working
capital needs and capital expenditures primarily from private placements of
equity securities totalling approximately $32.1 million. In the three months
ended March 31, 1996, cash provided by operating activities of $122,000 was
primarily attributable to a decrease in accounts receivable partially offset by
an increase in accrued compensation and deferred revenue. Cash used in investing
activities of $182,000 in the three months ended March 31, 1996 related to the
purchase of property and equipment. Cash flows used in financing activities of
$61,000 for the three months ended March 31, 1996 was primarily attributable to
payments on the Company's revolving line of credit.
Deferred revenues consist of the unrecognized portion of service and
maintenance revenue received pursuant to maintenance and support contracts and
the unrecognized portion of systems and license revenue subject to delivery of
goods or completion of services. Deferred revenue increased from $3.5 million at
December 31, 1995 to $4.0 million.
Capital expenditures have been, and future expenditures are anticipated to
be, primarily for facilities and equipment to support expansion of the Company's
operations and management information systems. While the Company currently has
no material capital commitments, the Company anticipates that its planned
purchases of capital equipment in 1996 will require additional expenditures of
approximately $500,000.
The Company expects that its requirements for office facilities and other
office equipment will grow as staffing requirements dictate. The Company's
operating lease commitments consist primarily of an office lease for the
Company's main operating facility. The Company plans to continue increasing its
professional staff during the remainder of fiscal 1996 and during fiscal 1997 to
meet anticipated sales volume and to support research and development efforts.
To the extent necessary to support increases in staffing, CEMAX-ICON may obtain
additional office space.
At March 31, 1996, the Company had cash and cash equivalents of
approximately $1.7 million and a working capital deficit of approximately $1.1
million. The Company believes that the estimated net proceeds from this offering
together with current cash and cash equivalent balances and internally generated
funds will satisfy the Company's projected working capital and capital equipment
requirements at least through 1997. Thereafter, if cash generated from
operations is insufficient to satisfy the Company's projected requirements, the
Company may be required to sell additional equity or debt securities or obtain
bank or other credit facilities. There can be no assurance that the Company will
be able to sell such securities or obtain such credit facilities on acceptable
terms in the future, if at all. The sale of additional equity or debt securities
could result in additional dilution to the Company's stockholders.
22
<PAGE> 25
BUSINESS
INTRODUCTION
CEMAX-ICON designs, manufactures and markets medical image information
systems which electronically acquire, archive, distribute and display medical
images throughout hospitals, outpatient facilities and integrated delivery
networks ("IDNs"). The Company's systems interface with virtually all
commercially available imaging modalities, including x-rays, computed tomography
("CT"), magnetic resonance imaging ("MRI"), computed radiography, ultrasound and
nuclear medicine. By automating and increasing the availability of medical
images within a healthcare facility or throughout an IDN, the Company's systems
reduce the cost and improve the management of medical care. CEMAX-ICON's systems
and modules are based on an open architecture and utilize standard hardware and
standard network protocols in order to facilitate integration with existing
image acquisition devices and healthcare information systems. CEMAX-ICON
provides complete turn-key systems as well as scalable software modules that
integrate with commercially available third-party hardware. CEMAX-ICON sells its
systems and software directly to end-users as well as through OEMs and
distributors. The Company's OEM relationships are with several leading suppliers
of imaging and information systems to the healthcare industry, including
Minnesota Mining and Manufacturing Co. ("3M"), Toshiba Corporation ("Toshiba"),
Lucent Technologies, Inc. (formerly a division of AT&T) ("Lucent"),
Hewlett-Packard Co. ("Hewlett-Packard"), Sterling Diagnostics, Inc. (formerly a
division of DuPont) ("Sterling") General Electric Co. ("General Electric"), and
Eastman Kodak Company ("Kodak"). CEMAX-ICON's systems and software are installed
at over 1,500 sites worldwide.
INDUSTRY BACKGROUND
The healthcare industry in the United States continues to change
dramatically in response to escalating healthcare costs. Reimbursement for
healthcare services has historically been based on a fee for service model of
payment. Under pressure to reduce costs, managed care organizations and other
payors are increasingly utilizing reimbursement models, including fixed fee and
capitation, that shift the financial risk of delivering healthcare from the
payors to the physicians and the institutional providers. In response to this
changing reimbursement environment, healthcare providers, including hospitals,
physician groups and laboratories, are combining horizontally and vertically to
create IDNs, and are reengineering their organizations and information systems
to achieve efficiencies wherever possible.
Healthcare providers and payors recognize that timely access to the
complete patient medical record throughout the healthcare institution or IDN can
help control healthcare costs and improve the quality of patient care. However,
until recently, information systems used by healthcare institutions focused on
automating financial, registration, scheduling, laboratory, pharmacy and
accounting departments but did not make data available throughout the entire
institution. Recent technological advances have enabled the creation of a
computerized patient record ("CPR") which integrates these disparate department
systems and data repositories throughout a single institution or across an IDN.
However, in order for a CPR to be effective in supporting care management, it
must contain all information in a patient's medical record. Medical images have
not been included in the CPR because those images are typically stored on film,
not generally accessible by computer.
Medical images from x-ray, CT, MRI, computed radiology, ultrasound and
nuclear medicine are a critical part of the patient's medical record as they are
used in all stages of patient care, including screening, diagnosis, treatment
and post-treatment assessment. As a result, medical images are viewed by, and
must be copied and manually transferred among, multiple parties involved in the
treatment of a patient within a healthcare enterprise, including the radiology,
orthopedics, surgery, oncology, emergency and other departments of a hospital,
multiple clinics, hospitals, and doctors' homes and offices. According to a 1995
report by the American College of Radiology, over 272 million radiographic and
other medical imaging procedures were performed in the United States in 1992,
producing an estimated one billion square feet of film. Recently introduced
diagnostic imaging devices such as spiral CT and interventional MRI generate
even greater numbers of images per patient exam. Currently, film retrieval and
distribution are manual processes which are
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inherently slow and labor-intensive. Furthermore, film is bulky, expensive to
store, frequently lost or misplaced and requires expensive chemical handling and
processing which produce environmentally hazardous by-products. Industry
analysts have estimated that films are lost or misplaced 10% to 20% of the time,
which increases costs and often presents complications in providing patient
care. A 1995 industry survey estimates that healthcare providers in the United
States purchased approximately one billion dollars of medical film in 1992, and
that the annual cost of processing, handling, storing and retrieving film ranges
from $3-4 billion.
Trends toward lower cost and higher quality care in the healthcare industry
are causing changes in the management of medical images. Healthcare institutions
are motivated to reengineer their management of medical images in order to
reduce the operational costs of film management, to ensure that images are
accessible throughout the healthcare organization or IDN, and to improve the
quality of patient care. Due to reductions in the reimbursement rates for
radiological interpretations, radiologists are also motivated to support the
implementation of new systems which enable them to increase the number of
interpretations they can perform on a daily basis. In addition, the ability to
access medical images remotely enables radiologists to compete for business over
larger geographic areas.
Traditional healthcare information systems are limited in their ability to
provide cost-effective, institution-wide access to medical images because many
existing image acquisition devices use a variety of proprietary platforms.
Devices utilizing proprietary platforms cannot easily communicate with each
other or be integrated into a network. As a result, the distribution of medical
images is generally a manual, labor-intensive and inefficient process. Moreover,
digitized medical images contain enormous quantities of data. For example, a
two-view chest x-ray contains eight to ten megabytes of data. More recent
healthcare information systems have improved the management of textual data, but
generally lack the storage capacity and the connectivity necessary to provide
immediate access to large databases of medical images.
Recent computing advances have made possible the creation of large-scale
networks that digitize, transmit, store and retrieve medical images. Despite
such technological advances, the broad implementation of such systems, known as
Picture Archiving and Communication Systems ("PACS"), has proven difficult. Most
PACS solutions lack some or all of the following capabilities required to be
effective in the healthcare industry: (i) networking capability that enables
connectivity with image acquisition devices that use emerging industry standard
interfaces and the many existing image acquisition devices that have proprietary
interfaces; (ii) data compression technology and communications bandwidth that
meet physician demands for immediate image display; (iii) data storage
architecture that is cost-effective and adequate to handle massive input/output
volumes and maintain continuous access to multiple medical images
simultaneously; (iv) scalability to grow as institutions consolidate to create
increasingly larger IDNs; (v) open systems architecture to allow customers to
choose from a variety of standard commercially available hardware platforms; and
(vi) user implementations that support clinicians without disrupting their
established procedures. Ideally, PACS should be able to collect and store
medical images from the various image acquisition devices, make the images
immediately available at any point in the institution or IDN, including multiple
hospitals, hospital departments and clinics as well as the doctors' offices and
homes. Furthermore, PACS should be integrated with the institution's existing
paper or document information system.
THE CEMAX-ICON SOLUTION
CEMAX-ICON's systems enable healthcare providers to cost-effectively
implement PACS within a healthcare facility or throughout an IDN. The Company's
systems, designed in consultation with clinicians, enable healthcare providers
to reengineer the management of medical images to increase the productivity of
radiologists, other clinicians and support staff. The Company's systems also
reduce film use and film-related expenses, clinical problems and costs related
to lost films, and costs of storing and accessing medical images. In addition,
the Company's systems increase the accessability of medical images to clinical
staff, both within an institution and at remote sites and enable healthcare
providers to broaden their geographic service areas.
The Company's systems are designed to address the technical challenges in
implementing PACS. The Company's systems are based on an open architecture
adhering to industry standards, allowing customers to choose from a variety of
standard commercially available hardware. For these reasons and because the
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Company's systems are modular in design, investment in early systems
implementation is preserved as the network expands. The Company's systems
acquire images from virtually all commercially available imaging modalities
including x-ray, CT, MRI, computed radiography, ultrasound and nuclear medicine.
The Company has developed a large library of interfaces to provide connectivity
with standard interfaces as well as the large installed base of proprietary
image acquisition devices. The Company's systems utilize a distributed server
and database architecture and advanced image compression technology to
cost-effectively store and transmit large image data sets at clinically
acceptable speeds.
STRATEGY
CEMAX-ICON has established itself as a leading supplier of medical image
information systems and software to the healthcare industry. The principal
elements of the Company's strategy are as follows:
Maintain Technology Leadership. The Company believes that maintaining
technology leadership in the digital collection, storage, transmission and
display of medical images is necessary to maintain its position as a leading
supplier of teleradiology systems and to increase its penetration of the high
performance PACS market. The Company's platform-independent, distributed
architecture and advanced technology provide real time image management,
optimized image compression and bandwidth, high volume storage capability, and
scalable installations which can interface with industry standard and
proprietary image acquisition devices. For example, the Company believes its
products are distinguished by their ability to provide real-time display of
multiple high resolution digitized x-ray images simultaneously on industry
standard hardware. The Company intends to continue to invest in research and
development to maintain its technology leadership.
Leverage Knowledge of Radiology Practice. The Company believes that its
expertise in the practice of radiology gives it a competitive advantage in the
marketplace where radiologists exert significant influence on the purchasing
decision for PACS and teleradiology systems. The Company has worked extensively
with radiologists and other clinicians for more than a decade in developing its
systems. In addition, the Company's Chief Technical Officer was a practicing
radiologist for several years prior to founding ICON Medical Systems, Inc. Based
on its insights into the workflow processes of radiology departments, the
Company's systems and software have been designed to enable radiologists and
other clinicians to incur minimal training and disruption to established
practice patterns. For example, the Company's AutoRad module automatically
customizes the order and manner in which images are displayed to meet the
individual radiologist's method of practice.
Leverage OEM Relationships. Strategic OEM relationships enable the Company
to access a significant number of large accounts, utilize technical knowledge of
the OEMs' product offerings to optimize the Company's own systems, allocate its
product development resources most effectively, and facilitate entrance to
international markets. The Company has established OEM relationships with
leading suppliers of imaging and information systems to the healthcare industry,
including 3M, Toshiba, Lucent, Hewlett-Packard, Sterling, General Electric and
Kodak. The Company intends to continue to enter into similar OEM relationships
with other major medical imaging and healthcare information system vendors in
the future.
Increase Penetration of PACS and Teleradiology Markets. The Company
believes that the market for PACS is likely to experience significant growth and
that those vendors obtaining early orders for initial system installations may
receive significantly larger follow-on orders for further system implementation.
The Company has previously invested heavily in research and development in order
to accelerate new product development, develop a broad product offering, and
maintain its technology leadership in the PACS market. The Company intends to
take advantage of its research and development investment, large installed base
of teleradiology systems and broad product line to expand its presence in the
PACS market and increase its significant share of the teleradiology market.
Cross-Sell Teleradiology and PACS. The Company believes that it has a
significant competitive advantage in selling teleradiology systems to customers
using the Company's PACS due to its ability to integrate certain of the
Company's teleradiology modules into its PACS. The Company also believes that
its position as a leading vendor of teleradiology systems with a large installed
base of approximately 1,300 customers increases access to potential PACS
customers. In addition, the familiarity of both the radiology
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department and the healthcare institutions' MIS department with the Company's
product offerings increases the likelihood of a successful system sale, as most
of the Company's PACS competitors do not offer their own teleradiology systems.
PRODUCTS
CEMAX-ICON's medical image information systems are primarily software-based
and consist of the following modules: (i) input modules enable the Company's
medical image information system to digitally acquire images from virtually all
commercially available imaging modalities including x-rays, CT, MRI, computed
radiology, ultrasound, and nuclear medicine; (ii) distribution and storage
modules route medical images throughout the network and save images for
immediate retrieval and long-term storage; (iii) display modules display,
process or print medical images supporting a wide range of clinical needs and
applications ranging from centralized diagnostic reading to remote clinical
review; and (iv) hardware products allow costly and specialized medical-imaging
specific functions to be performed on cost-effective PC platforms.
The following chart summarizes the various software modules comprising the
Company's systems:
[INSERT DISTRIBUTION AND STORAGE GRAPHIC]
Input Modules
CEMAX-ICON's family of input modules enables the Company's medical image
information systems to interface with virtually all commercially available
medical imaging modalities. Each of these modules acquires medical images and
associated patient and study information from the imaging devices in digitized
format and distributes them to the network in compliance with the emerging
industry-standard communications protocol for an open network, DICOM (Digital
Image Communications in Medicine). The Company has developed approximately 125
ScanLink interfaces.
DICOM ScanLinks are platform-independent software modules which interface
with DICOM-compliant image acquisition devices to support sending,
querying, receiving and printing images and study information. DICOM
ScanLinks incorporate CEMAX-ICON's compression technology which allows
transmission over low bandwidth connections such as telephone lines.
Legacy ScanLinks interface with virtually all existing CT and MRI scanners
which utilize a proprietary network protocol. Legacy ScanLinks are a
differentiating technology for CEMAX-ICON because most vendors do not have
access to the proprietary information necessary to develop interfaces for
devices other than their own. The Company has been able to obtain protocol
specifications from the majority of CT and MRI scanner vendors due to its
many and longstanding OEM relationships.
Printer ScanLinks interface with many medical scanners which output images
to commercial medical film printers but which are not designed to interface
with any network, whether proprietary or DICOM-compliant. Printer ScanLinks
emulate the interface on these scanners to digitally send images to an open
network. For teleradiology applications, up to four scanners may share a
centralized Printer ScanLink by performing remote image acquisition using
up to four Technologist Keypads described below.
Digitizer ScanLinks digitize and route film-based medical images to an open
network. Digitizer ScanLinks support virtually all medical film digitizers.
Digitizer ScanLink software provides full control over the image
digitization process including selection of image resolution, image
grayscale, image orientation, default window/level setting and region of
interest. The software also supports a quality-assurance function allowing
technologists to review the scanned image and make corrections prior to
saving it.
CR ScanLinks interface with virtually all computed radiography devices,
allowing x-ray images to be directly input and accessible on an open
network without ever having been filmed. CR ScanLinks automatically receive
images from computed radiography devices, extract patient, study and image
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information from the proprietary file format and apply proprietary image
processing as specified by parameters in the image file, for routing to
other DICOM-compliant devices.
Distribution and Storage Modules
CEMAX-ICON'S distribution and storage modules route digital images from the
Company's input modules throughout an open network and save images for immediate
and long-term storage and retrieval.
Image Server is a distributed image database which allows users to access
specific images regardless of where the images are stored or the users are
located. The Image Server is integrated with Clinical View, Diagnostic
View, VIP and Network Film Server modules as described below. Image Server
may be integrated with the Company's display modules as well as with any
DICOM-compliant devices. The distributed scalable nature of the database
provides maximum availability of information in the unlikely event any one
or more servers on an open network fail.
ImageCom provides the ability to send, receive, retrieve and track medical
imaging studies to and from remote locations. This module supports
optimized compression for transmission over low bandwidth connections as
well as transmission over a range of wide area connections including
telephone lines, ISDN, Frame Relay and T1. ImageCom provides fail-safe
telecommunications allowing it to run in an unattended mode and resume
transmission automatically after an interruption.
Network Film Server transmits images from Clinical View, Diagnostic View or
VIP to virtually all medical film printers, including those produced by 3M,
Agfa-Gevaert N.V., E.I. DuPont Nemours & Co., Fuji Photo Film Co., Ltd.,
Kodak and Konica Corporation.
Archive Manager 1.0 provides the ability to store images to removable tape
cartridges for later retrieval and to manage the tapes as a large shelf
library. Archive Manager 1.0 is expected to be superseded by Archive
Manager 2.0.
Archive Manager 2.0, currently under development, is a scalable rules-based
medical image information warehouse that automatically stores, retrieves
and distributes medical images. Archive Manager 2.0 is a distributed
object-oriented DICOM-compliant database that supports the reliability and
volume demands of PACS and health care information systems environments.
Archive Manager 2.0 offers capabilities ranging from routine queries to
complex data mining, supporting utilization review and research
applications. Its sophisticated hierarchical storage management capability
allows it to automatically migrate images between rapid on-line storage and
lower cost jukebox media. The module supports medical-optimized
compressions allowing medical facilities to specify that archived studies
be compressed in order to lower storage costs and expand system capacity.
Display Modules
CEMAX-ICON's display modules enable the Company's medical image information
system to support a wide range of clinical needs and applications ranging from
remote clinical review to centralized diagnostic reading. Each of these modules
allows the user to access and display specific medical images and associated
patient and study information from the Company's distribution and storage
systems.
Clinical View is a Unix-based software module designed for use by clinical
staff to display and review patients' current and historical medical images
from an open network, regardless of where the images are stored or the
users are physically located. Clinical View is DICOM-compliant, presents
images at medium resolution (1,500 lines) on one or two monitors and
provides a simple intuitive user interface which allows clinicians to
perform basic image manipulation and enhancement.
Diagnostic View is a Unix-based software module designed for use by
radiologists for diagnostic reading of medical images from an open network,
regardless of where the images are stored or the users are physically
located. Diagnostic View is DICOM-compliant, presents images at
high-resolution (2,000 lines) on one or two monitors, and provides access
to powerful image manipulation, enhancement and printing functions.
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VIP is a Unix-based software module designed for use by radiologists
whose practice requires three dimensional ("3D") reconstruction and
visualization capability. VIP receives two dimensional CT and MRI images
and renders these as 3D images which may be viewed and manipulated
electronically. User definable protocols provide a powerful tool to
automate complex image processing and presentation functions. Additional
features include real-time monitoring of scan progress, real-time
multi-planar reconstruction, interactive tissue classification and
disarticulation and creation of spinal and dental clinical protocol
packages.
RadAccess is a Macintosh-based software display module for less
demanding imaging requirements. CEMAX-ICON's PCI display controllers enable
medium resolution (1,500 line) display capability on one or two monitors.
RadAccess provides a simple intuitive user interface which allows
clinicians to navigate the available current and historical images and to
perform basic image manipulation and enhancement.
TeleMax Display software is designed for use by radiologists and
clinical staff at home or office using their existing Windows 95 based or
Macintosh personal computers. Telemax works in conjunction with ImageCom
software which transfers medical images over telephone lines or ISDN.
TeleMax allows users to create predefined or custom annotated illustrated
reports which may be printed or faxed to referring physicians. TeleMax
software presents images at conventional PC resolution (500-1,000 lines) on
a single monitor and provides image viewing and manipulation functions.
AutoRad, currently under development, is a DICOM-compliant primary
diagnostic reading module which optimizes radiologists' clinical
productivity and enhances communications of images and results with
clinical staff. The Company currently has 12 AutoRad clinical Beta sites,
ranging in scale from a freestanding imaging center to a teaching hospital.
AutoRad enables healthcare institutions to transition from film-based to
filmless reading of medical images. AutoRad displays medical images on as
many as four high-resolution monitors (2,500 lines) using CEMAX-ICON
developed graphics-accelerated PCI display controllers. It allows multiple
image files to be accessed and compared simultaneously, providing the
capability to view electronically high volumes of medical images faster
than with film. By automatically sorting and arranging current and
historical studies in accordance with each radiologist's preference,
AutoRad significantly increases the efficiency of interpretation. AutoRad
allows radiologists to annotate selected images with text notes and to
incorporate them into illustrated reports which may be printed or faxed to
referring clinicians.
Hardware Products
The Company designs hardware products to enable its software to implement
fully functional image information networks on cost-effective industry standard
hardware. The Company's hardware products use industry standard PCI interfaces
for maximum performance and compatibility with existing PC platforms.
PCI Display Controller allows standard PCs to display high resolution
images on medical monitors up to a resolution of 2,500 x 2,000 lines. To
the Company's knowledge, PCI Display Controller is the only commercially
available controller at this resolution to drive up to two monitors from
each controller card, allowing a typical PC system to drive up to eight
monitors.
PCI Analog and Digital Printer Interfaces acquire images from
proprietary medical scanners not designed to support a network connection.
An advanced switching capability allows the operator to select among three
modes without reconfiguring the system: (i) print to the network; (ii)
print to the film printer; and (iii) print to both the network and the film
printer. This allows the users to transition to a filmless environment and
still have back-up use of the printer in the event of network failure.
Technologist Keypad is an LCD-based controller which allows
technologists to monitor and control image input and routing in conjunction
with the PCI Analog and Digital Printer Interfaces described above. This
product provides barcode input capability which eliminates the requirement
for manual entry of patient and study demographics.
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Remote Workstation allows up to four remote users to have full
keyboard, mouse and monitor control over a shared central teleradiology
acquisition system. This product reduces cost in teleradiology applications
by eliminating the need to install a dedicated input computer for each
remote monitor.
LaserLink connects to the printer port on commercially available
medical film printers and allows users to print electronic medical images
to a medical film printer from any station on the network. This controller
emulates the digital printer interface found on current generation CT and
MRI scanners. It supports virtually all of the commercially available
printing protocols.
TECHNOLOGY
CEMAX-ICON's software is developed using object-oriented design methodology
and leading commercial C/C++ compilers. The Company's core technologies have
been developed using an open, platform-independent architecture. Communications
modules are compliant with industry standard DICOM 3.0, TCP/IP and HL-7. Archive
modules under development utilize a commercially available distributed object-
oriented database.
The Company's systems operate on a wide range of platforms including SUN
Sparc / Sparcstation work stations under Unix, Pentium PC's under Windows 95 and
NT, and Macintosh computers under MacOS 7.5. The Company is in the process of
porting key modules to HP Unix and NT computers. Acquisition and display
hardware products are based on PCI interfaces and support industry-standard
drivers for Windows 95, NT and Macintosh.
All CEMAX-ICON systems are designed and developed according to product
development procedures reviewed by the FDA and stringent quality assurance
procedures which meet or exceed FDA Good Manufacturing Practices.
MARKETING AND SALES
The primary market for the Company's systems includes hospitals, outpatient
facilities and IDNs. The Company currently sells its products directly through
its own sales organization and indirectly through OEMs, including 3M, Toshiba,
Lucent, Sterling, General Electric and Kodak, and six distributors. The use of
OEMs and distributors allows the Company to leverage its sales force and to
penetrate accounts which have strong customer loyalty to the OEM. The Company is
committed to expanding its market presence by expanding its direct sales force
to market directly to healthcare providers and through pursuing additional OEM
and distributor relationships.
The Company's OEM relationships often consist of multi-year distribution
agreements providing the OEMs with the right to acquire the Company's systems at
a discount and to offer such systems to third parties under private labels. The
Company's distributor relationships consist of multi-year agreements providing
the distributors with the right to purchase the Company's systems at a discount
for resale. When working with an OEM or distributor, the Company's sales people
work as a complementary extension of their sales team. Further revenue growth
depends, in part, on the Company's ability to successfully maintain and expand
OEM and distributor relationships and rapidly grow its direct sales force.
CEMAX-ICON has entered into an international distribution agreement with 3M
in addition to its domestic OEM arrangement. This distribution agreement
provides 3M with exclusive sales rights to jointly label the Company's products
for sale in Europe through the 3M sales force and calls for minimum quarterly
purchase commitments by 3M. Other OEMs and distributors can sell private label
CEMAX-ICON products in Europe.
In November 1995, the Company, Hewlett-Packard and 3M jointly announced a
cooperative effort to distribute Archive Manager 2.0 using Hewlett-Packard
hardware, 3M media and CEMAX-ICON software. This relationship is designed to
provide customers with simplified purchasing and lower costs associated with
combining the three companies' products to assemble a solution. The companies
expect to benefit through development of new channels of distribution.
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The Company currently sells its products directly through seven
representatives located in Charlotte, Chicago, Kansas City, New Haven, San
Antonio and San Francisco with marketing, sales and technical support provided
through the Company's headquarters in Fremont, California.
The Company's marketing department is comprised of technical personnel
experienced in network analysis, product management, target marketing,
competitive analysis, sales support, quoting, proposals and advertising. The
Company supports these efforts by publishing articles, presenting or sponsoring
talks at professional meetings, assuming leadership positions in professional
organizations, participating in trade shows, advertising in trade magazines and
issuing frequent announcements to the trade press. Prospective clients are
identified through the marketing programs of the Company's OEMs and
distributors, as well as the Company's own direct mail and telemarketing
efforts.
The Company's success is dependent on the success of its marketing and
distribution strategy which involves, to a significant degree, reliance on the
Company's OEMs to sell the Company's software modules as a component of the
systems being marketed by such OEMs. The Company's OEM agreements are subject to
cancellation by the OEMs under certain circumstances. Kodak, one of the
Company's OEMs, has alleged that the Company is in breach of its obligations
under the OEM agreement with Kodak. The Company is currently in negotiations
with Kodak with regard to an amendment of such OEM agreement to attempt to
resolve the dispute. Payments received from Kodak pursuant to this agreement
accounted for 12% of the Company's total revenues in the three months ended
March 31, 1996. If the Company's current or future OEMs elect to terminate their
agreements with the Company or elect not to include the Company's software
modules as components in their systems or are unsuccessful in achieving
significant sales of those systems, the Company's business would be materially
and adversely affected. In addition, a significant portion of the Company's
total revenues are derived from a small number of customers. In the years ended
December 31, 1994 and 1995 Toshiba accounted for more than 10% of total revenues
and in the three months ended March 31, 1996, 3M, Toshiba, and Kodak each
accounted for more than 10% of total revenues and in the aggregate accounted for
53% of total revenues. The Company expects to continue to depend upon its
principal customers for a significant portion of its revenues, although there
can be no assurance that the Company's principal customers will continue to
purchase systems and services from the Company at current levels, if at all. The
loss of one or more major customers or a change in their buying pattern could
have a material adverse effect on the Company's business and results of
operations. Recruiting and retaining qualified sales, customer service and
technical personnel will also be critical to the Company's success. There can be
no assurance that the Company will be successful in attracting and retaining
skilled technical personnel who generally are in high demand in the Company's
geographic area. The loss of certain key employees or the Company's inability to
attract and retain other qualified employees could have a material adverse
effect on the Company's business.
CUSTOMERS AND SIGNED SALES CONTRACTS
The Company's customers include healthcare providers located throughout the
United States, Europe and Japan. As of March 31, 1996, the Company had over
1,500 end-user customers. The Company believes that the installed customer base
of its OEMs and distributors also represents a significant opportunity to market
and sell its systems and services.
The decision by a healthcare provider to replace or substantially upgrade
its image information systems typically involves a major commitment of capital
and an extended review and approval process. Accordingly, the sales and delivery
cycle for the Company's system is typically two to 12 months from initial
contact to delivery and acceptance. The time required from initial contact to
contract execution is typically one to six months. During these periods, the
Company may expend substantial time, effort and funds preparing a contract
proposal and negotiating the contract. Any significant or ongoing failure to
identify appropriate potential customers, to achieve signed contracts, to
successfully complete products under development, and to obtain customer
acceptance after expending time, effort and funds could have a material adverse
effect on the Company's business, financial condition and results of operations.
At March 31, 1996, the Company had approximately $8.8 million of signed
sales contracts for systems and services which had not yet been delivered but
are scheduled for delivery within the next twelve months,
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including products under development. The Company adjusts the timing of an
installation, which typically requires one to six months to complete, to
accommodate customers' needs, and the Company cannot accurately predict the time
it will take to complete products under development. Consequently, the Company
cannot accurately predict the amount of revenue it expects to achieve in any
particular period. A termination or installation delay of one or more contracts,
or the failure of the Company to procure additional contracts, could have a
material adverse effect on the Company's business.
The Company's direct customers include the following purchasers of PACS
systems having a sales price of over $400,000:
Bowman Gray School of Medicine, Winston-Salem, NC
Charlotte-Mecklenburg Hospital Authority, Charlotte, NC
Northwest Texas Hospital, Amarillo, TX
Ochsner Clinic, New Orleans, LA
Saint Francis Hospital, Tulsa, OK
Saint Vincent Medical Center, Toledo, OH
Slagelse Central Hospital, West-Zealand County, Denmark
Stanford Health Services, Stanford, CA (1)
University of Iowa, Iowa City, IO
University of North Carolina Medical Center, Chapel Hill, NC
Turku University Central Hospital, Turku, Finland
Veteran's Administration Medical Center Oklahoma, Oklahoma City, OK
Virginia Mason Medical Center, Seattle, WA
- ---------------
(1) System scheduled for installation in July 1996.
CUSTOMER SUPPORT
The Company currently intends to continue to invest in the customer service
area by increasing headcount, build infrastructure (including a state-of-the-art
customer call handling service management system and diagnostic service and
installation tools), and develop and implement training programs for its
internal staff, customers, OEMs and distributors. Customer Support is provided
either directly from CEMAX-ICON by on-site staff visits, technical support by
phone or direct log onto the system via modem, or through the Company's OEM
relationships.
MANUFACTURING
The Company's manufacturing activities consist primarily of assembling and
testing components and subassemblies acquired from qualified vendors, and
subsequently integrating the appropriate application software programs. The
Company operates under the FDA Good Manufacturing Practices guidelines and is a
registered medical device manufacturer. The Company has recently undertaken
efforts to comply with the ISO 9000 class of standards.
The Company purchases industry-standard parts and components for the
assembly of its products, generally from multiple vendors. The Company generally
maintains good relationships with its vendors and, to date, has not experienced
any material supply problems.
COMPETITION
Competition in the market for the Company's systems is intense. A large
number of companies offer teleradiology systems which are competitive with those
of the Company. Many of the Company's competitors are larger and more
established and have substantially more financial, technical, research and
development and marketing resources than the Company. Several large
multi-national corporations, including Philips, Agfa and Siemens, offer
competitive products in the PACS market. Other large corporations have the
technical and financial ability to design and market competitive products, and
some of them have produced and marketed such products in the past. There can be
no assurance that such large potential competitors will not elect to
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reenter the market for the Company's systems, which could have a material
adverse effect on the Company's ability to sell its products. In the past,
certain competitors have from time to time offered PACS for sale at substantial
discounts to prevailing prices or offered PACS to customers at no additional
charge in connection with the sale of complementary systems, which has had and
could have a material adverse effect on the Company's ability to sell its
systems.
The Company's ability to compete successfully in the sale of its systems
will depend in large part upon its ability to implement successfully its
strategy of selling systems as a total solution as well as its ability to
attract new customers, sell new systems, deliver and support system enhancements
to its existing customers and respond effectively to continuing technological
change by developing new systems. There can be no assurance that the Company
will be able to compete successfully in the future, nor that future competition
for product sales will not have a material adverse effect on the business,
results of operations and financial condition of the Company.
CEMAX-ICON believes that the principal competitive factors in its market
are customer recommendations and references, company reputation, system
reliability, system features (including ease of use), technological
advancements, breadth of product line, customer service and support, the
effectiveness of marketing and sales efforts, product price and performance. In
addition, CEMAX-ICON believes that the speed with which companies in its market
can anticipate the evolving healthcare industry structure an identify unmet
needs are important competitive factors. There can be no assurance that the
Company will be able to compete successfully in the future against existing or
potential competitors.
PATENTS AND INTELLECTUAL PROPERTY
The Company generally does not rely on patent protection with respect to
its products. Instead, the Company relies on a combination of copyright and
trade secret law, employee and third-party nondisclosure agreements, and other
protective measures to protect intellectual property rights pertaining to its
systems and technology. There can be no assurance, however, that applicable
copyright or trade secret law or these agreements will provide meaningful
protection of the Company's copyrights, trade secrets, know-how or other
proprietary information in the event of any unauthorized use, misappropriation
or disclosure of such copyrights, trade secrets, know-how or other proprietary
information. In addition, the laws of certain foreign countries do not protect
the Company's intellectual property rights to the same extent as do the laws of
the United States. There can be no assurance that the Company will be able to
protect its intellectual property successfully.
The Company's systems and technology incorporate subject matter that the
Company believes is in the public domain or that it otherwise has the right to
use. There can be no assurance that third parties will not assert patent,
copyright or other intellectual property infringement claims against the Company
with respect to its products or technology or other matters. There may be
third-party patents, copyrights and other intellectual property relevant to the
Company's systems and technology which are not known to the Company. Although no
third party has asserted that the Company is infringing such third party's
patent rights, copyrights or other intellectual property, there can be no
assurance that litigation asserting such claims will not be initiated, that the
Company would prevail in any such litigation, or that the Company would be able
to obtain any necessary licenses on reasonable terms if at all. Any such claims
against the Company, with or without merit, as well as claims initiated by the
Company against third parties, can be time-consuming and expensive to defend or
prosecute and to resolve.
GOVERNMENT REGULATION
The manufacturing and marketing of the Company's systems are subject to
extensive government regulation as medical devices in the United States by the
FDA and in other countries by corresponding foreign regulatory authorities. The
process of obtaining and maintaining required regulatory clearances and
approvals is lengthy, expensive and uncertain. The Company believes that its
success depends upon commercial sales of improved versions of its systems,
certain of which cannot be marketed in the United States and other
32
<PAGE> 35
regulated markets unless and until the Company obtains clearance or approval
from the FDA and its foreign counterparts.
The FDA requires that a manufacturer seeking to market a new medical device
or an existing medical device for a new indication obtain either a premarket
notification clearance under Section 510(k) of the Federal Food, Drug and
Cosmetic Act or the approval of a premarket approval application under this Act
("PMA") prior to the introduction of such product into the market. Material
changes to existing medical devices are also subject to FDA review and clearance
or approval prior to commercialization in the United States. The Company is
currently relying on the Section 510(k) premarket notification method to obtain
governmental clearance ("510(k) clearance") to market its medical devices in the
United States. Although it is believed to be a shorter, less costly regulatory
plan than the process to obtain a PMA, the process of obtaining a 510(k)
clearance generally requires supporting data, which can be extensive and extend
the regulatory review process for a considerable length of time. All models of
the Company's systems that are commercially available have received 510(k)
clearance by the FDA. In addition, the Company recently received 510(k)
clearance for Archive Manager 2.0 and for its DICOM and AutoRad modules
currently under development. There can be no assurance that 510(k) clearance for
any future product or modifications of existing products will be granted by the
FDA within a reasonable time frame, if at all. Furthermore, the FDA may require
that a request for 510(k) clearance be supported by data from clinical trials
demonstrating substantial equivalence and the safety and effectiveness of the
device, which may prolong the Section 510(k) notification review period for a
particular device or may result in a finding that the product is not
substantially equivalent, so that a full PMA could be required.
Failure to comply with applicable regulatory requirements could result,
among other things, in warning letters, seizures of products, total or partial
suspension of production, refusal of the government to grant market clearance or
pre-market approval, withdrawal of approvals or criminal prosecution.
The Company is also required to register as a medical device manufacturer
with the FDA and the Food and Drug Branch of the California Department of Health
Services ("CDHS"). The Company will be inspected on a routine basis by both the
FDA and CDHS for compliance with the FDA's Good Manufacturing Practices and
other applicable regulations.
The Company is also subject to other federal, state and local laws and
regulations relating to safe working conditions and manufacturing practices. The
extent of government regulation that might result from any future legislation or
administrative action cannot be predicted. Failure to comply with regulatory
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations.
Sales of the Company's systems outside the United States are subject to
foreign regulatory requirements that vary from country to country. Additional
approvals from foreign regulatory authorities may be required, and there can be
no assurance that the Company will be able to obtain foreign marketing approvals
on a timely basis or at all, or that it will not be required to incur
significant costs in obtaining or maintaining its foreign regulatory approvals.
In Europe, the Company will be required to obtain the certificates necessary to
enable the CE Mark, an international symbol of adherence to quality assurance
standards and compliance with applicable European Union Medical Device
Directives, to be affixed to the Company's systems for sales in member
countries. Failure to obtain such certifications, any necessary foreign
regulatory approvals or any other failure to comply with regulatory requirements
outside the United States could have a material adverse effect on the Company's
business, financial condition and results of operations.
THIRD-PARTY REIMBURSEMENT
Third-party payors, such as governmental programs and private insurance
plans, can indirectly affect the pricing or the relative attractiveness of the
Company's systems by regulating the maximum amount of reimbursement that they
will provide for the acquisition, storage and interpretations of medical images.
In recent years, healthcare costs have risen substantially, and third-party
payors have come under increasing pressure to reduce such costs. In this regard,
extensive studies undertaken by the federal government, even though not
successfully translated into regulatory action, have stimulated widespread
analysis and reactions in the private sector focused on healthcare cost
reductions, which may involve reductions in reimbursement rates
33
<PAGE> 36
in radiology. A decrease in the reimbursement amounts for radiological procedure
may decrease the amount which physicians, clinics and hospitals are able to
charge patients for such services. As a result, adoption of teleradiology and
PACS may slow as capital investment budgets are reduced, and the demand for the
Company's systems could be significantly reduced.
PRODUCT LIABILITY AND INSURANCE
The manufacture and sale of medical image information systems entail
significant risk of product liability claims. There can be no assurance that the
Company's existing insurance coverage limits are adequate to protect the Company
from any liabilities it might incur in connection with the sale of the Company's
systems. In addition, the Company may require increased product liability
coverage as additional systems are commercialized. Such insurance is expensive
and in the future may not be available on acceptable terms, if at all. A
successful product liability claim or series of claims brought against the
Company in excess of its insurance coverage could have a material adverse effect
on the Company's business, financial condition and results of operations.
EMPLOYEES
As of March 31, 1996, the Company had 107 full-time employees, including 34
employees in research and development, 43 in quality, service and support, 19 in
sales and marketing and support activities and 10 in general administration and
finance. One employee resides in Europe performing sales and technical customer
support roles. The Company also relies on several part-time employees and
consultants. None of the Company's employees is represented by a collective
bargaining agreement nor has the Company experienced a work stoppage. Management
believes that the Company's relationship with its employees is good.
FACILITIES
The Company's principal facilities are located in Fremont, California, in
an approximately 26,000 square foot facility leased through December 1998. The
Company anticipates that additional space will be required as its business
expands and believes that it will be able to obtain suitable space as needed.
34
<PAGE> 37
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors, executive officers and key employees of the Company and
their ages as of March 31, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------
<S> <C> <C>
Terry Ross.......................... 48 President, Chief Executive Officer and Director
Jeremy B. Rubin, M.D................ 40 Vice President, Chief Technical Officer and Vice
Chairman
Gregory C. Patti.................... 40 Chief Financial Officer, Vice President, Finance
and Operations
Oran E. Muduroglu................... 34 Vice President, Sales and Marketing
Jean-Luc Chatelain.................. 37 Vice President, Engineering
Grady Floyd......................... 33 Vice President, Quality and Service
David N. White, M.D.(1)............. 47 Chairman of the Board
Reid W. Dennis(1)................... 70 Director
Philip E. McCarthy(2)............... 59 Director
M. David Titus(2)................... 39 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Terry Ross has served as President, Chief Executive Officer and Director of
the Company since June 1989. Mr. Ross also served as Chief Financial Officer
from October 1989 to June 1994 and as Vice President of Sales and Marketing from
December 1987 to June 1989. Prior to joining the Company, Mr. Ross was Vice
President of Sales and Marketing for Imatron, Inc. and held executive sales
positions at Picker International, Inc. and ADAC Laboratories, Inc., all of
which are medical imaging companies. Mr. Ross is currently a member of the Board
of Directors of Imatron, Inc.
Jeremy B. Rubin, M.D. joined the Company as Vice Chairman of the Board,
Vice President and Chief Technical Officer in June 1995. From November 1989
until he joined the Company, Dr. Rubin served as President and Chief Executive
Officer of ICON Medical Systems, Inc., a teleradiology company which was merged
with Cemax, Inc. in June 1995. Prior to 1989, Dr. Rubin practiced clinical
radiology for several years at Good Samaritan Hospital in San Jose, California.
Gregory C. Patti has served as Chief Financial Officer of the Company since
May 1994 and as Vice President, Finance and Operations since June 1995. From
November 1989 until he joined the Company in May 1994, Mr. Patti served as
Corporate Controller for Supermac Technology, Inc., a computer digital video
product manufacturer. Prior to that time, Mr. Patti served in senior financial
positions with a network software company and a computer workstation company and
was a practicing CPA with Price Waterhouse.
Oran E. Muduroglu joined the Company as Vice President of Sales and
Marketing in January 1992. From April 1989 until he joined the Company, Mr.
Muduroglu was a Product Manager of Toshiba America Medical Systems, Inc., a
medical imaging company. Prior to that, Mr. Muduroglu co-founded Voxel, Inc., a
company which developed holographic visualization technology for medical
imaging.
Jean-Luc Chatelain joined the Company as Director of Engineering in May
1994 and became Vice President of Engineering in February 1995. From August 1992
to April 1994, Mr. Chatelain was a Director of Marketing for ADAC Laboratories,
Inc., a medical imaging company. From August 1986 to August 1992, Mr. Chatelain
was Director of Engineering for Dynamic Digital Design, Inc., a medical imaging
company.
Grady Floyd joined the Company as Director of Engineering in April 1995 and
became Vice President of Service and Quality Assurance in December 1995. From
November 1993 until he joined the Company, Mr. Floyd served as Engineering
Manager for ADAC Laboratories, Inc., a medical imaging company. From
35
<PAGE> 38
March 1988 to July 1993, he served as Research and Development Manager of 3D
Systems, Inc., an industrial and medical imaging company.
David N. White, M.D. founded the Company in 1982 and has served as the
Chairman of the Board since its inception. Dr. White has been a practicing
reconstructive surgeon with the Palo Alto Medical Foundation since 1983.
Reid W. Dennis has served as a director of the Company since June 1986. Mr.
Dennis is a general partner of Institutional Venture Management, the general
partner of Institutional Venture Partners, a venture capital investment firm
which he founded in 1974. Mr. Dennis is a Director of Collagen Corporation, a
biotechnology company.
M. David Titus has served as a director of the Company since August 1989.
Mr. Titus also serves as Managing Director of Coronado Capital, a venture
capital investment firm which he founded in January 1993. From May 1986 through
December 1992 he held several positions, including general partner, with
Technology Funding, Inc., a venture capital investment firm. Mr. Titus is a
director of Shaman Pharmaceuticals, Inc., a biopharmaceutical company.
Philip E. McCarthy has served as a director the Company since December
1994. Mr. McCarthy has served as Managing Director of MBW Management, a venture
capital investment firm, since 1984.
BOARD COMPOSITION
The Company's Bylaws provide for a Board of Directors consisting of seven
members. The Company's Board of Directors currently has six members and one
board seat is currently vacant. In accordance with the terms of the Company's
Certificate of Incorporation, the terms of office of the Board of Directors is
divided into three classes, Class I, whose term will expire at the annual
meeting of stockholders to be held in 1997, Class II, whose term will expire at
the annual meeting of stockholders to be held in 1998, and Class III, whose term
will expire at the annual meeting of stockholders to be held in 1999. The Class
I directors are Philip E. McCarthy and Terry Ross, the Class II directors are
David N. White, M.D., and Reid W. Dennis, and the Class III directors are Jeremy
B. Rubin, M.D. and M. David Titus. After each such election, the directors in
each class will then serve in succeeding terms of three years until their
successors are duly elected and qualified. This classification of the Board of
Directors may have the effect of delaying or preventing changes in control or
management of the Company. Although directors of the Company may be removed for
cause by the affirmative vote of the holders of a majority of the Common Stock,
the Company's Certificate of Incorporation provides that holders of 66 2/3% of
the Common Stock must vote to approve the removal of a director without cause.
There are no family relationships among any of the directors, officers or
key employees of the Company.
BOARD COMMITTEES
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee, currently comprised of Philip E. McCarthy and M. David
Titus, reviews the internal accounting procedures of the Company and consults
with and reviews the services provided by the Company's independent accountants.
The Compensation Committee, currently comprised of Reid W. Dennis and David N.
White, M.D., reviews and recommends to the Board the compensation and benefits
of all officers of the Company and reviews general policy relating to
compensation and benefits of employees. The Compensation Committee also
recommends to the Board the issuance of stock options and other awards under the
Company's stock plans.
DIRECTOR COMPENSATION
Directors do not currently receive any cash compensation from the Company
for their service as members of the Board of Directors, although they are
reimbursed for certain expenses in connection with attendance at Board and
Committee meetings. David N. White, M.D., Chairman of the Board of the Company,
received the amount of $24,000 during 1995 for consulting services rendered to
the Company. In addition, during 1995
36
<PAGE> 39
Dr. White was granted options to purchase an aggregate of 7,659 shares of Common
Stock under the Company's 1986 Amended Incentive Stock Plan at an exercise price
of $1.41 per share. Such options vest over four years based upon continued
service to the Company and have a ten year term.
The Company's 1996 Director Option Plan provides that options shall be
granted to non-employee directors of the Company pursuant to an automatic
non-discretionary grant mechanism. Each of the current non-employee directors,
Reid W. Dennis, Philip E. McCarthy, M. David Titus and David N. White, will
automatically be granted an option to purchase 5,000 shares of the Company's
Common Stock as of the effective date of this offering and 2,500 shares annually
thereafter on the date of each annual meeting of the stockholders following the
effective date of this offering, at an exercise price equal to the fair market
value on the date of grant. Such options vest over four years from the date of
grant based upon continued service as a director. See "Executive
Compensation -- 1996 Director Option Plan."
EXECUTIVE COMPENSATION
The following table sets forth certain compensation awarded or paid by the
Company during the fiscal year ended December 31, 1995 to its Chief Executive
Officer and its other four most highly compensated executive officers during the
fiscal year ended December 31, 1995 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($)(1) BONUS($) OPTIONS(#)
- ------------------------------------------------------------ ------------ -------- ------------
<S> <C> <C> <C>
Terry Ross.................................................. $180,624 $75,000 85,106
President and Chief Executive Officer
Oran E. Muduroglu........................................... 140,000 27,000 42,553
Vice President, Sales and Marketing
Gregory C. Patti............................................ 128,000 25,000 21,277
Chief Financial Officer, Vice President,
Finance and Operations
Jeremy B. Rubin, M.D........................................ 150,228 0 0
Vice President, Chief Technical Officer
Jean-Luc Chatelain.......................................... 111,110 20,000 31,915
Vice President, Engineering
</TABLE>
- ---------------
(1) Includes amounts earned but deferred at the election of the executive
officer.
STOCK PLANS
1986 Amended Incentive Stock Plan. In July 1986 the Company adopted the
1986 Amended Incentive Stock Plan (the "1986 Plan") under which an aggregate of
1,276,596 shares of Common Stock have been reserved for issuance upon exercise
of options granted to employees, officers and employee-directors of and
consultants to the Company. As of March 31, 1996, options to purchase an
aggregate of 750,884 shares of Common Stock were outstanding under the 1986
Plan. In June 1996, the Board of Directors determined that no additional options
would be granted under the 1986 Plan. The 1986 Plan terminates in July 1996.
Under the 1986 Plan, in the event of a merger or consolidation involving
the Company in which the Company is not the surviving corporation, all options
outstanding under the 1986 Plan shall terminate if not previously exercised
unless the surviving corporation agrees to either assume such options or to
substitute similar options.
37
<PAGE> 40
Former ICON Options. In June 1995, Cemax merged with ICON. Pursuant to
such merger, outstanding options exercisable for shares of ICON Common Stock
became exercisable for conversion into approximately 323,210 shares of the
Common Stock of the Company at exercise prices of $1.46 and $7.48 per share (the
"Former ICON Options"). As of March 31, 1996, options to purchase an aggregate
of 182,761 shares of Common Stock were outstanding under the Former ICON
Options.
1996 Stock Plan. The Company's 1996 Stock Plan (the "1996 Plan") was
adopted by the Board of Directors in June 1996 and will be submitted to the
stockholders for approval at the Company's 1996 annual stockholders' meeting. A
total of 700,000 shares of Common Stock is reserved and remains available for
issuance under the 1996 Plan to employees and consultants. The 1996 Plan allows
for the grant to employees of incentive stock options, and for the grant to
employees and consultants of nonstatutory stock options and stock purchase
rights. The 1996 Plan is not qualified under Section 401(a) of the Internal
Revenue Code, as amended (the "Code") and is not subject to the Employee
Retirement Income Security Act of 1974. Unless sooner terminated by the Board of
Directors the 1996 Plan will terminate automatically in June 2006.
The purpose of the 1996 Plan is to attract and retain the best possible
available personnel for positions of substantial responsibility with the
Company, to provide additional incentive to the employees and consultants of the
Company and to promote the success of the Company's business. The 1996 Plan is
administered by the Board of Directors of the Company or a committee appointed
by the Board.
The Board of Directors or a committee appointed by the Board in its
discretion selects the employees and consultants to whom options and stock
purchase rights may be granted, the time or times at which such awards may be
exercised (vest), the number of shares subject to each such award, the form of
consideration payable upon exercise and the other terms and conditions of such
grant. The 1996 Plan provides for a maximum number of 300,000 shares of Common
stock for which options or stock purchase rights may be granted to any one
participant in any fiscal year; provided that in connection with an employee's
initial employment, options or rights to purchase up to an additional 150,000
shares may be granted.
The exercise price for stock options granted under the 1996 Plan is
determined by the Board of Directors of the Company or its committee and may not
be less than 100% of the fair market value of the Common Stock on the date such
option is granted, except in the case of options granted to 10% shareholders,
the exercise price of which may not be less than 110% of such fair market value.
Options are not generally transferable by the participant other than by will or
the laws of descent or distribution, and are exercisable during the
participant's lifetime only by him, or, in the event of death of the
participant, by a person who acquires the right to exercise the options by
bequest or inheritance by reason of the death of the participant. Options
granted under the 1996 Plan generally vest (become exercisable) over a four-year
period based upon continued service to the Company and typically expire 30 days
after the date of termination of employment. Options granted under the 1996 Plan
have a maximum term of ten years from the date of grant; provided that in the
case of an option granted to a 10% stockholder, the term of the option may be no
longer than five years from the date of grant.
The 1996 Plan also allows for the grant of stock purchase rights which give
the purchaser a period of up to six months from the date of grant to purchase
shares of Common Stock. The price to be paid for the shares to be purchased
under the 1996 Plan, the form of consideration to be paid for the shares, and
the terms of payment are determined by the Board or a committee appointed by the
Board. Payment for the shares may be made in installments or at one time, as
determined by the Board, and provision may be made by the Board for aiding any
eligible person in paying for the shares by promissory note or otherwise.
The 1996 Plan provides that in the event of a merger of the Company with or
into another corporation, a sale of substantially all of the assets or a like
transaction involving the Company, each outstanding option or stock purchase
right may be assumed or an equivalent option substituted by the successor
corporation. If the outstanding options and stock purchase rights are not
assumed or substituted, the holder of such option or stock purchase right shall
be entitled to fully exercise the option or stock purchase right including
shares not otherwise exercisable.
38
<PAGE> 41
1996 Employee Stock Purchase Plan. The Company's 1996 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors in
June 1996 and will be submitted to the stockholders for approval of the 1996
annual stockholder's meeting. A total of 150,000 shares of Common Stock is
reserved for issuance under the Purchase Plan. The Purchase Plan is intended to
qualify as an employee stock purchase plan within the meaning of Section 423 of
the Internal Revenue Code. Under the Purchase Plan, the Board of Directors may
authorize participation by eligible employees, including officers, in periodic
offerings following the adoption of the Purchase Plan. The Purchase Plan is
administered over offering periods of 24 months each, with each offering period
divided into four consecutive six-month purchase periods. Unless sooner
terminated by the Board of Directors, the Purchase Plan will terminate in June
2006.
Employees are eligible to participate if they are employed by the Company
or an affiliate of the Company designated by the Board of Directors for at least
20 hours per week and are employed by the Company or a subsidiary of the Company
designated by the Board for at least five months per calendar year. Employees
who participate in an offering can have up to 15% of their earnings withheld
pursuant to the Purchase Plan. The amount withheld will then be used to purchase
shares of the Common Stock on specified dates determined by the Board of
Directors. The price of Common Stock purchased under the Purchase Plan will be
equal to 85% of the lower of the fair market value of the Common Stock on the
commencement date of each offering period or the relevant purchase date.
Employees may end their participation in the offering at any time during the
offering period, and participation ends automatically on termination of
employment with the Company.
In the event of a merger, reorganization, consolidation or liquidation
involving the Company in which the Company is not a surviving corporation, the
Board of Directors has discretion to provide that each right to purchase Common
Stock will be assumed or an equivalent right substituted by the successor
corporation, or the Board may shorten the offering period and provide for all
sums collected by payroll deductions to be applied to purchase stock immediately
prior to such merger or other transaction. The Board has the authority to amend
or terminate the Purchase Plan, subject to the limitation that no such action
may adversely affect any outstanding rights to purchase Common Stock.
1996 Director Option Plan. The Company's 1996 Director Option Plan (the
"Director Plan") was adopted by the Board of Directors in June 1996 and will be
submitted to the stockholders for approval at the Company's 1996 annual
stockholders' meeting. A total of 100,000 shares of Common Stock is reserved for
issuance under the Director Plan. The option grants under the Director Plan
shall be automatic and non-discretionary, and the exercise price of the options
shall be 100% of the fair market value of the Common Stock on the grant date.
The Director Plan provides for the grant of options to purchase 5,000 shares of
Common Stock to each non-employee director of the Company upon the effectiveness
of this offering and 2,500 shares annually thereafter at each annual meeting of
the stockholders following the effective date of this offering, provided such
non-employee director has been a non-employee director of the Company for at
least six months prior to the date of such annual meeting of the stockholders.
Each new non-employee director shall automatically be granted an option to
purchase 10,000 shares of Common Stock upon the date such person joins the Board
of Directors. Any option granted to a non-employee director shall become
exercisable over a four-year period following the date of grant based upon
continued service as a member of the Board of Directors. The term of such
options is ten years. No option may be transferred by the optionee other than by
will or the laws of descent and distribution. Any optionee whose relationship
with the Company or any related corporation ceases for any reason may generally
exercise options only during a 90-day period following such cessation (unless
such options terminate or expire sooner by their terms). Upon a merger or asset
sale, all outstanding options under the Director Plan will be assumed or
replaced with an equivalent option by the successor corporation. In the event
that the successor corporation does not agree to assume the outstanding options
or substitute an equivalent option, each outstanding option shall become fully
vested and exercisable, including as to shares not otherwise exercisable. The
Director Plan will terminate in June 2006, unless sooner terminated by the Board
of Directors.
39
<PAGE> 42
401(K) PLAN
In 1990, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of the Company's employees.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation up to the annual statutory limit ($9,500 in 1996) and have the
amount of such reduction contributed to the 401(k) Plan. In June 1996 the
Company amended the 401(k) Plan to provide that the Company will match up to 25%
of the employee's eligible contributions, up to a maximum of $500. The Company
may also make an additional discretionary employer matching contribution to the
401(k) Plan each year to be allocated among the participants based on each
participant's total compensation received during the 401(k) Plan year.
Contributions made by the employee and the Company are fully vested and are not
subject to forfeiture. The trustee under the 401(k) Plan invests the assets of
the 401(k) Plan in any of several investment options. The 401(k) Plan is
intended to qualify under Section 401 of the Code so that contributions by
employees to the 401(k) Plan, and income earned on plan contributions, are not
taxable to employees until withdrawn, and so that the contributions by employees
will be deductible by the Company when made.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1995 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
----------------------------------------------------------- ANNUAL RATES OF
PERCENTAGE STOCK PRICE
NUMBER OF OF TOTAL APPRECIATION
SECURITIES OPTIONS FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERMS(4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------
NAME GRANTED(#)(1) FISCAL YEAR(%)(2) ($/SH)(3) DATE 5%($) 10%($)
- ------------------------- -------------- ----------------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Terry Ross............... 85,106 22.6 1.41 09/21/2005 75,600 190,799
Oran E. Muduroglu........ 42,553 11.3 1.41 09/21/2005 37,800 95,400
Gregory C. Patti......... 21,276 5.7 1.41 09/21/2005 18,899 47,699
Jeremy B. Rubin.......... -- -- -- -- -- --
Jean-Luc Chatelain....... 31,914 8.5 1.41 09/21/2005 28,349 71,548
</TABLE>
- ---------------
(1) All options are incentive stock options granted pursuant to the 1986 Plan.
Options granted become exercisable over a 50 month period following the date
of grant based upon continued service to the Company.
(2) Based on an aggregate of 337,340 options granted to employees of the Company
in 1995, including the Named Executive Officers.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board of
Directors.
(4) Options granted terminate on the earlier of 30 days after termination of
employment or ten years after date of grant. The potential realizable value
is calculated based on an assumed ten year term of the option. The 5% and
10% assumed annual rates of compounded stock price appreciation are mandated
by the rules of the Securities and Exchange Commission and do not represent
the Company's estimate or projection of the Company's future Common Stock
prices.
40
<PAGE> 43
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options during
the fiscal year ended December 31, 1995 and the number and value of securities
underlying unexercised options held by the Named Executive Officers at December
31, 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE 1995(#) DECEMBER 31, 1995($)(1)
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------- ----------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Terry Ross............ 0 0 5,106/80,000 45,954/720,000
Gregory C. Patti...... 8,510 73,599 1,277/26,383 11,493/237,447
Oran E. Muduroglu..... 0 0 46,962/51,852 422,658/466,668
Jeremy B. Rubin....... 0 0 0 0/0
Jean-Luc Chatelain.... 0 0 11,106/46,341 99,954/417,069
</TABLE>
- ---------------
(1) Value realized and value of unexercised in-the-money options is based on a
value of $9.00 per share, the assumed initial public offering price of the
Company's Common Stock. Amounts reflected are based on the assumed value
minus the exercise price ($0.3525 per share) and do not indicate that the
optionee sold such stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law (the "Delaware Law"),
the Company's Certificate of Incorporation provides that no director of the
Company will be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director except for liability
(i) for any breach of the director's duty of loyalty to the Company or to its
stockholders; (ii) for acts of omissions not made in good faith or which
involved intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the Delaware Law, relating to prohibited dividends or
distributions or the repurchase or redemption of stock or (iv) for any
transaction from which the director derives an improper personal benefit. In
addition, the Company's Certificate of Incorporation provides that any director
or officer who was or is a party or is threatened to be made a party to any
action or proceeding by reason of his or her services to the Company will be
indemnified to the fullest extent permitted by the Delaware Law.
The Company has entered into indemnification agreements with each of its
directors and officers under which the Company has indemnified each of them
against expenses and losses incurred for claims brought against them by reason
of their being a director or officer of the Company, and the Company maintains
directors' and officers' liability insurance.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any pending or threatened litigation that may result in claims
for indemnification by any director or officer.
41
<PAGE> 44
CERTAIN TRANSACTIONS
EXERCISE OF STOCK OPTIONS; OFFICER LOANS
In April 1996, Terry Ross, the Company's President and Chief Executive
Officer, executed a promissory note payable to the Company in the amount of
$120,000 in connection with the exercise of outstanding stock options to
purchase 85,106 shares of Common Stock exercised at a price of $1.41 per share.
The promissory note is secured by the underlying Common Stock, bears interest at
the rate of 5% per year and becomes due and payable on May 31, 1998.
In October 1995, the Company loaned Terry Ross the sum of $300,000 pursuant
to a promissory note bearing interest at the prime rate plus 1%, due and payable
on October 31, 1996, secured by a pledge of 185,957 shares of Common Stock owned
by Mr. Ross. In June 1996, the Company agreed with Mr. Ross to extend the due
date of such promissory note to October 31, 1997.
ACQUISITION OF ICON MEDICAL SYSTEMS, INC.
In June 1995, Cemax merged with ICON. All issued and outstanding shares of
Common Stock of ICON were converted into a total of approximately 1,879,158
shares of Common Stock of the Company. Options exercisable for shares of ICON
Common Stock became exercisable for approximately 323,211 shares of Common Stock
of the Company. Jeremy B. Rubin, M.D., was the President and CEO of ICON.
Pursuant to the merger Dr. Rubin's shares of ICON common stock were converted
into approximately 1,743,773 shares of Common Stock of the Company. Similarly,
shares of ICON common stock held by Daryl Rubin, the brother of Dr. Rubin, were
converted into approximately 20,054 shares of Common Stock of the Company. In
connection with the Merger the Company repaid in July 1995 certain loans made to
ICON by (i) Jeremy Rubin in the amounts of $95,083 and $34,921, and (ii) Darryl
Rubin, the brother of Jeremy Rubin, in the amount of $300,000. Jeremy Rubin
currently serves as Vice President, Chief Technical Officer, and Vice Chairman
of the Board of Directors of the Company.
3M TRANSACTION
In June 1995, the Company sold 845,054 shares of its Series A Preferred
Stock to 3M, a holder of more than five percent of the Company's voting
securities, at a purchase price of approximately $8.23 per share for a total of
$6,950,573 and issued to 3M a warrant (the "Warrant") exercisable for 198,837
shares of Common Stock of the Company at an exercise price of $12.93 per share.
In May 1996, the Company and 3M agreed to amend the Warrant to reduce the
exercise price to $11.47 per share and to provide that the Warrant would be
exercisable for 198,837 shares of Series A Preferred Stock. In addition, 3M
agreed to exercise the warrant in full prior to September 30, 1996.
In connection with the sale of the Series A Preferred Stock and the
issuance of the Warrant to 3M, the Company and 3M entered into a Sales Agreement
having a term of three years providing for the Company to assume service and
warranty obligations of 3M with regard to 17 PACS customer sites in exchange for
the payment by 3M to the Company of approximately $1.0 million and for 3M to
refer customer leads to the Company in exchange for a sales commission payable
to 3M based upon the revenue received by the Company from sales to such
customers. As of March 31, 1996 less than $50,000 in commissions had been paid
to 3M under this Sales Agreement. Pursuant to such agreement the Company
purchased approximately $120,000 of certain products from 3M at a purchase price
equal to fair market value of such products.
In November 1994 the Company entered into an OEM Agreement with 3M granting
3M the non-exclusive right to grant licenses to the Company's software modules
in connection with the sale of 3M image management systems or otherwise to
end-users in exchange for royalties payable to the Company.
PRIVATE PLACEMENT OF SECURITIES
In October 1994, the Company sold shares of Series D Preferred Stock
convertible into 212,786 shares of Common Stock at an effective price of $7.05
per share in exchange for the cancellation of certain existing indebtedness of
the Company. The purchasers of the Series D Preferred Shares included entities
affiliated with Institutional Venture Partners and with MBW Venture Partners,
holders of more than five percent (5%)
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<PAGE> 45
of the Company's voting securities, who purchased shares of Series D Preferred
Stock convertible into 85,751 and 42,117 shares of Common Stock, respectively.
All previously outstanding shares of Series D Preferred Stock were converted to
shares of Common Stock in June 1995.
The Company believes that all of the foregoing transactions were in its
best interests and were on terms no less favorable to the Company than could
have been obtained from unaffiliated third parties. All future transactions,
including loans, between the Company and its officers, directors, principal
stockholders and their affiliates will be approved by a majority of the Board of
Directors, including a majority of the independent and disinterested outside
directors and will continue to be on terms no less favorable to the Company than
could be obtained from unaffiliated third parties.
43
<PAGE> 46
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1996, as adjusted to
reflect the sale of the Common Stock being offered hereby (i) each stockholder
who is known by the Company to own beneficially more than 5% of the Common
Stock; (ii) each Named Executive Officer of the Company and (iii) each director
of the Company; (iv) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
BENEFICIALLY
OWNED(2)
NUMBER OF -------------------
DIRECTORS, EXECUTIVE OFFICERS SHARES BENEFICIALLY PRIOR TO AFTER
AND 5% STOCKHOLDERS OWNED(1) OFFERING OFFERING
- -------------------------------------------------------------- ------------------- -------- --------
<S> <C> <C> <C>
Jeremy B. Rubin, M.D. ........................................ 1,743,772 30.3% 20.4%
Cemax-Icon, Inc.
47281 Mission Falls Court
Fremont, CA 94539
Minnesota Mining & Manufacturing Company(3)................... 1,043,891 17.5 11.9
3M Center
P.O. Box 33428
St. Paul, Minnesota 55133
Entities affiliated with Institutional Venture Partners(4).... 826,216 14.3 9.7
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Reid W. Dennis(4)............................................. 826,216 14.3 9.7
Institutional Venture Partners
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Philip E. McCarthy(5)(7)...................................... 482,869 8.4 5.6
MBW Venture Partners
365 South Street
Morristown, NJ 07960
Entities affiliated with MBW Management(5).................... 482,858 8.4 5.6
365 South Street
Morristown, NJ 07960
Entities affiliated with Technology Funding Inc.(6) .......... 325,151 5.6 3.8
2000 Alameda de las Pulgas
San Mateo, CA 94403
Terry Ross(8)................................................. 271,063 4.6 1.0
David N. White, M.D.(9)....................................... 87,785 1.4 1.0
Gregory C. Patti(11).......................................... 61,703 1.1 *
Jean-Luc Chatelain(12)........................................ 58,241 1.0 *
Oran E. Muduroglu(10)......................................... 49,191 * *
M. David Titus(13)............................................ 10,723 * *
All directors and executive officers as a group (10 3,625,606 59.4 40.7
persons)(14)................................................
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined by the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of Common Stock subject to stock options and
warrants currently exercisable or exercisable within 60 days of the date of
this table are deemed to be outstanding for computing the percentage
ownership of the person holding such options and the percentage ownership
of any group of which the holder is a member, but are not deemed
outstanding for computing the percentage of any other person. Except as
indicated by footnotes, and subject to community property laws where
applicable, the persons named in the table have sole
44
<PAGE> 47
voting and investment power with respect to all shares of Common Stock
shown beneficially owned by them.
(2) Applicable percentage of ownership is based on 5,760,713 shares of Common
Stock outstanding prior to this offering and 8,560,713 shares of Common
Stock outstanding upon completion of this offering.
(3) Includes 198,837 shares of Common Stock issued upon exercise of outstanding
warrants.
(4) Includes 12,291 shares held by Institutional Venture Management III, L.P.
("IVMIII"), 808,180 shares held by Institutional Venture Partners III,
L.P., and 6,750 shares by Institutional Venture Partners. Reid W. Dennis, a
director of the Company, is a general partner of IVP, the general partner
of IVMIII and IVPIII.
(5) Includes 395,935 shares held by MBW Venture Partners, L.P. and 86,913
shares held by Michigan Investment Fund, L.P. Philip E. McCarthy, a
director of the Company, is Managing Director of MBW Management, the
authorized agent of MBW Venture Partners and Michigan Investment Fund.
(6) Includes 72,264 shares held by Technology Funding Inc. TTEE Technology
Funding Partners I Liquidating Trust, 86,446 shares held by Technology
Funding Inc. TTEE Funding Partners II, and 166,441 shares held by
Technology Funding Private Reserve, L.P.
(7) Includes 11 shares held by the Philip E. McCarthy Pension Fund.
(8) Includes 4,255 shares held by Guarantee & Trust Co. Cdn Terry Ross IRA and
85,106 shares issuable pursuant to options exercisable within 60 days of
March 31, 1996.
(9) Includes 87,405 shares issuable pursuant to options exercisable within 60
days of March 31, 1996.
(10) Includes 49,191 shares issuable pursuant to options exercisable within 60
days of March 31, 1996.
(11) Includes 4,255 shares held by Guarantee & Trust Co. Cdn Gregory C. Patti,
and 27,660 shares issuable pursuant to options exercisable within 60 days
of March 31, 1996.
(12) Includes 57,447 and 794 shares issuable pursuant to options exercisable
within 60 days of March 31, 1996 by Mr. Chatelain and his wife,
respectively
(13) Includes 4,000 shares issuable pursuant to options exercisable within 60
days of March 31, 1996.
(14) Includes 345,646 shares issuable pursuant to options exercisable within 60
days of March 31, 1996.
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock, $.001 par value, and
5,000,000 shares of Preferred Stock, $.001 par value ("Preferred Stock").
COMMON STOCK
As of March 31, 1996, there were 5,760,713 shares of Common Stock issued
and outstanding held of record by approximately 300 stockholders.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and all shares of
Common Stock to be outstanding upon completion of this offering will be, fully
paid and nonassessable.
45
<PAGE> 48
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by stockholders. The issuance of Preferred Stock could adversely
affect the voting power of holders of Common Stock and the likelihood that such
holders will receive dividend payments and payments upon liquidation and could
have the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plan to issue any shares of Preferred Stock.
WARRANTS
As of March 31, 1996, there were outstanding (i) a warrant to purchase
3,546 shares of Common Stock at an exercise price of $5.88 per share (the "Bank
Warrant") and (ii) a warrant, as amended in May 1996, to purchase 198,837 shares
of Series A Preferred Stock at an exercise price of $11.47 per share (the "3M
Warrant). The Bank Warrant was issued in September 1993 pursuant to the terms of
a loan agreement with Silicon Valley Bank and is exercisable at any time before
September 23, 1996. The 3M Warrant was issued in June 1995 in connection with a
private placement of 845,054 shares of Series A Preferred Stock to 3M and
provided for the purchase of 198,837 shares of Common Stock at an exercise price
of $12.93 per share prior to June 1997. In May 1996, the 3M Warrant was amended
to provide for the purchase of 198,837 shares of Series A Preferred Stock (or
Common Stock in the event the Company has undertaken an initial public offering
of its securities) at an exercise price of $11.47 per share and 3M agreed to
exercise such warrant in full prior to September 30, 1996.
REINCORPORATION IN DELAWARE
The Company intends to reincorporate in Delaware in connection with the
offering. The Company believes that Delaware law provides flexibility and the
Delaware courts have particular expertise with matters affecting public
companies and their stockholders. Except as otherwise noted, all information in
the Prospectus assumes the reincorporation has occurred.
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and the holders (or their
permitted transferees) ("Holders") of approximately 4,237,623 shares of Common
Stock, the Holders are entitled to certain rights with respect to the
registration of such shares under the Securities Act of 1933, as amended (the
"Securities Act"). If the Company proposes to register any of its securities
under the Securities Act, either for its own account or for the account of other
security holders, the Holders are entitled to notice of the registration and are
entitled to include, at the Company's expense, such shares therein, provided,
among other conditions, that the underwriters have the right to limit the number
of such shares included in the registration. In addition, certain of the Holders
may require the Company at its expense on not more than two occasions, to file a
registration statement under the Securities Act with respect to their shares of
Common Stock, and the Company is required to use its best efforts to effect the
registration, subject to certain conditions and limitations. Further, certain of
the Holders may require the Company at its expense to register their shares on
Form S-3 when such form becomes available to the Company, subject to certain
conditions and limitations.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Delaware Law"), an anti-takeover law. In general,
the statute prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
For purposes of Section 203, a "business combination" includes a merger asset
sale or other transaction resulting in a financial benefit to the interested
stockholder,
46
<PAGE> 49
and an "interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
The Company's Certificate of Incorporation and Bylaws also require that,
effective upon the closing of this offering any action required or permitted to
be taken by stockholders of the Company must be effected at a duly called annual
or special meeting of the stockholders and may not be effected by a consent in
writing. In addition, special meetings of the stockholders of the Company may be
called only by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer of the Company or by any person or persons holding shares
representing more than 50% of the outstanding capital stock. The Company's
Certificate of Incorporation also provides for a classified Board and specifies
that the authorized number of directors may be changed only by resolution of the
Board of Directors. See "Management -- Directors and Executive Officers." These
provisions may have the effect of deterring hostile takeovers or delaying
changes in control or management of the Company.
TRANSFER AGENT AND REGISTRAR
Chemical Mellon Bank has been appointed as the transfer agent and registrar
for the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering and assuming no exercise of outstanding
options and no exercise of the Underwriters over-allotment option, the Company
will have outstanding 8,560,713 shares of Common Stock. Of these shares, the
2,800,000 shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, except for any
shares held by "affiliates" of the Company as that term is defined in Rule 144
under the Securities Act ("Affiliates"), which shares will be subject to the
resale limitations of Rule 144. The remaining 5,760,713 shares of Common Stock
held by existing stockholders (the "Restricted Shares") were issued and sold by
the Company in reliance on exemptions from the registration requirements of the
Securities Act. These shares may be sold in the public market only if registered
or pursuant to an exemption from registration such as Rules 144, 144(k), or 701
under the Securities Act, which are summarized below.
In the absence of the restrictions contained in the agreements not to sell
described below, approximately 206,179 of these Restricted Shares will be
eligible for sale in the public market upon the date of this offering pursuant
to Rule 144(k). In the absence of the restrictions contained in the agreements
not to sell described below, approximately 147,254 additional Restricted Shares
will be eligible for sale beginning 90 days after the date of this offering
pursuant to Rule 144 and Rule 701. Holders of approximately 5,391,451 of the
Restricted Shares are subject to agreements not to sell or otherwise transfer
their shares for a certain period of time following the date of this offering
(the "Lock-up Shares"). Of such Lock-up Shares all will become available for
sale in the public market 180 days after the date of this offering although
1,066,161 of the Lock-up Shares will still be subject to certain volume and
other restrictions on resale under Rule 144 at the expiration of such lock-up
period. Volpe, Welty & Company may, in its sole discretion and at any time
without notice, release any or all of the holders of the Lock-up Shares from any
or all of their obligations under their respective agreements not to sell.
As of March 31, 1996, there were 1,009,339 shares of Common Stock issuable
upon exercise of outstanding options. The Company intends to file registration
statements under the Securities Act to register shares of Common Stock reserved
for issuance under the Option Plans, the Purchase Plan and the Directors Plan,
thus permitting the sale of such shares by non-affiliates in the public market
without restriction under the Securities Act. Such registration statement will
become effective immediately upon filing. Upon effectiveness of such
registration statements, holders of vested options to purchase approximately
601,812 shares will be entitled to exercise such options and immediately sell
such shares. Holders of all of these option shares have entered into agreements
not to sell any shares of Common Stock received upon exercise of such options
for 180 days following the date of this offering. Volpe, Welty & Company, in its
sole discretion and at
47
<PAGE> 50
any time without notice, may release any or all of such option holders from any
or all of their obligations under their respective agreements not to sell.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an Affiliate of the Company, or person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of (i) 1% of the then outstanding shares
of the Company's Common Stock (approximately 85,600 shares immediately after
this offering) or (ii) the average weekly trading volume of the Company's Common
Stock in the Nasdaq National Market during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission. Sales pursuant to Rule 144 are subject to certain
requirements relating to manner of sale, notice and availability of current
public information about the Company. A person (or person whose shares are
aggregated) who is not deemed to have been an Affiliate of the Company at any
time during the 90 days immediately preceding the sale and who has beneficially
owned Restricted Shares for at least three years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations described above.
An employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act which permits Affiliates and
non-Affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this Prospectus. In addition, non-Affiliates may sell Rule 701 shares
without complying with the public information, volume and notice provisions of
Rule 144.
Prior to this offering there has been no public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public market
could adversely affect market prices prevailing from time to time. As described
herein, only a limited number of shares will be available for sale shortly after
this offering because of certain contractual and legal restrictions on resale.
Sales of substantial amounts of Common Stock of the Company in the public market
after the restrictions lapse could adversely affect the prevailing market price
and the ability of the Company to raise equity capital in the future.
48
<PAGE> 51
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Volpe, Welty & Company,
Punk, Ziegel and Knoell, L.P. and Furman Selz LLC, have severally agreed to
purchase from the Company the following respective number of shares of Common
Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Volpe, Welty & Company....................................................
Punk, Ziegel and Knoell, L.P. ............................................
Furman Selz LLC...........................................................
---------
Total........................................................... 2,800,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and its
independent accountants. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
allow a concession not in excess of $ per share to certain other
dealers. After the initial public offering of the shares, the offering price and
other selling terms may be changed by the Representatives of the Underwriters.
The Company has granted the Underwriters an option for 30 days after the
date of this Prospectus to purchase, at the initial public offering price less
the underwriting discounts and commissions as set forth on the cover page of
this Prospectus, up to 420,000 additional shares of Common Stock, solely to
cover over-allotments, if any. If the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
of Common Stock to be purchased by each of them, as shown in the foregoing
table, bears to the 2,800,000 shares of Common Stock offered hereby. The
Underwriters may exercise such option only to cover the over-allotment in
connection with the sale of the 2,800,000 shares of Common Stock offered hereby.
Certain stockholders of the Company, including the executive officers and
directors, have agreed that they will not, without the prior written consent of
Volpe, Welty & Company, offer, sell or otherwise dispose of any shares of Common
Stock, options or warrants to acquire shares of Common Stock or securities
exchangeable for or convertible into shares of Common Stock owned by them during
the 180-day period following the date of the Prospectus. The Company has agreed
that it will not, without the prior written consent of Volpe, Welty & Company,
offer, sell or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable for or
convertible into shares of Common Stock during the 180-day period following the
date of this Prospectus, except that the Company may issue shares upon the
exercise of options granted prior to the date hereof, and may grant additional
options under its stock option plans, provided that, without the prior written
consent of Volpe, Welty & Company, such additional options shall not be
exercisable during such period.
49
<PAGE> 52
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act and to contribute to
payments the Underwriters may be required to make in respect thereof.
Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market and economic conditions, revenues and earnings of the Company, market
valuations of other companies engaged in activities similar to the Company,
estimates of the business potential and prospects of the Company, the present
state of the Company's business operations, the Company's management and other
factors deemed relevant. The estimated initial public offering price range set
forth on the cover or the preliminary Prospectus is subject to change as a
result of market conditions and other factors.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, Palo Alto, California. Certain
legal matters in connection with this offering will be passed upon for the
Underwriters by Cooley Godward Castro Huddleson & Tatum Palo Alto, California.
As of the date of this Prospectus, attorneys of Wilson Sonsini Goodrich & Rosati
beneficially own 163 shares and hold an option to purchase 4,255 shares of
Common Stock of the Company.
EXPERTS
The financial statements and schedule of the Company as of December 31,
1994 and 1995 and for each of the three years in the period ended December 31,
1995 appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their reports
thereon appearing elsewhere herein and in the Registration Statement and are
included in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto,
relating to the Common Stock offered hereby has been filed by the Company with
the Securities and Exchange Commission (the "Commission"), Washington, D.C. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement each such statement being qualified in all respects by such reference.
For further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement and the exhibits and
schedules thereto. A copy of the Registration Statement may be inspected by
anyone without charge at the public reference facilities maintained by the
Commission, at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C., 20549, or at its regional offices located at CitiCorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, Suite 1300, New York, New York 10048 and copies of all or any part
thereof may be obtained from such offices of the Commission, upon payment of
certain fees prescribed by the Commission.
50
<PAGE> 53
CEMAX-ICON, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors...................................... F-2
Balance Sheets......................................................................... F-3
Statements of Operations............................................................... F-4
Statements of Stockholders' Equity (Net Capital Deficiency)............................ F-5
Statements of Cash Flows............................................................... F-6
Notes to Financial Statements.......................................................... F-7
</TABLE>
F-1
<PAGE> 54
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
CEMAX-ICON, Inc.
We have audited the accompanying balance sheets of CEMAX-ICON, Inc. as of
December 31, 1994 and 1995, and the related statements of operations,
stockholders' equity (net capital deficiency) and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CEMAX-ICON, Inc. at December
31, 1994 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
Palo Alto, California
March 8, 1996, except for Note 8,
as to which the date is June 13, 1996
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon completion of
the 1-for-2.35 reverse stock split and reincorporation in Delaware described in
Note 8 to the financial statements.
Palo Alto, California
June 19, 1996
ERNST & YOUNG LLP
F-2
<PAGE> 55
CEMAX-ICON, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------- MARCH 31,
1994 1995 1996 (NOTE 7)
-------- -------- MARCH 31, -------------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 2,503 $ 1,775 $ 1,654
Accounts receivable, less allowance for doubtful accounts of
$484, $773 and $803 in 1994, 1995 and 1996, respectively... 1,726 3,510 3,237
Note receivable -- related party.............................. -- 300 300
Inventories................................................... 1,455 2,005 2,297
Other current assets.......................................... 159 142 125
-------- -------- --------
Total current assets....................................... 5,843 7,732 7,613
Property and equipment, net..................................... 1,140 1,512 1,510
Other assets.................................................... 36 35 34
-------- -------- --------
$ 7,019 $ 9,279 $ 9,157
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable.............................................. $ 1,882 $ 2,479 $ 2,146
Accrued compensation.......................................... 467 796 1,069
Other accrued liabilities..................................... 585 699 749
Sales tax accrual............................................. 600 600 600
Deferred revenue.............................................. 2,001 3,520 3,986
Long-term debt, current portion............................... 358 211 208
-------- -------- --------
Total current liabilities.................................. 5,893 8,305 8,758
Accrued rent.................................................... 49 53 --
Long-term debt, less current portion............................ 842 551 552
Commitments
Stockholders' equity (net capital deficiency):
Preferred stock, $0.001 par value: 30,000,000 shares
authorized, issuable in series: 10,841,508, 1,985,878 and
1,985,878 shares issued and outstanding at December 31,
1994, 1995 and March 31, 1996, respectively, all of which
are convertible; aggregate liquidation preference $7,944 at
December 31, 1995 (5,000,000 shares authorized, none issued
and outstanding, pro forma)................................ 11 2 2 $ --
Common stock, $0.001 par value: 50,000,000 shares authorized:
2,527,914, 4,877,325 and 4,915,659 shares issued and
outstanding at December 31, 1994, 1995 and March 31, 1996,
respectively (50,000,000 shares authorized, 5,760,713
shares issued and outstanding, pro forma).................. 3 5 5 6
Additional paid-in capital.................................... 24,987 31,974 32,038 32,039
Note receivable from stockholder.............................. -- -- (42) (42)
Deferred compensation......................................... -- (30) (57) (57)
Accumulated deficit........................................... (24,766) (31,581) (32,099) (32,099)
-------- -------- -------- --------
Total stockholders' equity (net capital deficiency)............. 235 370 (153) $ (153)
========
-------- -------- --------
$ 7,019 $ 9,279 $ 9,157
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 56
CEMAX-ICON, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Systems and licensing.................... $10,607 $15,017 $15,059 $4,322 $4,348
Service and maintenance.................. 1,507 1,440 1,971 317 770
------- ------- ------- ------ ------
Total revenues...................... 12,114 16,457 17,030 4,639 5,118
Costs of revenues:
Cost of systems and licensing............ 5,337 7,165 7,793 1,973 1,703
Cost of service and maintenance.......... 722 1,638 2,719 515 802
------- ------- ------- ------ ------
Total cost of revenues.............. 6,059 8,803 10,512 2,488 2,505
------- ------- ------- ------ ------
Gross profit............................... 6,055 7,654 6,518 2,151 2,613
Operating expenses:
Research and development................. 3,249 4,134 6,501 1,362 1,622
Sales, general and administrative........ 3,947 6,010 6,235 1,513 1,506
Merger related expense................... -- -- 624 -- --
------- ------- ------- ------ ------
Total operating expenses............ 7,196 10,144 13,360 2,875 3,128
------- ------- ------- ------ ------
Loss from operations....................... (1,141) (2,490) (6,842) (724) (515)
Interest and other income.................. 27 45 142 15 20
Interest and other expense................. (84) (133) (115) (46) (23)
------- ------- ------- ------ ------
Net loss................................... $(1,198) $(2,578) $(6,815) $ (755) $ (518)
======= ======= ======= ====== ======
Pro forma net loss per share............... $ (1.22) $(0.15) $(0.09)
======= ====== ======
Shares used in computing pro forma net loss
per share................................ 5,609 4,992 6,038
======= ====== ======
</TABLE>
See accompanying notes.
F-4
<PAGE> 57
CEMAX-ICON, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOTE
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
-------------------- ------------------- PAID-IN FROM DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDER COMPENSATION
----------- ------ ---------- ------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992.............. 10,341,460 $ 10 1,836,650 $ 2 $ 22,385 $ -- $ --
Issuance of common stock in conjunction
with the acquisition of Virtual Imaging
Inc..................................... -- -- 277,043 -- 98 -- --
Issuance of common stock upon the exercise
of stock options........................ -- -- 82,743 -- 603 -- --
Net loss.................................. -- -- -- -- -- -- --
Net transactions of Icon during eliminated
period from December 1, 1993 to December
31, 1993(2)............................. -- -- 25,283 -- 188 -- --
----------- --- ---------- --- ------- ---
--
Balances at December 31, 1993.............. 10,341,460 10 2,221,719 2 23,274 --
--
Issuance of Series D preferred stock in
June 1994 for cancellation of
subordinated convertible notes with
principal of $1,464 and accrued interest
of $36, net of issuance costs ($9)...... 500,048 1 -- -- 1,490 --
--
Issuance of common stock for cash and
conversion of notes payable............. -- -- 20,053 -- 150 --
--
Issuance of common stock upon the exercise
of stock options........................ -- -- 286,142 1 73 --
--
Net loss.................................. -- -- -- -- -- --
--
----------- --- ---------- --- ------- ---
--
Balances at December 31, 1994.............. 10,841,508 11 2,527,914 3 24,987 --
--
Conversion of Series A, B, C and D
preferred stock in June 1995 to common
stock................................... (10,841,508) (11) 2,305,907 2 9 --
--
Issuance of Series A preferred stock in
June of 1995 for cash investment and
conversion of bridge note, net of
issuance costs ($13).................... 1,985,878 2 -- -- 6,930 --
--
Issuance of common stock upon the exercise
of stock options........................ -- -- 43,504 -- 18 --
--
Deferred compensation related to issuance
of certain stock options................ -- -- -- -- 30 --
(30)
Net loss.................................. -- -- -- -- -- --
--
----------- --- ---------- --- ------- ---
--
Balances at December 31, 1995.............. 1,985,878 2 4,877,325 5 31,974 --
(30)
Issuance of common stock on exercise of
stock options (unaudited)............... -- -- 38,334 -- 35 --
--
Issuance of note receivable from
stockholder (unaudited)................. -- -- -- -- -- (42)
--
Deferred compensation related to issuance
of certain stock options (unaudited).... -- -- -- -- 29 --
(29)
Amortization of deferred compensation
(unaudited)............................. -- -- -- -- -- --
2
Net loss (unaudited)...................... -- -- -- -- -- --
--
----------- --- ---------- --- ------- ---
--
Balances at March 31, 1996 (unaudited)..... 1,985,878 $ 2 4,915,659 $ 5 $ 32,038 $(42)
$(57)
=========== === ========== === ======= ===
==
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY (NET
ACCUMULATED CAPITAL
DEFICIT DEFICIENCY)
----------- ---------------
<S> <C> <C>
Balances at December 31, 1992.............. $ (20,880) $ 1,517
Issuance of common stock in conjunction
with the acquisition of Virtual Imaging
Inc..................................... -- 98
Issuance of common stock upon the exercise
of stock options........................ -- 603
Net loss.................................. (1,198) (1,198)
Net transactions of Icon during eliminated
period from December 1, 1993 to December
31, 1993(2)............................. (110) 78
-------- -------
Balances at December 31, 1993.............. (22,188) 1,098
Issuance of Series D preferred stock in
June 1994 for cancellation of
subordinated convertible notes with
principal of $1,464 and accrued interest
of $36, net of issuance costs ($9)...... -- 1,491
Issuance of common stock for cash and
conversion of notes payable............. -- 150
Issuance of common stock upon the exercise
of stock options........................ -- 74
Net loss.................................. (2,578) (2,578)
-------- -------
Balances at December 31, 1994.............. (24,766) 235
Conversion of Series A, B, C and D
preferred stock in June 1995 to common
stock................................... -- --
Issuance of Series A preferred stock in
June of 1995 for cash investment and
conversion of bridge note, net of
issuance costs ($13).................... -- 6,932
Issuance of common stock upon the exercise
of stock options........................ -- 18
Deferred compensation related to issuance
of certain stock options................ -- --
Net loss.................................. (6,815) (6,815)
-------- -------
Balances at December 31, 1995.............. (31,581) 370
Issuance of common stock on exercise of
stock options (unaudited)............... -- 35
Issuance of note receivable from
stockholder (unaudited)................. -- (42)
Deferred compensation related to issuance
of certain stock options (unaudited).... -- --
Amortization of deferred compensation
(unaudited)............................. -- 2
Net loss (unaudited)...................... (518) (518)
-------- -------
Balances at March 31, 1996 (unaudited)..... $ (32,099) $ (153)
======== =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 58
CEMAX-ICON, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- ------------------
1993 1994 1995 1995 1996
---------- ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................ $ (1,198) $(2,578) $(6,815) $ (755) $ (518 )
Adjustments to reconcile net loss to net cash used in
(provided by) operating activities:
Depreciation and amortization...................... 418 761 662 163 186
Loss on disposal of property and equipment......... 40 -- 342 -- --
Changes in assets and liabilities:
Accounts receivable.............................. (442) (429) (1,784) (833) 273
Note receivable-related party.................... -- -- (300) --
Inventories...................................... (344) (424) (550) (270) (292 )
Other current assets............................. 7 (74) 17 53 17
Other assets..................................... 81 (5) 1 -- --
Accounts payable................................. 189 960 597 371 (333 )
Accrued compensation............................. 57 215 329 68 273
Other accrued liabilities........................ (110) 1,086 127 217 50
Deferred revenue................................. 62 1,277 1,519 239 466
------- ------- ------- ------ ------
Net cash used in (provided by) operating activities..... (1,240) 789 (5,855) (747) 122
------- ------- ------- ------ ------
Cash flows from investing activities:
Acquisition of property and equipment................. (682) (913) (1,376) (193) (182 )
Proceeds from sale of property and equipment.......... 4 -- -- -- --
Net increase in cash and cash equivalents of ICON for
the period December 1, 1993 to December 31, 1993... 116 -- -- -- --
------- ------- ------- ------ ------
Net cash used for investing activities................ (562) (913) (1,376) (193) (182 )
------- ------- ------- ------ ------
Cash flows from financing activities:
Proceeds from long-term debt.......................... -- 250 575 -- --
Repayment of long-term debt........................... (36) (206) (708) (699) (5 )
Proceeds from convertible subordinated notes.......... 1,464 -- -- -- --
Net proceeds from revolving line of credit............ -- 232 (314) 751 (49 )
Proceeds from note payable............................ 309 300 -- -- --
Note receivable to stockholder........................ -- -- -- -- (42 )
Proceeds from issuance of preferred stock............. -- -- 6,932 -- --
Proceeds from issuance of common stock................ 603 74 18 5 35
------- ------- ------- ------ ------
Net cash provided by (used for) financing
activities......................................... 2,340 650 6,503 57 (61 )
------- ------- ------- ------ ------
Net increase (decrease) in cash and cash
equivalents........................................ 538 526 (728) (883) (121 )
Cash and cash equivalents at beginning of year........ 1,439 1,977 2,503 2,503 1,775
------- ------- ------- ------ ------
Cash and cash equivalents at end of year.............. $ 1,977 $ 2,503 $ 1,775 $1,620 $1,654
------- ------- ------- ------ ------
Supplemental disclosure of cash flow information:
Interest paid......................................... $ 24 $ 46 $ 114 $ 49 $ 23
------- ------- ------- ------ ------
Supplemental schedule of noncash investing activities:
Property and equipment acquired under capital
leases............................................. $ -- $ 16 $ -- $ -- $ --
------- ------- ------- ------ ------
Net liabilities assumed in acquisition................ 98 -- -- -- --
------- ------- ------- ------ ------
Conversion of subordinated convertible notes and
accrued interest into Series D preferred stock, net
of issuance costs.................................. -- 1,491 -- -- --
------- ------- ------- ------ ------
Issuance of common stock for conversion of note
payable............................................ -- 150 -- -- --
------- ------- ------- ------ ------
Conversion of Series A, B, C, and D preferred stock
into common stock.................................. -- -- 7,749 -- --
------- ------- ------- ------ ------
</TABLE>
See accompanying notes.
F-6
<PAGE> 59
CEMAX-ICON, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AT MARCH 31, 1996 AND FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND
1996 IS UNAUDITED.)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
CEMAX-ICON, Inc. (the "Company") formerly Cemax, Inc. ("Cemax") and ICON
Medical Systems, Inc. ("ICON"), designs, manufactures and markets picture
archiving and communication systems ("PACS") and teleradiology systems which are
used primarily by medical imaging providers and users. The Company's software
products provide image management solutions using advanced technology to assist
radiology departments reduce operating expenses and improve efficiency. The
Company markets its medical imaging software to both Original Equipment
Manufacturers ("OEMs") and end users.
At March 31, 1996, the Company had an accumulated deficit of approximately
$32.0 million. Substantially all of these losses have been financed through
private placements of equity interests. If the Company has insufficient funds,
there can be no assurance that additional financing can be obtained on
acceptable terms, if at all.
Business Combinations
On June 14, 1995, Cemax completed its merger with ICON, a teleradiology
company located in Campbell, California. In accordance with the agreement, the
exchange ratio for each share of ICON common stock and common stock option was
0.641999 of a share of Cemax common stock and common stock option, respectively
(total of 1,879,157 shares of Cemax common stock and 323,211 options to purchase
Cemax common stock). In conjunction with the offering, 10,841,508 shares of
Cemax preferred stock converted to 2,305,907 shares of common stock. The merger
was accounted for as a pooling of interests and, accordingly, the recorded book
values of the assets and liabilities and prior operating results are combined
retroactively. The Company incurred costs in connection with the merger and
consolidation of operations. Included in the accompanying statements of
operations for the year ended December 31, 1995 are merger-related expenses of
$624,000 consisting primarily of charges for transaction and professional fees,
personnel severance costs, and elimination of duplicate facilities.
Prior to 1994, ICON's fiscal year end was November 30. The financial
statements for 1993 have not been restated for the change in fiscal year. The
results of operations for 1993 include Cemax's results of operations for the
year ended December 31, 1993 and ICON's results of operations for the year ended
November 30, 1993.
F-7
<PAGE> 60
CEMAX-ICON, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Separate results of operations for the periods prior to the merger are as
follows (in thousands):
<TABLE>
<CAPTION>
MERGER
RELATED
CEMAX- ICON CEMAX ICON EXPENSES COMBINED
---------- ------ ------- -------- --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Total revenues................ $ 9,510(1) $4,178(2) $ 3,342(2) $ -- $17,030
Net loss...................... $ (4,388)(1) $ (316)(2) $(1,487)(2) $ (624) $(6,815 )
Year ended December 31, 1994:
Total revenues................ -- $8,711 $ 7,746 -- $16,457
Net income (loss)............. -- $ 34 $(2,612) -- $(2,578 )
Year ended December 31, 1993:
(Icon as of November 30, 1993)
Total revenues................ -- $6,224 $ 5,890 -- $12,114
Net loss...................... -- $ (78) $(1,120) -- $(1,198 )
</TABLE>
- ---------------
(1) For the period from June 1, 1995 through December 31, 1995.
(2) For the period from January 1, 1995 through May 31, 1995.
In February 1993, Cemax acquired the business of Virtual Imaging, Inc., a
software company located in Sunnyvale, California. Cemax exchanged 277,043
shares of its common stock in return for all the outstanding stock of Virtual
Imaging as of the date of closing. The acquisition was accounted for using the
purchase method; accordingly, the assets and liabilities of the acquired
enterprise have been recorded at their estimated fair values as of the date of
acquisition. Virtual Imaging's results of operations have been included in
Cemax's results of operations since the date of purchase.
Interim Financial Information
The financial information at March 31, 1996 and for the three months ended
March 31, 1995 and 1996, are unaudited but includes all adjustments (consisting
only of normal recurring adjustments) which the Company considers necessary for
a fair presentation of the financial position at such date and of the operating
results and cash flows for those periods. Results of the 1996 period are not
necessarily indicative of results expected for the entire year.
Uses of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents are held in United States banks. Cash equivalents
consist of financial investments with original maturities of 90 days or less at
time of acquisition that are readily convertible into cash and have
insignificant interest rate risk.
As of January 1, 1995, the Company adopted Statement of Financial
Accounting Standard No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The Company classifies its investments as
available-for-sale. As of December 31, 1995, the Company's investments consisted
of money market funds.
F-8
<PAGE> 61
CEMAX-ICON, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Investments are recorded at market value. In 1995, the Company did not realize
any material gains or losses. There was no difference between cost and market
value at December 31, 1995.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventories at December 31, 1994 and 1995 and March 31, 1996 consist of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1994 1995 1996
------ ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials........................................... $ 429 $ 522 $ 998
Work in process......................................... 87 -- --
Finished goods, services and marketing inventory........ 939 1,483 1,299
------ ------ ------
$1,455 $2,005 $ 2,297
====== ====== ======
</TABLE>
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed on the
straight line method using useful lives of three to five years.
Property and equipment at December 31, 1994 and 1995 and March 31, 1996 are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1994 1995 1996
------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Machinery and equipment............................... $ 547 $ 569 $ 569
Computer equipment.................................... 3,194 3,680 3,854
Furniture and fixtures................................ 76 96 98
Leasehold improvements................................ 23 95 101
------- ------- -------
3,840 4,440 4,622
Less accumulated depreciation and amortization........ (2,700) (2,928) (3,112)
------- ------- -------
$ 1,140 $ 1,512 $ 1,510
======= ======= =======
</TABLE>
Property and equipment includes assets under capitalized leases at December
31, 1994 and 1995 and March 31, 1996 of approximately $75,000, $43,000 and
$26,000, respectively. Accumulated amortization related to leased assets was
approximately $47,000, $43,000 and $26,000, respectively.
Revenue Recognition
Revenues are derived from system sales, software licenses, development
contracts and fees from a range of services, including software maintenance,
support and training. Systems and licensing revenue is generated from software
licenses that grant the right to use the Company's software modules and hardware
products which are typically sold in conjunction with the Company's systems. In
addition to the software license typically sold as part of a system, the Company
generates revenue from sales of software licenses to its OEMs. Service and
maintenance revenue is generated from installation, training, documentation,
maintenance and support services. Fees for such services are generally charged
separately from the Company's software license fees.
F-9
<PAGE> 62
CEMAX-ICON, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Revenue from systems sales is recognized upon delivery of the system, which
typically occurs from one to six months after execution of a contract, depending
on the size and complexity of the system if no significant vendor obligations
remain and collection of the resulting receivable is deemed probable. Revenue
from software licenses to OEMs is recognized upon delivery, or upon completion
of specific milestones, if so stated. Delivery is further deferred in certain
contracts as delivery of the master or first copy for noncancelable product
licensing arrangements used which the customer has limited software reproduction
rights. Revenue from services is recognized as these services are performed
while revenue from software maintenance is recognized ratably over the term of
maintenance contracts. Software maintenance contracts are generally renewable on
an annual basis, although the Company occasionally negotiates long-term
maintenance contracts. Under customary system sales agreements, the Company
receives a partial payment upon the execution of a purchase agreement, further
payments upon completion of certain performance milestones and final payment due
upon completion of delivery of the system. The Company recognizes revenue on
development contracts based on the achievement of certain milestones. Amounts
received prior to the attainment of these milestones are deferred. Costs
incurred under development contracts are charged to research and development
expense as incurred.
Research and Development
Research and development expenditures are charged to operations as
incurred. Statement of Financial Accounting Standard No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed," requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility.
Based on the Company's product development process, technological
feasibility is established upon completion of a working model. Costs incurred by
the Company between completion of the working model and the point at which the
product is ready for general release have been insignificant. Through March 31,
1996, all research and development and software development costs have been
expensed.
Concentration of Credit Risk
The Company sells its processing workstations and software to customers in
the medical and health care industries primarily in North America, Europe and
Asia. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral. The Company maintains reserves for
potential credit losses and such losses have been within management's
expectations. No customers accounted for more than 10% of total revenues in
1993, one customer accounted for 10% of total revenues in 1994, one customer
accounted for 13% of total revenues in 1995 and three customers accounted for
23%, 18% and 12%, respectively in the three months ended March 31, 1996. Export
sales, primarily to Japan, for fiscal 1993, 1994 and 1995 and for the three
months ended March 31, 1996 were 13%, 22%, 17% and 29% of total revenues,
respectively.
Impact of Recently Issued Accounting Standards
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets
carrying amount. Statement 121 also addresses the accounting for long lived
assets that are expected to be disposed of. The Company adopted Statement 121 in
the first quarter of 1996 and the effect of adoption has not been material.
F-10
<PAGE> 63
CEMAX-ICON, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Accounting for Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which is effective for the Company's December 31,
1996 financial statements. SFAS 123 allows companies to either measure and
account for stock-based compensation under the new provisions of SFAS 123 or
continue to use the measurement and accounting provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") with pro forma disclosure in the notes to the financial statements as
if the measurement provision of SFAS 123 had been adopted. The Company intends
to continue accounting for its stock-based compensation in accordance with the
provisions of APB 25. As such, the adoption of SFAS 123 will not impact the
financial position or the results of operations of the Company.
Deferred Compensation
The Company recorded deferred compensation expense for the difference
between the exercise price and the deemed fair value for financial statement
presentation purposes of the Company's common stock for certain options granted
from August 1995 through June 1996. Such options were granted at exercise prices
ranging from $1.41 to $7.64 per share with deemed fair values ranging from $0.87
to $6.58 per share. This deferred compensation expense totaled approximately
$59,000, which is being amortized over the vesting period of the options.
Amortization of deferred compensation expense of approximately $2,000 was
recorded in the three months ended March 31, 1996.
Net Loss Per Share
Except as noted below, historical net loss per share is computed using the
weighted average number of common shares outstanding. Common equivalent shares
from stock options, convertible preferred stock and warrants are excluded from
the computation as their effect is antidilutive, except that, pursuant to the
Securities and Exchange Commission ("SEC") Staff Accounting Bulletins, common
and common equivalent shares issued during the period beginning 12 months prior
to the initial filing of the proposed public offering at prices substantially
below the assumed public offering price have been included in the calculation as
if they were outstanding for all periods presented (using the treasury stock
method and the assumed public offering price for stock options and warrants and
the if-converted method for convertible preferred stock).
Historical net loss per share information is as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- -----------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss per share.................... $(0.52) $(0.98) $(1.64) $(0.28) $(0.10)
===== ===== ===== ===== =====
Shares used in computing historical
net loss per share (in thousands)... 2,325 2,642 4,154 2,686 5,192
===== ===== ===== ===== =====
</TABLE>
Pro forma net loss per share has been computed as described above and also
gives effect, pursuant to SEC Staff policy, to the conversion of convertible
preferred shares that will automatically convert upon completion of the
Company's initial public offering (using the if-converted method) from the
original date of issuance.
2. SUBORDINATED CONVERTIBLE NOTES
In 1993, the Company issued subordinated convertible notes to certain of
its investors and received proceeds of $1,464,000 in contemplation of a
convertible preferred stock financing. In June 1994, these notes
F-11
<PAGE> 64
CEMAX-ICON, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUBORDINATED CONVERTIBLE NOTES -- (CONTINUED)
and associated accrued interest were converted into 500,048 shares of Series D
preferred stock. Series D preferred stock was converted to common stock in June
1995 at the rate for one share of common stock for 2.35 shares of Series D
preferred stock.
3. LINE OF CREDIT
In December 1995, the Company established an equipment purchase line of
credit for $575,000 which expires in December 1999. Borrowings bear interest at
12.16% per annum and are secured by property and equipment. As of December 31,
1995, $575,000 was outstanding against this line and was payable in 48
installments of approximately $15,000 including interest and principal beginning
January 1, 1996. The fair value of the line of credit at December 31, 1995,
approximated the carrying value. The fair value is estimated using discounted
cash flow analyses, based on the Company's current incremental borrowing rates
for similar types of borrowing arrangements.
During 1994, the Company borrowed $250,000 on a bank equipment purchase
line of credit which expired in December 1994. Borrowings are at the bank's
prime rate plus 1.75% (10.25% as of December 31, 1995) and are secured by
property and equipment. As of December 31, 1995, $166,666 was outstanding and
was payable to the bank in 24 installments of approximately $8,000 including
interest and principal.
4. LEASE AND RENTAL COMMITMENTS
The Company leases facilities and equipment under noncancelable operating
leases. As of December 31, 1995, future minimum lease commitments are as
follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
(IN THOUSANDS)
<S> <C> <C>
Year ended December 31,
1996............................................................ $ 280 $11
1997............................................................ 202 5
1998............................................................ 169 5
1999............................................................ -- 3
---- ---
Total minimum payments required................................... $ 651 24
====
Less amount representing interest................................. (4)
---
Present value of minimum lease payment............................ 20
Less current portion of capital lease obligations................. (9)
---
Long term portion of capital lease obligations.................... $11
===
</TABLE>
Rent expense for operating leases was approximately $359,000, $350,000,
$267,500, $105,000 and $57,000 for the three years ended December 31, 1993, 1994
and 1995 and the three months ended March 31, 1995 and 1996.
5. NOTE RECEIVABLE FROM RELATED PARTY
During the period ended December 31, 1995, the Company made a loan totaling
$300,000 to an officer of the Company. The loan bears interest at a rate of
prime plus 1% (9.5% at December 31, 1995). In June 1996, the note was amended to
allow for repayment of principal and accrued interest on October 31, 1997.
F-12
<PAGE> 65
CEMAX-ICON, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES
As of December 31, 1995, the Company had federal and state net operating
loss carryforwards of approximately $20,000,000 and $3,800,000, respectively.
The Company also had federal research and development tax credit carryforwards
of approximately $680,000. The federal net operating loss carryforwards will
expire at various dates beginning in 1996 through 2010, if not utilized. The
California net operating loss carryforwards will expire at various dates from
1996 through 2000.
Utilization of the net operating losses and credits is subject to a
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
As of December 31, 1994 and 1995, the Company had deferred tax assets of
approximately $9,100,000 and $11,400,000 respectively. The net deferred tax
asset has been fully offset by a valuation allowance. The valuation allowance
increased by $575,000, $950,000 and $2,300,000 during the years ended December
31, 1993, 1994 and 1995, respectively. Deferred tax assets relate primarily to
net operating losses, research credits, certain accrued expenses and reserves
that are not currently deductible for income tax purposes, and capitalized
research and development costs.
7. STOCKHOLDERS' EQUITY
Preferred stock
Preferred stock authorized and outstanding at December 31, 1995 is as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
-------------------------- AGGREGATE
ISSUED AND LIQUIDATION
AUTHORIZED OUTSTANDING AMOUNT PREFERENCE
---------- ----------- ------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Designated Series A convertible
(all convertible).................... 1,985,878 1,985,878 $6,945 $ 7,944
========= ====== ======
Undesignated........................... 28,014,122
----------
30,000,000
==========
</TABLE>
Series A preferred stock entitles the holder to receive noncumulative
dividends of $0.32 per share if declared by the board of directors. The Series A
preferred stock is convertible at the option of the holder, or automatically
upon a public offering with aggregate proceeds greater than $5,000,000 at the
rate of one share of common stock for each 2.35 shares of preferred stock
(subject to anti-dilution provisions). The holders of these shares are entitled
to one vote for each share of common stock into which such shares can be
converted. The terms of the agreement also limit the number of future shares
which may be granted as incentive options or stock purchase rights to 500,000
shares, as amended. As of December 31, 1995 there were 199,143 shares available
for grant.
At any time after January 1, 2000, the Company may redeem, at the option of
the board of directors, all outstanding shares of Series A preferred stock at
the redemption price of $4.00 per share plus any declared and unpaid dividends.
Upon liquidation of the Company, Series A preferred stock shall have a
liquidation preference of $4.00 per share, plus all declared but unpaid
dividends. If the assets and funds of the Company are insufficient to pay the
preferential amounts in full, such assets and funds shall be distributed to the
holders of preferred stock in proportion to the full amount to which each holder
is entitled. After such payments, the holders of common shares are entitled to
receive all remaining assets of the Company.
F-13
<PAGE> 66
CEMAX-ICON, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. STOCKHOLDERS' EQUITY -- (CONTINUED)
If certain conditions are met, additional shares of Series A preferred
stock may be issued in conjunction with the next round of capital financing. In
addition the Company issued a stock warrant to purchase 198,837 shares of common
stock exercisable at $11.47 per share through June 1997.
The Company has reserved 845,054 shares of common stock in the event of
conversion of the outstanding convertible preferred stock.
Stock Option and Employee Incentive Plans
In 1986, the Company established the 1986 Amended Incentive Stock Plan. As
amended, there are 1,276,596 shares of common stock reserved for issuance under
this plan.
Options, which may be either incentive stock options or nonstatutory stock
options, may be granted at prices greater than or equal to the fair value of the
stock on the date of grant, as determined by the board of directors. Generally,
options may be exercised at any time, vest over four years and expire five to
ten years from the date of grant.
Stock option activity including the stock option activity under the former
Icon stock option plan is summarized below:
<TABLE>
<CAPTION>
SHARES
---------------------------
INCENTIVE NONSTATUTORY OPTION PRICE
OPTIONS OPTIONS PER SHARE
---------- ------------ ------------
<S> <C> <C> <C>
Options outstanding at December 31, 1993..... 889,197 53,540 $0.09-$11.75
Granted.................................... 241,884 14,681 0.35- 7.47
Exercised.................................. (263,389) (2,275) 0.09- 1.46
Canceled................................... (141,096) (1,595) 0.35- 11.75
--------- ------- -----------
Options outstanding at December 31, 1994..... 726,596 43,874 0.09- 11.75
Granted.................................... 393,034 -- 1.06- 7.47
Exercised.................................. (39,249) (4,255) 0.09- 7.47
Canceled................................... (79,411) -- 0.35- 7.47
--------- ------- -----------
Options outstanding at December 31, 1995..... 1,000,970 39,619 0.09- 11.75
Granted (unaudited)........................ 14,681 -- 1.76
Exercised (unaudited)...................... (38,334) -- 0.35- 1.41
Canceled (unaudited)....................... (7,597) -- 0.35- 1.41
--------- ------- -----------
Options outstanding at March 31, 1996
(unaudited)................................ 969,720 39,619 $0.09-$11.75
========= ======= ===========
</TABLE>
At March 31, 1996, options to purchase 312,447 shares of common stock were
exercisable. Options exercised prior to the vesting date are subject to stock
purchase agreements that allow the Company to repurchase, at the original
issuance price, unvested shares upon termination of employment. Vesting of such
shares is generally ratable over a four year period, as determined by the board
of directors. As of December 31, 1995, 38,283 shares (27,588 shares as of March
31, 1996) were subject to this repurchase provision at the original price
($0.35-$0.71).
In September 1993, in connection with a bank line of credit, the Company
issued a warrant to purchase 3,546 shares of Common Stock at an exercise price
of $5.88 per share.
F-14
<PAGE> 67
CEMAX-ICON, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. STOCKHOLDERS' EQUITY -- (CONTINUED)
Unaudited Pro Forma Stockholders' Equity
Unaudited pro forma stockholders' equity at March 31, 1996 gives effect to
the conversion of 1,985,878 shares of convertible preferred stock into 845,054
shares of common stock upon the close of the Company's initial public offering.
8. SUBSEQUENT EVENTS
On June 13, 1996, the Board of Directors authorized management of the
Company to file a registration statement with the SEC permitting the Company to
sell shares of its common stock to the public. If the initial public offering is
consummated under the terms presently anticipated, all of the preferred stock
outstanding will automatically convert into 845,054 shares of common stock.
Unaudited pro forma stockholders' equity, as adjusted for the assumed conversion
of the preferred stock into shares of common stock, is set forth on the
accompanying balance sheet.
On June 13, 1996, the Board of Directors of the Company authorized the
reincorporation of the Company in the State of Delaware to be effective
immediately prior to the effectiveness of the Offering and a reverse stock
split, subject to stockholder approval, in which each 2.35 shares of common
stock are split into one share of preferred stock and common stock,
respectively. All the share and per share data in the accompanying financial
statements has been adjusted retroactively to give effect to the reverse stock
split.
On June 13, 1996, the Board of Directors of the Company adopted, subject to
shareholder approval, the 1996 Stock Plan which authorized the issuance of
700,000 shares of common stock, the 1996 Employee Stock Purchase Plan which
authorized the issuance of 150,000 shares of common stock and the 1996 Director
Option Plan which authorized the issuance of 100,000 shares of common stock.
F-15
<PAGE> 68
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY UNDERWRITER OR BY ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THE SHARES OF COMMON STOCK OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
The Company........................... 13
Use of Proceeds....................... 13
Dividend Policy....................... 13
Capitalization........................ 14
Dilution.............................. 15
Selected Financial Data............... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 23
Management............................ 35
Certain Transactions.................. 42
Principal Stockholders................ 44
Description of Capital Stock.......... 45
Shares Eligible for Future Sale....... 47
Underwriting.......................... 49
Legal Matters......................... 50
Experts............................... 50
Additional Information................ 50
Index to Financial Statements......... F-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
2,800,000 SHARES
CEMAX LOGO
COMMON STOCK
------------------------
PROSPECTUS
, 1996
------------------------
VOLPE, WELTY & COMPANY
PUNK, ZIEGEL & KNOELL
FURMAN SELZ
------------------------------------------------------
------------------------------------------------------
<PAGE> 69
APPENDIX -- DESCRIPTION OF GRAPHIC IMAGES
INSIDE FRONT COVER PAGE
[Caption: Cemax-Icon Medical Image Information Systems Electronically
acquire, archive, distribute and display medical images throughout a healthcare
facility or Integrated Delivery Network.]
[Narrative description: Graphic representation of how the Company's medical
image information system electronically acquires, archives, distributes and
displays medical images throughout a healthcare facility or Integrated Delivery
Network.]
PAGE 26 -- PRODUCTS SECTION
[Caption: Supporting hardware products include: PCI Display Controller, PCI
Analog and Digital Printer Interfaces, Technologist Keypad, Remote Workstation
and LaserLink.TM]
[Narrative description: Graphic representation of how the each of Company's
input modules, distribution and storage modules and display modules interact
with acquisition modalities to form an integrated medical image information
system.]
<PAGE> 70
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting commission, payable by the Registrant in connection with the sale
of Common Stock being registered. All amounts are estimates except the SEC
Registration Fee, the NASD Filing Fee and the Nasdaq National Market Application
Fee.
<TABLE>
<S> <C>
SEC Registration Fee...................................................... $ 11,103
NASD Filing Fee........................................................... 5,000
Nasdaq National Market Application Fee.................................... 10,000
Blue Sky Qualification Fees and Expenses.................................. 15,000
Printing and Engraving Expenses........................................... 125,000
Legal Fees and Expenses................................................... 250,000
Accounting Fees and Expenses.............................................. 150,000
Transfer Agent and Registrar Fees......................................... 10,000
Directors and Officers Liability Insurance................................ 150,000
Miscellaneous Expenses.................................................... 73,897
--
Total........................................................... $800,000
==
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to indemnify its directors, officers, employees and other agents in terms
sufficiently broad to permit indemnification (including reimbursement for
expenses) under certain circumstances for liabilities arising under the
Securities Act of 1933, as amended (the "Act"). The Registrant's Certificate of
Incorporation and Bylaws contain provisions covering indemnification of
corporate directors, officers and other agents against certain liabilities and
expenses incurred as a result of proceedings involving such persons in their
capacities as directors, officers, employees or agents, including proceedings
under the Act or the Securities Exchange Act of 1934, as amended.
The Registrant's Certificate of Incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
The Registrant's Bylaws provides for the indemnification of officers,
directors and third parties acting on behalf of the corporation if such person
acted in good faith and in a manner reasonably believed to be in and not opposed
to the best interest of the corporation, and, with respect to any criminal
action or proceeding, the indemnified party had not reason to believe his
conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Act, or
otherwise.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant in which
indemnification is being sought, nor is the Registrant aware of any threatened
litigation that may result in a claim for indemnification by any director,
officer, employee or other agent of the Registrant.
II-1
<PAGE> 71
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since March 31, 1993, the Registrant has sold and issued the following
securities which were not registered under the Act.
1. From March 31, 1993 to March 31, 1996, the Company sold and issued an
aggregate of 362,401 shares of Common Stock to employees, consultants, founders
and directors for consideration in the aggregate amount of $124,703.
2. In November 1993, the Company issued subordinated notes in the amount of
$1,464,000 to certain institutional investors. In October 1994, the Company
issued shares of Series D Preferred Stock convertible into 212,786 shares of
Common Stock to the holders of the subordinated notes in exchange for
cancellation of the notes together with accrued interest thereon in the
aggregate amount of $1,500,114.
3. In June 1995, the Company sold and issued 845,054 shares of Series A
Preferred Stock at a purchase price of $8.23 per share, together with a warrant
to purchase up to 198,837 shares of Common Stock at $12.93 per share to
Minnesota Mining and Manufacturing Company. Such warrant was subsequently
amended to provide that it is exercisable for up to 198,837 shares of Series A
Preferred Stock at a price of $11.47 per share.
4. In June 1995, pursuant to an Agreement and Plan of Reorganization and a
related Agreement and Plan of Merger, ICON Medical Systems, Inc., a California
corporation ("ICON"), was merged into the Company which was the surviving
corporation. The issued and outstanding common shares of ICON were converted and
exchanged into a total of approximately 1,879,158 shares of Common Stock of the
Company. In addition, 1,393,134 options exercisable for shares of ICON common
stock became exercisable for conversion into approximately 323,210 shares of the
Company at prices of $1.46 and $7.48 per share.
The sales and issuances of securities in the above transactions described
in paragraph (1) above were deemed to be exempt from registration under the Act
by virtue of Rule 701 promulgated thereunder.
The sales and issuances of securities in the transactions described in
paragraphs (2) and (3) above were deemed to be exempt from registration under
the Act by virtue of Section 4(2) adopted thereunder as transactions by an
issuer not involving a public offering.
The issuance of securities in the transaction described in paragraph (4)
above were deemed to be exempt from registration under the Act by virtue of
Section 3 (a)(10) adopted thereunder.
II-2
<PAGE> 72
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement
3.1* Articles of Incorporation of CEMAX-ICON, Inc., a California corporation, as
amended and in effect prior to the Registrant's reincorporation in Delaware.
3.2 Certificate of Incorporation of CEMAX-ICON, Inc., a Delaware corporation, as in
effect immediately following the Registrant's reincorporation in Delaware.
3.3 Bylaws of the Registrant, as in effect prior to the Registrant's
reincorporation in Delaware.
3.4 Bylaws of the Registrant, as in effect immediately following the Registrant's
reincorporation in Delaware.
4.1 Form of Lock-Up Agreement.
4.2* Form of Common Stock Certificate.
4.3 Form of warrant issued to existing warrant holders.
4.4 Restated Registration Rights Agreement dated December 23, 1995 among the
Registrant and certain shareholders of the Registrant.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 1986 Amended Incentive Stock Plan.
10.2 1996 Stock Plan.
10.3 1996 Director Option Plan.
10.4 1996 Employee Stock Purchase Plan.
10.5 Employees' 401(k) Savings Plan and Trust.
10.6 + Supply Agreement dated December 28, 1995 by and between Registrant and Eastman
Kodak Company.
10.7 + Sales Agreement dated June 13, 1995 by and between the Registrant and Minnesota
Mining and Manufacturing Company ("3M").
10.8 + Cooperation Agreement dated September 28, 1995 by and between the Registrant
and Hewlett-Packard Company.
10.9 + Agreement LGC950D for the License, Sublicense, and Maintenance of Software
dated September 14, 1994 by and between CEMAX, Inc. and AT&T, Corp.
10.10 Light Industrial Lease dated July 16, 1993 by and between the Registrant and
Teachers Insurance and Annuity Association of America.
10.11 + Purchase Agreement No. 900000 dated May 15, 1995, by and between GE Medical
Systems and CEMAX, Inc..
10.12 + OEM Purchase Agreement dated November 22, 1994 by and between the Registrant
and 3M.
10.13 + Loan and Security Agreement dated December 28, 1995 between the Registrant and
DVI Capital Company.
10.14*+ License Agreement dated November 30, 1992, as amended, by and between
Registrant and Toshiba Corporation.
10.15*+ European Distribution Agreement dated June 18, 1996 by and between the
Registrant and 3M.
11.1 Computation of net loss per share.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Wilson Sonsini Goodrich & Rosati (Included in Exhibit 5.1).
24.1 Power of attorney (Refer to II-4).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* Exhibits to be filed by amendment.
+ Confidential treatment requested.
(b) Financial Statement Schedules
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
Financial Statements or Notes thereto.
II-3
<PAGE> 73
SIGNATURE
Pursuant to the requirements of the Act, the Registrant has duly caused
this Registrant Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fremont, State of California, on the
19th day of June, 1996.
CEMAX-ICON, INC.
By: /s/ TERRY ROSS
Terry Ross,
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Terry Ross,
Gregory C. Patti and Jeremy B. Rubin, M.D., and each of them, individually and
without the other, his attorney-in-fact, each with the power of substitution,
for him in any and all capacities, to sign any and all amendments to this
Registration Statement (including post effective amendments and registration
statements filed pursuant to Rule 462), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE ACT, THIS REGISTRATION STATEMENT HAS
BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------- --------------
<S> <C> <C>
/s/ TERRY ROSS President, Chief Executive June 19, 1996
- ------------------------------------------ Officer and Director (Principal
Terry Ross Executive Officer)
/s/ JEREMY B. RUBIN Vice President, Chief Technical June 19, 1996
- ------------------------------------------ Officer and Vice Chairman of
Jeremy B. Rubin, M.D. the Board
/s/ GREGORY C. PATTI Chief Financial Officer June 19, 1996
- ------------------------------------------ (Principal Financial and
Gregory C. Patti Accounting Officer)
/s/ DAVID N. WHITE Chairman of the Board June 19, 1996
- ------------------------------------------
David N. White, M.D.
/s/ REID W. DENNIS Director June 19, 1996
- ------------------------------------------
Reid W. Dennis
/s/ M. DAVID TITUS Director June 19, 1996
- ------------------------------------------
M. David Titus
/s/ PHILIP E. MCCARTHY Director June 19, 1996
- ------------------------------------------
Philip E. McCarthy
</TABLE>
II-4
<PAGE> 74
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGES TO
BEGINNING COST AND BALANCE
OF PERIOD EXPENSES DEDUCTIONS AT END OF PERIOD
---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Year ended December 31, 1993.............. $ 70 $120 -$- $190
Year ended December 31, 1994.............. 190 294 -- 484
Year ended December 31, 1995.............. 484 299 -- 773
Three months ended March 31, 1996......... 773 30 -- 803
</TABLE>
<PAGE> 75
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
- ------------ -----------------------------------------------------------------------
<C> <S> <C>
1.1* Form of Underwriting Agreement
Articles of Incorporation of CEMAX-ICON, Inc., a California
corporation, as amended and in effect prior to the Registrant's
3.1* reincorporation in Delaware.
Certificate of Incorporation of CEMAX-ICON, Inc., a Delaware
corporation, as in effect immediately following the Registrant's
3.2 reincorporation in Delaware.
Bylaws of the Registrant, as in effect prior to the Registrant's
3.3 reincorporation in Delaware.
Bylaws of the Registrant, as in effect immediately following the
3.4 Registrant's reincorporation in Delaware.
4.1 Form of Lock-Up Agreement.
4.2* Form of Common Stock Certificate.
4.3 Form of warrant issued to existing warrant holders.
Restated Registration Rights Agreement dated December 23, 1995 among
4.4 the Registrant and certain shareholders of the Registrant.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 1986 Amended Incentive Stock Plan.
10.2 1996 Stock Plan.
10.3 1996 Director Option Plan.
10.4 1996 Employee Stock Purchase Plan.
10.5 Employees' 401(k) Savings Plan and Trust.
Supply Agreement dated December 28, 1995 by and between Registrant and
10.6 + Eastman Kodak Company.
Sales Agreement dated June 13, 1995 by and between the Registrant and
10.7 + Minnesota Mining and Manufacturing Company ("3M").
Cooperation Agreement dated September 28, 1995 by and between the
10.8 + Registrant and Hewlett-Packard Company.
Agreement LGC950D for the License, Sublicense, and Maintenance of
Software dated September 14, 1994 by and between CEMAX, Inc. and AT&T,
10.9 + Corp.
Light Industrial Lease dated July 16, 1993 by and between the
10.10 Registrant and Teachers Insurance and Annuity Association of America.
Purchase Agreement No. 900000 dated May 15, 1995, by and between GE
10.11 + Medical Systems and CEMAX, Inc..
OEM Purchase Agreement dated November 22, 1994 by and between the
10.12 + Registrant and 3M.
Loan and Security Agreement dated December 28, 1995 between the
10.13 + Registrant and DVI Capital Company.
License Agreement dated November 30, 1992, as amended, by and between
10.14*+ Registrant and Toshiba Corporation.
European Distribution Agreement dated June 18, 1996 by and between the
10.15*+ Registrant and 3M.
11.1 Computation of net loss per share.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Wilson Sonsini Goodrich & Rosati (Included in Exhibit 5.1).
24.1 Power of attorney (Refer to II-4).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* Exhibits to be filed by amendment.
+ Confidential treatment requested.
<PAGE> 1
Exhibit 3.2
CERTIFICATE OF INCORPORATION
OF
CEMAX-ICON, INC.
ARTICLE I.
The name of this corporation is Cemax-ICON, Inc.
ARTICLE II.
The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III.
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
ARTICLE IV.
The corporation is authorized to issue two classes of shares to be
designated respectively "preferred" and "common." The total number of shares
which the corporation is authorized to issue is 80,000,000 shares. The number of
preferred shares authorized is 30,000,000 shares (the "Preferred Stock"). The
number of common shares authorized is 50,000,000 shares (the "Common Stock").
The Preferred Stock authorized by these Articles of Incorporation may
be issued from time to time in one or more series. Except as set forth in
Article V hereof relating to the Series A Preferred Stock, the Board of
Directors is hereby authorized to fix or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock, and the number of shares constituting any such series
and the designation thereof, or any of them.
The Board of Directors is further authorized to increase or decrease
the number of shares of any series, the number of which was fixed by it,
subsequent to the issue of shares of such outstanding or necessary in order to
satisfy outstanding warrants or other securities convertible into or exercisable
for shares of such series, and, subject to the limitations and restrictions
stated in the resolution of the
<PAGE> 2
Board of Directors originally fixing the number of shares of such series. In
case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
ARTICLE V.
Section 1. Designation Series A Preferred. One million, nine hundred
and ninety-five thousand, eight hundred and seventy-eight (1,985,878) shares of
Preferred Stock are designated "Series A Preferred Stock" (hereinafter referred
to as the "Series A Preferred") with the rights, preferences and privileges
specified herein.
Section 2. Dividend Provisions. The holders of shares of Series A
Preferred shall be entitled to receive dividends, out of any assets legally
available therefor, prior and in preference to any declaration or payment of any
dividend (payable other than in Common Stock of this corporation) solely on the
Common Stock of this corporation. Dividends shall be at the rate of $.32 per
annum for each share of Series A Preferred whenever funds are legally available
therefor, payable when, as, and if declared by the Board of Directors, which
amounts shall be subject to equitable adjustment in the event of stock splits,
stock dividends, combinations, reclassifications, or other similar events
involving the Series A Preferred. Dividends on the Series A Preferred shall be
noncumulative, and no right shall accrue to the holders of the Series A
Preferred by reason of the fact that dividends on said shares are not declared
in any prior period.
Section 3. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of the corporation, either voluntary or involuntary, the entire assets
and funds of the corporation legally available for distribution (the
"Funds") shall be distributed first ratably among the holders of the
Series A Preferred in an amount per outstanding share of Series A
Preferred equal to the sum of $4.00 plus all declared but unpaid
dividends with respect to such share. If the entire assets and funds of
the corporation shall be insufficient to pay the aforesaid preferential
amounts in full, such assets and funds as are available shall be
distributed to the holders of Series A Preferred in proportion to the
full amount to which each such holder is entitled as set forth above.
After full payment of the aforesaid preferential amounts, all remaining
funds and assets shall be distributed ratably per share to the holders
of all of the outstanding shares Common Stock. All of the foregoing
amounts shall be subject to equitable adjustment in the event of stock
splits, stock dividends, combinations, reclassifications, or other
similar events involving the Series A Preferred or Common Stock.
(b) A consolidation or merger of this corporation with or into
any other corporation or corporations, a sale of all or substantially
all of the assets of the corporation, and the sale to a single entity
or group of entities under common control of capital stock possessing
more than 50% of the voting power of this corporation shall each be
deemed to be a liquidation, dissolution or winding up within the
meaning of this Section 3.
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<PAGE> 3
(c) Each holder of an outstanding share of Series A Preferred
shall be deemed to have consented, for purposes of Sections 502, 503
and 506 of the General Corporation Law of California, to distributions
made by the corporation in connection with the repurchase of shares of
Common Stock issued to or held by employees or consultants upon
termination of their employment or consulting relationship pursuant to
agreements providing for the right of said repurchase between the
corporation and such persons.
Section 4. Redemption.
(a) At any time after January 1, 2000, this corporation may,
at the option of the Board of Directors and upon satisfaction of the
terms and conditions as stated herein, from any source of funds legally
available therefor, redeem in whole or in part the outstanding shares
of Series A Preferred by paying in cash therefor a sum equal to $4.00
per share of Series A Preferred plus any declared and unpaid dividends
on such shares to be redeemed. The term "Redemption Price" as used in
this Section 4 refers to the respective amounts to be paid to redeem
the Series A Preferred.
(b) In the event of the redemption of only a part of the then
outstanding Series A Preferred, this corporation shall effect such
redemption pro rata on the basis of the aggregate Redemption Price of
each such series and within such series according to the number of
shares held by each holder thereof.
(c) At least thirty (30) but no more than sixty (60) days
prior to the Redemption Date (defined below), written notice shall be
mailed (the "Redemption Notice"), postage prepaid, to each holder of
record (at the close of business on the business day next preceding the
day on which notice is given) of Series A Preferred to be redeemed, at
the address last shown on the records of this corporation for such
holder or given by the holder to this corporation for the purpose of
notice or, if no such address appears or is given, at the place where
the principal executive office of this corporation is located,
notifying such holder of the redemption of such shares, specifying the
effective date of redemption (the "Redemption Date"), the Redemption
Price, the place at which payment may be obtained, the date on which
such holder's Conversion Rights (as hereinafter defined) as to such
shares terminate and calling upon such holder to surrender to this
corporation, in the manner and at the place designated, his certificate
or certificates representing the shares to be redeemed. On or after the
Redemption Date, each holder of Series A Preferred to be redeemed shall
surrender to this corporation the certificate or certificates
representing such shares, in the manner and at the place designated in
the Redemption Notice, and thereupon the Redemption Price of such
shares shall be payable to the order of the person whose name appears
on such certificate or certificates as the owner thereof and each
surrendered certificate shall be canceled. In the event fewer than all
the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
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<PAGE> 4
(d) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of
the holders of the shares of Series A Preferred designated for
redemption in the redemption notice as holders of Series A Preferred
(except the right to receive the Redemption Price without interest upon
surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be
transferred on the books of this corporation or be deemed to be
outstanding for any purpose whatsoever. The shares of Series A
Preferred not redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein.
(e) If, on or prior to the Redemption Date, this corporation
deposits the total Redemption Price of all outstanding shares of Series
A Preferred subject to redemption pursuant to a Redemption Notice in
trust for the benefit of the respective holders of such shares, then,
from and after the date of the deposit (although prior to the
Redemption Date), the shares so called shall be deemed redeemed and
dividends on those shares shall cease to accrue after the Redemption
Date. Such deposit shall be made with a bank or trust company in
California with irrevocable instructions and authority to such bank or
trust company to pay, on and after the Redemption Date, the Redemption
Price of the Series A Preferred to their respective holders upon
surrender of their certificates which shall constitute full payment of
the shares and, from and after the date of deposit, the shares shall no
longer be outstanding and the holders thereof shall cease to be
shareholders with respect to such shares, and shall have no rights with
respect thereto except the right to receive from the bank or trust
company payment of the Redemption Price of the shares without interest,
upon the surrender of their certificates, therefor. Any monies
deposited by this corporation pursuant to this paragraph for the
redemption of shares thereafter converted into shares of Common Stock
pursuant to Section 5 no later than the fifth day preceding the
Redemption Date shall be returned to this corporation forthwith upon
such conversion. The balance of any monies deposited by this
corporation pursuant to this paragraph remaining unclaimed at the
expiration of one (1) year following the Redemption Date shall
thereafter be returned to this corporation upon its request expressed
in a resolution of its Board of Directors, after which time the holders
of shares called for redemption shall be entitled to receive payment of
the Redemption Price (without interest) only from the corporation.
Section 5. Conversion. The holders of the Series A Preferred
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert.
(i) Subject to subparagraph (c) of this Section 5 and
at the option of each holder of Series A Preferred, at any
time after the date of issuance of the Series A Preferred and
prior to the close of business on the fifth day prior to any
Redemption Date, at the office of this corporation or any
transfer agent for such series of Preferred Stock, each share
of Series A Preferred shall be initially convertible into one
(1) fully paid and non-assessable share of Common Stock, with
the number of shares of
-4-
<PAGE> 5
Common Stock into which each share of such series of Preferred
Stock is convertible being referred to herein as the
"Conversion Rate."
(ii) In the event of a call for redemption of any
shares of Series A Preferred pursuant to Section 4 hereof, the
Conversion Rights as to the shares designated for redemption
shall terminate at the close of business on the fifth day
preceding the Redemption Date, unless default is made in
payment of the Redemption Price.
(iii) Each share of Series A Preferred shall
automatically be converted (without any action on the part of
the holder thereof) into shares of Common Stock using the then
effective Conversion Rate with respect to such series of
Preferred Stock immediately upon the closing of a firm
commitment underwritten public offering of the shares pursuant
to an effective registration statement under the Securities
Act of 1933, as amended (other than a registration statement
relating solely to the sale of securities to employees of the
corporation or a registration relating to a Securities and
Exchange Commission Rule 145 transaction), covering any of
this corporation's Common Stock, the aggregate proceeds to
this corporation of which would, at the public offering price,
exceed $5,000,000.
(b) Mechanics of Conversion. Before any holder of Series A
Preferred shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of this corporation or of any
transfer agent for such Preferred Stock, and shall give written notice
by mail, postage prepaid, to this corporation at its principal
corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. This corporation shall, as
soon as practicable thereafter, issue and deliver to such holder of
Series A Preferred, or the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to
which such holder shall be entitled and, subject to legally available
funds, a check payable to the holder in the amount of any declared and
unpaid dividends on the converted shares of Series A Preferred. Such
conversion shall be deemed to have been made immediately prior to the
close of business on the date of surrender of the shares to be
converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders thereof as of such date.
(c) Conversion Rates Adjustments. The Conversion Rates of the
Series A Preferred shall each be subject to adjustment from time to
time as follows:
(i) Special Definitions. For purposes of this
Section 5(c), the following definitions shall apply:
(A) `Options' shall mean rights, options or
warrants to subscribe for, purchase or otherwise
acquire either Common Stock or Convertible
Securities.
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<PAGE> 6
(B) `Convertible Securities' shall mean any
evidences of indebtedness, shares (other than the
Common Stock) or other securities convertible into or
exchangeable for Common Stock.
(C) `Additional Shares of Common Stock'
shall mean all shares of Common Stock issued (or,
pursuant to Section 5(c)(vi), deemed to be issued) by
the Corporation, other than shares of Common Stock
issued or issuable at any time:
(1) upon conversion of
the shares of
Preferred Stock
authorized herein;
(2) to officers,
directors, employees
of, or consultants
to, the Corporation
pursuant to any plan
or arrangement
approved by the
Board of Directors;
(3) as a dividend or
distribution on the
shares of Preferred
Stock or any event
for which adjustment
is made pursuant to
Section 5(c)(v)
hereof;
(4) by way of dividend
or other
distribution on
shares of Common
Stock excluded from
the definition of
Additional Shares of
Common Stock by the
foregoing clauses
(a), (b), or this
clause (d) or on
shares of Common
Stock so excluded.
(ii) Deemed Issue of Additional Shares of Common
Stock. In the event the Corporation, at any time or from time
to time, shall issue any Options or Convertible Securities or
shall fix a record date for the determination of holders of
any class of securities entitled to receive any such Options
or Convertible Securities, then the maximum number of shares
(as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of
such Convertible Securities, shall be deemed to be Additional
Shares of Common Stock issued as of the time of such issue or,
in case such a record date shall have been fixed, as of the
close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have
been issued unless the consideration per share (determined
pursuant to Section 5(c)(iv) hereof) of such Additional Shares
of Common Stock would be less than the Conversion Price for
such series in effect on the date of, and immediately prior
to, such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional
Shares of Common Stock are deemed to be issued:
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<PAGE> 7
(1) no further adjustment in the Conversion
Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon
the exercise of such Options or conversion or
exchange of such Convertible Securities;
(2) if such Options or Convertible
Securities by their terms provide, with the passage
of time or otherwise, for any increase or decrease in
the consideration payable to the Corporation, or in
the number of shares of Common Stock issuable, upon
the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under
such Convertible Securities;
(3) upon the expiration of any such Options
or any rights of conversion or exchange under such
Convertible Securities which shall not have been
exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such
expiration, be recomputed as if:
i) in the case of Convertible
Securities or Options for Common Stock, the
only Additional Shares of Common Stock
issued were shares of Common Stock, if any,
actually issued upon the exercise of such
Options or the conversion or exchange of
such Convertible Securities and the
consideration received therefor was the
consideration actually received by the
Corporation for the issue of all such
Options, whether or not exercised, plus the
consideration actually received by the
Corporation upon such exercise, or for the
issue of all such Convertible Securities
which were actually converted or exchanged,
plus the additional consideration, if any,
actually received by the Corporation upon
such conversion or exchange, and
ii) in the case of Options for
Convertible Securities, only the Convertible
Securities, if any, actually issued upon the
exercise thereof were issued at the time of
issue of such Options, and the consideration
received by the Corporation for the
Additional Shares of Common Stock deemed to
have been then issued was the consideration
actually received by the Corporation for the
issue of all such Options, whether or not
exercised, plus the consideration deemed to
have been
-7-
<PAGE> 8
received by the Corporation upon the issue
of the Convertible Securities with respect
to which such Options were actually
exercised;
(4) no readjustment pursuant to clause i) or
ii) above shall have the effect of increasing the
Conversion Price to an amount which exceeds the lower
of (i) the Conversion Price on the original
adjustment date, or (ii) the Conversion Price that
would have resulted from any issuance of Additional
Shares of Common Stock between the original
adjustment date and such readjustment date; and
(5) in the case of any Options which expire
by their terms not more than 90 days after the date
of issue thereof, no adjustment of the Conversion
Price shall be made until the expiration or exercise
of all such Options.
(iii) Determination of Consideration. For purposes of
this Section 5(c), the consideration received by the
Corporation for the issue of any Additional Shares of Common
Stock shall be computed as follows:
(A) Cash and Property: Such
consideration shall:
(1) insofar as it
consists of cash, be
computed at the
aggregate amount of
cash received by the
Corporation
excluding amounts
paid or payable for
accrued interest or
accrued dividends;
(2) insofar as it
consists of property
other than cash, be
computed at the fair
value thereof at the
time of such issue,
as determined in
good faith by the
Board irrespective
of any accounting
treatment; and
(3) in the event
Additional Shares of
Common Stock are
issued together with
other shares or
securities or other
assets of the
Corporation for
consideration which
covers both, be the
proportion of such
consideration so
received, computed
as provided in
clauses (a) and (b)
above, as determined
in good faith by the
Board.
(B) Options and Convertible Securities. The
consideration per share received by the Corporation
for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 5(c)(ii), relating to
Options and Convertible Securities, shall be
determined by dividing:
(x) the total amount, if any,
received or receivable by the Corporation as
consideration for the issue of such Options
or Convertible Securities, plus the minimum
aggregate amount of
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<PAGE> 9
additional consideration (as set forth in
the instruments relating thereto, without
regard to any provision contained therein
for a subsequent adjustment of such
consideration) payable to the Corporation
upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities, or in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities by
(y) the maximum number of shares of
Common Stock (as set forth in the
instruments relating thereto, without regard
to any provision contained therein for a
subsequent adjustment of such number)
issuable upon the exercise of such Options
or the conversion or exchange of such
Convertible Securities.
(iv) In the event the corporation at any time or from
time to time shall fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in Additional
Shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive
directly or indirectly, Additional Shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents")
without payment of any consideration by such holder for the
Additional Shares of Common Stock or the Common Stock
Equivalents (including the Additional Shares of Common Stock
issuable upon conversion or exercise thereof), then, as of
such record date (or the date of such dividend distribution,
split or subdivision if no record date is fixed), the
Conversion Rate for the Series A Preferred shall be
appropriately increased so that the number of shares of Common
Stock issuable on conversion of such series shall be increased
in proportion to such increase of outstanding shares of Common
Stock (including Common Stock Equivalents).
(v) If the number of shares of Common Stock
outstanding at any time is decreased by a reverse stock split
or other combination of the outstanding shares of Common
Stock, then, following the record date of such combination,
the Conversion Rate for the Series A Preferred shall be
appropriately decreased so that the number of shares of Common
Stock issuable on conversion of such series of Preferred Stock
shall be decreased in proportion to such decrease in
outstanding shares of Common Stock.
(vi) If the Common Stock issuable upon conversion of
the Series A Preferred shall be changed into the same or a
different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares
provided for above), the Conversion Rate for the Series A
Preferred then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be
proportionately adjusted such that the Series
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<PAGE> 10
A Preferred shall be convertible into, in lieu of the number
of shares of Common Stock which the holders would otherwise
have been entitled to receive, a number of shares of such
other class or classes of stock equivalent to the number of
shares of Common Stock that would have been subject to receipt
by the holders upon conversion of such series of Preferred
Stock immediately before that change.
(d) No Impairment. This corporation will not, by amendment of
its Articles of Incorporation or through any reorganization,
recapitalization transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by this corporation but
will at all times in good faith assist in the carrying out of all of
the provisions of this Section 5 and in the taking of all such action
as may be necessary or appropriate in order to protect the Conversion
Rights of the holders of the Series A Preferred against impairment.
(e) No Fractional Shares and Certificates as to
Adjustments.
(i) No fractional shares shall be issuable upon
conversion of the Series A Preferred, and the number of shares
of Common Stock to be issued shall be rounded to the nearest
whole share based upon the total number of shares of Series A
Preferred then being converted by such shareholder.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Rate pursuant to this Section
5, this corporation, at its expense, shall promptly compute
such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of the Series A
Preferred with respect to which the Conversion Rate is being
adjusted or readjusted a certificate setting forth such
adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. This
corporation shall, upon written request at any time of any
holder of Series A Preferred furnish or cause to be furnished
to such holder a like certificate setting forth (a) such
adjustment and readjustment, (b) the Conversion Rate at the
time in effect, and (c) the number of shares of Common Stock
and the amount, if any, of other property which at the time
would be received upon the conversion of such series of
Preferred Stock.
(f) Notices of Record Date. In the event of any taking by this
corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for purchase or otherwise acquire
any shares of stock of any class or any other securities or property,
or to receive any other right, this corporation shall mail to each
holder of Series A Preferred, at least ten (10) days prior to the date
specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of
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<PAGE> 11
such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
(g) Reservation of Stock Issuable upon Conversion. This
corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose
of effecting the conversion of the shares of Series A Preferred, such
number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the
Series A Preferred, and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Series A Preferred,
this corporation will take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient
for such purposes.
(h) Notices. Any notice required by the provisions of this
Section 5 to be given to the holders of shares of Series A Preferred
shall be deemed given if deposited in the United State mail, postage
prepaid, and addressed to each holder of record at his address
appearing on the books of this corporation.
Section 6. Voting Rights. Each holder of shares of Series A Preferred
shall be entitled to the number of votes equal to the number of shares
of Common Stock into which such shares of Preferred Stock could be
converted and shall have voting rights and powers equal to the voting
rights and powers of the Common Stock (except as otherwise expressly
provided herein or as required by law, voting together with the Common
Stock as a single class) and shall be entitled to notice of any
shareholders' meeting in accordance with the Bylaws of the Corporation.
Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula (after aggregating all
shares into which shares of Preferred held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half
being rounded upward). Each holder of Common Stock shall be entitled to
one (1) vote for each share of Common Stock held.
Section 7. Protective Provisions. So long as shares of Series A
Preferred are outstanding, this corporation shall not without first obtaining
the approval (by vote or written consent, as provided by law) of the holders of
a majority, voting together as a class and not as separate series, of the total
outstanding shares of Series A Preferred:
(a) alter or change the rights, preferences or privileges of
the shares of such series of Preferred Stock so as to
affect adversely the shares of such stock; or
(b) increase the authorized number of shares of such series
of Preferred Stock.
Section 8. Status of Converted or Redeemed Stock. In the event that
any shares of Series A Preferred shall be converted or redeemed pursuant to
Section 4 or Section 5 hereof, the shares so
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<PAGE> 12
converted or redeemed shall not be reissued by the corporation and the
authorized number of shares of the Series of shares so converted or redeemed
shall be reduced by the number of shares so converted or redeemed.
ARTICLE VI.
The Corporation reserves the right to amend, alter, change, or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this right.
ARTICLE VII.
The Corporation is to have perpetual existence.
ARTICLE VIII.
1. Limitation of Liability. To the fullest extent permitted by the
General Corporation Law of the State of Delaware as the same exists or as may
hereafter be amended, a director of the Corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
2. Indemnification. The corporation may indemnify to the fullest extent
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the corporation, or any predecessor of
the corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the corporation or any predecessor to the
corporation.
3. Amendments. Neither any amendment nor repeal of this Article VIII,
nor the adoption of any provision of the corporation's Certificate of
Incorporation inconsistent with this Article VIII, shall eliminate or reduce the
effect of this Article VIII, in respect of any matter occurring, or any action
or proceeding accruing or arising or that, but for this Article VIII, would
accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent
provision.
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<PAGE> 13
ARTICLE IX.
In the event any shares of Preferred shall be redeemed or converted
pursuant to the terms hereof, the shares so converted or redeemed shall not
revert to the status of authorized but unissued shares, but instead shall be
canceled and shall not be re-issuable by the corporation.
ARTICLE X.
Holders of stock of any class or series of this corporation shall not
be entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders, unless such cumulative voting is
required pursuant to Sections 2115 and/or 301.5 of the California Corporations
Code, in which event each such holder shall be entitled to as many votes as
shall equal the number of votes which (except for this provision as to
cumulative voting) such holder would be entitled to cast for the election of
directors with respect to his shares of stock multiplied by the number of
directors to be elected by him, and the holder may cast all of such votes for a
single director or may distribute them among the number of directors to be voted
for, or for any two or more of them as such holder may see fit, so long as the
name of the candidate for director shall have been placed in nomination prior to
the voting and the stockholder, or any other holder of the same class or series
of stock, has given notice at the meeting prior to the voting of the intention
to cumulate votes.
ARTICLE XI.
1. Number of Directors. The number of directors which constitutes the
whole Board of Directors of the corporation shall be designated in the Bylaws of
the corporation. The directors shall be divided into three classes with the term
of office of the first class (Class I) to expire at the annual meeting of
stockholders held in 1997; the term of office of the second class (Class II) to
expire at the annual meeting of stockholders held in 1998; the term of office of
the third class (Class III) to expire at the annual meeting of stockholders held
in 1999; and thereafter for each such term to expire at each third succeeding
annual meeting of stockholders after such election.
2. Election of Directors. Elections of directors need not be by
written ballot unless the Bylaws of the corporation shall so provide.
ARTICLE XII.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the corporation.
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<PAGE> 14
ARTICLE XIII.
No action shall be taken by the stockholders of the corporation except
at an annual or special meeting of the stockholders called in accordance with
the Bylaws and no action shall be taken by the stockholders by written consent.
The affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the then
outstanding voting securities of the corporation, voting together as a single
class, shall be required for the amendment, repeal or modification of the
provisions of Article IX, Article X or Article XII of this Restated Certificate
of Incorporation or Sections 2.4, 2.5, 2.10 or 3.2 of the Corporation's Bylaws.
ARTICLE XIV.
Meetings of stockholders may be held within or without the State of
Delaware, as the By-laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
This Restated Certificate of Incorporation has been duly adopted by the
board of directors and stockholders of the Corporation in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware, as amended.
IN WITNESS WHEREOF, Cemax-ICON, Inc. has caused this certificate to be
signed by Michael O'Donnell, its Secretary, this ___ day of June, 1996.
----------------------------
Michael O'Donnell, Secretary
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<PAGE> 1
Exhibit 3.3
BYLAWS
OF
CEMAX/ICON, INC.
<PAGE> 2
BYLAWS
OF
CEMAX/ICON, INC.
ARTICLE I
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The board of directors shall fix the location of the principal
executive office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state and
the corporation has one or more business offices in such state, then the board
of directors shall fix and designate a principal business office in the State of
California.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the board of directors. In the absence of
any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of shareholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the third
Thursday of March of each year at 2:00 p.m. However, if such day falls on a
legal holiday, then the
<PAGE> 3
meeting shall be held at the same time and place on the next succeeding full
business day. At the meeting, directors shall be elected, and any other proper
business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the board of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or otherwise
given in accordance with Section 2.5 of these bylaws not less than ten (10) (or,
if sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty
(30)) nor more than sixty (60) days before the date of the meeting. The notice
shall specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected
<PAGE> 4
shall include the name of any nominee or nominees who, at the time of the
notice, the board intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to Section
902 of the Code, (iii) a reorganization of the corporation, pursuant to Section
1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, then the notice shall also state the general nature of that
proposal.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 605 of the Code) on the record
date for the shareholders' meeting, or (iv) by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
<PAGE> 5
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any shareholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting is
fixed or if the adjournment is for more than forty-five (45) days from the date
set for the original meeting, then notice of the adjourned meeting shall be
given. Notice of any such adjourned meeting shall be given to each shareholder
of record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 2.4 and 2.5 of these bylaws. At any adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting.
2.8 VOTING
The shareholders entitled to vote at any meeting of share holders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in joint
ownership).
<PAGE> 6
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may
be otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of the shareholders. Any shareholder entitled to vote on any matter may
vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or, except when the matter is the election of directors, may
vote them against the proposal; but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote by
classes is required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the shareholder has given notice prior
to commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's shares are
normally entitled or (ii) by distributing the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder thinks fit. The
candidates receiving the highest number of affirmative votes, up to the number
of directors to be elected, shall be elected; votes against any candidate and
votes withheld shall have no legal effect.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after
<PAGE> 7
regular call and notice, if a quorum be present either in person or by proxy,
and if, either before or after the meeting, each person entitled to vote, who
was not present in person or by proxy, signs a written waiver of notice or a
consent to the holding of the meeting or an approval of the minutes thereof. The
waiver of notice or consent or approval need not specify either the business to
be transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in the second paragraph of Section 2.4 of these bylaws,
the waiver of notice or consent or approval shall state the general nature of
the proposal. All such waivers, consents, and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
<PAGE> 8
of these bylaws. In the case of approval of (i) a contract or transaction in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Code, (ii) indemnification of a corporate "agent," pursuant
to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant
to Section 1201 of the Code, and (iv) a distribution in dissolution other than
in accordance with the rights of outstanding preferred shares, pursuant to
Section 2007 of the Code, the notice shall be given at least ten (10) days
before the consummation of any action authorized by that approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING
CONSENTS
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held; and
(b) the record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
The record date for any other purpose shall be as provided in Article
VIII of these bylaws.
<PAGE> 9
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) the person who
executed the proxy revokes it prior to the time of voting by delivering a
writing to the corporation stating that the proxy is revoked or by executing a
subsequent proxy and presenting it to the meeting or by voting in person at the
meeting, or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the corporation before the vote pursuant to that proxy is
counted; provided, however, that no proxy shall be valid after the expiration of
eleven (11) months from the date of the proxy, unless otherwise provided in the
proxy. The dates contained on the forms of proxy presumptively determine the
order of execution, regardless of the postmark dates on the envelopes in which
they are mailed. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of
the Code.
2.13 INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The number
of inspectors shall be either one (1) or three (3). If inspectors are appointed
at a meeting pursuant to the request of one (1) or more shareholders or proxies,
then the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any shareholder or
a shareholder's proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the
voting power of each, the number of shares represented at the
<PAGE> 10
meeting, the existence of a quorum, and the authenticity, validity,
and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in
any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Code and any limitations in the
articles of incorporation and these bylaws relating to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall not be less than five
(5) nor more than nine (9), the actual number shall be seven (7) until changed,
within the limits specified above by a bylaw amending this Section 3.2, duly
adopted by the board of directors or by the shareholders. The indefinite number
of directors may be changed, or a definite number fixed without provision for an
indefinite number, by a duly adopted amendment to the articles of incorporation
or by an amendment to this bylay duly adopted by the vote or written consent of
holders of a mjority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the fixed number of less than five (5)
cannot be adopted if the votes cast against its adoption at a meeting, or the
shares not consenting in the of an action by written consent, are equal to more
than sixteen and two-thirds percent (16-2/3%) of the oustanding shares entitled
to vote thereon. NO amendment may
<PAGE> 11
change the stated maximum number of authorized directors to a number greater
than two (2) times the stated minimum number of directors minus one (1).
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of shareholders to
hold office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased, or (iv)
if the shareholders fail, at any meeting of shareholders at which any director
or directors are elected, to elect the number of directors to be elected at that
meeting.
<PAGE> 12
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of California that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
if the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who
<PAGE> 13
the person giving the notice has reason to believe will promptly communicate it
to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.10 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), Section 317(e) of the Code (as to
indemnification of directors), the articles of incorporation, and other
applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not
be given unless the meeting is adjourned for more than twenty-four (24) hours.
If the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes
<PAGE> 14
place, in the manner specified in Section 3.7 of these bylaws, to the directors
who were not present at the time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 APPROVAL OF LOANS TO OFFICERS*
The corporation may, upon the approval of the board of directors
alone, make loans of money or property to, or guarantee the obligations of, any
officer of the corporation or its parent or subsidiary, whether or not a
director, or adopt an employee benefit plan or plans authorizing such loans or
guaranties provided that (i) the board of directors determines that such a loan
or guaranty or plan may reasonably be expected to benefit the corporation, (ii)
the corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the board of directors, and (iii) the approval of the board of directors is by a
vote sufficient without counting the vote of any interested director or
directors.
- --------------
* This section is effective only if it has been approved by the
shareholders in accordance with Sections 315(b) and 152 of the Code.
<PAGE> 15
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have all the authority of
the board, except with respect to:
(a) the approval of any action which, under the Code, also requires
shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except
at a rate or in a periodic amount or within a price range determined by the
board of directors; or
(g) the appointment of any other committees of the board of
directors or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8
<PAGE> 16
(quorum), Section 3.9 (waiver of notice), Section 3.10 (adjournment), Section
3.11 (notice of adjournment), and Section 3.12 (action without meeting), with
such changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may be determined
either by resolution of the board of directors or by resolution of the
committee, that special meetings of committees may also be called by resolution
of the board of directors, and that notice of special meetings of committees
shall also be given to all alternate members, who shall have the right to attend
all meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
<PAGE> 17
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or non-
existence of a chairman of the board, at all meetings of the board of directors.
He shall have the general powers and duties of management usually vested in the
office of president of a corpo-
<PAGE> 18
ration, and shall have such other powers and duties as may be prescribed by the
board of directors or these bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by reso lution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records
<PAGE> 19
of accounts of the properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings, and shares. The books of account shall at
all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the Code, indemnify each of its directors and officers against
expenses (as defined in Section 317(a) of the Code), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding (as defined in Section 317(a) of the Code), arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.1, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as defined in Section 317(a) of the
Code), judgments, fines, settlements, and other amounts actually and reasonably
incurred in con-
<PAGE> 20
nection with any proceeding (as defined in Section 317(a) of the Code), arising
by reason of the fact that such person is or was an agent of the corporation.
For purposes of this Section 6.2, an "employee" or "agent" of the corporation
(other than a director or officer) includes any person (i) who is or was an
employee or agent of the corporation, (ii) who is or was serving at the request
of the corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or (iii) who was an employee or agent
of a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or
at the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least
five percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (1%) of such voting shares and has
filed a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors, may (i) inspect and copy the records of shareholders'
names, addresses, and shareholdings during usual business hours on five (5)
days' prior written demand on the corporation, (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such transfer
agent's usual charges for such list, a list of the names and addresses of the
shareholders who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that list has been
compiled or as of a date specified by the shareholder after the date of demand.
Such list shall be made available to any such shareholder by the transfer agent
on or before the later of five (5) days after the demand is received or five (5)
days after the date specified in the demand as the date as of which the list is
to be compiled.
The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust
<PAGE> 21
certificate, at any time during usual business hours, for a purpose reasonably
related to the holder's interests as a shareholder or as the holder of a voting
trust certificate.
Any inspection and copying under this Section 7.1 may be made in person
or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of these bylaws as amended
to date, which bylaws shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in such state, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any reasonable time during usual business hours, for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or by
an agent or attorney and shall include the right to copy and make extracts. Such
rights of inspection shall extend to the records of each subsidiary corporation
of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its
<PAGE> 22
subsidiary corporations. Such inspection by a director may be made in person or
by an agent or attorney. The right of inspection includes the right to copy and
make extracts of documents.
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of
the fiscal year, (ii) an income statement, (iii) a statement of changes in
financial position for the fiscal year, and (iv) any report of independent
accountants or, if there is no such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so long
as the shares of the corporation are held by fewer than one hundred (100)
holders of record.
7.6 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred twenty (120) days after the close of such fiscal year,
deliver or mail to the person making the request, within thirty (30) days
thereafter, a copy of a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corpo-
<PAGE> 23
ration has not sent to the shareholders its annual report for the last fiscal
year, the statements referred to in the first paragraph of this Section 7.6
shall likewise be delivered or mailed to the shareholder or shareholders within
thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a
meeting), the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Code.
<PAGE> 24
If the board of directors does not so fix a record date, then the
record date for determining shareholders for any such purpose shall be at the
close of business on the day on which the board adopts the applicable resolution
or the sixtieth (60th) day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The board of
directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All certificates
shall be signed in the name of the corporation by the chairman of the board or
the vice chairman of the board or the president or a vice president and by the
chief financial officer or an assistant treasurer or the secretary or an
assistant secretary, certifying the number of shares and the class or series of
shares owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate ceases to be that
officer, transfer agent or registrar before that certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.
<PAGE> 25
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or repealed by
the vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of incorporation of
the corporation set forth the number of authorized directors of the corporation,
then the authorized number of directors may be changed only by an amendment of
the articles of incorporation.
9.2 AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 9.1 of
these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the
authorized number of directors (except to fix the authorized number of directors
pursuant to a bylaw providing for a variable number of directors), may be
adopted, amended or repealed by the board of directors.
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
CEMAX-ICON, INC.
(A DELAWARE CORPORATION)
<PAGE> 2
BYLAWS
OF
CEMAX-ICON, INC.
(a Delaware corporation)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the
certificate of incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the third
Thursday in March of each year at 2:00 p.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding full business day. At the meeting, directors shall be elected,
and any other proper business may be transacted.
<PAGE> 3
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting. No other person or
persons are permitted to call a special meeting.
If a special meeting is called by any person or persons other than the
board of directors, then the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the chairman of the board, the president, or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.6 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be sent or otherwise
given in accordance with Section 2.6 of these bylaws not less than ten (10) nor
more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date and hour of the meeting and (i) in the case of a special
meeting, the purpose or purposes for which the meeting is called (no business
other than that specified in the notice may be transacted) or (ii) in the case
of the annual meeting, those matters which the board of directors, at the time
of giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
Subject to the rights of holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation,
(a) nominations for the election of directors, and
(b) business proposed to be brought before any stockholder meeting
-2-
<PAGE> 4
may be made by the board of directors or proxy committee appointed by the board
of directors or by any stockholder entitled to vote in the election of directors
generally if such nomination or business proposed is otherwise proper business
before such meeting. However, any such stockholder may nominate one or more
persons for election as directors at a meeting or propose business to be brought
before a meeting, or both, only if such stockholder has given timely notice in
proper written form of their intent to make such nomination or nominations or to
propose such business. To be timely, such stockholder's notice must be delivered
to or mailed and received at the principal executive offices of the corporation
not less than one hundred twenty (120) calendar days in advance of the date
specified in the corporation's proxy statement released to stockholders in
connection with the previous year's annual meeting of stockholders; provided,
however, that in the event that no annual meeting was held in the previous year
or the date of the annual meeting has been changed by more than thirty (30) days
from the date contemplated at the time of the previous year's proxy statement,
notice by the stockholder to be timely must be so received a reasonable time
before the solicitation is made. To be in proper form, a stockholder's notice to
the secretary shall set forth:
(i) the name and address of the stockholder who intends to make the
nominations or propose the business and, as the case may be, of the
person or persons to be nominated or of the business to be proposed;
(ii) a representation that the stockholder is a holder of record of
stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or each matter of
business to be proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or intended to
be proposed by the board of directors; and
(v) if applicable, the consent of each nominee to serve as director of
the corporation if so elected.
The chairman of the meeting shall refuse to acknowledge the nomination
of any person or the proposal of any business not made in compliance with the
foregoing procedure.
-3-
<PAGE> 5
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting in accordance
with Section 2.7 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
If a quorum be initially present, the stockholders may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time and place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
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2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation
or these bylaws, each stockholder shall be entitled to one vote for each share
of capital stock held by such stockholder and stockholders shall not be entitled
to cumulate their votes in the election of directors or with respect to any
matter submitted to a vote of the stockholders.
Notwithstanding the foregoing, if the stockholders of the corporation
are entitled, pursuant to Sections 2115 and 301.5 of the California Corporations
Code, to cumulate their votes in the election of directors, each such
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes that such stockholder normally
is entitled to cast) only if the candidates' names have been properly placed in
nomination (in accordance with these bylaws) prior to commencement of the
voting, and the stockholder requesting cumulative voting has given notice prior
to commencement of the voting of the stockholder's intention to cumulate votes.
If cumulative voting is properly requested, each holder of stock, or of any
class or classes or of a series or series thereof, who elects to cumulate votes
shall be entitled to as many votes as equals the number of votes that (absent
this provision as to cumulative voting) he or she would be entitled to cast for
the election of directors with respect to his or her shares of stock multiplied
by the number of directors to be elected by him, and he or she may cast all of
such votes for a single director or may distribute them among the number to be
voted for, or for any two or more of them, as he or she may see fit.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the Certificate of Incorporation, any
action required or permitted to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Such consents shall be delivered to the corporation by delivery to it
registered office in the state of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a record
date, which shall not precede the date upon which
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the resolution fixing the record date is adopted by the board of directors and
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting, and in such event only stockholders of record on
the date so fixed are entitled to notice and to vote, notwithstanding any
transfer of any shares on the books of the corporation after the record date.
If the board of directors does not so fix a record date, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
The record date for any other purpose shall be as provided in Section
8.1 of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware.
2.13 ORGANIZATION
The president, or in the absence of the president, the chairman of the
board, or, in the absence of the president and the chairman of the board, one of
the corporation's vice presidents, shall call the meeting of the stockholders to
order, and shall act as chairman of the meeting. In the absence of the
president, the chairman of the board, and all of the vice presidents, the
stockholders shall appoint a chairman for such meeting. The chairman of any
meeting of stockholders shall determine the order of business and the procedures
at the meeting, including such matters as the regulation of the manner of voting
and the conduct of business. The secretary of the corporation shall act as
secretary of all meetings of the stockholders, but in the absence of the
secretary at any meeting of the stockholders, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
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2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
2.15 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and to any limitations in the certificate of incorporation or these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.
3.2 NUMBER OF DIRECTORS
The board of directors shall consist of six (6) members. The number of
directors may be changed by an amendment to this bylaw, duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation. Upon the closing of the first sale of the
corporation's common stock pursuant to a firmly underwritten registered public
offering (the "IPO"), the directors shall be divided into three classes, with
the term of office of the first class, which class shall
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initially consist of two directors, to expire at the first annual meeting of
stockholders held after the IPO; the term of office of the second class, which
class shall initially consist of two directors, to expire at the second annual
meeting of stockholders held after the IPO; the term of office of the third
class, which class shall initially consist of two directors, to expire at the
third annual meeting of stockholders held after the IPO; and thereafter for each
such term to expire at each third succeeding annual meeting of stockholders held
after such election.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office as provided in
Section 3.2 of these bylaws. Each director, including a director elected or
appointed to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office for
a term expiring at the next annual meeting of the stockholders at which the term
of office of the class to which such director has been elected expires.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian
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of a stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders in
accordance with the provisions of the certificate of incorporation or these
bylaws, or may apply to the Court of Chancery for a decree summarily ordering an
election as provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with cause only, by the holders of a majority of the shares then
entitled to vote at an election of directors.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of Delaware that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting of the board, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another; and all such participating
directors shall be deemed to be present in person at the meeting.
3.7 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special
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meetings of the board of directors, or as shall be specified in a written waiver
signed by all of the directors.
3.8 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time as shall from time to time be determined by the board of directors.
If any regular meeting day shall fall on a legal holiday, then the meeting shall
be held at the same time and place on the next succeeding full business day.
3.9 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telecopy or telegram, it shall be
delivered personally or by telephone or to the telegraph company at least
forty-eight (48) hours before the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose or the place of the meeting, if the meeting
is to be held at the principal executive office of the corporation.
3.10 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.12 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the quorum for that meeting.
3.11 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice, whether before or after the meeting, or (ii) who attends the
meeting other than for the express purposed of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not
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lawfully called or convened. All such waivers shall be filed with the corporate
records or made part of the minutes of the meeting. A waiver of notice need not
specify the purpose of any regular or special meeting of the board of directors.
3.12 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting of the board to another time and place.
3.13 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting of the
board need not be given unless the meeting is adjourned for more than
twenty-four (24) hours. If the meeting is adjourned for more than twenty-four
(24) hours, then notice of the time and place of the adjourned meeting shall be
given before the adjourned meeting takes place, in the manner specified in
Section 3.9 of these bylaws, to the directors who were not present at the time
of the adjournment.
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board of directors.
3.15 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.15 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.16 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
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3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION
In the event only one director is required by these bylaws or the
certificate of incorporation, then any reference herein to notices, waivers,
consents, meetings or other actions by a majority or quorum of the directors
shall be deemed to refer to such notice, waiver, etc., by such sole director,
who shall have all the rights and duties and shall be entitled to exercise all
of the powers and shall assume all the responsibilities otherwise herein
described as given to the board of directors.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
committee, to the extent provided in the resolution of the board, shall have and
may exercise all the powers and authority of the board, but no such committee
shall have the power or authority to (i) amend the certificate of incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in Section 151(a) of the General Corporation Law of
Delaware, fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the following provisions of Article III of these
bylaws: Section 3.6 (place of meetings; meetings by telephone), Section 3.8
(regular meetings), Section 3.9 (special meetings; notice), Section 3.10
(quorum), Section 3.11 (waiver of notice), Section 3.12 (adjournment), Section
3.13 (notice of adjournment) and
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Section 3.14 (board action by written consent without meeting), with such
changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may be determined
either by resolution of the board of directors or by resolution of the
committee, that special meetings of committees may also be called by resolution
of the board of directors, and that notice of special meetings of committees
shall also be given to all alternate members, who shall have the right to attend
all meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
4.3 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
ARTICLE V
OFFICERS
5.1 OFFICERS
The Corporate Officers of the corporation shall be a president, a
secretary and a chief financial officer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more vice
presidents (however denominated), one or more assistant secretaries, a treasurer
and one or more assistant treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 5.3 of these bylaws. Any
number of offices may be held by the same person.
In addition to the Corporate Officers of the Company described above,
there may also be such Administrative Officers of the corporation as may be
designated and appointed from time to time by the president of the corporation
in accordance with the provisions of Section 5.12 of these bylaws.
5.2 ELECTION OF OFFICERS
The Corporate Officers of the corporation, except such officers as may
be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board of directors, subject to the rights,
if any, of an officer under any contract of employment, and shall hold their
respective offices for such terms as the board of directors may from time to
time determine.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other Corporate Officers as the business of the corporation may
require, each of whom shall hold office for
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such period, have such power and authority, and perform such duties as are
provided in these bylaws or as the board of directors may from time to time
determine.
The president may from time to time designate and appoint
Administrative Officers of the corporation in accordance with the provisions of
Section 5.12 of these bylaws.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of a Corporate Officer under any
contract of employment, any Corporate Officer may be removed, either with or
without cause, by the board of directors at any regular or special meeting of
the board or, except in case of a Corporate Officer chosen by the board of
directors, by any Corporate Officer upon whom such power of removal may be
conferred by the board of directors.
Any Corporate Officer may resign at any time by giving written notice
to the corporation. Any resignation shall take effect at the date of the receipt
of that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the Corporate
Officer is a party.
Any Administrative Officer designated and appointed by the president
may be removed, either with or without cause, at any time by the president. Any
Administrative Officer may resign at any time by giving written notice to the
president or to the secretary of the corporation.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise such other
powers and perform such other duties as may from time to time be assigned to him
by the board of directors or as may be prescribed by these bylaws. If there is
no president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction and control of the business and the officers of the corporation. He or
she shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the
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board of directors. He or she shall have the general powers and duties of
management usually vested in the office of president of a corporation, and shall
have such other powers and perform such other duties as may be prescribed by the
board of directors or these bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, and if there is no
chairman of the board, the vice presidents, if any, in order of their rank as
fixed by the board of directors or, if not ranked, a vice president designated
by the board of directors, shall perform all the duties of the president and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the board of directors, these bylaws, the president or the
chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of the board
of directors, committees of directors and stockholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if special,
how authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director for a purpose reasonably related to his
position as a director.
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The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors. He or she shall disburse the funds of
the corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his or
her transactions as chief financial officer and of the financial condition of
the corporation, and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, if any, or, if there is more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
5.12 ADMINISTRATIVE OFFICERS
In addition to the Corporate Officers of the corporation as provided in
Section 5.1 of these bylaws and such subordinate Corporate Officers as may be
appointed in accordance with Section 5.3 of these bylaws, there may also be such
Administrative Officers of the corporation as may be designated and appointed
from time to time by the president of the corporation. Administrative Officers
shall perform such duties and have such powers as from time to time may be
determined by the president or the board of directors in order to assist the
Corporate Officers in the furtherance of their duties. In the performance of
such duties and the exercise of such powers, however, such Administrative
Officers shall have limited authority to act on behalf of the corporation as the
board of directors shall establish, including but not limited to limitations on
the dollar amount and on the scope of agreements or commitments that may be made
by such Administrative Officers on behalf of the corporation, which limitations
may not be exceeded by such individuals or altered by the president without
further approval by the board of directors.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing powers, authority and duties, all officers
of the corporation shall respectively have such authority and powers and perform
such duties in the management of the business of the corporation as may be
designated from time to time by the board of directors.
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<PAGE> 18
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware as the same now exists or
may hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit, or proceeding in which such person was or is a party or is
threatened to be made a party by reason of the fact that such person is or was a
director or officer of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation shall mean any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
Board of Directors of the corporation.
The corporation shall pay the expenses (including attorney's fees)
incurred by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director of officer is
not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the corporation's Certificate of Incorporation,
these bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
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<PAGE> 19
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power
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<PAGE> 20
of attorney or such other writing that authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed to
the corporation at its registered office in Delaware or at its principal place
of business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine (and to make copies of)
the corporation's stock ledger, a list of its stockholders and its other books
and records for a purpose reasonably related to his or her position as a
director.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, if any, the president, any vice president,
the chief financial officer, the secretary or any assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
7.5 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these bylaws, as amended or otherwise altered
to date, certified by the secretary, shall be kept at the corporation's
principal executive office and shall be open to inspection by the stockholders
of the corporation, at all reasonable times during office hours.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not
precede the date upon which the resolution
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<PAGE> 21
fixing the record date is adopted and which shall not be more than sixty (60)
days before any such action. In that case, only stockholders of record at the
close of business on the date so fixed are entitled to receive the dividend,
distribution or allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any shares on the books of the corporation
after the record date so fixed, except as otherwise provided by law.
If the board of directors does not so fix a record date, then the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
applicable resolution.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize and empower any officer or officers, or agent or agents, to enter
into any contract or execute any instrument in the name of and on behalf of the
corporation; such power and authority may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.
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<PAGE> 22
Certificates for shares shall be of such form and device as the board
of directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such facts.
Upon surrender to the secretary or transfer agent of the corporation of
a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or
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<PAGE> 23
other adequate security sufficient to protect the corporation against any claim
that may be made against it, including any expense or liability, on account of
the alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 TRANSFER AGENTS AND REGISTRARS
The board of directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, each of which shall be an
incorporated bank or trust company -- either domestic or foreign, who shall be
appointed at such times and places as the requirements of the corporation may
necessitate and the board of directors may designate.
8.8 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, as used in these bylaws, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both an
entity and a natural person.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended
or repealed by the stockholders entitled to vote or by the board of directors of
the corporation. The fact that such power has been so conferred upon the
directors shall not divest the stockholders of the power, nor limit their power
to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in
the book of bylaws with the original bylaws, in the appropriate place. If any
bylaw is repealed, the fact of repeal with the date of the meeting at which the
repeal was enacted or the filing of the operative written consent(s) shall be
stated in said book.
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<PAGE> 1
EXHIBIT 4.1
180-DAY LOCK-UP AGREEMENT
Volpe, Welty & Company
Furman Selz, Inc.
Punk Zeigel & Knoell
as Representatives of the
Several Underwriters
One Maritime Plaza, 11th Floor
San Francisco, CA 94111
Ladies and Gentlemen:
The undersigned is a holder of securities of CEMAX-ICON, Inc., a
California corporation (the "Company"), and wishes to facilitate the public
offering of shares of the Company's Common Stock (the "Offering"). The
undersigned recognizes that such Offering and the public market for shares of
the Company's Common Stock created thereby will be of benefit to
the.undersigned.
In consideration of the foregoing and in order to induce you to act as
underwriters in connection with the Offering, the undersigned hereby irrevocably
agrees that he, she or it will not, without the prior written approval of Volpe,
Welty & Company, offer, sell, contract to sell, make any short sale (including,
but not limited to, a "short against the box"), pledge, or otherwise dispose of
directly or indirectly, any shares of Common Stock (except for shares included
in the Offering), options to acquire shares of Common Stock or securities
exchangeable or exercisable for or convertible into shares of, or any other
rights to purchase or acquire, Common Stock of the Company (the "Securities")
which he, she or it may own directly or indirectly or beneficially (as defined
by the Securities Exchange Act of 1934 and the rules and regulations thereunder)
for a period of one hundred eighty (180) days (the "Lock-up Period') following
the day on which the Form S-1 Registration Statement filed on behalf of the
Company in connection with the Offering (the "Registration Statement") shall
become effective by order of the Securities and Exchange Commission. The
foregoing restriction is expressly agreed to preclude the holder of Securities
from engaging in any hedging or other transaction that is designed to or
reasonably expected to lead to, or result in, a disposition of Securities during
the Lock-Up Period even if such Securities would be disposed of by the
undersigned subsequent to the Lock-up Period or by someone other than the
undersigned.
Notwithstanding the foregoing, any transfer of Securities which either
(i) will not result in any change in beneficial ownership, including, but not
limited to, pro rata partnership distributions and transfers into trusts for the
benefit of the original holder, or (ii) constitute bona fide gifts of such
shares will not require your consent; provided, that the transferee enters into
a lock-up
<PAGE> 2
agreement in substantially the form hereof covering the remainder of the Lock-up
Period under this Agreement.
The undersigned confirms that he, she or it understands that the
underwriters and the Company will rely upon the representations set forth in
this Agreement in proceed g with the Offering. The undersigned understands that
this Agreement is irrevocable and shall be binding on the undersigned and his,
her or its respective successors, heirs, personal representatives and assigns.
The undersigned agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent against the transfer of Securities of the
Company held by the undersigned except in compliance with this Agreement.
Notwithstanding anything else herein, if the Offering does not become
effective on or prior to January 1, 1997 the terms and provisions of this
Agreement shall be of no further force or effect.
______________________________
(Security holder's name)
______________________________
(Signature)
______________________________
(Name of person signing)
______________________________
(Title)
<PAGE> 1
Exhibit 4.3
AMENDMENT TO WARRANT
TO PURCHASE SHARES OF COMMON STOCK OF
CEMAX/ICON, INC.
This Amendment ("Amendment") dated as of May 6, 1996, between CEMAX/ICON,
INC., a California corporation (the "Company") and MINNESOTA MINING AND
MANUFACTURING COMPANY ("3M") amends that certain Warrant dated June 14, 1995 by
and between Minnesota Mining and Manufacturing Company and CEMAX/ICON, Inc.
titled 'WARRANT To Purchase Shares of Common Stock of CEMAX/ICON, INC.".
WHEREAS, the Company has previously issued to 3M a warrant exerciseable for
467,266 shares of Common Stock at a purchase price of Five Dollars and 50/100
($5.50) per share (the "Warrant").
WHEREAS, the Company and 3M desire to amend the terms of the Warrant as set
forth below and 3M has agreed to exercise the Warrant as amended prior to
September 30, 1996.
NOW, THEREFORE, the Company and 3M agree as follows:
1. The Warrant shall be exercisable for 467,266 shares of Series A
Preferred Stock of the Company at a price of Four Dollars and 88/100 ($4.88) per
share for a total exericse price of Two Million Two Hundred Eighty Thousand
Sixty-two Dollars and 88/100 ($2,280,062.88).
2. All other terms and conditions set forth in the Warrant shall remain in
full force and effect.
3. 3M agrees that it shall exercise in full the Warrant, as amended, by
payment of the total purchase price of Two Million Two Hundred Eighty Thousand
Sixty-two Dollars and 88/100 ($2,280,062.88) to the Company prior to September
30, 1996 in exchange for 467,266 shares of Series A Preferred Stock of the
Company, provided that in the evnt the Company has undertaken an initial public
offering of its securities which causes the Series A Preferred Stock of the
Company to convert to Common Stock pursuant to the Company's Restated Articles
of Incorporation prior to or simultaneous with the exercise of the Warrant, 3M
shall receive 467,266 shares of Common Stock upon exercise of the Warrant.
IN WITNESS WHEREOF, this Agreement is executed as of the date first set
forth above.
<TABLE>
<S> <C>
CEMAX/ICON Inc. MINNESOTA MINING AND
MANUFACTURING COMPANY
By By
Title Title
Date Date
</TABLE>
EXHIBIT B
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
WARRANT
To Purchase Shares of Common Stock of
CEMAX/ICON, INC.
197
<PAGE> 2
THIS CERTIFIES that, for value received, the Minnesota Mining and
Manufacturing Company is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after the date hereof and on or prior
to May 1, 1995, but not thereafter, to subscribe for and purchase, from
CEMAX/ICON, Inc., a California corporation (the "Company"), up to 467,266 fully
paid and non-assessable shares of the Company's Common Stock ("Common Stock") at
a purchase price (the "Purchase Price") of $5.50 per share. The number of shares
for which this Warrant is exercisable and the period during which this Warrant
is exercisable shall be subject to adjustment as provided herein.
1. TITLE OF WARRANT. Prior to the expiration hereof and subject to compliance
with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company,
referred to in Section 2 hereof, by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed.
2. EXERCISE OF WARRANT. The purchase rights represented by this Warrant are
exercisable by the registered holder hereof, in whole or in part, at any
time before the close of business on May 1, 1995, subject to adjustment as
hereinafter provided, by the surrender of this Warrant and the Notice of
Exercise Form annexed hereto duly executed at the office of the Company, in
Santa Clara, California (or such other office or agency of the Company as
it may designate by notice in writing to the registered holder hereof at
the address of such holder appearing on the books of the Company), and upon
payment of the Purchase Price for the shares thereby purchased (by cash or
by check or bank draft payable to the order of the Company or by
cancellation of indebtedness of the Company to the holder hereof, if any,
at the time of exercise in an amount equal to the purchase price of the
shares thereby purchased); whereupon the holder of this Warrant shall be
entitled to receive a certificate for the number of shares of Common Stock
so purchased. The Company agrees that if at the time of the surrender of
this Warrant and purchase the holder hereof shall be entitled to exercise
this Warrant, the shares so purchased shall be and be deemed to be issued
to such holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been exercised as
aforesaid.
Certificates for shares purchased hereunder shall be delivered to the
holder hereof within a reasonable time, but not later than 10 days, after the
date on which this Warrant shall have been exercised as aforesaid.
If this Warrant is exercised with respect to less than all of the shares of
Common Stock covered hereby, the holder hereof shall be entitled to receive a
new Warrant, in this form, covering the number of shares of Common Stock with
respect to which this Warrant shall not have been exercised.
The Company covenants that all shares of Common Stock which may be issued
upon the exercise of rights represented by this Warrant will, upon exercise of
the rights represented by this Warrant, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue).
3. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant.
4. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares of Common
Stock upon the exercise of this Warrant shall be made without charge to the
holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company, and such certificates shall be
issued in the name of the holder of this Warrant or in such name or names
as may be directed by the holder of this Warrant; provided, however, that
in the event certificates for shares of Common Stock are to be issued in
name other than the name of the holder of this Warrant, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the holder; and provided further, that
upon any transfer involved in the issuance or delivery of any certificates
for shares of Common Stock, the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer
tax incidental thereto.
5. NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle the holder hereof
to any voting rights or other rights as a shareholder of the Company prior
to the exercise hereof.
198
<PAGE> 3
6. EXCHANGE AND REGISTRY OF WARRANT. This Warrant is exchangeable, upon the
surrender hereof by the registered holder at the above-mentioned office or
agency of the Company, for a new Warrant of like tenor and dated as of such
exchange.
The Company shall maintain at the above-mentioned office or agency a
registry showing the name and address of the registered holder of this Warrant.
This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its terms, at such office or agency of the Company, and the
Company shall be entitled to rely in all respects, prior to written notice to
the contrary, upon such registry.
7. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated,
the Company will make and deliver a new Warrant of like tenor and dated as
of such cancellation, in lieu of this Warrant.
8. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for the
taking of any action or expiration of any right required or granted herein
shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.
9. ADJUSTMENT. The number of shares for which this Warrant is exercisable and
the time period for exercise are subject to adjustment from time to time as
follows:
(a) MERGER, SALE OF ASSETS, ETC. If at any time the Company proposes to
consolidate with or merge with or sell or convey all or substantially
all of its assets or stock to any other corporation, then the Company
shall give the holder of this Warrant fifteen (15) days notice of the
proposed effective date of such transaction and if the Warrant has not
been exercised by the effective date of such transaction it shall
terminate.
(b) PUBLIC OFFERING. Upon the effectiveness of a Registration Statement
under the Securities Act of 1933, as amended (the "Act"), covering any
of the Company's securities (as that term is defined under the Act, as
then in effect) the Company shall give the holder of this Warrant thirty
(30) days notice of the proposed effective date of such Registration
Statement and if the Warrant has not been exercised by the effective
date of such Registration Statement it shall terminate.
(c) RECLASSIFICATION, ETC. If the Company at any time shall, by
subdivision, combination or reclassification of securities or otherwise,
change any of the securities to which purchase rights under this Warrant
exist into the same or a different number of securities of any class or
classes, this Warrant shall thereafter be to acquire such number and
kind of securities as would have been issuable as the result of such
change with respect to the securities which were subject to the purchase
rights under this Warrant immediately prior to such subdivision,
combination, reclassification or other change.
(d) CASH DISTRIBUTIONS. No adjustment on account of cash dividends or
interest on the Company's Common Stock or other securities purchasable
hereunder will be made to the Purchase Price.
10. MISCELLANEOUS.
(a) ISSUE DATE. The provisions of this Warrant shall be construed and
shall be given effect in all respect as if it has been issued and
delivered by the Company on the date hereof. This Warrant shall be
binding upon any successors or assigns of the Company. This Warrant
shall constitute a contract under the laws of the State of California
and for all purposes shall be construed in accordance with and governed
by the laws of said state.
(b) RESTRICTIONS. The holder hereof acknowledges that the Common Stock
acquired upon the exercise of this Warrant shall have restrictions upon
its resale imposed by state and federal securities laws.
(c) AUTHORIZED SHARES. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to
199
<PAGE> 4
provide for the issuance of Common Stock upon the exercise of any
purchase rights under this Warrant. The Company further covenants that
its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under
this Warrant.
(d) NO IMPAIRMENT. The Company will not, by amendment of its Articles of
Incorporation or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will
at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate
in order to protect the rights of the holder hereof against impairment.
(e) NOTICES OF RECORD DATE. In Case
(a) the Company shall take a record of the holders of its Common Stock
for the purposes of entitling them to receive any dividend (other
than a cash dividend) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares or stock of
any class or any other securities or property, or to receive any
other rights; or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of
the Company with or into another corporation, or any conveyance of
all or substantially all of the assets of the Company to another
corporation; or
(c) of the voluntary or involuntary dissolution, liquidation, or
winding-up of the Company;
then, and in each such case, the Company will mail or cause to be mailed
to holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock
shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding-up. Such notice shall be mailed at least 10 days
prior to the date therein specified.
IN WITNESS WHEREOF, CEMAX/ICON, has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated:
CEMAX/ICON, INC.
By:
Title:
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<PAGE> 5
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned
to
(Please Print)
whose address is .
(Please
Print)
Dated: , 19 __ .
Holder's Signature:
Holder's Address:
Signature Guaranteed:
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
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<PAGE> 1
Exhibit 4.4
RESTATED REGISTRATION RIGHTS AGREEMENT
This Restated Registration Rights Agreement (the "Agreement") is
entered into as of January 9, 1995, among Cemax/ICON, Inc., a California
corporation (the "Company"), and the persons listed on Exhibit A attached hereto
(the "Shareholders").
RECITALS
Whereas, the Company has recently granted registration rights with
respect to Series A Preferred Stock pursuant to that certain Series A Preferred
Stock Purchase Agreement dated June 13, 1995 (the "1995 Series A Agreement"),
between the Company and the Purchasers listed on the Schedule of Purchasers
attached to the 1995 Series A Agreement as Exhibit A;
Whereas, the Company has previously granted registration rights with
respect to Common Stock issued in May 1995 upon conversion of the former Series
A Preferred, Series B Preferred, Series C Preferred, and Series D Preferred;
Whereas, the Company has previously granted registration rights with
respect to Common Stock issued in May 1992 upon conversion of the original
Series C Preferred, Series D Preferred, Series E Preferred, Series F Preferred,
and Series G Preferred;
Whereas, the Company has previously granted registration rights with
respect to Common Stock issued in May 1992 upon conversion of the original
Series A Preferred and Series B Preferred;
Whereas, the Company has previously granted registration rights with
respect to Common Stock issued to certain founders of the Company;
Whereas, the Company wishes to grant registration rights with respect
to certain of the Common Stock issued to the former majority shareholder of ICON
Medical Systems, Inc. ("ICON"), Jeremy B. Rubin, in connection with the
Agreement and Plan of Reorganization, dated April 12, 1995, and the Agreement
and Plan of Merger, dated June 12, 1995; and
Whereas, this Agreement restates and incorporates all such registration
rights into a single document;
NOW, THEREFORE, in consideration of the Recitals and the mutual
covenants and conditions set forth herein, the parties hereto agree as follows:
AGREEMENT
SECTION 1
1.1 RESTRICTIONS ON TRANSFERABILITY. The Restricted Securities
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Section 1, which conditions are intended to ensure compliance
with the provisions of the Securities Act. Each Purchaser
<PAGE> 2
will cause any proposed purchaser, assignee, transferee, or pledgee of the
Restricted Securities held by a Purchaser to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Section 1.
1.2 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities
Act.
"Conversion Stock" shall mean the Common Stock issuable upon
conversion of the Series A Preferred issued pursuant to the 1995 Series
A Agreement.
"Founders' Stock" means (i) certain shares of Common Stock
originally issued to Thomas P. Quinn (170 shares), David N. White (230
shares), E. N. Kaplan (156 shares), Edgar Greenbaum (98 shares), Carol
Lefcourt (33 shares), Vanguard Associates II (239 shares) and B. J.
Cassin (367 shares); (ii) any shares of Common Stock subsequently
acquired by such persons other than Vanguard Associates II; and (iii)
any Common Stock of the Company issued or issuable with respect to such
shares of Common Stock upon any stock split, stock dividend,
recapitalization or similar event.
"Holder" shall mean any person originally granted rights under
this Section 1.2 holding Registrable Securities or securities
convertible into Registrable Securities and any person holding such
securities to whom the rights under this Section 1.2 have been
transferred in accordance with Section 1.14 hereof.
"Initiating Holders" shall mean any Holder or Holders who in
the aggregate hold greater than 50% of the Registrable Securities.
"Registrable Securities" means (i) the Conversion Stock, (ii)
1,000,000 shares of Common Stock issued in June 1995 upon conversion of
the former capital stock of ICON held by the former majority
shareholder of ICON, Jeremy B. Rubin, (iii) the 200,299 shares of
Common Stock issued in May 1992 upon conversion of the original Series
C Preferred, Series D Preferred, Series E Preferred, Series F
Preferred, and Series G Preferred (the "Original Preferred"), (iv) the
5,421,882 shares of Common Stock issued in May 1995 upon conversion of
the former Series A Preferred, Series B Preferred, Series C Preferred,
and Series D Preferred (the "Recent Preferred") and (v) any Common
Stock otherwise issued or issuable with respect to any of the foregoing
shares, provided, however, that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so
long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities
transaction, or (B) (i) sold in or may not all be immediately sold in a
transaction exempt under Rule 144 of the Commission, in the opinion of
counsel to the Company, from the registration and prospectus delivery
requirements of the Securities Act
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<PAGE> 3
and (ii) do not exceed 5% of the total number of shares of the Company
then outstanding, so that all transfer restrictions and restrictive
legends with respect thereto are removed upon the consummation of such
sale. For purposes of the registration rights granted to holders of
Company securities pursuant to Section 1.7 hereof and for purposes of
the obligations imposed upon holders of Registrable Securities under
Sections 1.4, 1.11, and 1.15 hereof, but not for purposes of the
definition of Initiating Holders, "Registrable Securities" shall
include, in addition to the above, 913 shares of Common Stock issued in
May 1992 upon conversion of the original Series A Preferred and Series
B Preferred issued in 1984 and the Founders' Stock.
The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with
Sections 1.6, 1.7 and 1.8 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company and of one
special counsel for the participating Holders, blue sky fees and
expenses, the expense of any special audits incident to or required by
any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the
Company).
"Restricted Securities" shall mean the securities of the
Company required to bear the legend set forth in Section 1.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the
time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the
securities registered by the Holders and all reasonable fees and
disbursements of counsel for any Holder.
1.3 RESTRICTIVE LEGEND. Each certificate representing (i) the
Series A Preferred, (ii) the Conversion Stock, (iii) the Registrable Securities,
and (iv) any other securities issued in respect of the Series A Preferred, the
Conversion Stock, or the Registrable Securities upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of Section 1.4 below) be stamped
or otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD
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<PAGE> 4
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF
THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
Each Purchaser and Holder consents to the Company making a
notation on its records and giving instructions to any transfer agent of the
Series A Preferred or the Conversion Stock in order to implement the
restrictions on transfer established in this Section 1.3.
1.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 1.4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge (except
that if such holder or any successor thereto is a partnership, no such notice
described below shall be necessary for a transfer by such holder to a partner of
such holder). Each such notice shall describe the manner and circumstances of
the proposed transfer, sale, assignment or pledge in sufficient detail, and
shall be accompanied, at such holder's expense by either (i) an unqualified
written opinion of legal counsel who shall, and whose legal opinion shall be,
reasonably satisfactory to the Company addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear, except if such transfer is made pursuant to Rule 144,
the appropriate restrictive legend set forth in Section 1.3 above, except that
such certificate shall not bear such restrictive legend if in the opinion of
counsel for such holder and in the reasonable opinion of the Company such legend
is not required in order to establish compliance with any provision of the
Securities Act.
1.5 REMOVAL OF RESTRICTIONS ON TRANSFER OF SECURITIES. Any legend
referred to in Section 1.3 hereof stamped on a certificate evidencing (i) the
Series A Preferred, (ii) the Conversion Stock, (iii) the Registrable Securities,
or (iv) any other securities issued in respect of the Series A Preferred, the
Conversion Stock, or the Registrable Securities upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event and the stock
transfer instructions and record
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<PAGE> 5
notations with respect to such security shall be removed and the Company shall
issue a certificate without such legend to the holder of such security if such
security is registered under the Securities Act, or if such holder provides the
Company with an opinion of counsel (which may be counsel for the Company)
reasonably acceptable to the Company to the effect that a public sale or
transfer of such security may be made without registration under the Securities
Act or (iii) such holder provides the Company with reasonable assurances, which
may, at the option of the Company, include an opinion of counsel satisfactory to
the Company, that such security can be sold pursuant to paragraph (k) of Rule
144 under the Securities Act.
1.6 REQUESTED REGISTRATION.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to not less than 50% of
the number of shares (appropriately adjusted for recapitalizations) of
Registrable Securities held by the Initiating Holders whose anticipated
aggregate offering price, net of underwriting discounts and commissions, would
exceed $5,000,000, the Company will:
(i) within ten days of the receipt by the
Company of such notice, give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts
to effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within 20 days after receipt of such
written notice from the Company;
Provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 1.6:
(A) In any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) Prior to the earlier of (i) January
1, 1996, or (ii) three months after the effective date of the Company's first
registered public offering of its stock (the "Initial Offering");
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<PAGE> 6
(C) During the period starting with the
date sixty (60) days prior to the Company's estimated date of filing of, and
ending on the date three (3) months immediately following the effective date of,
any registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction, or registration with
respect to an employee benefit plan or with respect to the Company's first
registered public offering of its stock), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;
(D) After the Company has effected two
such registrations pursuant to this subparagraph 1.6(a), and such registrations
have been declared or ordered effective; provided, however that in the event
that any legal restriction or prohibition shall result in the inability of the
Holders participating in a registration pursuant to this subparagraph 1.6(a) to
sell at least 75% of the Registrable Securities included in such registration
within 180 days of the effectiveness thereof, then the Holders shall be entitled
to demand an additional registration pursuant to this subparagraph 1.6(a).
(E) If the Company shall furnish to
such Holders a certificate signed by the President of the Company stating that
in the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its shareholders for a registration statement to
be filed in the near future, then the Company's obligation to use its best
efforts to register, qualify or comply under this Section 1.6 shall be deferred
for a period not to exceed 90 days from the date of receipt of written request
from the Initiating Holders, provided that this right may only be exercised once
in any twelve (12) month period.
Subject to the foregoing clauses (A) through (E), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, after receipt of the request or
requests of the Initiating Holders.
(b) Underwriting. In the event that a registration
pursuant to Section 1.6 is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part of the notice
given pursuant to Section 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 1.6, and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company and reasonably acceptable to a majority of the Holders proposing
to distribute their securities through such underwriting. Notwithstanding any
other provision of this Section 1.6, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
holders of Registrable Securities and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated as follows:
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<PAGE> 7
first, among all Holders of the Common Stock issued upon conversion of the 1995
Series A Preferred, the Recent Preferred, the Original Preferred, and the first
500,000 shares of the 1,000,000 shares of Registrable Securities issued to
Jeremy B. Rubin, in proportion, as nearly as practicable, to the respective
amounts of such Registrable Securities held by such Holders at the time of
filing the registration statement; second, the original Series A Preferred and
Series B Preferred, in proportion, as nearly as practicable, to the respective
amounts of such Registrable Securities held by such Holders at the time of
filing the registration statement; third, the second 500,000 shares of the
1,000,000 shares of Registrable Securities issued to Jeremy B. Rubin, in
proportion, as nearly as practicable, to the respective amounts of such
Registrable Securities held by such Holder at the time of filing the
registration statement; and fourth, among all Holders of Founders' Stock, in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. No Registrable Securities excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such registration.
To facilitate the allocation of shares in accordance with the above provisions,
the Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to 90 days after the effective date
of such registration, or such other shorter period of time as the underwriters
may require.
1.7 COMPANY REGISTRATION.
(a) Notice of Registration. If at any time or from time
to time the Company shall determine to register any of its securities, either
for its own account or the account of a security holder or holders, other than
(i) a registration relating solely to employee benefit plans, (ii) a
registration relating solely to a Commission Rule 145 transaction or (iii) a
registration pursuant to Section 1.6 hereof, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within 20 days after receipt of such written
notice from the Company, by any Holder.
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 1.7(a)(i). In such event the right of any
Holder to registration pursuant to Section 1.7 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of Registrable
Securities in the underwriting to the extent provided
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<PAGE> 8
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
1.7, if the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
may limit the Registrable Securities and other securities to be distributed
through such underwriting; provided, however, that the number of Registrable
Securities to be included in such underwriting (other than the initial offering)
shall not be reduced to less than thirty percent (30%) of the aggregate
securities included therein without the prior written consent of the Holders of
a majority of such Registrable Securities. The Company shall so advise all
Holders distributing their securities through such underwriting of such
limitation and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated as follows:
first, among all Holders of the Common Stock issued upon conversion of the 1995
Series A Preferred, the Recent Preferred, the Original Preferred, and the first
500,000 shares of the 1,000,000 shares of Registrable Securities issued to
Jeremy B. Rubin, in proportion, as nearly as practicable, to the respective
amounts of such Registrable Securities held by such Holders at the time of
filing the registration statement; second, the original Series A Preferred and
Series B Preferred, in proportion, as nearly as practicable, to the respective
amounts of such Registrable Securities held by such Holders at the time of
filing the registration statement; third, the second 500,000 shares of the
1,000,000 shares of Registrable Securities issued to Jeremy B. Rubin, in
proportion, as nearly as practicable, to the respective amounts of such
Registrable Securities held by such Holder at the time of filing the
registration statement; and fourth, among all Holders of Founders' Stock, in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocated to any Holder
or holder to the nearest 100 shares. If any Holder disapproves of the terms of
any such underwriting, he may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall not
be transferred in a public distribution prior to 90 days after the effective
date of the registration statement relating thereto, or such other shorter
period of time as the underwriters may require.
(c) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 1.7 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 1.9 hereof.
1.8 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders of Registrable Securities
request that the Company file a registration statement on Form S-3 (or any
successor form to Form S-3), or any similar short-term registration statement,
for a public offering of not less than 20% of the number of shares
(appropriately adjusted for Recapitalizations) of the Registrable Securities,
the reasonably anticipated
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<PAGE> 9
aggregate price to the public of which, net of underwriting discounts and
commissions, would exceed $500,000 and the Company is a registrant entitled to
use Form S-3 to register the Registrable Securities for such an offering, the
Company shall use its best efforts to cause such Registrable Securities to be
registered on such form for the offering and to cause such Registrable
Securities to be qualified in such jurisdictions as the Holder or Holders may
reasonably request; provided, however, that the Company shall not be required to
effect more than one registration pursuant to this Section 1.8 in any six (6)
month period. After the Company's first public offering of its securities, the
Company will use its best efforts to qualify for Form S-3 registration or a
similar short-form registration. The provisions of Section 1.6(b) shall be
applicable to each registration initiated under this Section 1.8. The number of
registrations which may be requested by the Holders under this Section 1.8 shall
not be limited; provided, however, that the Company's obligation to pay the
Registration Expenses for registrations pursuant to this Section 1.8 shall be
limited to three (3) such registrations.
(b) Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this Section 1.8: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act; (ii) if
the Company, within ten (10) days of the receipt of the request of the
initiating Holders, gives notice of its bona fide intention to effect the filing
of a registration statement with the Commission within ninety (90) days of
receipt of such request (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities); (iii) during the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date
three (3) months immediately following, the effective date of any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or
(iv) if the Company shall furnish to such Holder a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the Company or its shareholders
for registration statements to be filed in the near future, then the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed 90 days from the receipt of the request to
file such registration by such Holder.
1.9 EXPENSES OF REGISTRATION.
(a) All Registration Expenses incurred in connection with
registrations pursuant to Sections 1.6 and 1.7 and three registrations pursuant
to Section 1.8 shall be borne by the Company. All Selling Expenses relating to
securities registered on behalf of the Holders shall be borne by the holders of
securities included in such registration pro rata with the Company and among
each other on the basis of the number of shares so registered.
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<PAGE> 10
(b) All Registration Expenses (other than Registration
Expenses for three such registrations) and Selling Expenses incurred in
connection with a registration pursuant to Section 1.8 shall be borne pro rata
by the Holder or Holders requesting the registration on Form S-3 and by any
other participants in such registration on the basis of the ratio of the number
of Registrable Securities included in such registration for each such holder to
the total number of Registration Securities included in such registration.
1.10 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the Registration
Statement has been completed;
(b) Furnish to the Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities.
1.11 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 1.11, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of the Securities Act or any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on
-10-
<PAGE> 11
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder, controlling person or
underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein. Notwithstanding the foregoing, the
liability of each Holder under this subsection (b) shall be limited in an amount
equal to the initial public offering price of the shares sold by such Holder,
unless such liability arises out of or is based on willful conduct by such
Holder.
(c) Each party entitled to indemnification under this
Section 1.11 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1.11 unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's ability
to defend such action and provided further, that the Indemnifying Party shall
not assume the defense for matters as to which there is a conflict of interest
or separate and different defenses. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
-11-
<PAGE> 12
1.12 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualifi cation or compliance referred to in this Section 1.
1.13 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended.
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (at any time
after it has become subject to such reporting requirements);
(c) So long as a Purchaser owns any Restricted Securities
to furnish to the Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934 (at
any time after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company as a Purchaser may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Purchaser
to sell any such securities without registration.
1.14 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted Holders under Sections 1.6, 1.7 and 1.8
may be assigned to a transferee or assignee reasonably acceptable to the Company
in connection with any transfer or assignment of Registrable Securities by a
Holder provided that: (i) such transfer may otherwise be effected in accordance
with applicable securities laws, and (ii) such assignee or transferee of rights
under Section 1.6 acquires at least 25% of the shares of Registrable Securities
purchased by the original Holder (appropriately adjusted for any subsequent
recapitalizations or the like).
1.15 STANDOFF AGREEMENT. Each Holder agrees, so long as such Holder
holds at least one percent (1%) of the Company's outstanding voting equity
securities, in connection with the Company's initial public offering of the
Company's securities, upon request of the Company or the underwriters managing
any underwritten offering of the Company's securities, not to sell, make any
-12-
<PAGE> 13
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any Registrable Securities (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed one hundred twenty (120)
days) from the effective date of such registration as may be requested by the
underwriters; provided, that the officers and directors of the Company who own
stock of the Company also agree to such restrictions.
1.16 REGISTRATION RIGHTS OF FUTURE ISSUES OF SECURITIES.
(a) From and after the date of this Agreement, the
Company shall not enter into any other agreement with any holder or prospective
holder of any securities of the Company which would: (i) provide that such
holder or prospective holder may require the Company to initiate any
registration of any securities of the Company, the effective date of the
registration statement for which shall be before the time that Initiating
Holders are entitled to request demand registration pursuant to Section 1.6, or
(ii) provide for the granting to such holder of registration rights unless such
agreement permits the Holders to include shares of Registrable Securities in the
Registrations requested pursuant to such registration rights and contains
provisions substantially similar to those contained in Section 1.6 and 1.7 with
respect to the allocation of securities to be included in an underwritten public
offering if marketing factors require a limitation on the number of such
securities to be included.
(b) Notwithstanding subparagraph (a) above, the Company
may, from time to time with the approval of its Board of Directors but without
obtaining the consent of the then-existing Holders, grant to such holders or
prospective holders registration rights equivalent to those granted to the
Holders of Registrable Securities hereunder.
SECTION 2
2.1 ADDITIONAL ACTIONS AND DOCUMENTS. The parties hereto
shall execute and deliver such further documents and instruments and shall take
such other further actions as may be required or appropriate to carry out the
intent and purposes of this Agreement.
2.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective successors and
assigns, provided, however, that the Shareholders shall not make any assignment
of any of their rights hereunder except as otherwise provided herein or unless
the Company shall otherwise consent.
2.3 AMENDMENTS AND WAIVERS. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the holders of a
majority of the outstanding shares of Registrable Securities and securities
convertible into Registrable Securities. Any amendment or waiver effected in
accordance with this Section 2.3 shall
-13-
<PAGE> 14
be binding upon each holder of any Registrable Securities or securities
convertible into Registrable Securities, each future holder of all such
securities, and the Company.
2.4 NOTICES, ETC. All notices and other communications
required or permitted hereunder shall be deemed given if in writing and mailed
by registered or certified mail, postage prepaid, or otherwise delivered by
hand, by messenger, or by telecopy, and properly addressed, to the party as
follows: (a) if to a Holder, at such Holder's last address or facsimile number
shown in the Company's records, or (b) if to any other holder of any Registrable
Securities, at such address or facsimile number as such holder shall have
furnished the Company in writing, or, until any such holder so furnishes an
address or facsimile number to the Company, then to and at the address or
facsimile number of the last holder of such Registrable Securities who has so
furnished an address or facsimile number to the Company, or (c) if to the
Company, at the address or facsimile number of its principal offices and
addressed to the attention of the Corporate Secretary and with a copy to Wilson,
Sonsini, Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California
94304-1050, facsimile number 415-493-6811, Attention: Michael J. O'Donnell, or
at such other address or facsimile number as the Company shall have furnished to
the Shareholders. All notices and other communications so sent shall be
effective as follows: (i) if sent by hand, messenger or by mail, upon delivery;
(ii) if sent by telecopy, upon receipt of confirmation of transmission (provided
such notice is sent on a business day during the hours of 9:00 a.m. and 6:00
p.m. local time of recipient, but if not, then immediately upon the beginning of
the first business day after being transmitted). Any party may change its
address or facsimile number for the purpose of this Section 2.4 by giving the
other parties written notice of its new address or facsimile number in
accordance herewith.
2.5 GOVERNING LAW AND VENUE. The rights and regulations
of the parties hereto shall be governed by, and this Agreement shall be
construed in accordance with, the laws of the State of California, except where
federal law may apply. All disputes arising out of this Agreement shall be
subject to the exclusive jurisdiction and venue of the California state courts
of Santa Clara County, California or the United States District Court for the
Northern District of California and the parties consent to the personal and
exclusive jurisdiction and venue of these courts.
2.6 ENTIRE AGREEMENT. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. This Agreement supersedes all prior written and
oral agreements and understandings between the parties hereto with respect to
the subject matter hereof.
2.7 SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
2.8 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall constitute
one instrument.
-14-
<PAGE> 15
2.9 EFFECTIVENESS. This Agreement shall become effective
upon execution by the Company and the holders of a majority of the outstanding
shares of Registrable Securities and the securities convertible into Registrable
Securities as set forth in the prior agreements granting registration rights to
such holders.
-15-
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"COMPANY" CEMAX/ICON, INC.
a California corporation
By:_____________________________________
Title:__________________________________
"SHAREHOLDERS"
________________________________________
Print Name
________________________________________
Signature
By:_____________________________________
Title:__________________________________
-16-
<PAGE> 17
EXHIBIT A
SCHEDULE OF SHAREHOLDERS
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Type of Shares
- ----------------------------- ---------------- --------------
<S> <C> <C>
David B. Apfelberg 64 shares Common
Arrow Family Trust 123 shares Common
Doris M. Bachrach 222 shares Common
George E. Backus, as Trustee 3 shares Common
UDT dated 10/24/85
George E. Backus 47 shares Common
Backus Family Trust 123 shares Common
Alfred L. & Sherill L. Bailey 27 shares Common
Donald E. & Patricia Barrick 30 shares Common
Donald L. Bebensee 67 shares Common
C. Gordon Bell 186 shares Common
Berthold Family Trust 245 shares Common
BFG II 72 shares Common
Susan S. Blumenthal 3 shares Common
Roberta Brosnahan 11 shares Common
Charles F. Brothers 474 shares Common
Lewis J. Brown III & 31 shares Common
Felicia D. Brown, JTWROS
Lawrence A. Brown, Jr. 38 shares Common
Joseph R. & Joan Ann Bugado 27 shares Common
Ian R.N. Bund 156 shares Common
Capform II Investment Fund 695 shares Common
Capform III Investment Fund 1,461 shares Common
Alfred R. Cartier Trust 64 shares Common
UDT July 31, 1987
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Type of Shares
- ----------------------------------- ---------------- --------------
<S> <C> <C>
B.J. Cassin 92,229 shares Common
Barbara Castagner 2 shares Common
Richard Castagner 2 shares Common
Collagen Corporation 318,163 shares Common
Richard N. Coppin 245 shares Common
Courtland Associates 1981-3 113 shares Common
Crane Family Trust 123 shares Common
Thomas M. Crawford 42 shares Common
Richard E. Davison 346 shares Common
Diversifund 1983-1 467 shares Common
John Douglas Dunn 15 shares Common
Henry M. Duque 42 shares Common
Saul Eisenstat, M.D. 42 shares Common
Enterprise Partners 575,779 shares Common
Jean M. Epstein 98 shares Common
Leslie B. Foster 10 shares Common
The First National Bank of Chicago, 275 shares Common
Trust for Robert J. Greenebaum
GC & H Partners 275 shares Common
Elinor F. Giffen 23 shares Common
Mark Gilford 257 shares Common
Michael Gold 123 shares Common
Janice S. Good 287 shares Common
Robert J. Greenebaum & William H. 1,430 shares Common
Schield, Jr., Co-Trustees of the
Edgar N. Greenebaum Jr. Living
Trust dated 12/3/94
Roger J. Guidi 30 shares Common
</TABLE>
-2-
<PAGE> 19
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Type of Shares
- ------------------------------------- ---------------- --------------
<S> <C> <C>
Kenneth & Donna Lee Harris 13 shares Common
Robert Harrington 13 shares Common
Harvest Technology Partners 371,758 shares Common
David Hirshfeld 245 shares Common
William A. Hockett, Jr. 72 shares Common
Terri D. Homer 210 shares Common
John D. & Betty Jo Hooker 42 shares Common
1982 Trust
Robert L. & Donna J. Huebner 123 shares Common
Donald M. & Laddie W. Hughes 13 shares Common
The Donald M. & Laddie W. 152 shares Common
Hughes Trust dated 5/9/79
Institutional Venture Management III 28,886 shares Common
Institutional Venture Partners 2,401 shares Common
Institutional Venture Partners III 1,915,325 shares Common
Arlene J. Kaplan 64 shares Common
Ernest N. Kaplan, M.D. 1,061 shares Common
The Kaplan Children's Trust 149 shares Common
Thomas A. King & Valeria M. 245 shares Common
Szigeti
K.S. & N. Investments Partnership 36 shares Common
The Kulp 1983 Revocable Trust 152 shares Common
Eugene K. & Charlotte N. Lamson 101 shares Common
Edwin & Carol Lefcourt 96 shares Common
Henry F. & Nora M. Lenartz 64 shares Common
Levi Revocable Living Trust 216 shares Common
dated 11/5/90
Louis & Ellen Levitas 117 shares Common
</TABLE>
-3-
<PAGE> 20
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Type of Shares
- ---------------------------------- ---------------- ------------------
<S> <C> <C>
John A. & Belinda J. Lipa 54 shares Common
Andrew B. Lipton 42 shares Common
Morton & Julia Maser 57 shares Common
Heidi B. Mason 11 shares Common
Garry G. & Karla J. Mathiason 123 shares Common
Irving B. Mayer 140 shares Common
MBW Venture Partners L.P. 930,447 shares Common
Philip E. McCarthy Pension Fund 25 shares Common
Glen McLaughlin 44 shares Common
Minnesota Mining and Manufacturing 1,985,878 shares Series A Preferred
Company
Michigan Investment Fund L.P. 204,245 shares Common
Harry Mittleman, M.D. 501 shares Common
Jack B. Murray 42 shares Common
Robert Nedd 541 shares Common
New Enterprise Associates IV 8,197 shares Common
Arthur A. & Katheryn N. Newfield, 7 shares Common
JTWROS
Arthur A. Newfield 57 shares Common
Newtek Ventures 11,190 shares Common
Pacific Coast Cardiac & Vascular 16,667 shares Common
Surgeons, a Medical Corporation
Profit Sharing Plan & Trust FBO
Perry M. Shoor
Louis & Marlene Palatella, JTWROS 100 shares Common
Peter J. & Janet L. Palmerson 42 shares Common
Paul J. & Sheila M. Pearce 64 shares Common
Richard B. & Carolee D. Peoples 32 shares Common
Carolee D. Peoples 5 shares Common
</TABLE>
-4-
<PAGE> 21
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Type of Shares
- ------------------------------------- ---------------- --------------
<S> <C> <C>
Richard B. Peoples 5 shares Common
Robert R. & Edith J. Peronto 49 shares Common
Robert A. Peterson 123 shares Common
Philips Medical Systems, Inc. 10,125 shares Common
William J. & Pamela J. Pinkerton 101 shares Common
J. David Pollard 42 shares Common
Thomas P. Quinn 445 shares Common
Jay Rouse 42 shares Common
Jeremy B. Rubin 1,000,000 shares Common
William H. Schield, Jr. 958 shares Common
Micki Schneider 23 shares Common
Arthur Schneiderman 28 shares Common
James Selover 123 shares Common
Harold F. & Bettie Shields 533 shares Common
Perry & Barbara Shoor 37 shares Common
John S. Smolowe 64 shares Common
James S. Stanford, as Trustee for the 8,824 shares Common
Stanford Family Revocable Trust of
December 19, 1990
Roger K. Summit 27 shares Common
Jack Sunseri 59 shares Common
Howard Swidler 2 shares Common
Technology Funding Partners I, L.P. 169,819 shares Common
Technology Funding Partners II, 203,147 shares Common
L.P.
Technology Funding Private Reserve, 391,137 shares Common
L.P.
Thomas A. & Rosemary S. Tisch 30 shares Common
Trust UDT 10/31/80
</TABLE>
-5-
<PAGE> 22
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Type of Shares
- --------------------------------- ---------------- --------------
<S> <C> <C>
James E. & Dee Tozer 42 shares Common
Transcorp c/f Ernest N. Kaplan 230 shares Common
TPS Account
James Valerio 42 shares Common
Vanguard Associates II 353,187 shares Common
Arthur Vassiliadis 1,035 shares Common
Venturn Partners 1,434 shares Common
W.S. Investment Company 86 248 shares Common
Wendy A. Wagner 15 shares Common
Anne Gray Walrod 42 shares Common
Jaroy Weber, Jr. 7 shares Common
James R. & Mary H. Weersing, 156 shares Common
Trustees of the Weersing Family
Trust U/D/T dated 4/24/91
Max Weil 2 shares Common
Michael W. & Barbara Weiner 59 shares Common
The Weiner Family Trust dated 1 share Common
6/30/89, Albert & Rita Weiner,
Co-Trustees
Ned M. Weinshenker Money 19 shares Common
Purchase Pension Plan
Westwind Development, Inc. 245 shares Common
Profit Sharing Plan
David N. White 893 shares Common
Patricia B. Wolf 42 shares Common
A.R. Woolworth 32 shares Common
Penny M. Woolworth 33 shares Common
Najib Yamini 15 shares Common
Barry M. Zide, M.D. 162 shares Common
</TABLE>
-6-
<PAGE> 1
EXHIBIT 10.1
CEMAX/ICON, INC.
1986 AMENDED INCENTIVE STOCK PLAN
1. Purposes of the Plan. The purposes of this Incentive Stock
Plan are to attract and retain the best available personnel, to provide
additional incentive to the Employees of Cemax/ICON, Inc. (the "Company") and to
promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock
Options or Nonstatutory Stock Options, at the discretion of the Board, and as
reflected in the terms of the written option agreement. The Board also has the
discretion to grant Stock Purchase Rights.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" shall mean the Committee, if one has been
appointed, or the Board of Directors of the Company, if no Committee is
appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Committee" shall mean the Committee appointed by the
Board of Directors in accordance with Section 4(a) of the Plan, if one is
appointed.
(d) "Common Stock" shall mean the Common Stock of the
Company.
(e) "Company" shall mean Cemax, Inc., a California
corporation.
(f) "Consultant" shall mean any person who is engaged by
the Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any director of the Company,
whether compensated for such services or not.
(g) "Continuous Status as an Employee or Consultant"
shall mean the absence of any interruption or termination of service as an
Employee or Consultant, as applicable. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board; provided
that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
(h) "Employee" shall mean any person, including officers
and directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be sufficient
to constitute "employment" by the Company.
(i) "Incentive Stock Option" shall mean an Option
intended to qualify as an incentive stock option within the meaning of Section
422 of the Code.
<PAGE> 2
(j) "Nonstatutory Stock Option" shall mean an Option not
intended to qualify as an Incentive Stock Option.
(k) "Option" shall mean a stock option granted pursuant
to the Plan.
(l) "Optioned Stock" shall mean the Common Stock subject
to an Option.
(m) "Optionee" shall mean an Employee or Consultant who
receives an Option.
(n) "Parent" shall mean a "parent corporation," whether
now or hereafter existing, as defined in Section 424 of the Code.
(o) "Plan" shall mean this 1986 Amended Incentive Stock
Plan.
(p) "Purchaser" shall mean an Employee or Consultant who
exercises a Stock Purchase Right.
(q) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(r) "Stock Purchase Right" shall mean a right to purchase
Common Stock pursuant to the Plan, or the right to receive a bonus of Common
Stock for past services.
(s) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 425(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of shares under the Plan is
3,000,000 shares of Common Stock. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option or Stock Purchase Right should expire or become
unexercisable for any reason without having been exercised in full, then the
unpurchased Shares which were subject thereto shall, unless the Plan shall have
been terminated, become available for future grant or sale under the Plan.
4. Administration of the Plan.
(a) Procedure. The Plan shall be administered by the
Board of Directors of the Company.
(i) Subject to subparagraph (ii), the Board of
Directors may appoint a Committee consisting of not less than two members of the
Board of Directors to administer the Plan on behalf of the Board of Directors,
subject to such terms and conditions as the Board of Directors may prescribe.
Once appointed, the Committee shall continue to serve until otherwise directed
by the Board
-2-
<PAGE> 3
of Directors. Members of the Board who are either eligible for Options and/or
Stock Purchase Rights or have been granted Options and/or Stock Purchase Rights
may vote on any matters affecting the administration of the Plan or the grant of
any Options and/or Stock Purchase Rights pursuant to the Plan, except that no
such member shall act upon the granting of an Option and/or Stock Purchase Right
to such member, but any such member may be counted in determining the existence
of a quorum at any meeting of the Board during which action is taken with
respect to the granting of Options and/or Stock Purchase Rights to the member.
(ii) Notwithstanding the foregoing subparagraph
(i), if and in any event the Company registers any class of any equity security
pursuant to Section 12 of the Exchange Act, from the effective date of such
registration until six (6)months after the termination of such registration, any
grants of Options and/or Stock Purchase Rights to officers or directors shall
only be made by the Board of Directors; provided, however, that if a majority of
the Board of Directors is eligible to participate in this Plan or any other
stock option or other stock plan of the Company, or any of its affiliates, or
has been eligible at any time during the prior one (1) year period (or, if
shorter, the period following the initial registration of the Company's equity
securities under Section 12 of the Exchange Act) any grants of Options and/or
Stock Purchase Rights to directors must be made by, or only in accordance with
the recommendation of, a Committee consisting of three or more persons, who may,
but need not be, directors or employees of the Company, appointed by the Board
of Directors and having full authority to act in the matter, none of whom is
eligible to participate in this Plan or any other stock option or other stock
plan of the Company or any of its affiliates, or has been eligible at any time
during the prior one (1) year period (or, if shorter, the period following the
initial registration of the Company's equity securities under Section 12 of the
Exchange Act). Any Committee administering the Plan with respect to grants to
officers who are not also directors shall confirm to the requirements of the
preceding sentence. Once appointed, the Committee shall continue to serve until
otherwise directed by the Board of Directors.
(iii) Subject to the foregoing subparagraphs (i)
and (ii), from time to time, the Board of Directors may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
(b) Powers of the Board. Subject to the provisions of the
Plan, the Board shall have the authority, in its discretion: (i) to grant
Incentive Stock Options, Nonstatutory Stock Options or Stock Purchase Rights;
(ii) to determine, upon review of relevant information and in accordance with
Section 7 of the Plan, the fair market value of the Common Stock; (iii) to
determine the exercise price per share of Options or Stock Purchase Rights, to
be granted, which exercise price shall be determined in accordance with Section
7 of the Plan; (iv) to determine the Employees or Consultants to whom, and the
time or times at which, Options or Stock Purchase Rights shall be granted and
the number of shares to be represented by each Option or Stock Purchase Right;
(v) to interpret the Plan; (vi) to prescribe, amend and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and provisions of
each Option and Stock Purchase Right granted (which need not be identical) and,
with the consent of the holder thereof, modify or amend any provisions
(including provisions relating to exercise price) of any Option or Stock
Purchase Right; (viii) to authorize any person to execute on behalf of the
Company any
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<PAGE> 4
instrument required to effectuate the grant of an Option or Stock Purchase Right
previously granted by the Board; and (ix) to make all other determinations
deemed necessary or advisable for the administration of the Plan.
(c) Effect of Board's Decision. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Optionees, Purchasers and any other holders of any Options or Stock Purchase
Rights granted under the Plan.
5. Eligibility.
(a) Options and Stock Purchase Rights may be granted to
Employees and Consultants, provided that Incentive Stock Options may only be
granted to Employees. An Employee or Consultant who has been granted an Option
or Stock Purchase Right may, if such Employee or Consultant is otherwise
eligible, be granted additional Option(s) or Stock Purchase Right(s).
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
fair market value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Options shall be taken
into account in the order in which they were granted, and the fair market value
of the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
(d) The Plan shall not confer upon any Optionee or holder
of a Stock Purchase Right any right with respect to continuation of employment
by or the rendition of consulting services to the Company, nor shall it
interfere in any way with his or her right or the Company's right to terminate
his or her employment or services at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by vote of
the holders of a majority of the outstanding shares of the Company entitled to
vote on the adoption of the Plan. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 14 of the Plan.
7. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option or Stock Purchase Right shall be such
price as is determined by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option:
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<PAGE> 5
(A) granted to an Employee who, at the
time of the grant of such Incentive Stock Option, owns stock representing more
than ten (10) percent of the voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise price shall be no less than
one hundred ten percent (110%) of the fair market value per Share on the date of
grant.
(B) granted to any Employee other than
an Employee described in the preceding paragraph, the per Share exercise price
shall be no less than one hundred percent (100%) of the fair market value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
or a Stock Purchase Right:
(A) granted to a person who, at the
time of the grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than one hundred
ten percent (110%) of the fair market value per Share on the date of the grant.
(B) granted to any person, the per
Share exercise price shall be no less than eighty-five percent (85%) of the fair
market value per Share on the date of grant.
For purposes of this Section 7(a), in the event that an Option
or Stock Purchase Right is amended to reduce the exercise price, the date of
grant of such Option or Stock Purchase Right shall thereafter be considered to
be the date of such amendment.
(b) The fair market value shall be determined by the
Board in its discretion; provided, however, that where there is a public market
for the Common Stock, the fair market value per Share shall be the mean of the
bid and asked prices (or the closing price per share if the Common Stock is
listed on the National Association of Securities Dealers Automated Quotation
("NASDAQ") National Market System of the Common Stock for the date of grant, as
reported in the Wall Street Journal (or, if not so reported, as otherwise
reported by the NASDAQ System) or, in the event the Common Stock is listed on a
stock exchange, the fair market value per Share shall be the closing price on
such exchange on the date of grant of the Option or Stock Purchase Right, as
reported in the Wall Street Journal.
(c) The consideration to be paid for the Shares to be
issued upon exercise of an Option or Stock Purchase Right, including the method
of payment, shall be determined by the Board and may consist entirely of cash,
check,promissory note, other Shares of Common Stock, which (i) either have been
owned by the Optionee for more than six (6) months on the date of surrender or
were not acquired directly or indirectly, from the Company, and (ii) have a fair
market value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, or any combination of
such methods of payment, or such other consideration and method of payment for
the issuance of Shares to the extent permitted under Sections 408 and 409 of the
California General Corporation Law. In making its determination as to the type
of consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company (Section 315(b)
of the California General Corporation Law).
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<PAGE> 6
8. Options.
(a) Term of Option. The term of each Incentive Stock
Option shall be ten (10) years from the date of grant thereof, or such shorter
term as may be provided in the Incentive Stock Option Agreement. The term of
each Option that is not an Incentive Stock Option shall be ten (10) years and
one (1) day from the date of grant thereof, or such shorter term as may be
provided in the Stock Option Agreement. However, in the case of an Option
granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, (i) if the Option is an
Incentive Stock Option, the term of the Option shall be five (5) years from the
date of grant thereof, or such shorter time as may be provided in the Stock
Option Agreement, or (ii) if the Option is a Nonstatutory Stock Option, the term
of Option shall be five (5) years and one (1) day from the date of grant thereof
or such other term as may be provided in the Stock Option Agreement.
(b) Exercise of Option.
(i) Procedure for Exercise; Rights as a
Shareholder. Any Option granted hereunder shall be exercisable at such times and
under such conditions as determined by the Board, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan, but in no case at a rate of less than twenty
percent (20%) per year over five (5) years from the date the Option is granted.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section 7 of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. In the
event that the exercise of an Option is treated in part as the exercise of an
Incentive Stock Option and in part as the exercise of a Nonstatutory Stock
Option pursuant to Section 5(b), the Company shall issue a separate stock
certificate evidencing the Shares treated as acquired upon exercise of an
Incentive Stock Option and a separate stock certificate evidencing the Shares
treated as acquired upon exercise of a Nonstatutory Stock Option and shall
identify each such certificate accordingly in its stock transfer records. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
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<PAGE> 7
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(ii) Termination of Status as an Employee or
Consultant. In the event of termination of an Optionee's Continuous Status as an
Employee or Consultant (as the case may be), such Optionee may, but only within
thirty (30) days (or such other period of time not exceeding three (3) months in
the case of an Incentive Stock Option or six (6) months in the case of a
Nonstatutory Stock Option, as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the date of such termination (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement, exercise the Option to the extent that such Employee or
Consultant was entitled to exercise it at the date of such termination. To the
extent that such Employee or Consultant was not entitled to exercise the Option
at the date of such termination, or if such Employee or Consultant does not
exercise such Option (which such Employee or Consultant was entitled to
exercise) within the time specified herein, the Option shall terminate.
(iii) Disability of Optionee. Notwithstanding the
provisions of Section 8(b)(ii) above, in the event of termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of such
Employee's or Consultant's disability, such Employee or Consultant may, but only
within six (6) months (or such other period of time not exceeding twelve (12)
months as is determined by the Board, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option) from the
date of such termination (but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent such Employee or Consultant was entitled to exercise it at
the date of such termination. To the extent that such Employee or Consultant was
not entitled to exercise the Option at the date of termination, or if such
Employee or Consultant does not exercise such Option (which such Employee or
Consultant was entitled to exercise) within the time specified herein, the
Option shall terminate.
(iv) Death of Optionee. In the event of the death
of an Optionee:
(i) during the term of the Option who
is at the time of his or her death an Employee or Consultant
of the Company and who shall have been in Continuous Status as
an Employee or Consultant since the date of grant of the
Option, the Option may be exercised, at any time within six
(6) months (but in no event later than the date of expiration
of the term of such Option as set forth in the Option
Agreement), by Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that would
have accrued had the Optionee continued living and remained in
Continuous Status as an Employee or Consultant six (6) months
(or such other period of time as is determined by the Board at
the time of grant of the Option) after the date of death; or
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<PAGE> 8
(ii) within thirty (30) days (or such
other period of time not exceeding three (3) months as is
determined by the Board, with such determination in the case
of an Incentive Stock Option being made at the time of grant
of the Option) after the termination of Continuous Status as
an Employee or Consultant, the Option may be exercised, at any
time within six (6) months (or such other period of time as is
determined by the Board at the time of grant of the Option)
following the date of death (but in no event later than the
date of expiration of the term of such Option as set forth in
the Option Agreement), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise
that had accrued at the date of termination.
9. Stock Purchase Rights.
(a) Rights to Purchase. After the Board of Directors
determines that it will offer an Employee or Consultant a Stock Purchase Right,
it shall deliver to the offeree a stock purchase agreement or stock bonus
agreement, as the case may be, setting forth the terms, conditions and
restrictions relating to the offer, including the number of Shares which such
person shall be entitled to purchase, and the time within which such person must
accept such offer, which shall in no event exceed six (6) months from the date
upon which the Board of Directors or its Committee made the determination to
grant the Stock Purchase Right. The offer shall be accepted by execution of a
stock purchase agreement or stock bonus agreement in the form determined by the
Board of Directors.
(b) Issuance of Shares. Forthwith after payment therefor,
the Shares purchased shall be duly issued; provided, however, that the Board may
require that the Purchaser make adequate provision for any Federal and State
withholding obligations of the Company as a condition to the Purchaser
purchasing such Shares.
(c) Repurchase Option. Unless the Board determines
otherwise, the stock purchase agreement or stock bonus agreement shall grant the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the Purchaser's employment with the Company for any reason
(including death or disability). If the Board so determines, the purchase price
for shares repurchased may be paid by cancellation of any indebtedness of the
Purchaser to the Company. The repurchase option shall lapse at such rate as the
Board may determine, but at a minimum rate of 20% per year.
(d) Other Provisions. The stock purchase agreement or
stock bonus agreement shall contain such other terms, provisions and conditions
not inconsistent with the Plan as may be determined by the Board of Directors.
10. Non-Transferability of Options and Stock Purchase Rights. The
Options and Stock Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during the lifetime of
the Optionee or Purchaser, only by the Optionee or Purchaser.
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<PAGE> 9
11. Adjustments Upon Changes in Capitalization or Merger. Subject
to any required action by the shareholders of the Company, the number of shares
of Common Stock covered by each outstanding Option and Stock Purchase Right, and
the number of shares of Common Stock which have been authorized for issuance
under the Plan but as to which no Options or Stock Purchase Rights have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option or Stock Purchase Right, or repurchase of Shares from a Purchaser
upon termination of employment, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock of the Company or
the payment of a stock dividend with respect to the Common Stock or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option or Stock Purchase Right.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of the merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. If, in such event, an Option or Stock Purchase Right is
not assumed or substituted, the Option or Stock Purchase Right shall terminate
as of the date of the closing of the merger.
12. Time of Granting Options. The date of grant of an Option or
Stock Purchase Right shall, for all purposes, be the date on which the Board
makes the determination granting such Option or Stock Purchase Right. Notice of
the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that, the following revisions or amendments shall require
approval of the shareholders of the Company in the manner described in Section
17 of the Plan:
(i) any increase in the number of Shares subject
to the Plan, other than in connection with an adjustment under Section 11 of the
Plan;
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<PAGE> 10
(ii) any change in the designation of the class
of persons eligible to be granted Options and Stock Purchase Rights; or
(iii) if the Company has a class of equity
securities registered under Section 12 of the Exchange Act at the time of such
revision or amendment, any material increase in the benefits accruing to
participants under the Plan.
(b) Shareholder Approval. If any amendment requiring
shareholder approval under Section 13(a) of the Plan is made subsequent to the
first registration of any class of equity securities by the Company under
Section 12 of the Exchange Act, such shareholder approval shall be solicited as
described in Section 17 of the Plan.
(c) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options or Stock Purchase
Rights already granted and such Options or Stock Purchase Rights shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee or Purchaser (as the case may be)
and the Board, which agreement must be in writing and signed by the Optionee or
Purchaser (as the case may be) and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Rights unless the
exercise of such Option or Stock Purchase Rights and the issuance and delivery
of such Shares pursuant thereto shall comply with all relevant provisions of
law, including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase
Rights, the Company may require the person exercising such Option or Stock
Purchase Rights to represent and warrant at the time of any such exercise that
the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
16. Option, Stock Purchase and Stock Bonus Agreements. Options
shall be evidenced by written option agreements in such form as the Board shall
approve. Upon the exercise of Stock Purchase
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<PAGE> 11
Rights, the Purchaser shall sign a stock purchase agreement or stock bonus
agreement in such form as the Board shall approve.
17. Shareholder Approval.
(a) Continuance of the Plan shall be subject to approval
by the shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted. If such shareholder approval is obtained at a duly
held shareholders' meeting, it must be obtained by the affirmative vote of the
holders of a majority of the outstanding shares of the Company, or if such
shareholder approval is obtained by written consent, it may be obtained by the
written consent of the holders of a majority of the outstanding shares of the
Company's capital stock entitled to vote.
(b) If and in the event that the Company registers any
class of equity securities pursuant to Section 12 of the Exchange Act, any
required approval of the shareholders of the Company obtained after such
registration shall be solicited substantially in accordance with Section 14(a)
of the Exchange Act and the rules and regulations promulgated thereunder.
(c) If any required approval by the shareholders of the
Plan itself or of any amendment thereto is solicited at any time otherwise than
in the manner described in Section 17(b) hereof, then the Company shall, at or
prior to the first annual meeting of shareholders held subsequent to the later
of (1) the first registration of any class of equity securities of the Company
under Section 12 of the Exchange Act or (2) the granting of an Option hereunder
to an officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled
to vote for the Plan substantially the same information which would be required
(if proxies to be voted with respect to approval or dis approval of the Plan or
amendment were then being solicited) by the rules and regulations in effect
under Section 14(a) of the Exchange Act at the time such information is
furnished; and
(ii) file with, or mail for filing to, the
Securities and Exchange Commission four copies of the written information
referred to in subsection (i) hereof not later than the date on which such
information is first sent or given to shareholders.
18. Information to Optionees and Purchasers. The Company shall
provide to each Optionee and to each individual who acquires Shares pursuant to
the Plan, not less frequently than annually during the period for which such
Optionee or Purchaser has one or more Options or Stock Purchase Rights
outstanding, and, in the case of an individual who acquires Shares pursuant to
the Plan, copies of annual financial statements. The Company shall not be
required to provide such information to key employees whose duties in connection
with the Company assure their access to equivalent information.
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<PAGE> 1
EXHIBIT 10.2
CEMAX-ICON, INC.
1996 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant of an Option and subject to the applicable provisions of Section 422 of
the Code and the regulations promulgated thereunder. Stock Purchase Rights may
also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code and the applicable laws of any
foreign country or jurisdiction where Options or Stock Purchase Rights are, or
will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Cemax-ICON, Inc.
(h) "Consultant" means any person who is engaged by the Company or
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any Director of the Company whether
compensated for such services or not. If the Company registers any class of any
equity security pursuant to the Exchange Act, the term Consultant shall
thereafter not include Directors who are not compensated for their services or
are paid only a Director's fee by the Company.
(i) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company, any Parent or Subsidiary
is not interrupted or
<PAGE> 2
terminated. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of (i) any leave of absence approved by the
Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor. A leave of absence
approved by the Company shall include sick leave, military leave, or any other
personal leave approved by an authorized representative of the Company. For
purposes of Incentive Stock Options, no such leave may exceed 90 days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract,
including Company policies. If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, on the 91st day of such
leave any Incentive Stock Option held by the Optionee shall cease to be treated
as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.
(j) "Director" means a member of the Board of Directors of the
Company.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
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<PAGE> 3
(p) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Optioned Stock" means the Common Stock subject to an Option or
a Stock Purchase Right.
(s) "Optionee" means an Employee or Consultant who receives an
Option or Stock Purchase Right.
(t) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(u) "Plan" means this 1996 Stock Plan.
(v) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(w) "Section 16(b)" means Section 16(b) of the Securities Exchange
Act of 1934, as amended.
(x) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(y) "Stock Purchase Right" means a right to purchase Common Stock
pursuant to Section 11 below.
(z) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of Shares which may be subject to
option and sold under the Plan is six hundred thousand (600,000) Shares. The
Shares may be authorized but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an option
exchange program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan, upon
exercise of either an Option or Stock Purchase Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
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<PAGE> 4
4. Administration of the Plan.
(a) Initial Plan Procedure. Prior to the date, if any, upon which
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a Committee appointed by the Board.
(b) Plan Procedure After the Date, if any, upon Which the Company
becomes Subject to the Exchange Act.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers and Employees who are neither Directors nor Officers.
(ii) Administration With Respect to Directors and Officers.
With respect to grants of Options and Stock Purchase Rights to Employees who are
also Officers or Directors of the Company, the Plan shall be administered by (A)
the Board if the Board may administer the Plan in compliance with the rules
under Rule 16b-3 promulgated under the Exchange Act or any successor thereto
("Rule 16b-3") relating to the disinterested administration of employee benefit
plans under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made, or (B) a Committee designated by the Board to
administer the Plan, which Committee shall be constituted to comply with the
rules under Rule 16b-3 relating to the disinterested administration of employee
benefit plans under which Section 16(b) exempt discretionary grants and awards
of equity securities are to be made. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the rules under Rule 16b-3 relating to the
disinterested administration of employee benefit plans under which Section 16(b)
exempt discretionary grants and awards of equity securities are to be made.
(iii) Administration With Respect to Other Employees and
Consultants. With respect to grants of Options and Stock Purchase Rights to
Employees or Consultants who are neither Directors nor Officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by
the Board, which committee shall be constituted in such a manner as to satisfy
Applicable Laws. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time the
Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members of
the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the
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<PAGE> 5
approval of any relevant authorities, including the approval, if required, of
any stock exchange upon which the Common Stock is listed, the Administrator
shall have the authority in its discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(m) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of Shares to be covered by each
such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which may be based
on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the shares of Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options or Stock Purchase
Rights.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An
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<PAGE> 6
Employee or Consultant who has been granted an Option or Stock Purchase Right
may, if otherwise eligible, be granted additional Options or Stock Purchase
Rights.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuation of his or her
employment or consulting relationship with the Company, nor shall it interfere
in any way with his or her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without cause.
(d) The following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 300,000 Shares.
(ii) In connection with his or her initial employment, an
Employee may be granted Options and Stock Purchase Rights to purchase up to an
additional 150,000 Shares which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 12), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the
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<PAGE> 7
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any other person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired directly or indirectly from the Company, have been owned by the
Optionee for more than six months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which such Option shall be exercised, (5) delivery of a
properly executed exercise notice together with such other documentation as the
Administrator and a broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price, or (6) any combination of the foregoing methods of
payment. In making its determination as to the type of consideration to accept,
the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
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<PAGE> 8
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan, but in no case at a rate of less than 20% per year over five (5)
years from the date the Option is granted.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) hereof. Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote, receive dividends or any other rights
as a shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 hereof.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (but not in the event of an Optionee's change of status from Employee
to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the date three (3)
months and one day following such change of status) or from Consultant to
Employee), such Optionee may, but only within such period of time as is
determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that the Optionee was
entitled to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, the Optionee may, but only within twelve (12) months from the
date of such termination (and in no event later than the expiration
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<PAGE> 9
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. If such disability is not a "disability" as such term is defined in
Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option on the day three months and one day following such termination. To the
extent that the Optionee was not entitled to exercise the Option at the date of
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant) by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent that the Optionee was entitled to exercise the Option on the date of
death. If, at the time of death, the Optionee was not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable portion of the
Option shall immediately revert to the Plan. If, after the Optionee's death, the
Optionee's estate or a person who acquires the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options and Stock Purchase Rights. Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed [thirty (30)] days from the
date upon which the Administrator makes the determination to grant the Stock
Purchase Right. The offer shall be accepted by execution of a Restricted Stock
purchase agreement in the form determined by the Administrator. Shares purchased
pursuant to the grant of a Stock Purchase Right shall be referred to herein as
"Restricted Stock."
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<PAGE> 10
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine, but in no case at a rate of less than 20% per year
over five years from the date of purchase.
(c) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
12. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action. To the extent
it has not been previously exercised, the Option or Stock Purchase Right shall
terminate immediately prior to the consummation of such proposed action.
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<PAGE> 11
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee that the Option or Stock Purchase Right
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the Option or Stock Purchase Right shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or
Stock Purchase Right shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
13. Time of Granting Options and Stock Purchase Rights. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
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<PAGE> 12
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase Right,
the Company may require the person exercising such Option or Stock Purchase
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Administrator shall approve from time to
time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under Applicable Laws and the rules of any
stock exchange upon which the Common Stock is listed.
19. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquires Shares pursuant to the
Plan, not less frequently than annually during the period such Optionee or
purchaser has one or more Options or Stock Purchase Rights outstanding, and, in
the case of an individual who acquires Shares pursuant to the Plan, during the
period such individual owns such Shares, copies of annual financial statements.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
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<PAGE> 13
CEMAX-ICON, INC.
1996 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
Optionee
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number __________________________
Date of Grant __________________________
Vesting Commencement Date __________________________
Exercise Price per Share $_________________________
Total Number of Shares Granted __________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: __________________________
Vesting Schedule:
You may exercise this Option, in whole or in part, according to the
following vesting schedule:
25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48 of the Shares subject to the Option
shall vest each month thereafter.
<PAGE> 14
Termination Period:
You may exercise this Option for three months after your employment or
consulting relationship with the Company terminates, or for such longer period
upon your death or disability as provided in the Plan. If your status changes
from Employee to Consultant or Consultant to Employee, this Option Agreement
shall remain in effect. In no case may you exercise this Option after the
Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. Cemax-ICON, Inc. (the "Company"), hereby grants to
the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the total number of shares of Common Stock (the "Shares")
set forth in the Notice of Grant, at the exercise price per share set forth in
the Notice of Grant (the "Exercise Price") subject to the terms, definitions and
provisions of the 1996 Stock Plan (the "Plan") adopted by the Company, which is
incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Option
Agreement.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement. In the
event of Optionee's death, disability or other termination of the employment or
consulting relationship, this Option shall be exercisable in accordance with the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
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<PAGE> 15
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as Exhibit B, and shall
read the applicable rules of the Commissioner of Corporations attached to such
Investment Representation Statement.
4. Lock-Up Period. Optionee hereby agrees that if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
longer period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall apply only to the
first registration statement of the Company to become effective under the
Securities Act that includes securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired directly or indirectly from the Company, have
been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(d) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an
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<PAGE> 16
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the Exercise Price.
6. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board.
7. Termination of Relationship. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
exercise this Option during the Termination Period set out in the Notice of
Grant. To the extent that Optionee was not entitled to exercise this Option at
the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
8. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of an Optionee's consulting relationship or
Continuous Status as an Employee as a result of his or her disability, Optionee
may, but only within twelve (12) months from the date of such termination (and
in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination; provided, however, that
if such disability is not a "disability" as such term is defined in Section
22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option on the day three months
and one day following such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
9. Death of Optionee. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option at
the date of death.
10. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
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<PAGE> 17
11. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.
12. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability or California income tax liability
upon the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(b) Exercise of ISO Following Disability. If the Optionee's
Continuous Status as an Employee or Consultant terminates as a result of
disability that is not total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within three months of such termination for the
ISO to be qualified as an ISO.
(c) Exercise of Nonstatutory Stock Option. There may be a regular
federal income tax liability and California income tax liability upon the
exercise of a Nonstatutory Stock Option. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. If Optionee is an Employee or a former Employee, the
Company will be required to withhold from Optionee's compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
(d) Disposition of Shares. In the case of an NSO, if Shares are held
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and California income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and California income
tax purposes. If Shares purchased under an ISO are disposed of within such
one-year period or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
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<PAGE> 18
income rates) to the extent of the difference between the Exercise Price and the
lesser of (1) the Fair Market Value of the Shares on the date of exercise, or
(2) the sale price of the Shares. Any additional gain will be taxed as capital
gain, short-term or long-term depending on the period that the ISO Shares were
held.
(e) Notice of Disqualifying Disposition of ISO Shares. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
13. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by California law except for that body of
law pertaining to conflict of laws.
CEMAX-ICON, INC.
By: ____________________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has reviewed
the Plan and this Option in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all
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<PAGE> 19
provisions of the Option. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan or this Option. Optionee further agrees to
notify the Company upon any change in the residence address indicated below.
Dated: _____________________ __________________________________
Optionee
Residence Address:_________________________________________________
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<PAGE> 1
EXHIBIT 10.3
CEMAX-ICON, INC.
1996 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1996 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means Cemax-ICON, Inc.
(e) "Director" means a member of the Board.
(f) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the date of
<PAGE> 2
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable,
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board, or;
(iv) For the purposes of the First Options granted upon the
Effective Date of the Plan, the Fair Market Value of the Common Stock shall be
the price to public as set forth in the final prospectus included within the
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Common Stock.
(i) "Inside Director" means a Director who is an Employee.
(j) "Option" means a stock option granted pursuant to the Plan.
(k) "Optioned Stock" means the Common Stock subject to an Option.
(l) "Optionee" means a Director who holds an Option.
(m) "Outside Director" means a Director who is not an Employee.
(n) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1996 Director Option Plan.
(p) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is one hundred thousand (100,000) Shares of Common Stock
(the "Pool"). The Shares may be authorized, but unissued, or reacquired Common
Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
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<PAGE> 3
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. The provisions set forth in this Section
4(a) shall not be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option to purchase ten thousand (10,000) Shares (the "First Option") on the date
on which the later of the following events occurs: (A) the effective date of
this Plan, as determined in accordance with Sec tion 6 hereof, or (B) the date
on which such person first becomes an Outside Director, whether through election
by the shareholders of the Company or appointment by the Board to fill a
vacancy; provided, however, that an Inside Director who ceases to be an Inside
Director but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted an
Option to purchase two thousand five hundred (2,500) Shares (a "Subsequent
Option") on July 1 of each year provided he or she is then an Outside Director
and if as of such date, he or she shall have served on the Board for at least
the preceding six (6) months.
(iv) The terms of a First Option granted hereunder shall be as
follows:
(A) the term of the First Option shall be ten (10) years.
(B) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the First Option. In the event
that the date of grant of the First Option is not a trading day, the exercise
price per Share shall be the Fair Market Value on the next trading day
immediately following the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option shall
become exercisable as to twenty-five percent (25%) of the Shares subject to the
First Option on each anniversary of its date of grant, provided that the
Optionee continues to serve as a Director on such dates.
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<PAGE> 4
(v) The terms of a Subsequent Option granted hereunder shall be
as follows:
(A) the term of the Subsequent Option shall be ten (10)
years.
(B) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be one hundred
percent (100%) of the Fair Market Value per Share on the date of grant of the
Subsequent Option. In the event that the date of grant of the Subsequent Option
is not a trading day, the exercise price per Share shall be the Fair Market
Value on the next trading day immediately following the date of grant of the
Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent Option
shall become exercisable as to one hundred percent (100%) of the Shares subject
to the Subsequent Option on the fourth anniversary of its date of grant,
provided that the Optionee continues to serve as a Director on such dates.
(vi) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the Board or the shareholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect
to continuation of service as a Director or nomination to serve as a Director,
nor shall it interfere in any way with any rights which the Director or the
Company may have to terminate the Director's relationship with the Company at
any time.
6. Term of Plan. The Plan shall become effective upon the date on which
the Company's registration statement on Form S-1 is declared effective by the
Securities and Exchange Commission. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 11 of the Plan.
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<PAGE> 5
7. Form of Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired either directly or indirectly from the Company, have been owned
by the Optionee for more than six (6) months on the date of surrender, and (y)
have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised, (iv)
delivery of a properly executed exercise notice together with such other
documentation as the Company and the broker, if applicable, shall require to
effect an exercise of the Option and delivery to the Company of the sale or loan
proceeds required to pay the exercise price, or (v) any combination of the
foregoing methods of payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or total and permanent disability (as
defined in Section 22(e)(3) of the Code)), the Optionee may exercise his or her
Option, but only within three (3) months following the date of such termination,
and only to the extent that the Optionee was entitled to exercise it on the date
of such termination (but in no event later than the expiration of its ten (10)
year term). To the extent that
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<PAGE> 6
the Optionee was not entitled to exercise an Option on the date of such
termination, and to the extent that the Optionee does not exercise such Option
(to the extent otherwise so entitled) within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a
Director terminates as a result of total and permanent disability (as defined in
Section 22(e)(3) of the Code), the Optionee may exercise his or her Option, but
only within twelve (12) months following the date of such ter mination, and only
to the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of termination, or if he or she does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
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<PAGE> 7
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the Option
or equivalent option shall continue to be exercisable as provided in Section 4
hereof for so long as the Optionee serves as a Director or a director of the
Successor Corporation. Following such assumption or substitution, if the
Optionee's status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as to
Shares for which it would not otherwise be exercisable. Thereafter, the Option
or option shall remain exercisable in accordance with Sections 8(c) through (e)
above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. Except as set forth in Section 4, the
Board may at any time amend, alter, suspend, or discontinue the Plan, but no
amendment, alteration,
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<PAGE> 8
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated there
under, state securities laws, and the requirements of any stock exchange upon
which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements.
16. Shareholder Approval. The adoption of the Plan shall be subject to
approval by the shareholders of the Company. Such shareholder approval shall be
obtained in the degree and manner required under applicable state and federal
law.
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<PAGE> 9
CEMAX-ICON, INC.
1996 DIRECTOR OPTION PLAN
DIRECTOR OPTION AGREEMENT
INITIAL GRANT
Cemax-ICON, Inc. (the "Company"), has granted to ____________________
(the "Optionee"), an option to purchase a total of ten thousand (10,000) shares
of the Company's Common Stock (the "Optioned Stock"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions of the Company's 1996 Director Option Plan (the "Plan") adopted by
the Company which is incorporated herein by reference. The terms defined in the
Plan shall have the same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of Common
Stock.
3. Exercise of Option. This Option shall be exercisable during its term in
accordance with the provisions of Section 8 of the Plan as follows:
a. Right to Exercise.
i. This Option shall become exercisable in installments
cumulatively with respect to twenty-five percent (25%) of the
Optioned Stock one year after the date of grant, and as to an
additional twenty-five percent (25%) of the Optioned Stock on
each anniversary of the date of grant, so that one hundred
percent (100%) of the Optioned Stock shall be exercisable four
years after the date of grant.
ii. This Option may not be exercised for a fraction of a share.
iii. In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of
the Option is governed by Section 8 of the Plan.
b. Method of Exercise. This Option shall be exercisable by written
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
4. Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
a. cash;
<PAGE> 10
b. check; or
c.surrender of other shares which (x) in the case of Shares acquired either
directly or indirectly from the Company, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised; or
d.delivery of a properly executed exercise notice together with such other
documentation as the Company and the broker, if applicable, shall require to
effect an exercise of the Option and delivery to the Company of the sale or loan
proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the issuance of
such Shares upon such exercise or the method of payment of consideration for
such shares would constitute a violation of any applicable federal or state
securities or other law or regulations, or if such issuance would not comply
with the requirements of any stock exchange upon which the Shares may then be
listed. As a condition to the exercise of this Option, the Company may require
Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.
6. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by the Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten (10) years
from the date of grant of this Option, and may be exercised during such period
only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon exercise of
this Option, he or she will recognize income for tax purposes in an amount equal
to the excess of the then Fair Market Value of the Shares purchased over the
exercise price paid for such Shares. Since the Optionee is subject to Section
16(b) of the Securities Exchange Act of 1934, as amended, under certain limited
circumstances the measurement and timing of such income (and the commencement of
any capital gain holding period) may be deferred, and the Optionee is advised to
contact a tax advisor concerning the application of Section 83 in general and
the availability a Section 83(b) election in particular in connection with the
exercise of the Option. Upon a resale of such Shares by the Optionee, any
difference between the sale price and the Fair Market Value of the Shares on the
date of exercise of the Option, to the extent not included in income as
described above, will be treated as capital gain or loss.
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<PAGE> 11
DATE OF GRANT: _____________________
CEMAX-ICON, INC.
By: _________________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: ________________________
_____________________________________
Optionee
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<PAGE> 12
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
Cemax-ICON, Inc.
Attention: Stock Option Administrator
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of Cemax-ICON, Inc. (the "Company") under and pursuant to the
Company's 1996 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the
Shares must be held indefinitely unless they are registered under the Securities
Act of 1933, as amended (the "1933 Act"), or unless an exemption from such
registration is available, and that the certificate(s) representing the Shares
may bear a legend to that effect. Optionee understands that the Company is under
no obligation to register the Shares and that an exemption may not be available
or may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company the
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by reference.
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject matter hereof. This
Exercise Notice and the Agreement are governed by California law except for that
body of law pertaining to conflict of laws.
<PAGE> 13
Submitted by: Accepted by:
OPTIONEE: CEMAX-ICON, INC.
_________________________ By:______________________________
Its:_____________________________
Address:
Dated:___________________ Dated:___________________________
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<PAGE> 14
CEMAX-ICON, INC.
1996 DIRECTOR OPTION PLAN
DIRECTOR OPTION AGREEMENT
SUBSEQUENT GRANT
Cemax-ICON, Inc. (the "Company"), has granted
to_________________________________ (the "Optionee"), an option to purchase a
total of two thousand five hundred(2,500) shares of the Company's Common Stock
(the "Optioned Stock"), at the price determined as provided herein, and in all
respects subject to the terms, definitions and provisions of the Company's 1996
Director Option Plan (the "Plan") adopted by the Company which is incorporated
herein by reference. The terms defined in the Plan shall have the same defined
meanings herein.
1. 1. Nature of the Option. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.
2. 2. Exercise Price. The exercise price is $_______ for each share of Common
Stock.
3. 3. Exercise of Option. This Option shall be exercisable during its term in
accordance with the provisions of Section 8 of the Plan as follows:
4. Right to Exercise.
(a) This Option shall become exercisable with respect to one hundred
percent (100%) of the Optioned Stock four years after the date of grant.
(b) This Option may not be exercised for a fraction of a share.
(c) In the event of Optionee's death, disability or other termination of
service as a Director, the exercisability of the Option is governed by Section 8
of the Plan.
(d) Method of Exercise. This Option shall be exercisable by written
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
4. 5. Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check; or
<PAGE> 15
(c) surrender of other shares which (x) in the case of Shares acquired
either directly or indirectly from the Company, have been owned by the Optionee
for more than six (6) months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised; or
(d) delivery of a properly executed exercise notice together with such
other documentation as the Company and the broker, if applicable, shall require
to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the exercise price.
5. 6. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulations, or if
such issuance would not comply with the requirements of any stock exchange
upon which the Shares may then be listed. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation
and warranty to the Company as may be required by any applicable law or
regulation.
6. 7. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The
terms of this Option shall be binding upon the executors, administrators,
heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may not be exercised more than ten (10) years
from the date of grant of this Option, and may be exercised during such period
only in accordance with the Plan and the terms of this Option.
9. Taxation Upon Exercise of Option. Optionee understands that, upon exercise
of this Option, he or she will recognize income for tax purposes in an amount
equal to the excess of the then Fair Market Value of the Shares purchased over
the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.
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<PAGE> 16
DATE OF GRANT: _____________________
CEMAX-ICON, INC.
By: ______________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: ________________________
__________________________________
Optionee
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<PAGE> 17
CEMAX-ICON, INC.
1996 DIRECTOR OPTION PLAN
DIRECTOR OPTION AGREEMENT
INITIAL PUBLIC OFFERING GRANT
Cemax-ICON, Inc. (the "Company"), has granted to _____________________
(the "Optionee"), an option to purchase a total of five thousand (5,000) shares
of the Company's Common Stock (the "Optioned Stock"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions of the Company's 1996 Director Option Plan (the "Plan") adopted by
the Company which is incorporated herein by reference. The terms defined in the
Plan shall have the same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of Common
Stock.
3. Exercise of Option. This Option shall be exercisable during its term in
accordance with the provisions of Section 8 of the Plan as follows:
4. Right to Exercise.
i. This Option shall become exercisable with respect to one hundred
percent (100%) of the Optioned Stock four years after the date of grant.
ii. This Option may not be exercised for a fraction of a share.
iii. In the event of Optionee's death, disability or other termination
of service as a Director, the exercisability of the Option is governed by
Section 8 of the Plan.
iv. Method of Exercise. This Option shall be exercisable by written
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
5. Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
i. cash;
ii. check; or
<PAGE> 18
iii. surrender of other shares which (x) in the case of Shares acquired
either directly or indirectly from the Company, have been owned by the Optionee
for more than six (6) months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised; or
iv. delivery of a properly executed exercise notice together with such
other documentation as the Company and the broker, if applicable, shall require
to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the exercise price.
6. Restrictions on Exercise. This Option may not be exercised if the issuance of
such Shares upon such exercise or the method of payment of consideration for
such shares would constitute a violation of any applicable federal or state
securities or other law or regulations, or if such issuance would not comply
with the requirements of any stock exchange upon which the Shares may then be
listed. As a condition to the exercise of this Option, the Company may require
Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.
7. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by the Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
8. Term of Option. This Option may not be exercised more than ten (10) years
from the date of grant of this Option, and may be exercised during such period
only in accordance with the Plan and the terms of this Option.
9. Taxation Upon Exercise of Option. Optionee understands that, upon exercise of
this Option, he or she will recognize income for tax purposes in an amount equal
to the excess of the then Fair Market Value of the Shares purchased over the
exercise price paid for such Shares. Since the Optionee is subject to Section
16(b) of the Securities Exchange Act of 1934, as amended, under certain limited
circumstances the measurement and timing of such income (and the commencement of
any capital gain holding period) may be deferred, and the Optionee is advised to
contact a tax advisor concerning the application of Section 83 in general and
the availability a Section 83(b) election in particular in connection with the
exercise of the Option. Upon a resale of such Shares by the Optionee, any
difference between the sale price and the Fair Market Value of the Shares on the
date of exercise of the Option, to the extent not included in income as
described above, will be treated as capital gain or loss.
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<PAGE> 19
DATE OF GRANT: _____________________
CEMAX-ICON, INC.
By: ____________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: ________________________
________________________________
Optionee
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<PAGE> 1
EXHIBIT 10.4
CEMAX-ICON, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock
Purchase Plan of Cemax- ICON, Inc..
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Common Stock" shall mean the Common Stock of the
Company.
(d) "Company" shall mean Cemax-ICON, Inc. and any
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time
gross earnings and commissions, overtime, shift premiums, bonuses and other cash
compensation but shall not include income recognized pursuant to stock options
or Shares purchased hereunder or to imputed fringe benefit income.
(f) "Current Purchase Period" shall mean any Purchase
Period which is scheduled to end in the current calendar year.
(g) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(h) "Employee" shall mean any individual who is an
Employee of the Company for tax purposes whose customary employment with the
Company is at least twenty (20) hours per week and more than five (5) months in
any calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds
ninety (90) days and the individual's right to reemployment is not guaranteed
either by statute or by contract, the employment relationship shall be deemed to
have terminated on the ninety-first (91)st day of such leave.
(i) "Enrollment Date" shall mean the first day of each
Offering Period.
<PAGE> 2
(j) "Exercise Date" shall mean the last day of each
Purchase Period.
(k) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable, or;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board; or
(iv) For the purposes of the Enrollment Date
under the first Offering Period under the Plan, the Fair Market Value of the
Common Stock shall be the price to public as set forth in the final prospectus
included within the Registration Statement on Form S-1 filed with the Securities
and Exchange Commission for the initial public offering of the Common Stock.
(l) "New Exercise Date" shall mean the new Exercise Date
set for Purchase Periods in the event of a proposed sale of all or substantially
all of the assets of the Company, or the merger of the Company with or into
another corporation in accordance with Section 18(c).
(m) "Offering Periods" shall mean the periods of
approximately twenty-four (24) months during which an option granted pursuant to
the Plan may be exercised, commencing on the first Trading Day on or after
February 1 and August 1 of each year and terminating on the last Trading Day in
the periods ending twenty-four (24) months later; provided, however, that the
first Offering Period shall be the period of approximately twenty-four (24)
months, commencing with the first Trading Day on or after the date on which the
Company's registration statement on Form S-1 is declared effective by the
Securities and Exchange Commission and terminating on the last Trading Day in
the period ending July 31, 1998. The duration and timing of Offering Periods may
be changed pursuant to Section 4 of this Plan.
(n) "Plan" shall mean this Employee Stock Purchase Plan.
(o) "Purchase Price" shall mean an amount equal to
eighty-five percent (85)% of the Fair Market Value of a share of Common Stock on
the Enrollment Date or on the Exercise Date, whichever is lower.
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<PAGE> 3
(p) "Purchase Period" shall mean the approximately six
(6) month period commencing after one Exercise Date and ending with the next
Exercise Date, except that the first Purchase Period of any Offering Period
shall commence on the Enrollment Date and end with the next Exercise Date;
provided that the first Purchase Period under the Plan shall be approximately
six (6) months in duration, commencing on the Enrollment Date of the first
Offering Period and terminating on the last Trading Day in the period ending
January 31, 1997.
(q) "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
(r) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than fifty percent (50)% of the voting shares are
held by the Company or a Subsidiary, whether or not such corporation now exists
or is hereafter organized or acquired by the Company or a Subsidiary.
(s) "Trading Day" shall mean a day on which national
stock exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee, who shall be employed by the Company on
a given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds twenty-five thousand dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by
consecutive, overlapping Offering Periods. The Board shall have the power to
change the duration of Offering Periods (including the commencement dates
thereof) with respect to future offerings without shareholder approval if such
change is announced at least two (2) days prior to the scheduled beginning of
the first Offering Period to be affected thereafter.
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<PAGE> 4
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll
office prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence
on the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her
subscription agreement, he or she shall elect to have payroll deductions made on
each pay day during the Offering Period in an amount not exceeding fifteen
percent (15%) of the Compensation which he or she receives on each pay day
during the Offering Period.
(b) All payroll deductions made for a participant shall
be credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her
participation in the Plan as provided in Section 10 hereof, or may increase or
decrease the rate of his or her payroll deductions during the Offering Period by
completing or filing with the Company a new subscription agreement authorizing a
change in payroll deduction rate. The Board may, in its discretion, limit the
number of participation rate changes during any Offering Period. The change in
rate shall be effective with the first full payroll period commencing after the
Company's receipt of the new subscription agreement unless the Company elects to
process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof,
a participant's payroll deductions may be decreased to zero percent (0%) at any
time the limit set forth in Section 423(b)(8) of the Code is likely to be
exceeded but for such decrease. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock. At
any time, the
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<PAGE> 5
Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on each Exercise Date during such Offering Period
(at the applicable Purchase Price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided that
in no event shall an Employee be permitted to purchase during each Purchase
Period more than a number of shares determined by dividing twenty-five thousand
dollars ($25,000) (fifty thousand dollars ($50,000) for the first Purchase
Period under the Plan) by the Fair Market Value of a share of the Company's
Common Stock on the Enrollment Date, and provided further that such purchase
shall be subject to the limitations set forth in Sec tions 3(b) and 12 hereof
and in Code Section 423(b)(8). Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the
Plan as provided in Section 10 hereof, his or her option for the purchase of
shares shall be exercised automatically on the Exercise Date, and the maximum
number of full shares subject to option shall be purchased for such participant
at the applicable Purchase Price with the accumulated payroll deductions in his
or her account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier with drawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option or shall cause an appropriate entry
to be made in participant's brokerage account reflecting the shares purchased.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all
the payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any time by giving written notice
to the Company in the form of Exhibit B to this Plan. All of the participant's
payroll deductions credited to his or her account shall be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period shall be automatically terminated,
and no further payroll deductions for the purchase of shares shall be made
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<PAGE> 6
for such Offering Period. If a participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the succeeding Offering
Period unless the participant delivers to the Company a new subscription
agreement.
(b) Upon a participant's ceasing to be an Employee for
any reason, he or she shall be deemed to have elected to withdraw from the Plan
and the payroll deductions credited to such participant's account during the
Offering Period but not yet used to exercise the option shall be returned to
such participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 14 hereof, and such participant's option shall be
automatically terminated. The preceding sentence notwithstanding, a participant
who receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the participant's customary number
of hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.
(c) A participant's withdrawal from an Offering Period
shall not have any effect upon his or her eligibility to participate in any
similar plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering Period
from which the participant withdraws.
11. Interest. No interest shall accrue on the payroll deductions
of a participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be three
hundred and fifty thousand (350,000) shares, subject to adjustment upon changes
in capitalization of the Company as provided in Section 18 hereof. If, on a
given Exercise Date, the number of shares with respect to which options are to
be exercised exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) The participant shall have no interest or voting
right in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the
Plan shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
13. Administration. The Plan shall be administered by the Board or
a committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclu sive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
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<PAGE> 7
14. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such partici pant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the Reserves, the amount of the
annual Plan share replenishment, as well as the price per share and the number
of shares of Common Stock covered by each option under the Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in
-7-
<PAGE> 8
the number of shares of Common Stock effected without receipt of consideration
by the Company; provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Offering Periods shall
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale
of all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, any Purchase Periods then in progress
shall be shortened by setting a new Exercise Date and any Offering Periods then
in progress shall end on the New Exercise Date. The New Exercise Date shall be
before the date of the Company's proposed sale or merger. The Board shall notify
each participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for the participant's option has been
changed to the New Exercise Date and that the participant's option shall be
exercised automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Plan is in the best
interests of the Company and its shareholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's
-8-
<PAGE> 9
Compensation, and establish such other limitations or procedures as the Board
(or its committee) determines in its sole discretion advisable which are
consistent with the Plan.
20. Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
23. Automatic Transfer to Low Price Offering Period. To the extent
permitted by Rule 16b-3 of the Exchange Act, if the Fair Market Value of the
Common Stock on any Exercise Date in an Offering Period is lower than the Fair
Market Value of the Common Stock on the Enrollment Date of such Offering Period,
then all participants in such Offering Period shall be automatically withdrawn
from such Offering Period immediately after the exercise of their option on such
Exercise Date and automatically re-enrolled in the immediately following
Offering Period as of the first day thereof.
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<PAGE> 10
EXHIBIT A
CEMAX-ICON, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the 1996 Employee
Stock Purchase Plan (the "Employee Stock Purchase Plan") and subscribes
to purchase shares of the Company's Common Stock in accordance with
this Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 1 to 15%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse only):
_________________________.
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within two (2) years after the Enrollment Date (the first day
of the Offering Period during which I purchased such shares) or one (1)
year after the Exercise Date, I will be treated for federal income tax
purposes as having received ordinary income at the time of such
disposition in an amount equal to the excess of the fair market value
of the shares at the time such shares were
-1-
<PAGE> 11
purchased by me over the price which I paid for the shares. I hereby
agree to notify the Company in writing within thirty (30) days after
the date of any disposition of my shares and I will make adequate
provision for Federal, state or other tax withholding obligations, if
any, which arise upon the disposition of the Common Stock. The Company
may, but will not be obligated to, withhold from my compensation the
amount necessary to meet any applicable withholding obligation
including any withholding necessary to make available to the Company
any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any
time after the expiration of the two (2) year and one (1) year holding
periods, I understand that I will be treated for federal income tax
purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only
to the extent of an amount equal to the lesser of (a) the excess of the
fair market value of the shares at the time of such disposition over
the purchase price which I paid for the shares, or (b) 15% of the fair
market value of the shares on the first day of the Offering Period. The
remainder of the gain, if any, recognized on such disposition will be
taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)______________________________________________
(First) (Middle) (Last)
_______________________________ ____________________________________
Relationship
____________________________________
(Address)
-2-
<PAGE> 12
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ _______________________________________
Signature of Employee
_______________________________________
Spouse's Signature (If beneficiary other
than spouse)
-3-
<PAGE> 13
EXHIBIT B
CEMAX-ICON, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Cemax-ICON,
Inc. 1996 Employee Stock Purchase Plan which began on ____________, ____ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned under stands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:__________________________
-4-
<PAGE> 1
Exhibit 10.5
CEMAX-ICON, INC.
EMPLOYEES' 401(K) SAVINGS PLAN AND TRUST
ADOPTION AGREEMENT
The undersigned Employer hereby establishes a 401(k) profit sharing plan and
trust as set forth herein pursuant to the following action by unanimous consent:
RESOLVED, the Plan and Trust Agreement, consisting of this Adoption Agreement
and the CDA Benefit Consultants, Inc. Defined Contribution Plan and Trust
Agreement attached as Exhibit A hereto, is hereby adopted for the benefit of all
qualified employees of the Employer.
RESOLVED FURTHER, that any officer or director of the Employer is authorized and
directed for and on behalf of the Employer to take all actions necessary to
implement this Plan and this Trust and to prepare, execute and file all such
documents as are necessary to establish and operate the Plan and Trust and to
take whatever steps deemed necessary or advisable to ensure the qualification of
the Plan and Trust under the Internal Revenue Code.
RESOLVED FURTHER, that for purposes of section 415 of the Internal Revenue Code,
the Limitation Year shall be the 12-consecutive-month period designated
hereunder.
RESOLVED FURTHER, that the adoption of this Plan and Trust shall constitute a
total amendment and restatement of the CEMAX, Inc. 401(k) Savings Plan and Trust
which were effective February 15, 1990.
PROVISIONS RELATING TO ARTICLE I (DEFINITIONS)
1. COMPENSATION (1.07).
Compensation shall include only Compensation actually received by the
Employee.
Compensation shall include elective contributions that are made by the
Employer on behalf of the Employee that are not includable in income under
Code sections 125, 402(a)(8)/402(e)(3), 402(h), or 403(b).
The determination period for Compensation shall be the Plan Year.
2. EFFECTIVE DATE (1.09).
The Effective Date of this Plan and Trust is June 13, 1995.
3. EMPLOYER (1.12). EMPLOYER SHALL MEAN:
Name of Employer: CEMAX-ICON, Inc. (formerly CEMAX, Inc.)
EIN: 77-0103865
Date of Incorporation: March 9, 1982
Employer Fiscal Year: January 1st to December 31st.
For purposes of crediting Hours of Service for vesting and eligibility,
Employer shall also include ICON Medical Systems, Inc.
4. HIGHLY COMPENSATED EMPLOYEE (1.14).
In determining the Highly Compensated Employees for the Plan Year, the
Employer shall use the Plan Year as the determination period.
203
<PAGE> 2
5. HOUR OF SERVICE (1.15): EQUIVALENCY METHOD FOR CERTAIN JOB CATEGORIES.
If the Employer does not maintain hourly records for a classification of
Employees, then Hours of Service shall be credited on the basis of days
worked. An Employee shall be credited with 10 Hours of Service for each day
in which he is credited with at least one Hour of Service.
6. PLAN NAME (1.22).
The name of the Plan shall be the CEMAX-ICON, Inc. Employees' 401(k)
Savings Plan. For identification purposes the Employer has assigned the
following three digit number to this Plan: 001.
7. PLAN ADMINISTRATOR (1.23).
The Plan Administrator shall be the Employer.
8. PLAN YEAR (1.24).
The Plan Year shall be the period beginning on February 15, 1990 and ending
on December 31, 1990 and each 12-consecutive-month period ending on
December 31st thereafter.
9. TRUST (1.30). The name of the Trust shall be the CEMAX-ICON, Inc.
Employees' 401(k) Savings Trust. The tax identification number assigned to
the Trust by the Internal Revenue Service is 77-0242695.
10. TRUSTEE (1.32). The following individual is hereby appointed as the
Trustee: Greg Patti.
11. ELAPSED TIME METHOD. (1.33)
Service shall not be determined under the Elapsed Time Method under Section
1.33 of the Plan.
PROVISIONS RELATING TO ARTICLE II (PARTICIPATION)
1. ELIGIBLE EMPLOYEES/INELIGIBLE CATEGORY OF EMPLOYMENT (2.01).
An Employee who is an Employee who is included in a unit of Employees
covered by a collective bargaining agreement between Employee
representatives (within the meaning of Code section 7701(a)(46)) and one or
more employers, including the Employer, under which retirement benefits
have been the subject of good faith bargaining between such Employee
representatives and such employer or employers shall be excluded from
participation in the Plan. Any other Employee who meets the Participation
Requirements shall be eligible to participate in the Plan. An Employee who
moves from an ineligible category of employment to an eligible category of
employment shall participate in the Plan in accordance with the provisions
of Section 2.01.
2. PARTICIPATION REQUIREMENTS (2.01).
(a) Eligibility to Make Elective Deferrals.
An Eligible Employee may elect to make Elective Deferrals at any time
following his date of hire.
The above eligibility requirements shall apply only to persons who are
Employees on September 30, 1995. Any other Employee may elect to make
Elective Deferrals at any time following the first day of the calendar
quarter which is coincident with or next following his date of hire.
(b) Eligibility to Share in the Allocation of Employer Contributions and
Forfeitures.
An Eligible Employee shall be eligible to share in the allocation of
Employer Contributions (other than Employer Matching Contributions) on
the first day of the calendar quarter which is coincident with or next
following the date on which he completes 1 Year of Service.
204
<PAGE> 3
(c) Year Of Service.
For purposes of eligibility, a Year of Service shall mean the completion
of 1,000 or more Hours of Service during the Eligibility Computation
Period.
3. ELIGIBILITY COMPUTATION PERIOD (2.01 AND 2.02).
For purposes of determining Years of Service and Breaks in Service with
regards to eligibility, the initial computation period shall be the 12
consecutive month period which began on the date the Employee first
performed an Hour of Service. Thereafter, the computation period shall be
the Plan Year, commencing with the Plan Year in which the initial
computation period ends. For purposes of crediting Years of Service for
eligibility, Plan Year shall be determined as though the Plan had been in
effect at all times.
4. ENTRY DATE (2.01).
An Eligible Employee shall enter the Plan on the earlier of the date he
first makes an Elective Deferral to the Plan or the date on which he is
eligible to share in the allocation of Employer Contributions and
Forfeitures.
5. ELECTION NOT TO PARTICIPATE (2.05).
An Employee shall not be permitted to file an election not to participate
in this Plan.
PROVISIONS RELATING TO ARTICLE III (CONTRIBUTIONS)
1. ELECTIVE DEFERRALS.
Elective Deferrals shall be permitted under this Plan. Unless otherwise
specified in this Plan, Elective Deferrals shall be deemed to be Employer
Contributions.
An Employee shall elect in the manner and form prescribed by the Plan
Administrator the amount of Elective Deferrals to be made to the Plan. Such
election must specify the percentage or amount of the Elective Deferral.
Having made an election, an Employee may nevertheless revoke it or modify
it at least once each calendar year according to rules established by the
Plan Administrator which are applied in a uniform and nondiscriminatory
manner.
Any Elective Deferral must meet the requirements of Plan Section 3.03.
2. EMPLOYER CONTRIBUTIONS (3.01).
EMPLOYER MATCHING CONTRIBUTION:
For each Plan Year, the Employer shall contribute an Employer Matching
Contribution on behalf of each Participant who is eligible to receive an
allocation of Employer Matching Contributions for the Plan Year in an
amount equal to a percentage of each Participant's Elective Deferrals,
subject to a maximum dollar amount, for the Plan Year. Said percentage and
maximum dollar amount shall be determined at the discretion of the
Employer.
Said Employer Matching Contribution shall be reduced by forfeitures, if
any, to be applied for the Plan Year.
EMPLOYER DISCRETIONARY CONTRIBUTION:
The Employer shall determine any additional amount of Employer
contributions to be deposited to the Trust fund with respect to such Plan
Year.
3. EMPLOYEE CONTRIBUTIONS (3.02) (3.03).
(a) Voluntary Employee Contributions
205
<PAGE> 4
Voluntary Employee Contributions shall not be permitted under this Plan.
(b) Employee Rollover Contributions
Employee Rollover Contributions shall be permitted under this Plan.
(c) Trustee-to-Trustee Transfers
Trustee-to-Trustee Transfers shall be permitted under this Plan.
PROVISIONS RELATING TO ARTICLE IV (ALLOCATIONS)
1. ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES (4.02).
Any Employer Matching Contributions shall be allocated during the Plan Year
on a monthly, quarterly, semi-annual or annual basis to any Participant who
has Elective Deferrals during the period for which the matching
contributions are being made, regardless of the Participant's Hours of
Service during the Plan Year.
NON-INTEGRATED ALLOCATION.
NON-TOP HEAVY PLAN. If this Plan is not a Top Heavy Plan for a Plan Year,
then, after the restoration of any benefits required under Section 7.05 and
matching the Participant's Elective Deferrals within the limits set forth
in Section III(2) of this Adoption Agreement, any remaining Employer
Contributions and Forfeitures for the Plan Year shall be allocated in the
same ratio that each Covered Participant's Compensation bears to the total
Compensation of all Covered Participants for the Plan Year.
TOP HEAVY PLAN. If this Plan is a Top Heavy Plan for a Plan Year, then,
after the restoration of any benefits required under Section 7.05, any
remaining Employer Contributions and Forfeitures for the Plan Year shall be
allocated in the following manner:
(1) in the same ratio that each Covered Participant's Compensation for the
Plan Year bears to the total Compensation of all Covered Participants
for the Plan Year, up to a maximum allocation of 3% of each
Participant's Compensation. For purposes of this initial allocation
only, Covered Participant shall include any Participant who is still
employed on the last day of the Plan Year, regardless of the number of
Hours of Service credited during the Plan Year. This initial Top Heavy
Plan allocation shall be reduced by any allocation on behalf of a
Covered Participant on the accounting date under any other qualified
retirement plan maintained by the Employer.
(2) after matching the Participant's Elective Deferrals within the limits
set forth in Section III(2) of this Adoption Agreement, any remaining
Employer Contributions and Forfeitures will be allocated in the same
ratio that each Covered Participant's Compensation bears to the total
Compensation of all Covered Participants for the Plan Year.
COMPENSATION for purposes of the allocation of Employer Contributions and
Forfeitures shall mean the Participant's Compensation for the determination
period.
COVERED PARTICIPANT shall mean any Participant who has completed 1,000 or
more Hours of Service during the Plan Year and who is employed with the
Employer on the last day of the Plan Year. Covered Participant shall also
include any Participant who became disabled or died during the Plan Year,
regardless of the number of Hours worked during the Plan Year. For Plan
Years beginning after December 31, 1993, Covered Participant shall also
include nonhighly compensated Participants who have completed more than 500
Hours of Service during the Plan Year, but only to the extent the Plan
Administrator determines is necessary to satisfy the requirements of Code
sections 401(a)(26) and 410(b) in accordance with the procedure in Plan
Section 2.06.
206
<PAGE> 5
2. LIMITATION YEAR (4.05).
The Limitation Year shall be each 12-consecutive-month period ending on
December 31st.
3. LIMITATION FOR PARTICIPATION IN DEFINED BENEFIT PLAN (4.05).
If the sum of a Participant's defined benefit plan fraction plus the
defined contribution plan fraction exceeds 1.0 during a Limitation Year,
then the Participant's Annual Additions under this Plan for the Limitation
Year shall be reduced to the extent necessary to prevent the limitation
from being exceeded.
4. EXCESS ANNUAL ADDITIONS (4.06).
If a Participant's Annual Additions during a Limitation Year exceed the
limitations of Section 4.05 and the Participant is covered by another
qualified defined contribution plan maintained by the Employer, then his
Annual Additions under this Plan shall be reduced to the extent necessary
to prevent the limitations from being exceeded.
PROVISIONS RELATING TO ARTICLE V (RETIREMENT BENEFITS)
1. EARLY RETIREMENT AGE (5.01).
Early Retirement Age shall be the later of age 55 or the completion of 7
Years of Service for vesting purposes.
2. NORMAL RETIREMENT AGE (5.01).
Normal Retirement Age shall be the later of age 65 or the Participant's age
on the 5th anniversary of his Entry Date.
PROVISIONS RELATING TO ARTICLE VII
(TERMINATION BENEFITS AND IN-SERVICE DISTRIBUTIONS)
1. VESTING (7.02).
A Participant shall always be fully vested in that portion of his Accrued
Benefit which is attributable to his Employee Contributions, Elective
Deferrals, Qualified Non-Elective Contributions, and Employer Matching
Contributions. The remaining portion of his Accrued Benefit shall vest
under the following schedule:
<TABLE>
<CAPTION>
YEARS OF SERVICE NONFORFEITABLE PERCENTAGE
- ---------------- -------------------------
<S> <C>
1 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
Irrespective of the above schedule, a Participant who was an Employee on
September 30, 1995 shall have his Nonforfeitable percentage calculated
under the following schedule:
<TABLE>
<CAPTION>
YEARS OF SERVICE NONFORFEITABLE PERCENTAGE
- ---------------- -------------------------
<S> <C>
1 30%
2 60%
3 or more 100%
</TABLE>
207
<PAGE> 6
2. YEAR OF SERVICE FOR VESTING PURPOSES.
A Year of Service for vesting purposes shall mean a Vesting Computation
Period in which the Employee completes 1,000 or more Hours of Service. The
Vesting Computation Period shall be the Limitation Year.
3. YEARS OF SERVICE TAKEN INTO ACCOUNT FOR VESTING PURPOSES.
In computing the Employee's Nonforfeitable percentage, all Years of Service
shall be credited.
4. IN-SERVICE DISTRIBUTIONS (7.08).
In-service distributions other than withdrawals of Employee Contributions
shall not be permitted under the Plan.
5. WITHDRAWALS OF ELECTIVE DEFERRALS (7.09).
Financial hardship distribution of a Participant's Elective Deferrals will
be allowed.
PROVISIONS RELATING TO ARTICLE X
1. SIGNATURE OF TRUSTEE [10.04(A)].
If more than one Trustee has been appointed under this Adoption Agreement,
then the signature of one Trustee may be accepted by an interested party as
conclusive evidence that all Trustees have duly authorized the actions set
forth therein.
2. SEGREGATED ACCOUNTS [10.04(D)].
Segregated Accounts shall be permitted under this Plan.
PROVISIONS RELATING TO ARTICLE XI (PARTICIPANT LOANS)
1. PARTICIPANT LOANS (11.01).
Participant loans shall be permitted under this Plan.
SIGNATURES BY ADOPTING EMPLOYER AND TRUSTEE
On behalf of the Employer, this Plan and Trust Agreement is hereby adopted
this __ day of October, 1995 to be effective as of the date specified in this
Adoption Agreement.
--------------------------------------
TERRY ROSS
President
CONSENT TO TERMS OF TRUST AGREEMENT BY TRUSTEE
The undersigned hereby accepts the terms of this Plan and Trust Agreement
as of the Effective Date.
------------------------------------------
GREG PATTI
Trustee
208
<PAGE> 7
EXHIBIT A
TO ADOPTION AGREEMENT
DEFINED CONTRIBUTION PLAN AND TRUST AGREEMENT
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I DEFINITIONS.......................................................... 1
1.01 Accounting Date...................................................... 1
1.02 Accrued Benefit...................................................... 1
1.03 Adoption Agreement................................................... 1
1.04 Annuity Starting Date................................................ 1
1.05 Beneficiary.......................................................... 1
1.06 Code................................................................. 2
1.07 Compensation......................................................... 2
1.08 Earned Income........................................................ 4
1.09 Effective Date....................................................... 4
1.10 Elective Deferrals................................................... 5
1.11 Employee............................................................. 5
1.12 Employer............................................................. 5
1.13 ERISA................................................................ 5
1.14 Highly Compensated Employee.......................................... 5
1.15 Hour of Service...................................................... 7
1.16 Leased Employee...................................................... 8
Safe Harbor Plan Exception........................................... 8
1.17 Nonforfeitable....................................................... 8
1.18 Nontransferable Annuity.............................................. 8
1.19 Owner-Employee....................................................... 9
Special Rules and Restrictions....................................... 9
1.20 Participant.......................................................... 10
1.21 Participant's Account................................................ 10
1.22 Plan................................................................. 10
1.23 Plan Administrator................................................... 10
1.24 Plan Year............................................................ 10
1.25 Related Employer..................................................... 10
1.26 Self-Employed Individual............................................. 10
1.27 Service/Separation from Service...................................... 11
1.28 Shared Employee...................................................... 11
1.29 Top Heavy Plan/Top Heavy Definitions................................. 12
Definitions.......................................................... 12
Determination Date................................................... 12
Top Heavy Ratio...................................................... 12
Key Employee......................................................... 14
Non-Key Employee..................................................... 15
Employer............................................................. 15
Aggregation Group.................................................... 15
1.30 Trust................................................................ 15
1.31 Trust Fund........................................................... 15
1.32 Trustee.............................................................. 15
</TABLE>
209
<PAGE> 8
<TABLE>
<C> <S> <C>
1.33 Year of Service...................................................... 16
ARTICLE II PARTICIPATION IN THE PLAN/ENTRY DATE................................. 20
2.01 Eligibility to Participate........................................... 20
2.02 Break in Service and Participation................................... 20
2.03 Maternity or Paternity Leave......................................... 21
2.04 Participation Upon Re-employment..................................... 21
2.05 Election Not to Participate.......................................... 22
2.06 Failure of Plan to Meet the Coverage Requirements of Code Section
410(b) or 401(a)(26)................................................. 22
ARTICLE III CONTRIBUTIONS TO THE PLAN............................................ 24
3.01 Employer Contribution................................................ 24
In General........................................................... 24
Profit Sharing Plan.................................................. 24
3.02 Employee Contributions............................................... 25
Voluntary Employee Contributions..................................... 26
Employee Rollover Contributions...................................... 26
Trustee-to-Trustee Transfers......................................... 26
Voluntary Deductible Contributions................................... 27
Mandatory Employee Contributions..................................... 28
3.03 Provisions Applicable to 401(k) Plans and to Plans Permitting
Voluntary and Mandatory Employee Contributions or Employer Matching
Contributions........................................................ 28
Provisions Applicable to Voluntary and Mandatory Employee
Contributions and Employer Matching Contributions.................... 28
Actual Contribution Percentage Test.................................. 28
Special Rules for Highly Compensated Employees....................... 30
Correction If ACP Test Is Not Satisfied.............................. 31
Provisions Applicable to Elective Deferrals.......................... 33
Excess Elective Deferrals Under Code Section 402(g).................. 33
Actual Deferral Percentage Test...................................... 34
Special Rules for Highly Compensated Employees....................... 36
Correction If ADP Test Is Not Satisfied.............................. 37
Restrictions on Multiple Use of Alternative Limitation (Plans Subject
to Both 401(k) and 401(m))........................................... 40
Special Top-Heavy Plan Rules......................................... 40
Definitions.......................................................... 41
Matching Employer Contribution....................................... 41
Qualified Non-Elective Contribution and Qualified Employer Matching
Contribution......................................................... 41
Compensation......................................................... 41
Employer............................................................. 42
Rules Applicable to Partnership Cash or Deferred Arrangements........ 42
ARTICLE IV PARTICIPANT'S ACCOUNTS AND ALLOCATIONS............................... 43
4.01 Participant's Accounts............................................... 43
4.02 Allocation of Employer Contributions and Forfeitures................. 43
4.03 Allocation of Employee Contributions................................. 43
4.04 Allocation of the Trust Fund Earnings................................ 43
4.05 Limitations on Annual Additions...................................... 44
Basic Limitation 44
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Amounts Not Considered As Annual Additions........................... 45
Maximum Annual Addition in Short Limitation Year..................... 45
Limitation for Present or Prior Participation in Defined Benefit
Plan................................................................. 46
Definitions.......................................................... 46
Compensation......................................................... 46
Employer............................................................. 46
Defined Contribution Plan............................................ 46
Defined Benefit Plan................................................. 47
Defined Benefit Plan Fraction........................................ 47
Defined Contribution Plan Fraction................................... 48
Projected Annual Benefit............................................. 49
Special Top Heavy Rules.............................................. 50
4.06 Treatment of Excess Annual Additions................................. 50
ARTICLE V RETIREMENT BENEFITS.................................................. 52
5.01 Retirement Benefits.................................................. 52
Early Retirement Benefit............................................. 52
Normal Retirement Benefit............................................ 52
Deferred Retirement Benefit.......................................... 52
5.02 Time of Commencement of Retirement Benefit........................... 52
5.03 Form of Retirement Benefit........................................... 53
Qualified Joint and Survivor Annuity................................. 53
Optional Forms of Benefit............................................ 53
Election to Receive the Retirement Benefit in a Form Other Than a
Qualified Joint and Survivor Annuity................................. 54
Written Explanation Requirement...................................... 54
Participant Waiver Election.......................................... 55
Spousal Consent Requirement.......................................... 55
Minimum Distribution Requirements.................................... 56
5.04 Retirement Benefit Less Than $3,500.................................. 57
5.05 Designation of Distribution Made in Accordance With Section 242(b)(2)
of TEFRA............................................................. 58
5.06 Direct Rollover Requirement.......................................... 59
ARTICLE VI DEATH BENEFIT........................................................ 61
6.01 Death Benefit........................................................ 61
6.02 Designation of Beneficiary........................................... 61
6.03 Time of Commencement of Death Benefit................................ 61
6.04 Form of Death Benefit................................................ 62
Qualified Pre-Retirement Survivor Annuity............................ 62
Election to Waive the QPSA........................................... 63
Optional Forms of Benefit............................................ 64
6.05 Death Benefit Less Than $3,500....................................... 65
6.06 Designation of Distribution Made Prior to January 1, 1984............ 65
6.07 Irrevocable Distribution Option to Spouse or Trust for Benefit of
Spouse............................................................... 66
ARTICLE VII DISABILITY AND TERMINATION BENEFITS IN-SERVICE DISTRIBUTIONS......... 67
7.01 Disability Benefit................................................... 67
7.02 Termination Benefit.................................................. 67
7.03 Time of Commencement of Disability or Termination Benefit............ 67
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7.04 Form of Disability or Termination Benefit............................ 67
7.05 Forfeiture and Restoration of Accrued Benefit........................ 68
7.06 Partial Restoration of the Termination Benefit....................... 69
7.07 Breaks in Service and Vesting........................................ 69
7.08 In Service Distributions............................................. 69
Employee Contribution Withdrawal..................................... 70
Profit Sharing Distribution.......................................... 70
Hardship Distribution................................................ 70
Financial Need....................................................... 71
Distribution Necessary to Satisfy Need............................... 71
7.09 Restriction on Withdrawals of Elective Deferrals..................... 72
7.10 Distribution Under Qualified Domestic Relations Order................ 73
ARTICLE VIII BENEFIT CLAIMS AND APPEAL PROCEDURE.................................. 75
8.01 Claims Procedure..................................................... 75
8.02 Claims Review/Approval or Denial by Plan Administrator............... 75
8.03 Benefit Denial Procedure............................................. 75
Notice of Denial of Benefit Claim.................................... 75
Appeal of Decision of Plan Administrator............................. 76
8.04 Standard of Review................................................... 77
8.05 Missing or Lost Participant or Beneficiary........................... 77
ARTICLE IX ADMINISTRATION OF THE PLAN........................................... 78
9.01 Designation of Named Fiduciary....................................... 78
9.02 Discretion of Plan Administrator..................................... 78
9.03 Powers and Duties of Plan Administrator.............................. 78
9.04 Procedure With Respect to Qualified Domestic Relations Orders........ 80
9.05 Information to Plan Administrator.................................... 81
9.06 Funding Policy....................................................... 82
9.07 Administrative Committee............................................. 82
9.08 Resignation and Removal of Plan Administrator........................ 82
9.09 Indemnity of Plan Administrator...................................... 82
9.10 Compensation and Expenses of the Plan Administrator.................. 83
ARTICLE X TRUST AGREEMENT...................................................... 84
10.01 Establishment of Trust/Appointment of Trustee........................ 84
10.02 Duties of Trustee.................................................... 84
10.03 Trustee Powers....................................................... 84
10.04 Allocation of Fiduciary Responsibility............................... 87
As Between Co-Trustees............................................... 87
As Between the Trustee and the Plan Administrator or Any Other
Person............................................................... 87
Appointment of Investment Manager.................................... 87
Segregated Account/Participant Direction of Investment............... 87
10.05 Investment in Group Trust Fund....................................... 88
10.06 Resignation/Removal/Appointment of Successor Trustee................. 88
Resignation.......................................................... 88
Removal.............................................................. 88
Appointment of Successor Trustee..................................... 88
10.07 Fees and Expenses From Fund.......................................... 89
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10.08 Indemnification...................................................... 89
ARTICLE XI PARTICIPANT AND BENEFICIARY LOANS ADOPTION OF LOAN ADMINISTRATION
POLICIES............................................................. 90
11.01 Elective Allowance of Participant and Beneficiary Loans.............. 90
11.02 Limit on Amount of Outstanding Loan Balance After December 31,
1986................................................................. 90
11.03 Loan Terms........................................................... 91
11.04 Use of Nonforfeitable Accrued Benefit as Loan Security............... 91
In General........................................................... 91
Married Participant.................................................. 92
11.05 Loan Administration Policies......................................... 93
11.06 Participant Loans Prior to 12/31/96.................................. 94
11.07 Participant Loans to Owner-Employee or Shareholder-Employee
Prohibited Without Administrative Exemption.......................... 94
ARTICLE XII PROVISIONS RELATING TO LIFE INSURANCE................................ 95
12.01 Insurance Benefit.................................................... 95
12.02 Incidental Insurance Benefits........................................ 95
12.03 Distribution or Discontinuance of Life Insurance Protection.......... 96
ARTICLE XIII AMENDMENT OR TERMINATION OF THE PLAN AND TRUST....................... 97
13.01 Amendment by Employer/Amendment Procedure............................ 97
Code Section 411(d)(6) Protected Benefits............................ 97
Computation of Nonforfeitable Percentage............................. 97
13.02 Discontinuance of Employer Contributions............................. 98
13.03 Partial Termination.................................................. 99
13.04 Termination of the Plan and Trust.................................... 99
ARTICLE XIV MISCELLANEOUS........................................................ 101
14.01 No Responsibility for Employer Action................................ 101
14.02 Fiduciaries Not Insurers............................................. 101
14.03 Successors........................................................... 101
14.04 Employment and Rights Not Guaranteed................................. 101
14.05 Assignment or Alienation............................................. 102
14.06 Exclusive Benefit.................................................... 102
14.07 Merger/Direct Transfer............................................... 102
14.08 Liability of Employer................................................ 102
14.09 Rights and Remedies Limited.......................................... 102
14.10 Construction of the Plan and Trust Agreement......................... 103
14.11 Headings and Gender.................................................. 103
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EXHIBIT A
TO ADOPTION AGREEMENT
DEFINED CONTRIBUTION PLAN AND TRUST AGREEMENT
Pursuant to the resolutions contained in the Adoption Agreement, this
defined contribution plan and trust agreement is adopted for the sole benefit of
the Employees of the Employer and their Beneficiaries:
ARTICLE I
DEFINITIONS
1.01 ACCOUNTING DATE shall mean the last day of the Plan Year or any
interim valuation date, as selected by the Plan Administrator.
1.02 ACCRUED BENEFIT shall mean the value of a Participant's Account as
of any Accounting Date. A Participant shall not accrue any right to any Employer
Contributions or Forfeitures for a Plan Year until the last day of the Plan
Year.
1.03 ADOPTION AGREEMENT shall mean the Adoption Agreement used to adopt
this Plan and establish the Trust set forth herein, including any amendments
thereto.
1.04 ANNUITY STARTING DATE shall mean the first day of the first period
for which an amount is payable as an annuity or, in the case of a benefit not
payable in the form of an annuity, the first day on which all events have
occurred which entitle the Participant to such benefit.
1.05 BENEFICIARY shall mean the person (or persons or entity) designated
by a Participant or under the terms of this Agreement to receive all or part of
the Participant's benefit under the Plan upon the Participant's death. A
Beneficiary's right to (and the Plan Administrator's or Trustee's duty to
provide to the Beneficiary) information concerning the Plan does not arise until
the Participant's date of death.
1.06 CODE shall mean the Internal Revenue Code of 1986, as amended.
1.07 COMPENSATION, except as otherwise provided for herein or in the
Adoption Agreement, shall mean the wages received by the Employee from the
Employer as defined in Code section 3401(a) for the purposes of income tax
withholding at the source but determined without regard to any rules that limit
the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in section 3401(a)(2)). For a Self-Employed Individual, Compensation shall
mean Earned Income, as defined under Section 1.08. For a Leased Employee who is
considered an Employee under the provisions of Section 1.16, Compensation shall
mean the 3401(a) wages paid to the Leased Employee by the leasing organization
which are attributable to services performed for the Employer.
In addition, for any determination period, the following shall be excluded
as Compensation for all Employees:
(a) compensation deferred under an eligible deferred compensation plan
within the meaning of Code section 457(b) (deferred compensation plans
of state and local governments and tax exempt organizations)\; and
(b) employee contributions under governmental plans described in Code
section 414(h)(2) that are picked up by the Employer and thus are
treated as Employer contributions.
For any determination period beginning after December 31, 1988 and prior to
January 1, 1994, Compensation taken into account for any Employee shall not
exceed $200,000, as adjusted at the beginning of such determination period in
the same manner as the dollar limitation under Code section 415(d). However,
with respect to the 1990 through 1993 Plan Years, the Plan Administrator may
elect to use the Compensation limit under Code section 401(a)(17) in effect on
the January 1 within the said Plan Years.
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In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
The above limitation shall apply to the combined Compensation of the
Employee and any family member aggregated with the Employee as set forth herein
who is either the Employee's spouse or the Employee's lineal descendant who has
not attained age 19 as of the last day of the determination period. If the
aforementioned limitation is exceeded by the Employee and one or more family
members, then the Compensation of any family member who is not benefiting under
this Plan or any other qualified plan maintained by the Employer or any Related
Employer shall be reduced to "0." If the dollar limitation is still exceeded,
then the Compensation for the remaining family members including the Participant
shall be reduced under one of the following methods:
(a) By prorating the dollar limitation among each family member in
proportion to his Compensation determined without regard to the dollar
limitation.
(b) If the Employer contribution is allocated taking into account
permitted disparity:
By reducing the Compensation of any family member whose Compensation
exceeds the integration level used for determining Excess Compensation.
The remaining amount after deducting from the dollar limitation the
Compensation for each family member whose Compensation is equal to or
less than the integration level shall be prorated among each family
member without regard to the integration level\; or
(c) By reducing the Compensation of the family member with the highest
level of Compensation to the extent necessary to prevent the dollar
limitation from being exceeded.
For any determination period beginning prior to January 1, 1989, the above
referenced $200,000 limitation shall be applied without regard to the above
referenced family aggregation rules and shall apply to an Employee only if the
Plan was a Top Heavy Plan for such determination period. If the period for
determining compensation is shorter than 12 months, the annual compensation
limit is an amount equal to the otherwise applicable annual compensation limit
multiplied by the fraction, the numerator of which is the number of months in
the short period, and the denominator of which is 12.
1.08 EARNED INCOME shall mean net earnings from self-employment in the
trade or business with respect to which the Employer has established the Plan,
provided personal services of the individual are a material income producing
factor. The Plan Administrator will determine net earnings without regard to
items excluded from gross income and the deductions allocable to those items.
Net earnings shall be reduced by the deduction allowed to the Self-Employed
Individual under Code section 404 for all contributions made by the Employer to
a qualified plan, including this Plan, and, for Plan Years beginning after
December 31, 1989, the deduction allowed to the Self-Employed Individual under
Code section 164(f) for self-employment
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taxes. Any reference in this Plan to Compensation is also a reference to the
Earned Income of any Self-Employed Individual.
1.09 EFFECTIVE DATE shall mean the effective date of the Plan or
restatement date of the Plan as set forth in the Adoption Agreement. This date
signifies the date on which the Plan and Trust hereunder take effect either as a
new Plan and Trust or as an amendment and restatement in its entirety to the
Plan and Trust previously adopted by the Employer.
1.10 ELECTIVE DEFERRALS shall mean any Employer Contributions made to the
Plan at the election of the Participant, in lieu of cash compensation, and shall
include contributions made pursuant to a salary reduction agreement or other
deferral mechanism. For any taxable year Elective Deferrals shall be the sum of
any elective contribution made by a Participant under a cash or deferred
arrangement (as defined in Code section 401(k)), any Employer contribution to a
simplified employee pension plan to the extent such contribution is not
includable in the individual's gross income for the taxable year under Code
section 402(h)(1)(B), any Employer contribution to an annuity contract under
Code section 403(b) under a salary reduction agreement, and any Employee
contribution designated as deductible under a trust described in Code section
501(c)(18) to the extent that such contribution is deductible from such
individual's income for the taxable year on account of Code section 501(c)(18).
1.11 EMPLOYEE shall mean any common law employee of the Employer, and
shall also include, if applicable, any Self-Employed Individual and any Leased
Employee deemed to be an employee of the Employer.
1.12 EMPLOYER shall mean the corporation, individual or entity designated
in the Adoption Agreement.
1.13 ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.14 HIGHLY COMPENSATED EMPLOYEE shall mean an Employee who, during the
Plan Year or the preceding 12-month period:
(a) is a more than 5% owner of the Employer (applying the constructive
ownership rules of Code section 318 and the principles of Code section
318, for an unincorporated entity)\;
(b) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year)\;
(c) has Compensation in excess of $50,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year) and is part of
the top-paid 20% group of Employees (based on Compensation for the
relevant year)\; or
(d) has Compensation in excess of 50% of the dollar amount prescribed in
Code section 415(b)(1)(A) (relating to defined benefit plans) and is an
officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in the
Plan Year but not during the preceding 12-month period and does not satisfy
clause (a) in either period, the Employee is a Highly Compensated Employee only
if he is one of the 100 most highly compensated Employees for the Plan Year. The
number of officers taken into account under clause (d) will not exceed the
greater of 3 or 10% of the total number (after application of the Code section
414(q) exclusions) of Employees, but no more than 50 officers. If no Employee
satisfies the Compensation requirement in clause (d) for the relevant year, the
Plan Administrator will treat the highest paid officer as satisfying clause (d)
for that year.
The Plan Administrator must make the determination of who is a Highly
Compensated Employee, including the determinations of the number and identity of
the top paid 20% group, the top 100 paid Employees, the number of officers
includable in clause (d) and the relevant Compensation, consistent with Code
section 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. For purposes of
applying any nondiscrimination test required under the Plan or under the Code,
in a manner consistent with applicable Treasury regulations, the Plan
Administrator will treat a Highly Compensated Employee described
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in clause (a) of this Section and a family member (a spouse, a lineal ascendant
or descendant, or a spouse of a lineal ascendant or descendant) of a Highly
Compensated Employee described in clause (a) of this Section, or a family member
of one of the ten Highly Compensated Employees with the greatest Compensation
for the Plan Year, and such Highly Compensated Employee as a single Highly
Compensated Employee by aggregating the total of Compensation and Plan
contributions received by all such individuals for the Plan Year.
A former Highly Compensated Employee shall be 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 or received Compensation in excess of $50,000 during either the year of
his Separation from Service (or the prior year) or any year ending after his
54th birthday.
1.15 HOUR OF SERVICE shall mean the following:
(a) Each hour for which an Employee is paid, or is entitled to payment,
for the performance of duties for the Employer during the applicable
computation period.
(b) Each hour for which an Employee is paid, or is entitled to payment,
by the Employer on account of a period during which no duties are
performed (irrespective of whether the employment relationship has
terminated) due to vacation, jury duty, military duty, or leave of
absence. No more than 501 Hours of Service shall be credited under this
paragraph to an Employee on account of any single computation period.
In addition, no Hours of Service shall be credited for any payment
which is made under a plan maintained by the Employer solely for the
purpose of complying with the applicable workers' compensation,
unemployment compensation or disability insurance laws nor any payment
which solely reimburses an Employee for medical or medically related
expenses incurred by the Employee.
(c) Each hour for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Employer. These hours shall be
credited to the Employee for the computation period or periods to which
the award or agreement pertains rather than the computation period in
which the award, agreement or payment is made. The same Hours of
Service shall not be credited both under paragraph (a) or paragraph
(b), as the case may be, and under this paragraph (c).
Hours of Service under paragraphs (b) and (c) shall be determined and
credited according to the provisions of sections 2530.200(b)-2(b) and (c) of the
Department of Labor regulations. An Hour of Service shall not be credited to an
Employee under more than one of the above paragraphs.
Hours of Service shall be credited according to hourly records maintained
by the Employer. In the absence of maintaining hourly records for a
classification of Employees, Hours of Service shall be credited according to the
equivalency method selected in the Adoption Agreement, provided the
classification is reasonable and consistently applied.
For purposes of determining Hours of Service, Employer shall mean the
Employer and any Related Employer.
1.16 LEASED EMPLOYEE shall mean 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 related persons within the meaning of Code section
414(n)(6)) on a substantially full time basis for at least one year and who
performs services historically performed by employees in the Employer's business
field. Unless covered under the Safe Harbor Plan Exception, a Leased Employee
shall be treated as an Employee. For purposes of Section 1.07, Compensation of a
Leased Employee shall mean Compensation from the leasing organization which is
attributable to services performed for the Employer. Contributions or Benefits
provided a Leased Employee by the leasing organization which are attributable to
services performed for the Employer shall be treated as being provided by the
Employer.
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SAFE HARBOR PLAN EXCEPTION. For services performed after December 31,
1986, a Leased Employee shall be treated as an Employee of the Employer unless
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 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.
For services performed prior to December 31, 1986, the aforementioned
nonintegrated contribution shall be at least 7- 1/2%, and the Plan shall be a
safe harbor plan even though prior to application of the Safe Harbor Plan
Exception more than 20% of the Employees are Leased Employees.
1.17 NONFORFEITABLE shall mean a Participant's or Beneficiary's
unconditional claim, legally enforceable against the Plan, to the Participant's
Accrued Benefit.
1.18 NONTRANSFERABLE ANNUITY shall mean 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 issuing insurance company. If the Trustee
distributes an annuity contract to a Participant or Beneficiary, the contract
must be a Nontransferable Annuity.
1.19 OWNER-EMPLOYEE shall mean a Self-Employed Individual who, in the
case of a sole proprietorship, is the sole proprietor or, in the case of a
partnership, is a partner who owns more than 10% of either the capital or profit
interest of the partnership.
SPECIAL RULES AND RESTRICTIONS. The following special rules and
restrictions apply to Owner-Employees:
(a) If the Plan provides contributions or benefits for an Owner-Employee
or for a group of Owner-Employees who controls the trade or business
with respect to which this Plan is established and one or more other
trades or businesses, plans must exist or be established with respect
to all the controlled trades or businesses so that when the plans are
combined they form a single plan which satisfies the requirements of
Code section 401(a) and Code section 401(d) with respect to the
employees of the controlled trades or businesses.
(b) If the Owner-Employee or group of Owner-Employees controls any other
trade or business, then the Owner-Employee shall be excluded from this
Plan unless the employees of the other controlled trade or business
participate in a plan which satisfies the requirements of Code section
401(a) and Code section 401(d). The other qualified plan must provide
contributions and benefits which are not less favorable than the
contributions and benefits provided for the Owner-Employee or group of
Owner-Employees under this Plan, or if an Owner-Employee is covered
under another qualified plan as an Owner-Employee, then the plan
established with respect to the trade or business he does control must
provide contributions or benefits as favorable as those provided under
the most favorable plan of the trade or business he does not control.
(c) For purposes of paragraphs (a) and (b), an Owner-Employee or group of
Owner-Employees controls a trade or business if the Owner-Employee or
Owner-Employees together own the entire interest in an unincorporated
trade or business or, in the case of a partnership, own more than 50%
of either the capital interest or the profits interest in the
partnership. For purposes of this subparagraph (c), an Owner-Employee,
or two or more Owner-Employees, shall be treated as owning any interest
in a partnership which is owned directly, or indirectly, by a
partnership which such Owner-Employee, or such two or more
Owner-Employees, are considered to control within the meaning of this
subparagraph (c).
1.20 PARTICIPANT'S ACCOUNT shall mean an Employee who enters the Plan in
accordance with the provisions of this Plan and Trust Agreement.
1.21 PARTICIPANT'S ACCOUNT shall mean the separate account(s) which the
Plan Administrator or the Trustee shall maintain for a Participant under the
Plan. A separate subaccount shall be maintained for the Participant's Employer
Contributions and Forfeitures and each type of Employee Contribution credited on
behalf of the Participant.
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1.22 PLAN shall mean this Plan established or continued by the Employer
in the form of this Agreement.
1.23 PLAN ADMINISTRATOR shall be the person or entity designated as such
in the Adoption Agreement.
1.24 PLAN YEAR shall mean the fiscal year of the Plan, as designated in
the Adoption Agreement. The final Plan Year shall be the designated twelve month
period in the Adoption Agreement, which includes the date of the final
distribution of the Trust Fund assets.
1.25 RELATED EMPLOYER shall mean any corporation, trade or business
(whether or not incorporated) who, along with the Employer, is part of a
controlled group, as defined under Code sections 414(b) and (c), or is part of
an affiliated service group, as defined under Code sections 414(m) and (o).
1.26 SELF-EMPLOYED INDIVIDUAL shall mean an individual who has Earned
Income (or would have had Earned Income but for the fact that the trade or
business did not have net profits for the taxable year) from the trade or
business for which the Plan is established.
1.27 SERVICE/SEPARATION FROM SERVICE. Service shall mean 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. Separation from
Service shall occur when the Employee ceases performance of services for the
Employer maintaining the Plan.
In addition, in any case where this Plan is the plan of a predecessor
employer, all service with such predecessor employer shall be treated as service
for the Employer.
1.28 SHARED EMPLOYEE shall mean an individual if, during a Plan
computation period, such individual performs services as an employee for the
Employer and one or more other persons who are not Related Employers
(collectively referred to as employing persons) at one or more shared business
premises of such employing persons or one or more common locations. With respect
to a Shared Employee, this Plan shall take into account only Hours of Service
performed for the Employer by such Shared Employee.
However, the Employer may elect with respect to all Shared Employees who
perform services of the same type for the Employer and whose combined hours of
service during a Plan computation period at such shared premises or locations
for the Employer equals or exceeds 1,000 Hours of Service to credit each such
Employee with 1,000 Hours of Service for such period.
The Employer may also elect to credit each Shared Employee who is credited
with 1,000 or more hours of service with all employing persons during a Plan
computation period with 1,000 Hours of Service for said computation period.
An individual shall receive credit for vesting and eligibility purposes for
each Plan Year in which the individual is a Shared Employee. The Employer
Contributions and Forfeitures allocated to a Shared Employee for a Plan Year
shall be determined by multiplying the contribution calculated under the Plan as
if the Shared Employee was employed exclusively by the Employer and received all
compensation paid to the Shared Employee by all of the employing persons from
the Employer by a fraction, the numerator of which is the amount of Compensation
paid the Shared Employee by the Employer, and the denominator of which is the
amount of compensation paid the Shared Employee by all of the employing persons.
1.29 TOP HEAVY PLAN/TOP HEAVY DEFINITIONS. If this Plan is the only
qualified plan maintained by the Employer, the Plan shall be a Top Heavy Plan
for any Plan Year beginning after December 31, 1983 if, on the Determination
Date, the Top Heavy Ratio exceeds 60%. If the Employer maintains any other
qualified plan (including a simplified employee pension plan) or maintained
another such plan which is now terminated, this Plan shall be a Top Heavy Plan
for any Plan Year beginning after December 31, 1983 if, during the calendar year
which includes the Plan's Determination Date, the Top Heavy Ratio determined for
the Aggregation Group exceeds 60%.
This Plan shall be a Super Top Heavy Plan if the Top Heavy Ratio as
determined above exceeds 90%.
DEFINITIONS. For purposes of applying the provisions of this Section, the
following definitions shall apply:
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(a) DETERMINATION DATE shall mean the last day of a plan's preceding plan
year, or, in the case of the first plan year, the last day of such plan
year.
(b) TOP HEAVY RATIO shall mean a fraction, the numerator of which is the
sum of the present value of accrued benefits for Key Employees and the
denominator of which is the sum of the present value of the accrued
benefits for all Employees.
The present value of an Employee's accrued benefit under any defined
contribution plan, including this Plan, shall be determined as of the
Valuation Date. The Valuation Date shall be the most recent date used
for valuing the accrued benefit which occurred during the 12-month
period ending on the Determination Date. In the case of a profit
sharing plan, including a 401(k) plan, the present value of the accrued
benefit shall include any contributions actually made after the
valuation date but on or before the Determination Date, except that in
the case of the first plan year, such value shall also include any
contributions made after the Determination Date that are allocated as
of a date during that first plan year. In the case of a pension plan,
the present value of the accrued benefit shall include any
contributions due as of the Determination Date which are required under
section 412 of the Code as well as any contributions that would be
allocated as of a date not later than the Determination Date, even
though such amounts were not required to be contributed.
The present value of an Employee's accrued benefit under a defined
benefit plan shall be determined on the Valuation Date. The Valuation
Date is the date used for computing plan costs for minimum funding
purposes which occurred during the 12-month period ending on the
Determination Date. The present value of the accrued benefit for a
current Employee must be determined as if the individual terminated
service on the Valuation Date, or, in the case of the first plan year,
as if the individual terminated service on the Determination Date. The
accrued benefit for any Non-Key Employee shall be determined under the
uniform accrual method, if any, which is used by 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 described in Code section 411(b)(1)(C). For purposes of computing
the present value of the accrued benefit, the uniform actuarial
assumptions specified in all defined benefit plans of the Employer
shall be used, or if the actuarial assumptions specified are not
uniform, an interest assumption of 5% shall be used in conjunction with
the Unisex Pension 1984 Mortality Table as the post-retirement
mortality assumption. The present value of the accrued benefit shall
include the value of nonproportional subsidies and shall exclude the
value of proportional subsidies.
The present value of an Employee's accrued benefit under both a defined
contribution plan and a defined benefit plan shall include the value of
any non-deductible voluntary or mandatory Employee contributions. In
addition, the present value of the accrued benefit shall include a
distribution paid to the Employee from the plan during the 5-year
period ending on the Determination Date (including a distribution from
a terminated plan which, if it had not terminated, would have been
required to be included in the Aggregation Group), unless such
distribution was a rollover contribution or trustee-to-trustee transfer
to another plan maintained by the Employer. Any rollover contribution
or trustee-to-trustee transfer accepted by a plan shall be included in
the present value of the Employee's accrued benefit unless the rollover
contribution or trustee-to-trustee transfer was from the plan of an
unrelated employer, initiated by the Employee and accepted by the Plan
after December 31, 1983.
In calculating the sum of the present value of the accrued benefits for
a plan, the present value of the accrued benefit for any Non-Key
Employee who was formerly a Key Employee and the present value of the
accrued benefit for any Employee who has not received credit for one
Hour of Service during the 5-year period ending on the Determination
Date shall not be included.
(c) KEY EMPLOYEE shall mean any Employee, including any former Employee,
who at any time during the 5-year period ending on the Determination
Date is:
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(1) an officer of the Employer whose Compensation for the plan year
is greater than 50% of the dollar limitation in effect under Code
section 415(b)(1)(A) for the plan year. The number of officers
taken into account under this clause shall not exceed the greater
of 3 or 10% of the total number of Employees (after application
of Code section 414(q)(8) exclusions), such number not to exceed
50.
(2) 1 of the 10 Employees owning the largest interests in the
Employer whose Compensation for the plan year exceeds the dollar
limitation in effect under Code section 415(c)(1)(A) of the plan
year.
(3) a person who owns, if the Employer is a corporation, more than 5%
of the outstanding stock or stock possessing more than 5% of the
total combined voting power of all stock of the corporation or,
if the Employer is not a corporation, a person who owns more than
5% of the capital or profits interest in the Employer.
(4) a person who meets the requirements of clause (3) if "1%" is
substituted for "5%" each place it appears in clause (3) and
whose Compensation for the plan year exceeds $150,000.
For purposes of determining ownership in the Employer, the constructive
ownership rules of Code section 318 (or, if the Employer is not a
corporation, principles similar to the principles of Code section 318
if capital or profits interest is substituted for stock) shall apply
except that subparagraph (c) of Code section 318(a)(2) shall be applied
by substituting "5 percent" for "50 percent". However, the rules of
subsections (b), (c) and (m) of Code section 414 shall not apply for
purposes of determining ownership in the Employer.
Compensation shall mean the amount defined under Section 1.07 plus any
additional amounts paid by the Employer which are excludable from the
Employee's gross income under Code sections 125, 402(a)(8), 402(h) or
403(b).
Key Employee shall also mean the Beneficiary of a Key Employee.
(d) NON-KEY EMPLOYEE shall mean an Employee or Beneficiary who is not a
Key Employee.
(e) EMPLOYER shall mean the Employer that adopts this Plan and any
Related Employer.
(f) AGGREGATION GROUP shall mean:
(1) each qualified plan of the Employer, including any terminated
plan, in which a Key Employee is a participant during the 5-year
period ending on the Determination Date\;
(2) each other qualified plan of the Employer which enables any plan
described in clause (1) to meet the requirements of Code section
401(a)(4) or Code section 410\; and
(3) any other qualified plan maintained by the Employer, provided
such plan and the plans under clauses (1) and (2) satisfy in the
aggregate the requirements of Code section 401(a)(4) and Code
section 410.
1.30 TRUST shall mean the separate Trust created under this Agreement.
1.31 TRUST FUND shall mean all property of every kind held or acquired by
the Trustee under the Agreement.
1.32 TRUSTEE shall mean the individual(s) or entity designated in the
Adoption Agreement as Trustee, to be governed by the Trust provisions herein, or
any successor in office.
1.33 YEAR OF SERVICE shall be the period defined in the Adoption
Agreement.
In the event that the Elapsed Time Method of crediting Service has been
elected in the Adoption Agreement, then the following Section 1.33 shall apply:
YEAR OF SERVICE/MONTH OF SERVICE/ELAPSED TIME METHOD FOR CREDITING
SERVICE. This Plan shall use the elapsed time method of crediting service for
both eligibility and vesting under the Plan. Service shall be
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credited in accordance with the provisions of Regulation 1.410(a)-7 including
any amendment thereof. In accordance with the foregoing, crediting of service
under the Plan shall be based on the following:
(a) CALCULATION OF SERVICE. For purposes of determining an Employee's
initial or continued eligibility to participate in the Plan or the
Nonforfeitable interest in the Participant's Account balance derived
from Employer contributions (except for periods of Service which may be
disregarded on account of the "rule of parity" described in section
2.02 as to participation and Section 7.02 as to vesting), an Employee
will receive credit for the aggregate of all time period(s) commencing
with the Employee's first day of employment or reemployment and ending
on the date a Break in Service begins. The first day of employment or
reemployment is the first day the Employee performs an Hour of Service.
An Employee will also receive credit for any period of severance of
less than 12 consecutive months.
(b) YEAR OF SERVICE FOR PURPOSES OF VESTING. Assuming no interruption in
employment, an Employee hired on any day of a given month will have one
Year of Service on the anniversary date of that month in the next
following year, and an additional Year of Service on the anniversary
date in which he was employed in each succeeding year thereafter.
(c) MONTHS OF SERVICE. For purposes of the Elapsed Time Method, Months
of Service shall mean periods of employment of thirty (30) days
(whether or not consecutive) commencing on the Employee's employment
commencement date (including reemployment) and ending on the date a
Period of Severance begins.
(d) BREAKS IN SERVICE -- "ONE YEAR PERIOD OF SEVERANCE." Breaks in
service will be calculated in consecutive calendar months and years in
accordance with subparagraph (a) above. A "one year break in service"
means the applicable computation period of twelve consecutive months
during which an Employee fails to accrue a month of service. Further,
solely for purposes of determining whether a Participant has incurred a
one year break in service, Hours of Service shall be recognized for
"authorized leaves of absence" and "maternity and paternity leaves of
absence." Years of Service and one year breaks in service shall be
measured on the same computation period.
An Employee shall be not be deemed to have incurred a one year break in
service if he completes an Hour of Service within twelve months
following the date his employment terminated.
In the case of an individual who is absent from work for maternity or
paternity reasons, the 12-consecutive month period beginning on the
first anniversary of the first date of such absence shall not
constitute a Break in Service. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an absence
(1) by reason of the pregnancy of the individual, (2) by reason of the
birth of a child of the individual, (3) by reason of the placement of a
child with the individual in connection with the adoption of such child
by such individual, or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
(e) SERVICE SPANNING RULES. Service credited through the last day in
which Severance From Service has occurred and service credited
subsequent to the Reemployment Commencement Date shall be added
together for all purposes under this Plan (including current vested
status), but the intervening times shall be disregarded.
Notwithstanding the preceding paragraph, if a terminated participant is
reemployed within the twelve consecutive calendar month period
following his Severance From Service Date, he will be credited with
service for the period during which his employment with the Employer
was interrupted. Such Employee will not be regarded as having incurred
a break in service for Plan purposes. In no event, however, will an
Employee who had not yet become a Participant when said Employee
terminated become a Participant until his Reemployment Commencement
Date.
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(f) AGGREGATING SERVICE. All periods of employment shall be aggregated
in determining an Employee's service. In computing the aggregate, such
aggregate shall not include any service that can be disregarded by
reason of a prior break in service.
If the Employer is a member of an affiliated service group (under
section 414(m)), a controlled group of corporations (under section
414(b)), a group of trades or businesses under common control (under
section 414(c)) or any other entity required to be aggregated with the
Employer pursuant to section 414(o), service will be credited for any
employment for any period of time for any other member of such group.
Service will also be credited for any individual required under section
414(n) or section 414(o) to be considered an employee of any employer
aggregated under section 414(b), (c), or (m).
(g) COMPUTATION OF SERVICE WHILE DISABLED. Service will include all
periods during which an Employee was deemed to be totally and
permanently disabled as defined in the Plan provided that if an
Employee ceases to be disabled and does not return to employment within
ninety (90) days thereafter no service credit will be given from and
after the last day of the month during which such eligibility ceased.
(h) DEFINITIONS APPLICABLE TO SECTION 1.33.
(1) SEVERANCE FROM SERVICE DATE. A severance from service shall
occur on the earlier of:
(i) The date on which an Employee quits, retires, is
discharged or dies; or
(ii) The first anniversary of the first date of a period in
which an Employee remains absent from service (with or
without pay) with the Employer maintaining the Plan for any
reason other than a quit, retirement, discharge or death,
such as vacation, holiday, sickness, disability, leave of
absence or layoff.
(2) EMPLOYMENT COMMENCEMENT DATE. The first day an Employee performs
an Hour of Service. An Employee will also receive credit for any
period of severance of less than 12 consecutive months.
(3) REEMPLOYMENT COMMENCEMENT DATE. The term "reemployment
commencement date" shall mean the first date, following a period
of severance from service which is not required to be taken into
account under the service spanning rules herein on which an
Employee performs an Hour of Service as defined in the Plan for
the Employer maintaining the Plan.
(4) PERIOD OF SERVICE. The term "period of service" shall mean a
period of service commencing on the Employee's employment
commencement date or reemployment commencement date whichever is
applicable, and ending on the severance from service date.
ARTICLE II
PARTICIPATION IN THE PLAN/ENTRY DATE
2.01 ELIGIBILITY TO PARTICIPATE. An Employee shall be eligible to become
a Participant upon satisfying the participation requirements set forth in the
Adoption Agreement. Each eligible Employee who satisfies the participation
requirements shall enter the Plan on the Entry Date set forth in the Adoption
Agreement.
The Adoption Agreement may establish one or more categories of Employees or
employment positions which are ineligible to participate in the Plan. An
Employee who is employed in a position described in the Adoption Agreement as an
ineligible category of employment shall not be eligible to participate until
said Employee is employed in a position of employment that is not an ineligible
category. In that event, said Employee shall enter the Plan on the later of the
date said Employee became employed in an eligible category of employment or the
first Entry Date said Employee would have entered the Plan if said Employee had
been employed in an eligible category. A Participant who becomes employed in an
ineligible category of
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employment after having been employed in an eligible category of employment
shall continue to participate in the Plan but shall not receive credit for any
Compensation earned while in an ineligible category of employment.
2.02 BREAK IN SERVICE AND PARTICIPATION. An Employee shall incur a Break
in Service if he does not complete more than 500 Hours of Service during a
computation period. The computation period for purposes of determining a Break
in Service shall be the same computation period for determining a Year of
Service for eligibility purposes under the Adoption Agreement.
In the event that the Adoption Agreement shall provide for the completion
of more than one Year of Service as a condition of participation, then an
Employee who incurs a Break in Service before completing the service condition
set forth in the Adoption Agreement shall be treated as a new Employee on the
date he first performs an Hour of Service for the Employer after the Break in
Service.
In the case of a nonvested Participant who incurs one or more consecutive
Breaks in Service, Years of Service prior to the initial Break in Service shall
not be required to be taken into account for eligibility purposes if the number
of Breaks in Service equals or exceeds the greater of 5 or the aggregate number
of Years of Service credited to the Participant prior to the initial Break in
Service. Such aggregate number of Years of Service shall not include any Years
of Service disregarded under the preceding sentence by reason of any prior
Breaks in Service.
Except as provided above, all Years of Service prior to a Break in Service
shall be credited to an Employee for purposes of Plan Participation.
2.03 MATERNITY OR PATERNITY LEAVE. Solely for purposes of determining
whether the Employee incurs a Break in Service under any provision of this Plan,
the Plan Administrator shall credit Hours of Service during an Employee's unpaid
absence period due to maternity or paternity leave. The Plan Administrator shall
consider 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 of an adopted child with the Employee, or the care of the Employee's
child immediately following the child's birth or placement. The Plan
Administrator shall credit Hours of Service under this paragraph on the basis of
the number of Hours of Service the Employee would have received if he were paid
during the absence period or, if the Plan Administrator cannot determine the
number of Hours of Service the Employee would have received, on the basis of
eight (8) hours per day during the absence period. The Plan Administrator shall
credit only the number of Hours of Service (not exceeding 501 Hours of Service)
necessary to prevent an Employee from incurring a Break in Service. The Plan
Administrator shall credit 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 Plan Administrator
shall credit these Hours of Service to the next computation period.
2.04 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment
terminates shall re-enter the Plan as a Participant on the date of his
re-employment. An Employee who has satisfied the eligibility conditions of
Section 2.01 but who terminates employment prior to his Entry Date shall become
a Participant in the Plan on the later of the date of his re-employment or the
aforementioned Entry Date. Any other Employee whose employment terminates and
who is subsequently re-employed shall become a Participant in accordance with
the provisions of Section 2.01.
2.05 ELECTION NOT TO PARTICIPATE. An Employee eligible to participate,
including any present Participant, may elect not to participate in the Plan. For
an election to be effective for a particular Plan Year, the Employee must file
the election in writing with the Plan Administrator not later than the last day
of that Plan Year. The Plan Administrator shall have the discretion to not honor
said election for any Plan Year where the election may jeopardize the continued
qualification of the Plan. The Employer may not make any contribution under the
Plan for the Employee for any Plan Year for which the election is in effect. An
Employee who elects not to participate may later elect to participate in the
Plan by filing an election in writing with the Plan Administrator not later than
the end of the Plan Year for which such election is to be effective. If an
Employee is a Self-Employed Individual, the Employee's election must be
effective no later than the
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date the Employee first would have become a Participant in the Plan and the
election is irrevocable (except as permitted by Treasury regulations without
creating a Code section 401(k) arrangement with respect to that Self-Employed
Individual). An election timely filed is effective for the entire Plan Year.
For each Plan Year for which a Participant's election not to participate is
effective, the Participant's Account, if any, shall continue to share in the
allocation of Trust Fund earnings. Furthermore, the Employee electing not to
participate shall receive credit for eligibility and vesting purposes for each
Year of Service completed during the period the election not to participate is
effective.
2.06 FAILURE OF PLAN TO MEET THE COVERAGE REQUIREMENTS OF CODE SECTION
410(B) OR 401(A)(26). If this is a Plan that would otherwise fail to meet the
requirements of Code sections 401(a)(26) or 410(b) and the Regulations
thereunder, the group of Participants eligible to share in the Employer's
Contribution and Forfeitures for the Plan Year shall be expanded to include the
minimum number of Non-Highly Compensated Employees who would not otherwise be
eligible as is necessary to satisfy such requirements. The Plan Administrator
shall specify which such Non-Highly Compensated Employees shall share in the
allocation of Employer Contributions and Forfeitures for the Plan Year.
For Plan Years beginning prior to the later of January 1, 1994 or the
effective date of the final regulations under Code section 410(b), if a
Participant failed to receive an allocation of Employer Contributions and
Forfeitures due to his failure to complete a minimum number of Hours of Service
(not to exceed 1,000) during the Plan Year, or his Separation from Service prior
to the end of the Plan Year, he shall be deemed to have benefited for said Plan
Year under Code section 410(b).
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ARTICLE III
CONTRIBUTIONS TO THE PLAN
3.01 EMPLOYER CONTRIBUTION.
(a) IN GENERAL. The Employer Contribution for a Plan Year shall be
determined under the Employer Contribution provisions in the Adoption
Agreement. Any Employer Contribution to the Plan shall be conditioned
on its deductibility under Code section 404.
The Trustee, upon request from the Employer, must return to the
Employer the amount of the Employer Contribution made by a mistake of
fact or disallowed as a deduction under Code section 404. The Trustee
shall not return any portion of the Employer Contribution under the
provisions of this Section more than one (1) year after the date on
which:
(1) the Employer made the contribution by mistake of fact\; or
(2) the disallowance of the contribution as a deduction occurs.
The amount which may be returned to the Employer shall be the excess of
the total amount contributed over the amount that would have been
contributed had there not occurred a mistake of fact or disallowance of
deduction. The amount of the Employer Contribution returnable under
this Section shall not be increased by any earnings attributable to the
contribution but shall be decreased by any losses attributable to it.
In the event that the Commissioner of Internal Revenue determines that
the Plan is not initially qualified under the Internal Revenue Code,
any contribution made incident to that initial qualification by the
Employer must be returned to the Employer within one (1) year after the
date the initial qualification is denied, but only if the application
for the qualification is made by the time prescribed by law for filing
the Employer's tax return for the taxable year in which the Plan is
adopted, or such later date as the Secretary of the Treasury may
prescribe.
(b) PROFIT SHARING PLAN. If this Plan is a profit sharing plan, the
primary limitation on the amount of Employer Contributions shall be 15%
of the aggregate Compensation of the Participants for the Plan Year.
If, in any Plan Year beginning before January 1, 1987, the Employer
contributed less than 15% of the Participants' aggregate Compensation,
the difference shall be carried forward and may be contributed in a
succeeding Plan Year. However, the total contribution for any such
succeeding Plan Year shall not exceed the lesser of:
(1) 25% of the Participants' aggregate Compensation\; or
(2) the sum of the amounts carried forward from the preceding Plan
Years plus the primary limitation for the Plan Year.
An Employer Contribution received after the close of the Employer's
taxable year may be credited to such year only if the contribution is
treated in the same manner as a contribution received on the last day
of the taxable year and either the Employer informs the Plan
Administrator or Trustee in writing prior to the due date (including
extensions) of the Employer's tax return that the contribution is to be
applied to such year or the Employer claims the contribution as a
deduction on the Employer's income tax return for such year. Unless
otherwise designated in writing by the Employer the contribution for
any Plan Year shall equal the contribution made for the Employer's
taxable year ending within the Plan Year.
In addition, if this Plan is a profit sharing plan, no Employer
Contribution may be made to this Plan for a Plan Year if the Employer
has no current or accumulated net profits, unless the Employer elects
otherwise. Net profits shall mean the Employer's net income for any
taxable year determined in accordance with generally accepted
accounting practices consistently applied
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without regard to any deductions for federal, state and local income
taxes or for any contributions to this Plan or any other qualified
retirement plan maintained by the Employer.
3.02 EMPLOYEE CONTRIBUTIONS. Employee Contributions shall be made to the
Plan as permitted or required in the Adoption Agreement. In the event that this
Agreement shall amend or replace a pre-existing plan which permitted any type of
Employee Contribution which is no longer permitted under this Agreement, then
any such Employee Contribution made by an Employee prior to the Effective Date
of this Agreement shall remain a part of the Trust Fund and shall be accounted
for and distributed in accordance with the terms and conditions of this
Agreement. Any Employee Contributions credited for Plan Years beginning after
December 31, 1986, together with any Employer Matching Contributions as defined
in section 401(m) of the Code will be limited so as to meet the
nondiscrimination test of section 401(m).
(a) VOLUNTARY EMPLOYEE CONTRIBUTIONS. If allowed under the Adoption
Agreement, an Employee may elect in the manner and form prescribed by
the Plan Administrator the amount of Voluntary Employee Contributions
to be made to the Plan. Any Voluntary Employee Contributions must meet
the requirements of the ACP and the combined ACP/ADP tests of Plan
Section 3.03.
A Participant's Voluntary Employee Contributions to this Plan and any
other Plan maintained by the Employer for the Plan Year shall not
exceed an amount which, when added to the sum of all prior Voluntary
Employee Contributions less the sum of all withdrawals of any such
Voluntary Employee Contributions, equals 10% of the Participant's
aggregate Compensation for all Plan years during which he was a
Participant.
(b) EMPLOYEE ROLLOVER CONTRIBUTIONS. If allowed under the Adoption
Agreement, any Employee may contribute cash or other property to the
Trust from another eligible retirement plan if the contribution is a
rollover contribution as defined in Code section 402(a)(5). The
Employee Rollover Contribution must not include any voluntary or
mandatory employee contributions. Before accepting a rollover
contribution, the Trustee may require that an Employee furnish
satisfactory evidence that the proposed transfer is in fact a rollover
contribution. If an Employee makes a rollover contribution to the Trust
prior to satisfying the Plan's eligibility conditions, he shall be
treated as a Participant for all purposes of the Plan except the
Employee shall not share in the allocation of Employer Contribution and
Forfeitures under Section 4.02 until after his Entry Date.
(c) TRUSTEE-TO-TRUSTEE TRANSFERS. If allowed under the Adoption
Agreement, the Trustee shall possess the specific authority to enter
into merger agreements or direct transfer of assets agreements with the
trustees of other retirement plans described in Code section 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 whether before or after the date the Employee satisfies the
Plan's eligibility condition(s). If the Trustee accepts a direct
transfer of plan assets prior to the Employee's Plan Entry Date, the
Plan Administrator and Trustee shall treat the Employee as a
Participant for all purposes of the Plan except the Employee shall not
share in the Employer contributions or Forfeitures under the Plan until
he actually enters the Plan.
The Trustee after August 9, 1988 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. A transfer is an
elective transfer if: (1) the transfer satisfies Section 14.07\; (2)
the transfer is a voluntary fully informed election by the
Participant\; (3) the Participant had an alternative to the transfer to
retain his Code section 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 applicable\;
(6) the Participant had a right to an immediate distribution from the
transferor plan in lieu of the elective transfer\; (7) the transferred
benefit is at
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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.
(d) VOLUNTARY DEDUCTIBLE CONTRIBUTIONS. Although the Plan may have
previously permitted Voluntary Deductible Contributions, no such
contributions may be made to the Plan which are attributable to a
Participant's taxable year beginning after December 31, 1986. For
purposes of Sections 5.04, 6.05 and 7.04, the Participant's benefit
shall not include his Voluntary Deductible Contributions for Plan Years
beginning after December 31, 1988.
(e) MANDATORY EMPLOYEE CONTRIBUTIONS. If Mandatory Employee
Contributions are required under the Adoption Agreement, then the
Participant shall contribute the amount specified therein.
3.03 PROVISIONS APPLICABLE TO 401(K) PLANS AND TO PLANS PERMITTING
VOLUNTARY AND MANDATORY EMPLOYEE CONTRIBUTIONS OR EMPLOYER MATCHING
CONTRIBUTIONS. If the Employer has elected in the Adoption Agreement to allow
for Employee Contributions, Employer matching contributions or Elective
Deferrals under a 401(k) arrangement, the following additional provisions shall
apply:
(a) PROVISIONS APPLICABLE TO VOLUNTARY AND MANDATORY EMPLOYEE
CONTRIBUTIONS AND EMPLOYER MATCHING CONTRIBUTIONS.
(1) ACTUAL CONTRIBUTION PERCENTAGE TEST. For each Plan Year
beginning after December 31, 1986, the Actual Contribution
Percentage (ACP) for Participants who are Highly Compensated
Employees must satisfy one of the following tests:
(i) the ACP for the Participants who are Highly Compensated
Employees shall not exceed 1.25 times the ACP for
Participants who are not Highly Compensated Employees\; or
(ii) the ACP for Participants who are Highly Compensated
Employees shall not exceed the lesser of two times the ACP
for the Participants who are not Highly Compensated
Employees or the ACP for the Participants who are not
Highly Compensated Employees plus two percentage points.
The ACP for a group of Participants shall be equal to the average
of the actual contribution ratios calculated separately for each
Participant in the group. The actual contribution ratio is the
amount of Aggregate Contributions made by the Participant for the
Plan Year divided by the Participant's Compensation for the Plan
Year (whether or not the Employee was a Participant for the
entire Plan Year). Aggregate Contributions shall mean the sum of
the Participant's Voluntary and Mandatory Employee Contributions,
and Employer Matching Contributions, and Elective Deferrals and
Qualified Non-Elective Contributions, if any, that are treated as
Employer Matching Contributions. Aggregate Contributions shall
not include Matching Employer Contributions that are forfeited
either to correct Excess Aggregate Contributions or because the
contributions to which they relate are Excess Elective Deferrals,
Excess Contributions or Excess Aggregate Contributions. For
purposes of the ACP test only, a Participant shall be any
Employee who is directly or indirectly eligible to receive an
allocation of Matching Employer Contributions or to make Employee
Contributions and shall include (1) an Employee who would be a
Participant but for the failure to make required contributions,
(2) an Employee whose right to make Employee Contributions or
receive Matching Employer Contributions has been suspended
because of an election (other than certain one-time elections)
not to participate, and (3) an Employee who cannot make an
Employee Contribution or receive a Matching Employer Contribution
because Code section 415(c)(1) or 415(e) prevents the Employee
from receiving additional Annual Additions. A Participant who is
not credited
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with Aggregate Contributions for the Plan Year shall have an
actual contribution ratio of 0. The ACP and actual contribution
ratio for each Participant shall be calculated to the nearest
one-hundredth of one percent.
For purposes of calculating the ACP, Voluntary and Mandatory
Employee Contributions must be paid to the Trustee or other agent
of the Plan by the end of the Plan Year and deposited to the
Trust within a reasonable period of time thereafter. Any Employer
Matching Contributions must be paid to the Trust during the Plan
Year or within the 12-month period immediately following the end
of the Plan Year and must be made on account of the Participant's
Elective Deferrals for the Plan Year. Any excess Elective
Deferral which is recharacterized as a Voluntary Employee
Contribution will be treated as contributed during the Plan Year
in which such excess is includable in the Participant's gross
Compensation. Any Qualified Employer Matching Contribution or
Qualified Non-Elective Contribution that is treated as an
Elective Deferral for purposes of the ADP test shall not be
included in determining the actual contribution ratio.
In the event that this Plan satisfies the requirements of Code
section 410(b) only if aggregated with one or more other
qualified plans or if one or more other plans satisfy the
requirements of such Code section only if aggregated with this
Plan, then all such plans including this Plan shall be treated as
a single plan for purposes of the ACP test. For Plan Years
beginning after December 31, 1989, plans may be aggregated under
this paragraph only if they have the same Plan Year. For Plan
Years beginning after December 31, 1988, contributions and
allocations under an ESOP plan (or the ESOP portion of a plan)
may not be combined under this paragraph with the contributions
and allocations under a non-ESOP plan (or the non-ESOP portion of
a plan).
(2) SPECIAL RULES FOR HIGHLY COMPENSATED EMPLOYEES. The actual
contribution ratio for any Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible to
participate under two or more plans of the Employer to which
Employee Contributions, Matching Employer Contributions, or
Elective Deferrals are made shall be determined by treating all
such plans as one plan. Notwithstanding the foregoing, two or
more plans shall be treated as separate plans if they are
required to be disaggregated under regulations issued under Code
section 401(m).
If a Highly Compensated Employee is subject to the family
aggregation rules set forth herein because such Employee is
either a more than 5% owner or one of the ten most Highly
Compensated Employees during the Plan Year, the combined actual
contribution ratio for the family group (which shall be treated
as one Highly Compensated Employee) shall be determined by
combining the Aggregate Contributions and Compensation of all the
eligible family members.
The contributions for all family members used in determining the
ACP for Highly Compensated Employees shall be disregarded for
purposes of determining the ACP for the Participants who are not
Highly Compensated Employees. In addition, if a Participant is
required to be aggregated as a member of more than one family
group, all Participants who are members of those family groups
which include the Participant shall be aggregated as one family
group for purposes of this section.
(3) CORRECTION IF ACP TEST IS NOT SATISFIED. The Employer shall
maintain records sufficient to demonstrate satisfaction of the
ACP test and the amount of Qualified Non-Elective Contributions
or Qualified Employer Matching Contributions, or both, used in
such test. If the ACP for the Participants who are Highly
Compensated Employees does not satisfy the ACP test for a Plan
Year, then any of the following methods (or a combination
thereof) may be used to satisfy the ACP test:
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<PAGE> 28
(i) The Employer may treat Qualified Non-Elective
Contributions or Elective Deferrals as Employer Matching
Contributions to the extent necessary to satisfy the ACP
test provided such contributions satisfy the requirements
of Treasury Regulation 1.401(m)-1(b)(5).
(ii) Employer Matching Contributions (and the earnings
attributable to such contributions) that are not vested
(determined without regard to any increase in vesting which
may occur after the date of forfeiture) may be forfeited to
the extent necessary to satisfy the ACP test. Any amount so
forfeited for an Employee shall not be included in the
calculation of the Employee's actual contribution ratio.
(iii) The allocation of Employer Matching Contributions and
Employee Contributions to a Participant's account may be
limited to the extent necessary to satisfy the ACP test.
(iv) The Excess Aggregate Contributions for a Highly
Compensated Employee, plus earnings thereon, may be
distributed to the Highly Compensated Employee at any time
during the 12-month period immediately following the end of
the Plan Year in which the ACP test was not satisfied. In
such event, the Employer will notify adopting employers who
are required to correct the Excess Aggregate Contributions.
If such Excess Aggregate Contributions are composed of both
Employee Contributions and Employer Matching Contributions,
the distribution shall include the Employer Matching
Contributions which are attributable to the distributed
Employee Contributions.
Excess Aggregate Contributions shall mean, with respect to any
Plan Year, the excess of (1) the total Aggregate Contributions
taken into account in computing the numerator of the actual
contribution ratios for the Highly Compensated Employees for such
Plan Year, over (2) the maximum Aggregate Contributions permitted
by the ACP test (determined by reducing contributions made on
behalf of Highly Compensated Employees in order of their actual
contribution ratios beginning with the highest of such ratios.
The determination of Excess Aggregate Contributions shall be made
after first determining Excess Contributions pursuant to Section
3.03(b)(4) of this Agreement.
The amount of Excess Aggregate Contributions for each Highly
Compensated Employee shall be determined by first reducing the
Aggregate Contributions for the Highly Compensated Employee with
the greatest actual contribution ratio to the extent which will
either enable the Plan to satisfy the ACP test or cause such
Highly Compensated Employee's actual contribution ratio to equal
the ratio of the Highly Compensated Employee with the next
highest actual contribution ratio. This process shall be repeated
until the ACP test is satisfied. The amount of Excess Aggregate
Contributions so determined for a family group which is treated
as a single Highly Compensated Employee shall be allocated among
the family members in proportion to their Aggregate
Contributions.
The earnings attributable to the Excess Aggregate Contributions
shall be equal to the earnings allocable to the Participant's
Aggregate Contributions for the Plan Year multiplied by a
fraction, the numerator of which is the Participant's excess
Aggregate Contributions for the Plan Year and the denominator of
which is the value of the Participant's Aggregate Contributions
determined without regard to any earnings for the year.
For Plan Years which began prior to January 1, 1992, any
reasonable method for determining the earnings attributable to
Excess Aggregate Contributions may be used, provided such method
is applied consistently to all Participants and for all
corrective distributions for such year.
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<PAGE> 29
(b) PROVISIONS APPLICABLE TO ELECTIVE DEFERRALS.
(1) EXCESS ELECTIVE DEFERRALS UNDER CODE SECTION 402(G). Excess
Elective Deferrals shall mean those Elective Deferrals made by a
Participant which are includable in his gross income to the
extent such Elective Deferrals for the Participant's taxable year
exceed the dollar limitation in effect under Code section 402(g)
at the beginning of said taxable year. If a Participant's
Elective Deferrals for his taxable year exceed said dollar
limitation, then the Excess Elective Deferrals shall be returned
to the Participant. Any such corrective distribution may only be
made if the Participant designates the distribution as an excess
deferral, the distribution is made after the date on which the
Plan received the excess deferral, and not later than the first
April 15 following the close of the taxable year and the Plan
designates the distribution as a distribution of Excess Elective
Deferrals. A Participant shall be deemed to have designated the
distribution as an excess deferral to the extent the Participant
has excess deferrals for the taxable year calculated by taking
into account only elective deferrals under the Plan and other
plans of the same Employer.
A corrective distribution which takes place after the end of the
Employee's taxable year shall include the earnings attributable
to the Excess Elective Deferrals. Said earnings shall be equal to
the earnings allocable to the Participant's Elective Deferrals
for the taxable year multiplied by a fraction, the numerator of
which is the Participant's Excess Elective Deferrals for the year
and the denominator of which is the value of the Participant's
Elective Deferrals including the Elective Deferrals for the
taxable year determined without regard to any earnings for the
year.
For taxable years which began prior to January 1, 1992, any
reasonable method for determining the earnings attributable to
Excess Elective Deferrals may be used, provided that such method
is applied consistently to all Participants and for all
corrective distributions for such year.
The amount of the Excess Elective Deferrals of a Participant that
may be distributed shall be reduced by any excess contributions
previously distributed or recharacterized with respect to such
Participant for the Plan Year beginning with or within such
taxable year.
(2) ACTUAL DEFERRAL PERCENTAGE TEST. For each Plan Year, the Actual
Deferral Percentage (ADP) for Participants who are Highly
Compensated Employees must satisfy one of the following tests:
(i) the ADP for the Participants who are Highly Compensated
Employees shall not exceed 1.25 times the ADP for
Participants who are not Highly Compensated Employees\; or
(ii) the ADP for the Participants who are Highly Compensated
Employees shall not exceed the lesser of two times the ADP
for the participants who are not Highly Compensated
Employees or the ADP for the Participants who are not
Highly Compensated Employees plus two percentage points.
The ADP for a group of Participants shall be equal to the average
of the actual deferral ratios calculated separately for each
Participant in the group. The actual deferral ratio is the amount
of the Participant's Elective Deferrals credited for the Plan
Year divided by the Participant's Compensation for the Plan Year.
For purposes of calculating the actual deferral ratio, Elective
Deferrals shall include (1) any Elective Deferrals made pursuant
to the Participant's deferral election (including Excess Elective
Deferrals of Highly Compensated Employees) but excluding (i)
Excess Elective Deferrals of non-Highly Compensated Employees
that arise solely from Elective Deferrals made under the Plan or
plans of the Employer and (ii) Elective Deferrals that are taken
into account under the ACP test (provided the ADP test is
satisfied both with and without exclusion of these Elective
Deferrals) and (2) at the election of the Employer, Qualified
Non-Elective Contributions
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<PAGE> 30
and Qualified Employer Matching Contributions. An Employee who
would be a Participant but for the failure or inability to make
Elective Deferrals shall be treated as a Participant on whose
behalf no Elective Deferrals are made and shall have an actual
deferral ratio of 0. The ADP and actual deferral ratio for each
Participant shall be calculated to the nearest one-hundredth of
one percent.
For purposes of calculating the ADP, Elective Deferrals,
Qualified Non-Elective Contributions and Qualified Employer
Matching Contributions must be allocated to the Employee at any
time during the Plan Year and must be contributed to the Trust no
later than the end of the 12-month period immediately following
the end of the Plan Year. In order to be treated as an Elective
Deferral, a Qualified Non-Elective Contribution and Qualified
Employer Matching Contribution must satisfy the requirements of
Treasury Regulation 1.401(k)-1(b)(5). In addition, any Elective
Deferral must relate to Compensation which either would have been
received by the Employee in the Plan Year but for the Employee's
election to defer or is attributable to Service performed by the
Employee in the Plan Year and would have been received by the
Employee within two and one-half months following the end of the
Plan Year but for the Employee's election to defer.
In the event that this Plan satisfies the requirements of Code
sections 401(k), 401(a)(4) or 410(b) only if aggregated with one
or more other qualified plans or if one or more other plans
satisfy the requirements of such Code sections only if aggregated
with this Plan, then the ADP shall be determined as if all such
plans were a single plan. For Plan Years beginning after December
31, 1988, contributions and allocations under an ESOP plan (or
the ESOP portion of a plan) may not be combined under this
paragraph with the contributions and allocations under a non-ESOP
plan (or the non-ESOP portion of a plan).
The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified
Non-Elective Contributions or Qualified Employer Matching
Contributions, or both, used in such test.
(3) SPECIAL RULES FOR HIGHLY COMPENSATED EMPLOYEES. The actual
deferral ratio for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to make Elective
Deferrals under two or more arrangements described under Code
section 401(k) which are maintained by the Employer and any
Related Employer shall be determined as if such deferrals were
made under a single arrangement. If the different cash or
deferred arrangements have different plan years, then all cash or
deferred arrangements ending with or within the same calendar
year shall be treated as a single arrangement. Notwithstanding
the foregoing, two or more plans shall be treated as separate
plans if they are required to be disaggregated under regulations
issued under Code section 401(k).
If a Highly Compensated Employee is subject to the family
aggregation rules set forth herein because such Employee is
either a more than 5% owner or one of the ten most Highly
Compensated Employees during the Plan Year, the combined actual
deferral ratio for the family group (which shall be treated as
one Highly Compensated Employee) shall be determined by combining
the Elective Deferrals, Compensation and any other amounts
treated as Elective Deferrals of all of the eligible family
members.
The Elective Deferrals, Compensation, and other amounts treated
as Elective Deferrals for all family members shall be disregarded
for purposes of determining the ADP for the Participants who are
not Highly Compensated Employees, except to the extent permitted
above. In addition, if a Participant is required to be aggregated
as a member of more than one family group, all Participants who
are members of those family groups which include the Participant
shall be aggregated as one family group for purposes of this
section.
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<PAGE> 31
(4) CORRECTION IF ADP TEST IS NOT SATISFIED. If the ADP for the
Participants who are Highly Compensated Employees does not
satisfy the ADP test for a Plan Year, then the Employer may use
one or more of the following methods to satisfy the ADP test:
(i) Any non-matching Employer Contributions may be designated
as Qualified Non-Elective Contributions and any Employer
Matching Contributions may be designated as Qualified
Employer Matching Contributions for the Participants who
are not Highly Compensated Employees to the extent
necessary to satisfy the ADP test. Said Qualified
Non-Elective Contributions and Qualified Matching
Contributions shall be allocated to one or more Non-Highly
Compensated Employees in a nondiscriminatory manner.
(ii) The Excess Contributions for a Highly Compensated
Employee, plus earnings thereon, may be distributed to the
Highly Compensated Employee at any time during the 12-month
period immediately following the end of the Plan Year in
which the ADP test was not satisfied. The amount of the
Excess Contributions for each Highly Compensated Employee
shall be determined by first reducing the Elective
Deferrals for the Highly Compensated Employee with the
greatest actual deferral ratio to the extent which will
either enable the arrangement to satisfy the ADP test or
cause such Highly Compensated Employee's actual deferral
ratio to equal the ratio of the Highly Compensated Employee
with the next highest actual deferral ratio. This process
shall be repeated until the ADP test is satisfied. The
amount of Excess Contributions so determined for a family
group which is treated as a single Highly Compensated
Employee shall be allocated among the family members in
proportion to their Elective Deferrals. The amount of
earnings attributable to the Excess Contributions shall be
equal to the earnings for the Plan Year attributable to the
Participant's Elective Deferrals and amounts treated as
Elective Deferrals multiplied by a fraction\; the numerator
of which is the Participant's excess contributions for the
Plan Year and the denominator of which is the subaccount of
the Participant's Account as of the last day of the Plan
Year which is attributable to his Elective Deferrals and
amounts treated as Elective Deferrals, less any earnings
allocable to such subaccount for the Plan Year.
For Plan Years which began prior to January 1, 1992, any
reasonable method for determining the earnings attributable
to Excess Contributions may be used, provided that such
method is applied consistently to all Participants and for
all corrective distributions for such year. Such a method
is not required to take into account any earnings between
the end of the Plan Year and the date of distribution.
(iii) If Voluntary Employee Contributions are permitted under
this Plan, all or any part of the Excess Contributions
determined under (ii) above may be recharacterized as
Voluntary Employee Contributions using the same "leveling
method" used for correcting Excess Contributions under (ii)
above. The amount of recharacterized Excess Contributions
plus the Highly Compensated Employee's actual Voluntary
Employee Contributions must satisfy the ACP test. For
purposes of Code sections 72, 401(a)(4), 401(k)(3) and
6047, the recharacterized contributions shall be treated as
Employee contributions. For all other purposes of the Code,
the recharacterized contributions shall be treated as
Employer Contributions that are Elective Deferrals.
Elective contributions may not be recharacterized after the
later of two and one-half months following the end of the
Plan Year to which the recharacterization relates or
October 24, 1988. Recharacterization will be deemed to have
occurred on the date on which the last of the Highly
Compensated Employees with excess
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<PAGE> 32
contributions to be recharacterized is notified in writing
of the amount recharacterized and the consequences thereof.
Excess Contributions shall mean, with respect to any Plan Year, the
excess of (1) the aggregate amount of Elective Deferrals taken into
account in computing the actual deferral percentage of the Highly
Compensated Employees for such Plan Year, over (2) the maximum amount
of such contributions permitted by the ADP test (determined by reducing
the Elective Deferrals made on behalf of the Highly Compensated
Employees in order of the actual deferral percentages, beginning with
the highest of such percentages).
(c) RESTRICTIONS ON MULTIPLE USE OF ALTERNATIVE LIMITATION (PLANS SUBJECT
TO BOTH 401(K) AND 401(M)). If one or more Highly Compensated
Employees is eligible to make Elective Deferrals and make or receive
Aggregate Contributions under any plan of the Employer including this
Plan, then the sum of the ADP plus the ACP for the entire group of
Highly Compensated Employees for any Plan Year shall not exceed the
aggregate limit. Said aggregate limit shall be equal to the greater of:
(1) 1.25 times the greater of (a) the ADP of the group of non-Highly
Compensated Employees for the Plan Year or (b) the ACP for such
group, plus
(2) Two percent plus the lesser of (a) the ADP of the group of
non-Highly Compensated Employees or (b) the ACP for such group.
However, in no event shall this amount exceed two times the
lesser of (a) or (b)\; or
(3) The sum obtained by substituting the word "lesser" for the word
"greater" in (1) above and substituting the word "greater" for
the word "lesser" in (2) above.
The ADP and ACP used in this limitation shall take into account any
corrective measures taken without regard to this limitation.
If the limitations of this section are exceeded with respect to any
Highly Compensated Employee, then the Employer shall reduce the actual
deferral ratios or the actual contribution ratios only for those Highly
Compensated Employees who are eligible to make and/or receive Elective
Deferrals and Aggregate Contributions. The reduction in the Elective
Deferrals shall be made in a similar manner for the purposes of
satisfying the ADP test, and the reduction in Aggregate Contributions
shall be made in a similar manner for satisfying the ACP test.
(d) SPECIAL TOP-HEAVY PLAN RULES. Effective for Plan Years beginning
after December 31, 1988, Elective Deferrals on behalf of Key Employees
are treated as Employer Contributions for purposes of satisfying the
minimum Top-Heavy allocation while Elective Deferrals on behalf of
Non-Key Employees shall not be treated as Employer Contributions. In
addition, Matching Employer Contributions allocated to Key Employees
shall be treated as Employer Contributions for purposes of satisfying
the minimum Top-Heavy allocation. However, if the Plan utilizes
Employer Contributions allocated to Non-Key Employees on the basis of
Employee Contributions (including Elective Deferrals) to satisfy the
minimum Top-Heavy allocation, such Employer Contributions shall not be
treated as Matching Employer Contributions for purposes of applying the
requirements of Code sections 401(k) and 401(m) for Plan Years which
begin after December 31, 1988.
Any Qualified Non-Elective Contribution may be treated as an Employer
Contribution for purposes of satisfying the minimum Top-Heavy
allocation.
(e) DEFINITIONS. For purposes of this Section, the following definitions
shall apply:
(1) MATCHING EMPLOYER CONTRIBUTION. Matching Employer Contribution
shall mean an Employer Contribution made to this or any other
defined contribution plan on behalf of a Participant on account
of an Employee Contribution or Elective Deferral made by such
Participant under a plan maintained by the Employer.
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<PAGE> 33
(2) QUALIFIED NON-ELECTIVE CONTRIBUTION AND QUALIFIED EMPLOYER
MATCHING CONTRIBUTION. A Qualified Non-Elective Contribution is
an Employer Contribution other than an Elective Deferral or
Employer Matching Contribution or Qualified Employer Matching
Contribution which satisfies the vesting and distribution
requirements of an Elective Deferral. A Qualified Employer
Matching Contribution is an Employer Matching Contribution made
on account of an Employee's Elective Deferrals or Employee
Contributions to the Plan which satisfies the vesting and
distribution requirement of an Elective Deferral.
(3) COMPENSATION. Compensation shall mean Compensation as specified
under Section 1.07, including any Elective Deferrals made by the
Employee to this Plan or any other plan. Compensation for an
Employee for purposes of the ADP and ACP tests shall exclude
Compensation prior to the date on which he was first eligible to
make an Elective Deferral.
(4) EMPLOYER. Employer shall mean the Employer adopting this Plan
and any Related Employer.
(f) RULES APPLICABLE TO PARTNERSHIP CASH OR DEFERRED ARRANGEMENTS.
(1) An individual partner may not make an Elective Deferral with
respect to Compensation for a partnership taxable year after the
last day of that year. A partner's Compensation for a partnership
taxable year ending with or within a Plan Year beginning on or
before October 1, 1991 is, however, deemed not to be currently
available until the due date, including extensions, for filing
the partnership's federal information return for such taxable
year.
(2) Effective for contributions made for Plan Years beginning after
12/31/88, a cash or deferred arrangement includes any arrangement
that directly or indirectly permits individual owners to vary the
amount of contributions made on their behalf. A one-time
irrevocable election to participate or not to participate in this
Plan, if partners may participate, is not a cash or deferred
election if the election was made on or before the later of the
first day of the first Plan Year beginning after December 31,
1988 or March 31, 1989. This election may be made after the
commencement of employment or after the Employee's first becoming
eligible under any Plan of the Employer. The election may be made
even if the one-time irrevocable election under Regulation
1.401(k)-1(a)(3)(iv) was previously made. In addition, the
exclusion of a partner or other Employee from participation in
the Plan due to his employment in an ineligible class is not a
cash or deferred arrangement.
(3) If a partnership makes Employer Matching Contributions with
respect to an individual partner's Elective Deferrals, then the
Employer Matching Contributions are treated as Elective Deferrals
made on behalf of the partner. If, on August 8, 1988, the Plan
did not treat Employer Matching Contributions as Elective
Deferrals, the preceding sentence only applies to Plan Years
beginning after August 8, 1988.
ARTICLE IV
PARTICIPANT'S ACCOUNTS AND ALLOCATIONS
4.01 PARTICIPANT'S ACCOUNTS. The Plan Administrator shall establish and
maintain sufficient records to account for each Participant's and Beneficiary's
individual interest in the Trust Fund. As of each Accounting Date, allocations
shall be made to the individual accounts as provided for herein. In no event
shall the allocations to a Participant's Account for any Plan Year exceed the
limitations of Section 4.05.
4.02 ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES. The Employer
Contributions and Forfeitures for each Plan Year shall be allocated pursuant to
the provisions of the Adoption Agreement. In any Plan Year in which this Plan is
a Top Heavy Plan, said allocation to the account of any Participant who is not a
Key Employee shall not be less than three percent (3%) of said Participant's
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<PAGE> 34
Compensation or, if less, the largest percentage of the Key Employee's
Compensation allocated to the account of any Key Employee for that Plan Year.
4.03 ALLOCATION OF EMPLOYEE CONTRIBUTIONS. A Participant's Employee
Contributions, as provided for in the Adoption Agreement, shall be allocated to
the Participant's Account on the date the contributions are made. However, any
Voluntary or Mandatory Employee Contribution which is deposited within 30 days
following the Accounting Date may, at the option of the Participant, be
allocated to the Participant's Account on such Accounting Date.
Each type of Employee Contribution provided for in the Adoption Agreement
shall be accounted for separately under its own subaccount. In addition, if the
Plan permitted the withdrawal of any Voluntary Employee Contributions on May 5,
1986, then an additional subaccount shall be established for any voluntary
contributions received on or before December 31, 1986.
4.04 ALLOCATION OF THE TRUST FUND EARNINGS. Based on the Trustee's
annual or interim report, the Plan Administrator shall determine the net
earnings of the Trust Fund for the allocation period ending on the Accounting
Date. The net earnings shall include any increase or decrease in the fair market
value of the Trust Fund since the last valuation date. The earnings so
determined shall be allocated to each individual Participant's Account in the
proportion that the value of each such account bears to the total value of all
such accounts as of the prior valuation date. The value of any Segregated
Account, as provided for in Section 10.04 of this Agreement, or any separate
account established as a result of a Qualified Domestic Relations Order, or any
individual insurance contract, as provided for under Article XII, shall be
deducted from the value of the Participant's Account and shall not be included
in the earnings allocation. Instead, the earnings attributable to a Segregated
Account or individual insurance contract shall be credited directly to the
Participant's Account in whose name the Segregated Account or individual
insurance contract was established.
Prior to allocating the earnings, the Plan Administrator may adjust the
value of the individual Participant's Account on the prior valuation date to
take into account any withdrawals or contributions made in the interim.
4.05 LIMITATIONS ON ANNUAL ADDITIONS.
(a) BASIC LIMITATION. The total Annual Additions allocated to a
Participant's Account and his account under any other defined
contribution plan maintained by the Employer during a Limitation Year
shall in no event exceed the lesser of $30,000.00 (or, if greater,
one-fourth of the defined benefit dollar limitation in effect for the
Limitation Year under Code section 415(b)(1)(A)) or 25% of the
Participant's Compensation for the Limitation Year. Annual Additions
shall mean the sum of the following amounts:
(1) Employer contributions\;
(2) Forfeitures\;
(3) all Voluntary and Mandatory Employee Contributions\;
(4) amounts allocated, after March 31, 1984, to an individual medical
benefit account, as defined in Code section 415(l)(2), which is
part of a pension or annuity plan maintained by the Employer and
amounts derived from contributions paid or accrued after December
31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the
separate account of a key employee (as defined in Code section
419A(d)(3)) under a welfare benefit fund (as defined in Code
section 419(e))\; and
(5) allocations under a simplified employee pension.
Annual Additions shall also include excess Elective Deferrals, excess
ADP contributions, or excess Aggregate Contributions even though such
excess deferrals and contributions are corrected under the terms of the
Plan.
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Irrespective of the foregoing, excess Elective Deferrals under Code
section 402(g) shall not be considered to be Annual Additions if the
amount designated by the Plan Participant (or deemed to have been
designated in accordance with the Plan) as an excess Elective Deferral
(and any income allocable to said deferral) is distributed to the
Participant after the date on which the Plan received the excess
Elective Deferral and not later than the first April 15th following the
close of the Participant's taxable year.
(b) AMOUNTS NOT CONSIDERED AS ANNUAL ADDITIONS. For Limitation Years
beginning prior to January 1, 1987, only the lesser of the
Participant's Voluntary and Mandatory Employee Contributions in excess
of 6% of said Participant's Compensation or one-half of such Employee
Contributions shall be treated as Annual Additions under (a)(3) above.
If the Employer contributes an amount to a Participant's Account
because of an erroneous failure to allocate amounts in a prior
Limitation Year, the contribution will be considered an Annual Addition
with respect to such prior Limitation Year rather than the Limitation
Year in which the contribution is made. Furthermore, the restoration of
a Participant's Accrued Benefit pursuant to the provisions of Section
7.05 shall not be considered an Annual Addition for the Limitation
Year.
(c) MAXIMUM ANNUAL ADDITION IN SHORT LIMITATION YEAR. A short Limitation
Year shall be created by an amendment to the Plan changing the
Limitation Year to a different 12-consecutive month period. The short
Limitation Year shall be the period which begins on the first day of
the current Limitation Year and ends on the day before the first day of
the new Limitation Year. The maximum Annual Additions allocated to a
Participant's Account during such short Limitation Year shall be the
lesser of one-twelfth of the current dollar limitation in effect for
the Limitation Year times the number of months in the short Limitation
Year or 25% of the Participant's Compensation for the short Limitation
Year.
(d) LIMITATION FOR PRESENT OR PRIOR PARTICIPATION IN DEFINED BENEFIT
PLAN. If a Participant currently participates, or has ever
participated, in a defined benefit plan maintained by the Employer,
then the sum of the defined benefit plan fraction and the defined
contribution plan fraction for the Participant during any Limitation
Year shall not exceed 1.0. If such sum exceeds 1.0 for any Limitation
Year, then the Plan Administrator shall either reduce the Participant's
Annual Additions under this Plan pursuant to the provisions of Section
4.06 or shall reduce the Participant's accrual under the defined
benefit plan only to the extent necessary to satisfy the 1.0 limitation
for the Limitation Year, as provided for in the Adoption Agreement.
(e) DEFINITIONS. For purposes of this Section only, the following
definitions shall apply:
(1) COMPENSATION shall mean Compensation determined under Section
1.07 without regard to any elective contributions or deferred
compensation under (a), (b) and (c) of that Section. For
Limitation Years beginning after December 31, 1991, Compensation
for a Limitation Year is the Compensation actually paid or
includable in gross income during such limitation year.
(2) EMPLOYER shall mean the Employer that adopts this Plan and any
Related Employer. Solely for the purposes of this Section, a
Related Employer will be determined under Code sections 414(b)
and (c) by substituting the phrase "more than 50 percent" for the
phrase "more than 80%" each place it appears in Code section
1563(a)(1).
(3) DEFINED CONTRIBUTION PLAN shall mean 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 Administrator may allocate to such participant's
account. The Plan Administrator shall treat all defined
contribution plans (whether or not terminated) maintained by the
Employer as a single plan. For purposes of the limitations of
this Article IV only, the Plan Administrator shall treat employee
contributions made to a defined benefit plan maintained by the
Employer as a separate
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defined contribution plan. The Plan Administrator shall treat as
a defined contribution plan an individual medical benefit account
(as defined in Code section 415(l)(2)) included as part of a
defined benefit plan maintained by the Employer and, for taxable
years ending after December 31, 1985, a welfare benefit fund
under Code section 419(e) maintained by the Employer to the
extent there are post-retirement medical benefits allocated to
the separate account of a key employee (as defined in Code
section 419(d)(3)).
(4) DEFINED BENEFIT PLAN shall mean a retirement plan which does not
provide for individual accounts for Employer contributions. The
Plan Administrator shall treat all defined benefit plans (whether
or not terminated) maintained by the Employer as a single plan.
(5) DEFINED BENEFIT PLAN FRACTION shall mean a fraction, the
numerator of which is the projected annual benefit of the
Participant under the defined benefit plan(s) and the denominator
of which is the lesser of (i) 1.25 times the dollar limitation in
effect under Code section 415(b)(1)(A) for the Limitation Year,
or (ii) 1.4 times the Participant's limitation under Code section
415(b)(1)(B).
The Plan Administrator shall determine the denominator of this
fraction by taking into account the years of participation and
the years of service the Plan Administrator reasonably can
project the Participant will have at the time his projected
annual benefit is payable. If the Employee was a Participant in
one or more defined benefit plans maintained by the Employer
which were in existence on May 5, 1986, the denominator of this
fraction will not be less than 125% of the Employee's Current
Accrued Benefit. An Employee's Current Accrued Benefit is the sum
of the annual benefits under such defined benefit plans which the
Employee had accrued as of the end of the last Limitation Year
beginning before January 1, 1987, determined without regard to
any change in the terms or conditions of the Plan made after May
5, 1986, and without regard to any cost of living adjustment
occurring after May 5, 1986. The preceding sentence only applies
if the defined benefit plans individually and in the aggregate
satisfied the requirements of Code section 415 as in effect at
the end of the 1986 Limitation Year.
(6) DEFINED CONTRIBUTION PLAN FRACTION shall mean a fraction, the
numerator of which is the sum of the Annual Additions to the
Participant's Account under the defined contribution plan(s) and
welfare benefit funds (as defined in Code section 419(e)) for all
Limitation Years, and the denominator of which is the sum of the
lesser of the following amounts determined for the Limitation
Year and for each prior Limitation Year: (i) 1.25 times the
dollar limitation in effect under Code section 415(c)(1)(A) for
the Limitation Year (determined without regard to the special
dollar limitations for employee stock ownership plans), or (ii)
35% of the Participant's Compensation for the Limitation Year.
With respect to any defined contribution plan in existence on
July 1, 1982, the denominator of the defined contribution plan
fraction attributable to all Limitation Years beginning before
January 1, 1983, at the election of the Plan Administrator, shall
be an amount equal to:
(i) the sum of the lesser of the dollar limitation in effect
under Code section 415(c)(1)(A) or 25% of the Participant's
Compensation determined for each such Limitation Year\;
times
(ii) the transition fraction. The transition fraction shall be
equal to the lesser of $51,875 or 35% of the Participant's
Compensation for the Limitation Year beginning in 1981\;
divided by the lesser of $41,500 or 25% of the
Participant's Compensation for the Limitation Year
beginning in 1981.
If the Plan satisfied Code section 415 for all Limitation Years
beginning before January 1, 1987, the Plan Administrator will
redetermine the defined contribution plan fraction and the
defined benefit plan fraction as of the end of the Limitation
Year which began in 1986, in accordance with the limitations of
this Section and disregarding any other changes in the
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terms and conditions of the Plan made after May 5, 1986. If the
sum of the redetermined fractions exceeds 1.0, the Plan
Administrator will permanently subtract from the numerator of the
defined contribution plan fraction an amount equal to the product
of the excess of the sum of the fractions over 1.0 times the
denominator of the defined contribution plan fraction.
In addition, the Plan Administrator may use any other
transitional rules prescribed by law to compute a Participant's
defined contribution plan fraction.
(7) PROJECTED ANNUAL BENEFIT shall mean the annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity if
the benefit is payable in a form other than a straight life
annuity or qualified joint and survivor annuity) of the
Participant determined under the terms of the defined benefit
plan using the following assumptions:
(i) he continues employment until his normal retirement age
(or current age, if later) as stated in the defined benefit
plan,
(ii) his compensation continues at the same rate as in effect
in the Limitation Year under consideration until the date
of his normal retirement age, and
(iii) all other relevant factors used to determine benefits
under the defined benefit plan as of the current Limitation
Year remain constant for all future Limitation Years.
(f) SPECIAL TOP HEAVY RULES. If a defined benefit plan or defined
contribution plan maintained by the Employer is determined to be a Top
Heavy Plan for a Limitation Year, a factor of 1.0 shall be substituted
for the factor 1.25 for purposes of determining the defined benefit
plan fraction and the defined contribution plan fraction. In addition,
for purposes of computing the transition fraction, "$41,500" shall be
substituted for "$51,875". However, no substitution of factors shall be
required if there are no further benefit accruals on behalf of the
Participant under the defined benefit plan and there are no further
contributions and forfeitures allocated to such Participant under the
defined contribution plan. In addition, no substitution of factors
shall be required for any Top Heavy Plan which is not a Super Top Heavy
Plan if either the defined contribution plan, including this Plan,
provides for a minimum allocation of Employer Contributions and
Forfeitures of 7.5% of Compensation for any Participant who is not a
Key Employee or the defined benefit plan provides a minimum accrued
benefit percentage of 3% per year of service, up to a maximum of 10
years, for any Participant who is not a Key Employee.
4.06 TREATMENT OF EXCESS ANNUAL ADDITIONS. In the event the Annual
Additions to a Participant's Account for any Limitation Year exceed the
limitations (including any earnings on said contributions) of Section 4.05, then
any Voluntary or Mandatory Employee Contributions or Elective Deferrals included
in the Annual Additions (including any earnings on said contributions) may be
returned to the Participant. If further reductions are necessary, then the
Participant's Annual Additions may be reduced to the amount necessary to satisfy
the maximum limitation. If the Participant is covered by another qualified
defined contribution plan maintained by the Employer, then the Annual Additions
will be reduced pursuant to the provisions of the Adoption Agreement. The amount
of the excess Annual Additions under this Plan shall not be distributed to the
Participant (including former Participants) but shall instead be treated in
accordance with one of the following methods:
(a) The excess amount attributable to Employer Contributions and
Forfeitures shall be allocated and reallocated in the Limitation Year
to the other Participants. If, after the allocations are made and the
limitations of Section 4.05 are met with respect to each Participant,
then any remaining excess amount shall be held in an unallocated
suspense account. No Employer or Employee Contributions which
constitute Annual Additions may be made to the Plan in any following
Limitation Year until the suspense account has been allocated to the
Participant's Accounts.
(b) The excess amount shall be used to reduce Employer Contributions for
the next Limitation Year and each succeeding Limitation Year, as
necessary, for the Participant provided the Participant is
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entitled to an allocation under Section 4.02 for such Limitation Year.
If said Participant is not entitled to an allocation under Section 4.02
for such Limitation Year, then any excess amount shall be held in an
unallocated suspense account. The excess amount shall be allocated in
accordance with the provisions of paragraph (a) in the next Limitation
Year and each succeeding Limitation Year, if necessary, and must be
used to reduce Employer contributions for any such Limitation Year.
(c) The excess amount shall be held in an unallocated suspense account
and shall be allocated and reallocated to all of the Participant's
Accounts in the next Limitation Year and each succeeding Limitation
Year, if necessary. The excess amount must be used to reduce Employer
contributions for any such Limitation Year.
A suspense account created under one of the above methods shall not
receive any allocation of Trust Fund earnings under Section 4.04.
ARTICLE V
RETIREMENT BENEFITS
5.01 RETIREMENT BENEFITS.
(a) EARLY RETIREMENT BENEFIT. Upon the separation from Service after the
attainment of his Early Retirement Age, as set forth and if permitted
in the Adoption Agreement, a Participant shall be entitled to receive
100% of his Accrued Benefit.
(b) NORMAL RETIREMENT BENEFIT. Upon the attainment of his Normal
Retirement Age, as set forth in the Adoption Agreement, a Participant
shall be entitled to receive 100% of his Accrued Benefit.
(c) DEFERRED RETIREMENT BENEFIT. A Participant who remains in the
Service of the Employer after the attainment of his Normal Retirement
Age shall continue to receive allocations of Employer contributions and
Forfeitures under the terms of the Plan and shall be entitled to
receive 100% of his Accrued Benefit at any time thereafter.
5.02 TIME OF COMMENCEMENT OF RETIREMENT BENEFIT. At any time after the
attainment of his Normal Retirement Age, or his Early Retirement Age as stated
in the Adoption Agreement, the Participant can elect to receive distribution of
his Retirement Benefit. The payment of a Participant's Retirement Benefit shall
begin no later than the Participant's Required Distribution Date, or if earlier,
the 60th day following the last day of the Plan Year which includes the latest
of:
(a) the date on which the Participant attains the earlier of his Normal
Retirement Age or age 65\;
(b) the 10th anniversary of the date the Participant commenced
participation in the Plan\;
(c) the date on which the Participant terminates his Service\; or
(d) the date specified in a written election, filed with the Plan
Administrator, which describes the benefit and the date on which the
payment of such benefit shall commence.
The Required Distribution Date for a Participant who attained age
70- 1/2 prior to January 1, 1988 and who is not a 5% owner (as defined
under Section 1.29(c)(3) of this Agreement) at any time during the
5-year period prior to attaining age 70- 1/2 shall be the April 1st
following the calendar year in which the Participant terminates his
Service. The Required Distribution Date for any other Participant shall
be the April 1st following the calendar year in which the Participant
attains age 70- 1/2.
If a Participant does not file a written claim for the commencement of
his Retirement Benefit, the payment of his Retirement Benefit shall
commence on the later of age 62 or the date determined above.
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5.03 FORM OF RETIREMENT BENEFIT.
(a) QUALIFIED JOINT AND SURVIVOR ANNUITY. Unless elected otherwise by
the Participant with proper spousal consent, the Participant's
Retirement Benefit must be distributed in the form of a Qualified Joint
and Survivor Annuity. A Qualified Joint and Survivor Annuity (QJSA) is
an immediate annuity which is purchased with the Participant's
Nonforfeitable Accrued Benefit and which is payable for the life of the
Participant with a survivor annuity payable for the life of the spouse
which is equal to 50% of the amount of the annuity payable during the
joint lives of the Participant and his spouse. For an unmarried
Participant, a QJSA is an immediate annuity payable for the life of the
Participant which is purchased with the Participant's Nonforfeitable
Accrued Benefit. In determining the amount of the QJSA, the
Participant's Accrued Benefit shall be reduced by any security interest
held by the Plan by reason of a loan outstanding to the Participant at
the time of payment, provided the security interest is treated as
satisfaction of the loan.
(b) OPTIONAL FORMS OF BENEFIT. In lieu of receiving his QJSA, a
Participant may elect, with spousal consent, to receive his benefit
under one of the following options:
(1) one single-sum payment in cash, securities or other property as
the Plan Administrator shall determine\;
(2) payments in monthly, quarterly, semi-annual, or annual
installments over a stated period of time\;
(3) by the purchase of a non-transferable annuity payable over the
life of the Participant or the joint lives of the Participant and
a designated individual. The terms of any such annuity contract
purchased and distributed by the Plan to a Participant or spouse
shall comply with the requirements of the Plan\; or
(4) by the payment of installments over a period certain not
extending beyond the life expectancy of the Participant or the
joint life expectancy of the Participant and a designated
individual\; such payments to be made directly from the Plan or
by the purchase of a non-transferable period certain annuity. The
terms of such annuity contract purchased and distributed by the
Plan to a Participant or spouse shall comply with the
requirements of the Plan.
(c) ELECTION TO RECEIVE THE RETIREMENT BENEFIT IN A FORM OTHER THAN A
QUALIFIED JOINT AND SURVIVOR ANNUITY.
(1) WRITTEN EXPLANATION REQUIREMENT. The Plan Administrator must
provide the Participant with a written explanation of the QJSA no
less than 30 days and no more than 90 days before the Annuity
Starting Date. The explanation shall include a general
description of the terms and conditions of the QJSA\; the
circumstances in which the QJSA will be provided unless the
Participant has elected not to have his retirement benefit
provided in that form\; the Participant's right to make, and the
effect of, an election to waive the QJSA\; the rights of the
Participant's spouse with respect to such an election\; the
Participant's right to make, and the effect of, a revocation of
such an election\; and a general explanation of the relative
financial effect of the election on the Participant's annuity.
For Plan Years beginning after December 31, 1988, the Participant
must also be given a general description of the eligibility
conditions and other material features of the optional forms of
benefit available under subparagraph (b) above and an explanation
of the relative values of such optional forms.
(2) PARTICIPANT WAIVER ELECTION. Once a Participant has received the
above written explanation of the QJSA, he can elect to waive the
QJSA and receive his Retirement Benefit under any of the above
optional forms at any time prior to his Annuity Starting Date.
The election shall be in writing and clearly indicate that the
Participant is electing to receive all
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or part of his Retirement Benefit in a form other than that of a
QJSA and also must state the specific nonspouse beneficiary, if
any, who may receive a portion of his benefit. Additionally, a
Participant's waiver of the QJSA shall not be effective unless
the election designates a form of benefit payment which may not
be changed without spousal consent or the spouse expressly
permits designations by the Participant without further spousal
consent. Having made an election, a Participant may nevertheless
revoke it or file a new election any number of times prior to his
Annuity Starting Date or thereafter.
(3) SPOUSAL CONSENT REQUIREMENT. If a Participant is married on his
Annuity Starting Date, the Participant's spouse must consent in
writing to an election to waive the QJSA. The spouse's consent
shall acknowledge the effect of the election and must be
witnessed by either a Plan representative or notary public. If
the spouse is legally incompetent to give consent, the spouse's
legal guardian (even if the guardian is the Participant) may give
consent. If it is established to the satisfaction of the Plan
Administrator that the spouse cannot be located or if the
Participant is legally separated or has been abandoned (within
the meaning of the local law) and the Participant has a court
order to such effect, spousal consent is not required unless a
Qualified Domestic Relations Order provides otherwise. Once
given, the spouse's consent cannot be revoked with respect to a
given election.
Any consent by a spouse obtained under this provision (or
establishment that the consent of a spouse may not be obtained)
shall be effective only with respect to such spouse. A consent
that permits designations by the Participant without any
requirement of further consent by such spouse must acknowledge
that the spouse has the right to limit consent to a specific
beneficiary, and a specific form of benefit where applicable, and
that the spouse voluntarily elects to relinquish either or both
of such rights.
(d) MINIMUM DISTRIBUTION REQUIREMENTS. Any form of the Retirement
Benefit must, as of the Participant's Required Distribution Date,
satisfy the minimum distribution requirements under Code section
401(a)(9) including the minimum distribution incidental benefit
requirements in the Treasury regulations thereunder including section
1.401(a)(9)-2 of the proposed regulations or the final form of said
regulations. The first distribution year for the purposes of this
section (d) is the calendar year immediately preceding the
Participant's Required Distribution Date. The minimum distribution for
that calendar year must be paid by the Required Distribution Date. The
required minimum distribution for any subsequent calendar year must be
paid by December 31st of that year.
The minimum distribution for a calendar year equals the Participant's
Accrued Benefit as of the latest valuation date during the calendar
year immediately preceding the distribution calendar year divided by
the Participant's life expectancy or, if applicable, the joint life
expectancy of the Participant and his designated Beneficiary. The
Participant's Accrued Benefit as determined on the valuation date will
be increased by any contributions and forfeitures allocated after the
valuation date but prior to the distribution calendar year and will be
decreased by any distributions made after the valuation date but prior
to the distribution calendar year. Any portion of the minimum
distribution for the first distribution year which is made after the
close of the year will be treated as a distribution during that first
year. Life expectancies shall be computed using Tables V and VI under
Treasury Regulation 1.72-9 based on the attained ages of the
Participant and his designated Beneficiary during the calendar year.
For purposes of determining his minimum distribution amount, a
Participant may file an irrevocable written election with the Plan
Administrator prior to his initial minimum distribution to have his
life expectancy or the combined life expectancy of the Participant and
his designated Beneficiary be either (i) recalculated with respect to
each distribution year or (ii) be equal to the life expectancy for the
initial distribution year, said life expectancy to be reduced by one
for each succeeding distribution year. The life expectancy for any
individual shall be based on his attained age during the applicable
distribution year. However, the combined life expectancy of a
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Participant and a non-spouse designated Beneficiary may not be
recalculated in a manner which takes into account any adjustments other
than the Participant's life expectancy. Furthermore, if the
Participant's spouse is not his designated Beneficiary, then any
distribution to the Participant after December 31, 1988 and after his
Required Distribution Date shall satisfy the minimum distribution
incidental benefit ("MDIB") requirement contained in the Treasury
Regulations issued under Code section 401(a)(9). To satisfy this
requirement, the applicable MDIB factor will be substituted for the
life expectancy factor in determining the minimum distribution. Prior
to January 1, 1989, the Plan satisfies the incidental benefit
requirements if the distributions to the Participant satisfy the MDIB
requirements or if the present value of the benefit which is payable
solely to the Participant is greater than 50% of the present value of
the benefit payable to the Participant and his Beneficiary.
If no written election is filed with respect to a Participant, his
minimum distribution shall be based on recalculated life expectancy if
he is single and the initial combined life expectancy reduced by one
for each succeeding distribution year if he is married.
If the Participant receives distribution in the form of a
nontransferable annuity contract, the distribution will satisfy the
provisions of this section only if the terms of the annuity contract
comply with the requirements of Code section 401(a)(9) and applicable
proposed or final regulations.
5.04 RETIREMENT BENEFIT LESS THAN $3,500. Irrespective of the
provisions of this Article, except for the "Direct Rollover"
requirements in Section 5.06 if the Participant's Retirement Benefit
immediately prior to his Annuity Starting Date is less than $3,500,
then the Plan Administrator may, without Participant or spousal
consent, distribute his Retirement Benefit in the form of a single-sum
payment at any time prior to his Required Distribution Date.
5.05 DESIGNATION OF DISTRIBUTION MADE IN ACCORDANCE WITH SECTION
242(B)(2) OF TEFRA. The provisions of Section 5.02 and Section 5.03 of
this Article shall not apply to any distribution made pursuant to the
provisions of a designation if the following requirements are met:
(a) the distribution by the Plan is one which would not have disqualified
the Plan under section 401(a) of the Code, as in effect on the last day
of the Plan Year beginning prior to January 1, 1984\;
(b) the distribution is in accordance with a method of distribution
designated by the Participant whose interest in the Plan is being
distributed\;
(c) the designation is in writing, is signed by the Participant, and is
executed prior to January 1, 1984\;
(d) the Participant whose interest is being distributed had a
Participant's Account under the Plan as of December 31, 1983\;
(e) the method of distribution specifies the following:
(1) the form of distribution,
(2) the time at which distribution will commence,
(3) the period over which distributions will be made, and
(4) in the case of the Participant's death, the Beneficiaries of the
Participant, listed in order of priority.
The designation must, in and of itself, provide sufficient information to
fix the timing and the formula for the definite determination of the Plan
payments. The designation must be complete and not allow further choice.
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For distributions which commence before January 1, 1984, but continue after
December 31, 1983, the Participant will be presumed to have designated the
method of distribution under which the distribution is being made if the
distribution is specified in writing and satisfies all the requirements of this
section. If a designation herein described is revoked at any time by the
Participant after December 31, 1983, then the Participant's interest must be
distributed in accordance with the provisions of Section 5.02 and 5.03 of this
Article. Any change in the designation will be deemed to be a revocation of the
designation. However, the substitution or addition of another Beneficiary under
the designation will not be considered a revocation of the designation if such
substitution or addition does not alter the period over which the distributions
are to be made under the designation, either directly or indirectly, nor will
spousal consent, as required under the terms of this Agreement, be deemed a
revocation of the designation.
In the case of a Participant's Trustee-to-Trustee Transfer from another
qualified plan under which the Participant executed a designation which
satisfied the requirements of this section, such amount can be distributed under
the terms of the election only if the Employee did not elect to have the amount
transferred. Only the amount transferred, plus earnings thereon, may be
distributed under the election.
5.06 DIRECT ROLLOVER REQUIREMENT. Effective January 1, 1993 any
Distributee including an Alternate Payee under a QDRO who is entitled to receive
an Eligible Rollover Distribution shall be entitled to elect (pursuant to the
procedure established by the Plan Administrator) to have any portion of said
distribution paid directly to an Eligible Retirement Plan specified by the
Distributee as a Direct Rollover.
ELIGIBLE ROLLOVER DISTRIBUTION: An Eligible Rollover Distribution is any
distribution of all or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated beneficiary, or for a specified
period of ten years or more\; any distribution to the extent such distribution
is required under Code section 401(a)(9)\; and the portion of any distribution
that is not includable in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to Employer securities).
ELIGIBLE RETIREMENT PLAN: An Eligible Retirement Plan is an individual
retirement account described in Code section 408(a), an individual retirement
annuity described in Code section 408(b), an annuity plan described in Code
section 403(a), or a qualified trust described in Code section 401(a), that
accepts the Distributee'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.
DISTRIBUTEE: A Distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the Alternate
Payee under a qualified domestic relations order, as defined in Code section
414(p), are Distributees with regard to the interest of the spouse or former
spouse.
DIRECT ROLLOVER: A Direct Rollover is a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
ARTICLE VI
DEATH BENEFIT
6.01 DEATH BENEFIT. Upon the death of a Participant who is currently
employed by the Employer, the Death Benefit payable to his Beneficiary on or
after the date of his death shall be 100% of his Accrued Benefit plus the
proceeds of any life insurance purchased on the Participant's behalf under
Article XII of this Agreement. If a Participant dies after separation from
service or after starting to receive benefits under the Plan but prior to
receiving his entire Plan benefit, then his Beneficiary shall receive the
remaining amount of benefits to which the Participant was entitled at the time
of his death. The Plan Administrator may
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require such proof of death and such evidence of the right of any Beneficiary to
receive the Death Benefit, as the Plan Administrator deems necessary.
6.02 DESIGNATION OF BENEFICIARY. A Participant may at any time
designate, in writing, the Beneficiary or Beneficiaries to whom his Death
Benefit under the Plan shall be paid. The designation, which shall be in such
written form as the Plan Administrator requires, may include contingent or
successive Beneficiaries. If a married Participant designates a nonspouse
Beneficiary to receive his Death Benefit, such designation shall be deemed
invalid to the extent it designates a nonspouse Beneficiary to receive more than
50% of his Death Benefit unless the Participant and Participant's spouse have
filed an election to waive the QPSA, as provided for under Section 6.04.
If a Participant has not designated a Beneficiary in writing or if the
Beneficiary designated by the Participant predeceases him or dies before a
complete distribution of his portion of the Participant's Death Benefit, then,
subject to the provisions of Section 6.04, the Participant shall be deemed to
have designated the estate of the Participant as his Beneficiary.
For purposes of this Section only, a Beneficiary shall be deemed to be a
Participant but shall not be subject to the waiver agreement of the QPSA under
Section 6.04.
6.03 TIME OF COMMENCEMENT OF DEATH BENEFIT. If a participant dies after
the distribution of his Nonforfeitable Accrued Benefit begins but prior to
receiving his entire Nonforfeitable Accrued Benefit, the remaining portion of
his benefit shall continue to be distributed to his Beneficiary over a period
which does not exceed the payment period which had commenced for the
Participant. If a Participant dies before the distribution of his Nonforfeitable
Accrued Benefit begins, then his entire Death Benefit shall be distributed
within five years following the end of the calendar year in which the
Participant died unless:
(a) Any portion of the Participant's Death Benefit is payable to, or for
the benefit of, his designated Beneficiary\;
(b) Such portion will be distributed over a period of time not exceeding
the life expectancy of such Beneficiary\; and
(c) The distribution of the Participant's Death Benefit shall commence
not later than one year following the end of the calendar year in which
the Participant died, or, if the Beneficiary is the Participant's
spouse, the date on which the Participant would have attained age
70- 1/2.
If the surviving spouse dies before the distribution of the Participant's
Death Benefit is complete, then the spouse shall be treated as a Participant for
purposes of this section.
In lieu of receiving payment of the death benefit on the latest date
determined above, a Beneficiary may file a written election with the Plan
Administrator to have the payment of his portion of the Participant's Death
benefit commence at any time following the Participant's death. If a Beneficiary
does not file a written election for the commencement of his benefit, then the
payment of his Benefit shall commence on the latest date determined above.
6.04 FORM OF DEATH BENEFIT.
(a) QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY. Unless otherwise elected,
50% of a married Participant's Death Benefit shall be distributed in
the form of a Qualified Pre-Retirement Survivor Annuity. A Qualified
Pre-Retirement Survivor Annuity (QPSA) is an immediate annuity payable
for the life of the Participant's spouse. In determining the amount of
the QPSA, the Participant's Accrued Benefit shall be reduced by any
security interest held by the Plan by reason of a loan outstanding to
the Participant at the time of his death, provided the security
interest is treated as satisfaction of the loan.
(b) ELECTION TO WAIVE THE QPSA.
(1) WRITTEN EXPLANATION. The Plan Administrator shall provide the
Participant with a written explanation of the QPSA by the later
of the first anniversary of the Participant's Entry
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Date or the period beginning with the first day of the Plan Year
in which the Participant attains age 32 and ending on the last
day of the Plan Year in which the Participant attains age 34. If
a Participant separates from Service prior to attaining age 35,
then the explanation shall be provided to the Participant no
later than one year following his date of separation. The
explanation of the QPSA shall be comparable to the explanation of
the QJSA, as provided under Section 5.03(c) of this Agreement.
(2) PARTICIPANT WAIVER. Once the Participant has received the above
written explanation of the QPSA, he may elect to waive the QPSA
at any time prior to his death. The election shall be in writing
and must state the specific nonspouse beneficiary, if any, who
may receive a portion of his benefit. The election to waive the
QPSA for a Participant which was filed prior to the first day of
the Plan Year in which the Participant attained age 35 shall
become invalid on the first day of said Plan Year. The
Participant must then file a new election in order for the waiver
of the QPSA to be effective. Having made an election, a
Participant may nevertheless revoke it or file a new election any
number of times.
(3) SPOUSAL CONSENT REQUIREMENT. If a Participant is married, then
the Participant's spouse must consent in writing to the election
to waive the QPSA or any change in the nonspouse Beneficiary. The
spouse's consent shall acknowledge the effect of the election and
must be witnessed by either a Plan representative or notary
public. If the spouse is legally incompetent to give consent, the
spouse's legal guardian (even if the guardian is the Participant)
may give consent. If it is established to the satisfaction of the
Plan Administrator that the spouse cannot be located or if the
Participant is legally separated or has been abandoned (within
the meaning of the local law) and the Participant has a court
order to such effect, spousal consent is not required unless a
Qualified Domestic Relations Order (as defined under Section
7.10) provides otherwise. Once given, the spouse's consent cannot
be revoked with respect to a given election.
(c) OPTIONAL FORMS OF BENEFIT. A Beneficiary may, at any time following
the Participant's date of death, file a written election with the Plan
Administrator to receive his portion of the Participant's Death Benefit
under one of the following options:
(1) one single-sum payment in cash, securities or other property as
the Plan Administrator shall determine\;
(2) payments in monthly, quarterly, semi-annual, or annual
installments over a stated period of time\; or
(3) by the purchase of a non-transferable annuity payable over the
life of the Beneficiary. The terms of any such annuity contract
purchased and distributed by the Plan to a Participant or spouse
shall comply with the requirements of the Plan\; or
(4) by the payment of installments over a period certain not
extending beyond the life expectancy of the Beneficiary or the
joint life expectancy of the Beneficiary and a designated
individual\; such payments to be made directly from the Plan or
by the purchase of a non-transferable period certain annuity. The
terms of such annuity contract purchased and distributed by the
Plan to a Participant or spouse shall comply with the
requirements of the Plan.
At any time thereafter, a Beneficiary may file a written request with the
Plan Administrator to accelerate payment of his portion of the Participant's
Death Benefit. If no written election to receive his portion of the
Participant's Death Benefit in an optional form is filed by the Participant's
spouse, then the spouse's portion of the Participant's Death Benefit shall be
distributed in the form of a QPSA. If no written election is filed by a
nonspouse Beneficiary, then the nonspouse Beneficiary's portion of the
Participant's Death Benefit shall be distributed in one or more installments.
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6.05 DEATH BENEFIT LESS THAN $3,500. Irrespective of the provisions of
this Article, if a Participant dies prior to his Annuity Starting Date and his
Death Benefit is less than $3,500, then the Plan Administrator may, without the
consent of the Beneficiary, distribute his Death Benefit in the form of a
single-sum payment at any time during the 5-year period following the
Participant's date of death.
6.06 DESIGNATION OF DISTRIBUTION MADE PRIOR TO JANUARY 1, 1984. The
provisions of Section 6.03 and 6.04 shall not apply to any distribution made
pursuant to the provisions of a designation of a Beneficiary which meets the
requirements of Section 5.05 only if the Beneficiary is treated as a Participant
and the Participant filed a designation under Section 5.05 which contained the
information required under 5.05(e) with respect to the distributions to be made
upon the death of the Participant.
6.07 IRREVOCABLE DISTRIBUTION OPTION TO SPOUSE OR TRUST FOR BENEFIT OF
SPOUSE. A Participant may (subject to the spousal consent requirements of
Section 6.04) make an irrevocable election to have said Participant's death
benefit distributed in equal annual installments to the Participant's spouse or
to a trust established by the Participant pursuant to Code section 2056(b)(7)
("QTIP Trust")\; or to a trust established by the Participant pursuant to Code
section 2056(b)(5) ("Qualified Power of Appointment Trust"). Under the
aforementioned irrevocable election, the Participant's Accrued Benefit must be
distributed to the aforementioned spousal or trust beneficiary over a period not
exceeding the lifetime of the Participant's spouse, and the income on the
undistributed portion of the Participant's account balance earned during each
calendar year must be distributed to said beneficiary in one or more payments at
least annually by the close of said calendar year. In the event of the death of
the spousal Beneficiary during the calendar year, all undistributed income
accrued to the date of said Beneficiary's death shall be distributed to the
estate of said Beneficiary. On the death of the Participant's spouse, any
undistributed balance of the Participant's Accrued Benefit will be distributed
pursuant to the Participant's beneficiary designation form or, if applicable,
pursuant to the terms of the above referenced QTIP Trust or Qualified Power of
Appointment Trust, as the case may be.
The aforementioned distributions, however, shall be increased if necessary
to comply with the minimum distribution requirements of Section 5.03.
ARTICLE VII
DISABILITY AND TERMINATION BENEFITS IN-SERVICE DISTRIBUTIONS
7.01 DISABILITY BENEFIT. If a Participant becomes disabled, he shall be
entitled to receive 100% of his Accrued Benefit. A Participant shall be
considered to be disabled if he is unable to engage in any substantial and
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or be of long-continued and
indefinite duration. A Participant shall also be considered disabled if he
incurs a permanent loss of the use of a member or function of the body which
causes him to separate from Service. The Plan Administrator shall require the
Participant to submit to a physical examination or submit such other proof of
disability as the Plan Administrator deems necessary. The determination of
disability by the Plan Administrator shall be based on uniform principles
consistently applied in a nondiscriminatory manner.
7.02 TERMINATION BENEFIT. If a Participant terminates his Service for
any reason other than Normal, Early or Deferred Retirement, death or disability,
the Participant shall be entitled to receive the full value of his Accrued
Benefit attributable to his Employee Contributions and, if applicable, Elective
Deferrals plus the Nonforfeitable percentage of the remainder of his Accrued
Benefit based on the vesting provisions of the Adoption Agreement.
7.03 TIME OF COMMENCEMENT OF DISABILITY OR TERMINATION BENEFIT. At any
time after the Participant is disabled or terminates his Service, he may elect
to receive a distribution of his Disability or Termination Benefit. If a
Participant does not file a written claim for the commencement of his benefit,
then the payment of his benefit shall commence on the date determined under
Section 5.02 of this Agreement.
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7.04 FORM OF DISABILITY OR TERMINATION BENEFIT. A Participant's
Disability or Termination Benefit shall be distributed in a form which satisfies
the requirements of Section 5.03 of this Agreement. If a Participant's
Disability or Termination Benefit is less than $3,500 prior to his Annuity
Starting Date, then the Plan Administrator may distribute his Accrued Benefit as
a single-sum payment without Participant or spousal consent at any time from the
date he is disabled or terminates his Service to the date determined under
Section 5.02 of this Agreement.
7.05 FORFEITURE AND RESTORATION OF ACCRUED BENEFIT. The nonvested
portion of the Participant's Accrued Benefit upon separation from Service shall
become a Forfeiture on the earlier of the date the Participant receives a
distribution of his entire Termination Benefit or the date on which the
Participant incurs 5 consecutive Breaks in Service as defined in Section 7.07. A
nonvested Participant shall be deemed to have received his entire Termination
Benefit on the date of his separation from Service. Any Forfeiture shall be held
in suspense without Trust Fund earnings and shall be allocated under the
provisions of Article IV as of the end of any Plan Year following the date on
which the Forfeiture occurred, so long as the Forfeiture is allocated on or
before the last day of the Plan Year in which the Participant incurs 5
consecutive Breaks in Service.
A terminated Participant, who received a distribution of his entire
Termination Benefit which was less than 100% of his Accrued Benefit and who is
subsequently rehired by the Employer before incurring 5 or more Breaks in
Service following the date of distribution, shall have the right to repay to the
Trustee the total amount of the distribution at any time during the 5-year
period commencing on his initial date of reemployment with the Employer. Only
upon the repayment of his entire distribution shall the Participant's Accrued
Benefit be restored to the dollar amount of his Accrued Benefit at the time of
distribution, determined without regard to any subsequent gains and losses in
the Trust Fund. A nonvested Participant who is deemed to have received his
entire Termination Benefit and is subsequently rehired by the Employer before
incurring 5 or more Breaks in Service following his date of termination shall be
deemed to have repaid his entire termination benefit on his date of rehire. The
restoration of the Participant's Accrued Benefit shall include all protected
benefits under Code section 411(d)(6). The Trust Fund earnings during the Plan
Year of repayment shall be used to restore the Participant's Accrued Benefit\;
and, if such earnings are not sufficient to fully restore the Accrued Benefit,
then the Employer Contribution and Forfeitures shall be utilized. If a deficit
still remains, then the Employer shall contribute the necessary amount by the
end of the following Plan Year in order to provide full restoration of the
Accrued Benefit.
7.06 PARTIAL RESTORATION OF THE TERMINATION BENEFIT. In determining the
Termination Benefit at any relevant time for a Participant who has received a
partial distribution of his Nonforfeitable Accrued Benefit, without forfeiting
the nonvested portion of his Accrued Benefit, the following formula shall be
used:
X = P(AB + D) -- D\;
where X is the vested portion of the Accrued Benefit attributable to Employer
Contributions and Forfeitures, "P" is the vested percentage at the relevant
time, "AB" is the balance of the Accrued Benefit attributable to Employer
Contributions and Forfeitures, and "D" is the amount of all distributions
attributable to Employer Contributions and Forfeitures received by the
Participant prior to the relevant time.
7.07 BREAKS IN SERVICE AND VESTING. A Break in Service for vesting
purposes shall be a Vesting Computation Period in which the Employee completes
500 or fewer Hours of Service. In computing a Participant's Termination Benefit,
all pre-break and post-break service will be counted except for the following:
(a) In the case of an Employee who has incurred a Break in Service, Years
of Service prior to the Break in Service shall not be taken into
account until he has completed one Year of Service after his return\;
(b) In the case of an Employee who has incurred 5 or more consecutive
Breaks in Service, any Year of Service after the last Break in Service
shall not be used in determining the vested percentage of his Accrued
Benefit which accrued prior to the initial Break in Service\; and
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<PAGE> 47
(c) In the case of a nonvested Participant whose number of consecutive
Breaks in Service equals or exceeds the greater of 5 or his aggregate
number of Years of Service prior to the initial Break in Service, Years
of Service prior to the initial Break in Service shall not be taken
into account in determining the Participant's current vested percentage
under the Plan.
7.08 IN SERVICE DISTRIBUTIONS. A distribution may be made to an Employee
while still in the Service of the Employer and prior to the attainment of the
Early or Normal Retirement Age only if the form of the distribution meets the
requirements of Section 5.03, and the distribution is one of the following:
(a) EMPLOYEE CONTRIBUTION WITHDRAWAL. Any portion of a Participant's
Accrued Benefit which is attributable to his Employee Contributions
(excluding Mandatory and 401(k) Contributions) may be withdrawn at any
time by the Participant after filing a written election with the Plan
Administrator.
(b) PROFIT SHARING DISTRIBUTION. If permitted in the Adoption Agreement,
a Participant may file a written election with the Plan Administrator
to withdraw any portion of his Nonforfeitable Accrued Benefit which is
attributable to Employer Contributions and Forfeitures (other than
Qualified Non-Elective Contributions and Qualified Employer Matching
Contributions) which were allocated to his Participant's Account at
least 2 years prior to the date of distribution.
(c) HARDSHIP DISTRIBUTION. If this is a profit sharing plan and if
permitted in the Adoption Agreement, a Participant shall have the right
to request a distribution of any portion of his Nonforfeitable Accrued
Benefit, and the Plan Administrator shall grant such request only if
the Plan Administrator determines that such distribution is necessary
to satisfy an immediate and heavy financial need of the Participant as
determined herein and the regulations under Code section 401(k)(2)(B).
Any such request shall be made in writing, shall set forth in detail
the nature of such hardship and the amount of the distribution needed
as a result of such hardship, and shall state that the need cannot
reasonably be relieved (i) through reimbursement or compensation by
insurance or otherwise\; (ii) by liquidation of the Participant's
assets, or (iii) by cessation of elective deferrals or by Employee
contributions under the Plan or (iv) by other distributions or
nontaxable (at the time of the loan) loans from plans maintained by the
Employer or by any other Employer, or by borrowing from commercial
sources on reasonable commercial terms in an amount sufficient to
satisfy the need and shall be supplemented with such additional
information as the Plan Administrator requests. Unless the Employer has
actual knowledge to the contrary, the Plan Administrator may rely on
the Participant's written certificate and of the amount necessary to
alleviate such need. If the Plan Administrator grants such request,
such application shall be processed and such distribution shall be made
in a single sum as soon as administratively feasible.
FINANCIAL NEED. An immediate and heavy financial need shall mean:
(1) deductible medical expenses described in Code section 213(d)
previously incurred by the Participant, his spouse or his
dependents (as defined in Code section 152), or necessary for
those persons to obtain medical care described in Code section
213(d),
(2) the purchase of (but not the mortgage payments for) a principal
residence of the Participant,
(3) the payment of tuition and related educational fees for the next
twelve months of post-secondary education for the Participant,
his spouse, his children or his dependents (as defined in Code
section 152), or
(4) the prevention of the eviction of the Participant from his
principal residence or the foreclosure on the mortgage of the
Participant's principal residence.
DISTRIBUTION NECESSARY TO SATISFY NEED. A distribution shall be deemed
to be necessary to satisfy an immediate and heavy financial need only
if all of the following requirements are satisfied:
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(1) the distribution is not in excess of the amount of such need. The
amount of an immediate and heavy financial need may include any
amounts necessary to pay any federal, state or local income tax
or penalties reasonably anticipated to result from the
distribution\;
(2) the Participant has obtained all distributions (other than
hardship distributions) and all nontaxable loans currently
available under this Plan and other plans maintained by the
Employer or a Related Employer\; and
(3) the Participant's Employee Contributions under this Plan and his
deferrals and employee contributions under all other plans
maintained by the Employer or a Related Employer shall be
suspended for the 12 month period following the date of receipt
of such hardship distribution.
(4) the Participant's elective deferrals under this Plan and all
other plans maintained by the Employer shall for the next taxable
year of the Employee be limited to the applicable limit under
Code section 402(g) for that year minus the Participant's
elective contributions for the year of the hardship distribution.
7.09 RESTRICTION ON WITHDRAWALS OF ELECTIVE DEFERRALS. A Participant's
Elective Deferrals, Qualified Non-Elective Contributions and Qualified Employer
Matching Contributions, plus earnings thereon, may not be distributed to a
Participant prior to his Separation from Service, death, or disability, except
in the following circumstances:
(a) the termination of the Plan without the establishment of another
defined contribution plan other than an employee stock ownership plan
(as defined in Code section 4975(e) or Code section 409) or a
simplified employee pension plan as defined in Code section 408(k).
(b) the disposition of the Employer, if incorporated, of substantially
all of its assets (within the meaning of Code section 409(d)(2) of the
Code) to an unrelated corporation, where the Employer continues to
maintain the Plan, but only with respect to Employees who become
employed by the corporation acquiring the assets.
(c) the disposition by the Employer, if incorporated, of its interest in
a subsidiary (within the meaning of Code section 409 (d)(3)), where the
Employer continues to maintain the Plan, but only with respect to the
Employees who continue employment with the subsidiary.
(d) the Participant's attainment of age 59- 1/2.
(e) if elected in the Adoption Agreement and subject to the requirements
of Section 7.08, the financial hardship of the Participant. Any such
hardship distribution shall not include any earnings credited to the
Participant's Account after the later of December 31, 1988 or the last
Plan Year ending before July 1, 1989.
All distributions that may be made pursuant to one or more of the foregoing
distributable events are subject to the spousal and Participant consent
requirements (if applicable) contained in Code sections 411(a)(11) and 417. In
addition, distributions after March 31, 1988, that are triggered by any of the
first three events enumerated above must be made in a lump sum.
7.10 DISTRIBUTION UNDER QUALIFIED DOMESTIC RELATIONS ORDER. Nothing
contained in this Plan shall prevent the Trustee, in accordance with the
direction of the Plan Administrator, from complying with the provisions of a
qualified domestic relations order (as defined in ERISA section
206(d)(3)(B)(i)). 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 ERISA) under the Plan. "Alternate Payee" for this purpose shall be as
defined under ERISA section 206(d)(3)(K). 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 provides for the
earlier distribution pursuant to an agreement between the Plan and the Alternate
Payee\; and (2) if the present value of the Alternate Payee's benefits under the
Plan exceeds $3,500, the Alternate Payee
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consents to any distribution occurring prior to the Participant's attainment of
earliest retirement age. Nothing in this Section shall permit a Participant to
receive a distribution at a time otherwise not permitted under the Plan nor
shall it permit the Alternate Payee to receive a form of benefit not permitted
under the Plan.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the Plan Administrator is making its determination of
the qualified status of the domestic relations order, the Plan Administrator
shall direct the Trustee to make a separate accounting of the amounts payable.
If the Plan Administrator determines the order is a qualified domestic relations
order within eighteen (18) months of the date amounts first are payable
following receipt of the order, the Plan Administrator shall direct the Trustee
to distribute the payable amounts in accordance with the order. If the Plan
Administrator does not make its determination of the qualified status of the
order within the eighteen (18) month determination period, the Plan
Administrator shall direct the Trustee to distribute the payable amounts in the
manner the Plan would distribute if the order did not exist and shall apply the
order prospectively if the Plan Administrator later determines the order is a
qualified domestic relations order.
The reasonable costs of the Plan Administrator in determining the qualified
status of the order (including the cost of counsel's opinion) shall be
chargeable to the account of the Participant and shall be recoverable from the
Participant and the Alternate Payee from sums due to the Alternate Payee and/or
the Participant in the discretion of the Plan Administrator.
To the extent it is not inconsistent with the provisions of the Qualified
Domestic Relations Order, the Plan Administrator may direct the Trustee to
invest any partitioned amount in a separate account. Such separate account shall
remain a part of the Trust, but it alone shall share in any income it earns, and
it alone shall bear any expense or loss it incurs. The Trustee shall make any
payments or distributions required under this Section by separate benefit checks
or other separate distribution to the Alternate Payee.
ARTICLE VIII
BENEFIT CLAIMS AND APPEAL PROCEDURE
8.01 CLAIMS PROCEDURE. Except as provided in Article V, VI or VII, no
benefit shall be paid under this Plan unless a Participant or Beneficiary
("Claimant") shall file a claim for his benefit in writing setting forth such
information as shall be reasonably requested by the Plan Administrator for the
determination of the Claimant's benefit.
8.02 CLAIMS REVIEW/APPROVAL OR DENIAL BY PLAN ADMINISTRATOR. The Plan
Administrator shall inform the Claimant within 60 days (the claim review period)
following receipt of the written benefit claim of the approval or denial of the
benefit claim. If, due to special circumstances, an extension of time for
processing the claim is required, the Plan Administrator shall provide the
Claimant with a written notice of the extension prior to the end of the initial
60-day period. Such notice shall indicate the special circumstances requiring an
extension of time and the date by which a final decision will be rendered. In no
event shall any extension of time exceed a period of 60 days from the end of the
initial period.
8.03 BENEFIT DENIAL PROCEDURE.
(a) NOTICE OF DENIAL OF BENEFIT CLAIM. In the event that a claim for
benefits is denied, in whole or in part, the Plan Administrator shall
notify the Claimant in writing of such denial within the claims review
period (or, in the event of an extension, within the extension period).
Such written notice shall set forth specific reasons for such denial\;
specific references to pertinent Plan provisions on which the denial is
based\; a description of any additional material or information
necessary for the Claimant to perfect his claim\; an explanation of why
such material or information is necessary\; and an explanation of the
Plan's review procedure. The notice must further advise the Claimant
that his failure to appeal the action in writing within 60 days
following receipt of the notice will render the denial of benefits
final, binding and conclusive.
(b) APPEAL OF DECISION OF PLAN ADMINISTRATOR.
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(1) REFERRAL TO PLAN ADMINISTRATOR. Any Claimant who has been denied
a benefit or has any other claim relating to the Plan shall be
entitled to request the Plan Administrator to give further
consideration to his claim by filing with the Plan Administrator
(on a form acceptable to the Plan Administrator) a request for a
hearing. Such a request, together with a written statement of the
reasons the Claimant believes his claim should be allowed, shall
be filed with the Plan Administrator no later than sixty (60)
days after receipt of written notification of denial of his
claim. The Plan Administrator shall then conduct a hearing within
the next sixty (60) days, at which the Claimant may be
represented by an attorney or other representative of his
choosing and at which the Claimant shall have an opportunity to
submit written and oral evidence and arguments in support of his
claim. Either the Claimant or the Plan Administrator may cause a
court reporter to attend the hearing and record the proceedings.
In such event, a complete written transcript of the proceedings
shall be furnished to both parties by the court reporter. The
full expense of any such court reporter and such transcripts
shall be borne by the party causing the court reporter to attend
the hearing. A final decision as to the allowance of the claim
shall be made by the Plan Administrator within sixty (60) days of
hearing of the appeal. Said decision shall include specific
reasons for the decision and specific references to the pertinent
Plan provisions on which the decision is based and shall be
binding and conclusive on all parties.
(2) OPTIONAL REFERRAL TO ARBITRATION. At the option of either the
Claimant or the Plan Administrator, and in lieu of review of a
claim by the Plan Administrator as set forth above, the Plan
Administrator or the Claimant may elect arbitration of said claim
in accordance with the arbitration provisions of the American
Arbitration Association or under arbitration provisions under
applicable state law. Said election shall be made by the Claimant
when filing the appeal of his claim with the Plan Administrator,
or by the Plan Administrator within thirty (30) days of receiving
said written appeal. If the arbitration proceeding is invoked, it
shall be binding upon the parties and shall be arbitrated before
an arbitrator selected in accordance with the aforementioned
procedure and the award of said arbitrator may be enforced in
accordance with said provisions and in accordance with applicable
state law. All fees and costs of the arbitrator shall be borne by
the party electing the arbitration proceeding.
8.04 STANDARD OF REVIEW. The denial of a benefit claim shall be upheld
upon review by either the Plan Administrator or an arbitration proceeding unless
a determination is made that the Plan Administrator's denial of the benefit
claim was arbitrary and capricious.
8.05 MISSING OR LOST PARTICIPANT OR BENEFICIARY. If, after reasonable
effort, the Plan Administrator cannot locate a Participant or Beneficiary who is
entitled to a benefit under the Plan, then the benefit shall either be forfeited
and allocated under the provisions of Section 4.02 or be deposited in the name
of the Participant or Beneficiary in an investment which meets the distribution
requirements of Article V or Article VI.
If a Participant or Beneficiary whose benefit has been forfeited under the
provisions of this Section later files a claim with the Plan Administrator for
the forfeited benefit, then the benefit shall be restored pursuant to the
provisions of Section 7.05.
The decision as to how to treat the benefit of a missing or lost
Participant or Beneficiary shall be made by the Plan Administrator under uniform
principles consistently applied in a nondiscriminatory manner and in accordance
with regulations issued by the Internal Revenue Service.
ARTICLE IX
ADMINISTRATION OF THE PLAN
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9.01 DESIGNATION OF NAMED FIDUCIARY. The individual(s) or entity
appointed in the Adoption Agreement as the Plan Administrator shall be the Named
Fiduciary of this Plan and shall be subject to the fiduciary responsibilities
set forth in Title I of ERISA. The Plan Administrator shall make such rules,
interpretations, and computations and shall take such other action to administer
the Plan as deemed appropriate, provided that all such action shall be done in a
nondiscriminatory manner consistent with the requirements of the Code and ERISA.
The Plan Administrator shall have all powers necessary to accomplish his duties
under this Plan.
9.02 DISCRETION OF PLAN ADMINISTRATOR. The Plan Administrator shall
administer the Plan solely in the interests of the Plan Participants and for the
exclusive purpose of providing benefits to Participants and providing for the
costs of reasonable administrative expenses. The Plan Administrator shall,
however, administer this Plan in accordance with the reasonable discretion of
the Plan Administrator. All powers as set forth in Section 9.03 shall be
exercised in accordance with the Plan Administrator's discretion, and the
determination of the Plan Administrator shall be final, conclusive and binding
on all parties unless shown to be arbitrary and capricious.
9.03 POWERS AND DUTIES OF PLAN ADMINISTRATOR. The Plan Administrator
shall have the following powers and duties in addition to any other power or
duty granted under the Plan:
(a) To determine the eligibility of an Employee to participate in the
Plan, the value of a Participant's Accrued Benefit and the
Nonforfeitable percentage of such Participant's Accrued Benefit\;
(b) 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\;
(c) To interpret and enforce the terms of this Agreement and the rules
and regulations it adopts\;
(d) To direct the Trustee with respect to the crediting and distribution
of the Trust Fund\;
(e) To exercise discretion to review and render decisions respecting a
claim for (or denial of a claim for) a benefit under the Plan\;
(f) To engage the services of agents whom it may deem advisable to
assist it with the performance of its duties\;
(g) To engage the services of an Investment Manager or Managers (as
defined in ERISA section 3(38)), who shall 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\;
(h) To establish procedures for determining whether any order issued by a
state court shall meet the requirements for treatment as a Qualified
Domestic Relations Order ("QDRO") pursuant to ERISA section
206(d)(3)(B)(i). In this connection, the procedure set forth in Section
9.04 shall apply to the determination of the validity and effect of a
court order and its compliance with ERISA requirements. The Plan
Administrator may treat as qualified any domestic relations order
entered prior to January 1, 1985, irrespective of whether it satisfies
all the requirements described in ERISA section 206(d)(3)(B)(i)\;
(i) To take such corrective action with respect to restoration of plan
accounts, coverage, allocations to accounts and such other actions as
shall be in accordance with Code section 7805(b) relief under the
Employee Plans Restoration Guidelines issued by the Internal Revenue
Service and such other corrective action as shall be desirable in the
discretion of the Plan Administrator so as to assure continued
qualification of this Plan, said corrective action to be effective as
of the date the deficiency arises or such earlier date as shall be
necessary to assure the qualification of the Plan at all times.
(j) To adopt such procedures as shall be necessary to allow a
distributee of any Eligible Rollover Distribution to elect a Direct
Rollover of such distribution to an Eligible Retirement Plan. Said
procedure shall be in accordance with temporary or final regulations
promulgated under Code section 401(a)(31).
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9.04 PROCEDURE WITH RESPECT TO QUALIFIED DOMESTIC RELATIONS ORDERS. The
Plan Administrator shall have the responsibility to determine whether any court
order contains the provisions necessary to a Qualified Domestic Relations Order
("QDRO").
Promptly upon receiving a court order which creates, assigns or recognizes
the right of any party to a Participant's Benefit under this Plan, the Plan
Administrator shall:
(a) Notify the Participant and any alternate payee of the receipt by the
Plan Administrator of the court order and of the procedure set forth
herein.
(b) Make a determination (within 60 days of receipt of the court order)
of whether the court order complies with the requirements of ERISA
section 206(d)(3)(B)(i). The Plan Administrator may obtain the
assistance of counsel in making the determination, including the
obtaining of a written opinion of counsel if deemed necessary by the
Plan Administrator.
(c) After receipt of the court order, the Plan Administrator shall direct
the Trustee to separately account for the sum which would be payable
under the order if said order were determined to be a QDRO. To the
extent it is not inconsistent with the provisions of the Qualified
Domestic Relations Order, the Plan Administrator may direct the Trustee
to invest any partitioned amount in a separate account. Such separate
account shall remain a part of the Trust, but it alone shall share in
any income it earns, and it alone shall bear any expense or loss it
incurs. The Trustee shall make any payments or distributions required
under this Section by separate benefit checks or other separate
distribution to the Alternate Payee.
(d) Within 60 days from receipt of the court order, the Plan
Administrator shall notify (in a manner consistent with Department of
Labor Regulations) the Participant and each Alternate Payee of the Plan
Administrator's determination as to the qualification of the court
order as a QDRO.
A determination that the order is a QDRO shall state that the Plan
Administrator will commence any payments currently due under the Plan to the
person or persons entitled thereto after the expiration of a period of 60 days
commencing on the day of the mailing of the notice unless prior thereto the Plan
Administrator receives a notice of the institution of legal proceedings
disputing the determination. The Plan Administrator shall, as soon as practical
after such 60 day period, ascertain the dollar amount currently payable to each
payee pursuant to the Plan and, if the order is determined to be a QDRO,
disburse any such amounts.
18 MONTH DETERMINATION PERIOD--TREATMENT OF SEGREGATED ACCOUNT: During the
18 month period beginning with the date on which the first payment would be
required to be made under the order the segregated account shall be treated as
follows:
(a) If, within the 18 month period, the order is determined to be a QDRO
the Plan Administrator shall pay the segregated sum and earnings
thereon to the person entitled thereto under the order.
(b) If, within said period the order is determined not to be a QDRO or
the issue as to whether the order is a QDRO is not resolved, then the
Plan Administrator shall pay the segregated sum and earnings thereon to
those persons who would be entitled thereto had there been no order.
(c) Any determination that an order is a QDRO which is made after the
close of the 18 month period shall be applied prospectively.
The reasonable costs of the Plan Administrator in determining the qualified
status of the order (including the cost of counsel's opinion) shall be
chargeable to the account of the Participant and shall be recoverable from the
Participant and the Alternate Payee from sums due to the Alternate Payee and/or
the Participant in the discretion of the Plan Administrator.
9.05 INFORMATION TO PLAN ADMINISTRATOR. The Employer shall supply
information to the Plan Administrator 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 Plan
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Administrator considers necessary to perform the above powers and duties. The
Employer's records as to such information shall be conclusive as to all persons.
9.06 FUNDING POLICY. The Plan Administrator shall direct the Trustee to
invest the Trust Assets in a manner which shall satisfy the Plan's short-term
and long-term financial needs. This funding policy shall be consistent with the
objectives of the Plan and the requirements of ERISA.
9.07 ADMINISTRATIVE COMMITTEE. In the event an administrative committee
has been appointed as the Plan Administrator, a decision of the majority of the
committee shall be final and binding on all parties and on committee members as
to all matters upon which they may act hereunder. Any action may be taken either
by a vote at a meeting or in writing without a meeting.
The committee shall appoint a Secretary, who shall be one of the committee,
to keep all records of its meetings and actions. Unless the committee decides
otherwise, the Secretary shall be authorized to execute and deliver on behalf of
the committee any instrument required or deemed necessary under this Agreement.
9.08 RESIGNATION AND REMOVAL OF PLAN ADMINISTRATOR. The Plan
Administrator, or any member of the administrative committee, may resign at any
time by delivering to the Employer a written notice of resignation to take
effect at a date specified therein, which shall not be less than 15 days from
the date of delivery, unless such notice shall be waived.
The Employer may remove the Plan Administrator, or any member of the
administrative committee, with or without cause, by delivery of a written notice
of removal to take effect at a date specified therein, which shall not be less
than 15 days from the date of delivery, unless such notice shall be waived.
Upon the resignation or removal of the Plan Administrator or member of the
administrative committee, the Employer may name a successor Plan Administrator
or successor administrative committee member who must acknowledge acceptance of
this position in writing. In the event no successor Plan Administrator is
appointed, the Employer shall be the Plan Administrator until a new
Administrator has been nominated and has accepted such appointment.
9.09 INDEMNITY OF PLAN ADMINISTRATOR. The Employer shall indemnify and
hold harmless the Plan Administrator from and against any and all loss resulting
from liability to which the Plan Administrator may be subjected by reason of any
act or conduct (except willful misconduct or gross negligence) in the
administration of this Plan, including all expenses reasonably incurred for
defense of any legal claim, in case the Employer fails to provide such defense.
9.10 COMPENSATION AND EXPENSES OF THE PLAN ADMINISTRATOR. The Plan
Administrator shall be permitted to receive from the Trust Fund reasonable
compensation and reimbursement of expense for services rendered as Plan
Administrator. In addition the Plan Administrator is authorized to direct the
Trustee to pay the fees and costs from the Trust Fund in connection with the
administration of the Plan. However, no full time employee of the Employer may
be compensated for services rendered as Plan Administrator or as an agent of the
Plan Administrator.
ARTICLE X
TRUST AGREEMENT
10.01 ESTABLISHMENT OF TRUST/APPOINTMENT OF TRUSTEE. The Trust Agreement
set forth in this Article shall govern the duties and responsibilities of the
Trustee appointed in the Adoption Agreement or any successor Trustee. All assets
of the Plan shall be held in trust, pursuant to the provisions hereof. The
Trustee may be one or more individuals, a bank, trust company or any other
corporation authorized under state law to have trustee powers.
10.02 DUTIES OF TRUSTEE. The sole duty of the Trustee shall be to assume
title and to hold all assets of the Plan and to invest said assets at the
direction of the Plan Administrator and in accordance with the funding policy
adopted by the Plan Administrator. In addition, the Trustee shall render an
accounting of the assets of the Trust as of each Accounting Date. The Trustee
shall furnish to the Employer and the Plan
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Administrator a statement of account as of each Accounting Date showing the
condition of the Trust Fund and all investments, receipts, disbursements and
other transactions effected by the Trustee during the period covered by the
statements and also stating the fair market value of the Trust Fund on the
Accounting Date. Such statement shall be conclusive on all persons with respect
to valuation of the Trust Fund. The Employer or Plan Administrator may file with
the Trustee written exceptions with respect to any transaction, act or
computational error within 90 days of the receipt of the statement or such
longer period as authorized under ERISA.
The Trustee and Employer may agree, by separate instrument, for the
assumption of additional duties by the Trustee, including the assumptions of
investment responsibilities. The Trustee shall be accountable to the Employer
for the funds contributed to it by the Employer, but shall have no duty to see
that the contributions received comply with the provisions of the Plan. The
Trustee shall not be obliged to collect any contributions from the Employer.
Except as set forth in this Agreement no additional duties shall be imposed on
the Trustee.
10.03 TRUSTEE POWERS. The Trustee is authorized and empowered, but not by
way of limitation, with the following powers, rights and duties:
(a) To invest any part or all of the Trust Fund in any common or
preferred stocks, open-end or closed-end mutual funds, and to buy or
sell options with or without holding the underlying stock and other
securities, corporate bonds, debentures, convertible debentures,
commercial paper, and any 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 the United States, limited partnerships, insurance
contracts of any type and life insurance policies pursuant to the
provisions of Article XII herein, mortgages, notes or other property of
any kind, real or personal, as a prudent man would do under like
circumstances with due regard for the purposes of this Plan\;
(b) In the case of a profit sharing plan in any amount and in the case of
a money purchase or target benefit plan in an amount of up to 10% of
the Trust Fund, the Trustee is specifically authorized to invest in
qualifying Employer real property and in qualifying Employer securities
within the meaning of Section 407(d)(4) and (5) of ERISA\;
(c) To retain any cash held in the Trust Fund in an account at reasonable
interest. If a bank is acting as Trustee, specific authority to invest
in any type of deposit of the Trustee (or of a bank related to the
Trustee) within the meaning of Code section 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 section 584 which the Trustee (or an
affiliate of the Trustee, as defined in Code section 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 shall decide\;
(e) To credit and distribute the Trust as directed by the Plan
Administrator. The Trustee shall not be obligated 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 shall be
accountable only to the Plan Administrator for any payment or
distribution made by it in good faith on the order or direction of the
Plan Administrator\;
(f) To compromise, contest, arbitrate or abandon claims and demands in
its discretion:
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(g) To have with all respect to all assets of the Trust all of the rights
of an individual owner including the power to give proxies, to
participate in any voting trusts, mergers, consolidations of
liquidations, and to exercise or sell stock subscriptions or conversion
rights\;
(h) 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\;
(i) To hold any securities and other property in the name of the Trustee
or its nominee, with depositories or agent depositories or in other
form as it may deem best, with or without disclosing the trust
relationship\;
(j) 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 Fund\;
(k) 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\;
(l) To file all tax returns required of the Trustee\;
(m) To begin, maintain or defend any litigation necessary in connection
with the administration of the Trust, except that the Trustee shall not
be obliged or required to do so unless indemnified to its
satisfaction\;
(n) To make distribution under the Plan in cash or property, or partly in
each, at its fair market value as determined by the Trustee\;
(o) To 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.
10.04 ALLOCATION OF FIDUCIARY RESPONSIBILITY.
(a) AS BETWEEN CO-TRUSTEES. In the event that two or more Trustees have
been appointed, they shall jointly manage and control the assets of the
Plan, however, the Trustees may allocate specific duties,
responsibilities and obligations among themselves by filing a written
agreement with the Plan Administrator. The signature of the specified
number of trustees in the Adoption Agreement may be accepted by an
interested party as conclusive evidence that all Trustees have duly
authorized the actions therein set forth. No interested party acting in
good faith and in reliance on the Adoption Agreement shall be obliged
or held liable to ascertain the validity of such action.
(b) AS BETWEEN THE TRUSTEE AND THE PLAN ADMINISTRATOR OR ANY OTHER
PERSON. The Plan Administrator shall be the Named Fiduciary with
respect to the Plan. In addition, the Plan Administrator, the Trustee
or any other person may make such additional allocation or delegation
of responsibilities or assumption of duties as shall be provided by
written instrument subsequent to the date of this Agreement and agreed
upon by the parties and filed with the Plan Administrator.
(c) APPOINTMENT OF INVESTMENT MANAGER. In the event that an Investment
Manager (or Managers) is appointed by the Plan Administrator or Trustee
to manage the assets of the Plan (including the power to acquire and
dispose of any assets of the Plan), then no Trustee shall be liable for
the acts or omissions of such Investment Manager or Managers.
(d) SEGREGATED ACCOUNT/PARTICIPANT DIRECTION OF INVESTMENT. If permitted
under the Adoption Agreement, a Participant may file a written election
with the Plan Administrator to have the right to direct the Trustee
with respect to the investment of all or a portion of the assets
comprising the Participant's Accrued Benefit. That portion of the Trust
Fund under the direction of the Participant shall constitute a
Segregated Account. In addition, the Plan Administrator may adopt a
written policy allowing for Participant control over all or a portion
of the assets comprising the Participant's Accrued Benefit in
compliance with the provisions of section 404(c) of ERISA. In
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the event of establishment of said policy the Participant shall not be
deemed to be a fiduciary by reason of his exercise of control over
investment of said assets and no person who is otherwise a fiduciary
shall be liable for any loss which results from said exercise of
control.
10.05 INVESTMENT IN GROUP TRUST FUND. The Plan Administrator may direct
the Trustee, for collective investment purposes, to combine into one (1) trust
fund the Trust Fund created under this Plan with the trust fund created under
any other qualified retirement plan. However, the Plan Administrator shall
maintain separate records of account for the assets of each Trust in order to
reflect properly each Participant's Accrued Benefit under the Plan in which he
is a Participant.
10.06 RESIGNATION/REMOVAL/APPOINTMENT OF SUCCESSOR TRUSTEE.
(a) RESIGNATION. A Trustee may resign upon thirty (30) days written
notice to the Employer. Concurrent with the effective date of
resignation, the Trustee shall furnish to the Plan Administrator a
written statement of account as to all assets of the Trust held by the
Trustee as of the effective date of resignation.
(b) REMOVAL. A Trustee may be removed upon five (5) days written notice
from the Employer.
(c) APPOINTMENT OF SUCCESSOR TRUSTEE. The Employer may, by written
instrument, appoint a Successor Trustee in the event of the resignation
or removal of an incumbent Trustee, or in the event that an incumbent
Trustee shall be unable for any reason to continue to serve as Trustee.
Said appointment shall become effective on or before the effective date
of the resignation, removal or other termination of service of the
incumbent Trustee. In the event the Employer shall fail to appoint a
successor Trustee, the Employer shall be treated as having appointed
the Employer (or in the case of an incorporated Employer, the board of
directors) as Trustee.
10.07 FEES AND EXPENSES FROM FUND. The Trustee shall receive reasonable
compensation as may be agreed upon from time to time between the Employer and
the Trustee. The Trustee shall pay all fees and expenses reasonably incurred by
the Plan Administrator and Trustee in the administration of the Plan from the
Trust Fund unless the Employer pays the fees and expenses. The Employer shall
have the discretion to treat any fee or expense paid, directly or indirectly, by
the Employer as an Employer Contribution. However, no person so serving who
already receives full-time pay from an employer or an association of employers,
whose employees are participants in the Plan, or from an employee organization
whose members are Participants in the Plan shall receive compensation from the
Plan, except for reimbursement of expenses properly and actually incurred.
10.08 INDEMNIFICATION. The Employer will indemnify and hold the Trustee
harmless from any liability, loss, cost or expense arising from or in any way
connected with his acting upon the directions of the Plan Administrator,
Investment Manager, or Participant or for failing to act because of the lack of
any direction from the Plan Administrator, Investment Manager, or Participant,
except due to the willful misconduct of the Trustee or to the extent such
indemnification is prohibited by law or where the Trustee has assumed the role
of Investment Manager and/or Plan Administrator.
ARTICLE XI
PARTICIPANT AND BENEFICIARY LOANS
ADOPTION OF LOAN ADMINISTRATION POLICIES
11.01 ELECTIVE ALLOWANCE OF PARTICIPANT AND BENEFICIARY LOANS. The loan
provisions herein apply only in the event that the Employer has elected in the
Adoption Agreement to allow loans to Participants and Beneficiaries based upon
their benefit under the Plan. If the Employer has not elected in the Adoption
Agreement to allow for Participant and Beneficiary loans, then this Article
shall not be implemented, and no such loans shall be allowed under this Plan.
11.02 LIMIT ON AMOUNT OF OUTSTANDING LOAN BALANCE AFTER DECEMBER 31,
1986. The aggregate amount of all loans granted to a Participant or Beneficiary
(hereinafter referred to as
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"Borrower") on January 1, 1987 and thereafter (or any renegotiation of a loan
outstanding prior to said date) shall not exceed the greater of:
(a) $10,000\; or
(b) one-half of the Borrower's Nonforfeitable Accrued Benefit calculated
on the date a loan is to be made, up to a maximum of $50,000, with said
maximum to be reduced by the excess (if any) of:
(1) The highest outstanding balance of loans from the Plan during the
one year period ending on the day before the date on which such
loan was made, over
(2) The outstanding balance of loans from the Plan on the date on
which such loan was made.
In determining whether the limitations of this section have been exceeded
at any date, all loans made at any time from the Plan (or from any other
qualified plans maintained by the Employer or by a Related Employer) to the
Borrower and still outstanding on such date shall be aggregated, and the
Borrower's vested interest in all qualified plans maintained by the Employer or
a Related Employer, shall be aggregated.
11.03 LOAN TERMS. All loans granted under this Article shall be
evidenced by the Borrower's promissory note and shall be based upon the
following terms:
(a) The loan shall bear a reasonable rate of interest. In this regard,
the interest rate determined by the Plan Administrator under the
procedures established in Section 11.05 herein shall be deemed to be a
reasonable rate of interest.
(b) The loan agreement shall call for at least substantially level
amortization with payments, inclusive of principal and interest, not
less frequently than quarterly.
(c) Said loan shall, by its terms, be required to be repaid within a
period not greater than five (5) years from the date of the loan unless
the Borrower shall demonstrate to the satisfaction of the Plan
Administrator that said loan shall be used to acquire a principal
residence of the Borrower within a reasonable period of time after the
date the loan is made. In such case the loan may, at the discretion of
the Plan Administrator, bear a maturity date commensurate with the
maturity dates of loans made by institutional lenders located in the
geographic area in which the borrower resides.
(d) Said loan shall be adequately secured by the Borrower's vested
interest under the Plan or by any real or personal property that is
acceptable to the Plan Administrator. In the event that a Borrower's
vested interest under the Plan is to be used as security, the
provisions of Section 11.04 herein shall be complied with in all
respects.
(e) The Borrower shall satisfy the Plan Administrator that he is
creditworthy and financially able to repay such loan.
11.04 USE OF NONFORFEITABLE ACCRUED BENEFIT AS LOAN SECURITY.
(a) IN GENERAL. Pursuant to the restrictions herein, a loan may be
secured by the Nonforfeitable Accrued Benefit of the Borrower. However,
after October 19, 1989 no more than 50% of the Nonforfeitable Accrued
Benefit of the Borrower may be used as security. Said security
arrangement shall be pursuant to a written assignment or other
instrument sufficient to create the security interest under state law,
and shall be perfected in the manner called for under the Uniform
Commercial Code as adopted under state law.
The loan shall be a lien on all interests of the Borrower in the Trust.
If a Borrower's benefit becomes payable under Articles V, VI or VII
prior to repayment in full of any such loan and interest due thereon,
the full amount of the loan shall be due and payable pursuant to the
terms of the promissory note. In the event the loan is not repaid in
full, the amount to be paid to the Borrower under Articles V, VI or VII
shall be reduced by the outstanding balance of any such loan and
interest due thereon.
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In the event of default, the Participant's Nonforfeitable Accrued
Benefit will be offset at the time the Trustee otherwise would
distribute the Participant's Nonforfeitable Accrued Benefit.
(b) MARRIED PARTICIPANT. The use of the Nonforfeitable Accrued Benefit
by a Participant who is married on the date of the loan (or any
renegotiation of said loan) shall be subject to the following
additional restrictions:
(1) The Participant may not pledge any portion of the Accrued Benefit
as security for a loan made after August 18, 1985, unless, within
the 90 day period ending on the date the pledge becomes effective
the Participant's spouse, at the time of the loan or any
modification thereof consents to the security or, by separate
consent, to an increase in the amount of security. Any such
Spousal Consent shall acknowledge the possibility that a
subsequent amount to be paid under Articles V, VI or VII might be
reduced as set forth above by the amount of the outstanding
balance of the loan and interest due thereon. If such Spousal
Consent is given at the time that the loan is made, any such
subsequent reduction of a distribution shall be made (without any
Spousal Consent), even if the Borrower is married to a different
spouse at the time of the subsequent reduction. If an unmarried
Borrower agrees to a subsequent reduction of a distribution at
the time that the loan is made, any such reduction shall be
valid, even if the Borrower is married when the distribution is
reduced.
(2) The Spousal Consent called for herein shall be in writing and
shall comply with the Spousal consent requirements set forth in
Article VI with respect to spousal consent to a Participant's
waiver of the QPSA.
11.05 LOAN ADMINISTRATION POLICIES. This Article specifically authorizes
the Trustee, when directed by the Plan Administrator, to grant loans to
Participants and Beneficiaries on a nondiscriminatory basis in accordance with
the loan policy established under this Section. Loans shall be made available to
all Participants on a reasonably equivalent basis. For Plan Years beginning in
1989 and thereafter, the loan policy of the Plan Administrator shall include and
be governed by the administrative policies set forth herein:
(a) The Plan Administrator shall administer the Participant Loan program.
In this respect, the Plan Administrator may adopt such additional
written loan guidelines, including establishment of a minimum loan
restriction, as shall be consistent with Department of Labor
Regulations, Section 2550.408.
(b) Any Plan Participant or Beneficiary may make application for a loan
with the Plan Administrator.
(c) Loans shall be approved on a nondiscriminatory basis, based upon the
information provided by the Borrower as well as any information bearing
upon the creditworthiness of the Borrower.
(d) The Plan Administrator shall determine the interest rate to be
charged for the loan. Said interest rate shall be commensurate with the
interest rates being charged at the date of the loan by financial
institutions in the immediate geographic area of the Borrower for loans
comparable to the proposed loan.
(e) All loans shall be adequately secured. In this connection, both real
and personal property may be used as collateral for a loan.
(f) A loan shall be in default if the terms set forth in the promissory
note have not been met and the Plan Administrator has determined that
the principal and interest will not be repayable to the Trust. The Plan
Administrator shall take possession of the collateral for the loan in
accordance with the terms of the security agreement. In the case of a
loan secured by the Nonforfeitable Accrued Benefit of the Borrower, the
Plan Administrator shall reduce the Borrower's Accrued Benefit in full
discharge of the loan on the earliest date a distribution may be made.
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11.06 PARTICIPANT LOANS PRIOR TO 12/31/86. Participant loans prior to
December 31, 1986 shall be governed by the rules in effect on the date of said
loan. Any such loan which is modified or extended after December 31, 1986 shall
be treated as a new loan as of the date of modification or extension.
11.07 PARTICIPANT LOANS TO OWNER-EMPLOYEE OR SHAREHOLDER-EMPLOYEE
PROHIBITED WITHOUT ADMINISTRATIVE EXEMPTION. If the Employer is an
unincorporated trade or business, a Participant who is an Owner-Employee may not
receive a loan from the Plan. Further, if the Employer is an "S Corporation", a
Participant who is a shareholder-employee (an employee or an officer who, at any
time during the Employer's taxable year, owns more than 5%, either directly or
by attribution under Code section 318(a)(1), of the Employer's outstanding
stock) may not receive a loan from the Plan.
ARTICLE XII
PROVISIONS RELATING TO LIFE INSURANCE
12.01 INSURANCE BENEFIT. The Employer may elect to provide incidental life
insurance benefits for insurable Participants who consent to life insurance
benefits by signing the appropriate insurance company forms.
The Plan Administrator shall direct the Trustee as to the insurance company
and insurance agent through which the Trustee is to purchase the insurance
contracts, the amount of the coverage and the type of insurance contract. Each
application for a policy, and the policies themselves, shall designate the
Trustee as sole owner and beneficiary, with the right reserved to the Trustee to
exercise any right or option contained in the policies, subject to the terms and
provisions of this Agreement. Proceeds of insurance contracts paid to the
Participant's Account under this Article XII shall be subject to the
distribution requirements of Article VI. The Trustee shall not retain any such
proceeds for the benefit of the Trust. In the event of any conflict between the
terms of this Plan and Trust Agreement and the terms of any life insurance
contract purchased hereunder, the provisions of this agreement shall control.
The premiums on any life insurance contract covering the life of a
Participant shall be deducted from the Participant's Account during the Plan
Year in which the premiums are paid. The Trustee shall hold all insurance
contracts issued under the Plan as assets of the Trust. The cash surrender value
of the policy shall be considered to be a part of the Participant's Account.
12.02 INCIDENTAL INSURANCE BENEFITS. The aggregate of life insurance
premiums paid for the benefit of a Participant, at all times, must be less than
the following percentages of the aggregate of the Employer's Contributions and
Forfeitures allocated to the Participant's Account: (i) 50% in the case of the
purchase of ordinary life insurance contracts\; or (ii) 25% in the case of the
purchase of term life insurance contracts. If the Trustee purchases a
combination of an ordinary life insurance contract and a term life insurance
contract on behalf of the Participant, then the sum of one-half of the premiums
paid for the ordinary life insurance contract and the premiums paid for the term
life insurance contract must be less than 25% of the aggregate Employer
Contributions and Forfeitures allocated to the Participant's Account.
If the Trustee purchases another form of life insurance contract on behalf
of a Participant, such contract shall be considered a term life insurance
contract, but only with respect to the term insurance portion of the contract.
Notwithstanding anything to the contrary contained above, if this is a
Profit Sharing Plan, contributions and forfeitures which have remained in the
Trust for two (2) or more years may be used for the purchase or continuation of
life insurance policies without regard to the above limitations.
12.03 DISTRIBUTION OR DISCONTINUANCE OF LIFE INSURANCE PROTECTION. The
Trustee shall not continue any life insurance protection for any Participant
beyond notification from the Plan Administrator of termination of employment. If
the Trustee holds any insurance contract on the life of a Participant when he
terminated his employment (other than by reason of death), the Participant shall
be given the option to retain such insurance contract by:
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(a) transferring ownership of the insurance contract to the Participant
as part of his distribution under the Plan, or
(b) allowing the Participant to purchase the policy by paying the Trustee
the cash surrender value of the policy at the time of the purchase.
The Trustee shall not distribute any contract without satisfying the
provisions of Section 5.03.
If the Participant chooses not to retain the insurance contract, then the
Trustee shall surrender the contract, and the proceeds, if any, shall be
credited to the Participant's Account.
The Employer shall have the right to discontinue the purchase of insurance
at any time, and the Participant shall be given the right to purchase the policy
as above. If the Participant does not purchase the contract, then the insurance
policy shall be surrendered and the proceeds credited to the Participant's
Account.
ARTICLE XIII
AMENDMENT OR TERMINATION OF THE PLAN AND TRUST
13.01 AMENDMENT BY EMPLOYER/AMENDMENT PROCEDURE. The Employer shall have
the right at any time to amend this Agreement in any manner, including any
amendment deemed necessary or advisable in order to qualify or maintain the
qualification of the Plan and Trust under the appropriate provisions of the
Code.
Plan amendments shall be effected by a resolution by the board of directors
if the Employer is a corporation. If the Employer is a sole proprietor or
partnership, amendments shall be effected by a declaration of a sole proprietor,
or in the case of a partnership, a resolution of the requisite members of said
partnership.
Any amendment adopted by the Employer shall be in writing and shall state
the date on which it is effective. The Employer shall not make any amendments
which affect the rights, duties or responsibilities of the Trustee or the Plan
Administrator without the written consent of the Trustee or Plan Administrator.
(a) CODE SECTION 411(D)(6) PROTECTED BENEFITS. An amendment (including
the adoption of this Agreement as a restatement of an existing plan)
may not decrease a Participant's Accrued Benefit, except to the extent
permitted under Code section 412(c)(8), and may not reduce or eliminate
Code section 411(d)(6) protected benefits by either eliminating or
reducing an early retirement benefit or a retirement-type subsidy, as
defined in Treasury Regulations, or eliminating an optional form of
benefit, except to the extent permitted under Treasury Regulations. The
Plan Administrator must disregard an amendment to the extent
application of the amendment would fail to satisfy this paragraph. If
the Plan Administrator must disregard an amendment because the
amendment would violate the provisions of this paragraph, then the Plan
shall continue to provide the early retirement options or other
optional forms of benefit for the affected Participants.
(b) COMPUTATION OF NONFORFEITABLE PERCENTAGE. If an amendment affects
the computation of the Nonforfeitable percentage of a Participant's
Accrued Benefit, then in no event shall the Nonforfeitable percentage
for any Employee who is a Participant on the later of the amendment's
adoption date or effective date be less than his percentage computed on
such date without regard to the amendment.
In addition, any Participant who has completed 3 Years (or, for Plan
Years beginning before January 1, 1989, 5 Years) of Service prior to 60
days following the later of:
(1) the date the amendment is adopted\;
(2) the date the amendment is effective\; or
(3) the date the Participant receives written notice of the Plan
amendment,
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shall have his Nonforfeitable percentage calculated with or without
regard to the Plan amendment, whichever produces the greatest
percentage.
If an amendment changes the Vesting Computation Period, then the first
Vesting Computation Period established under the amendment must begin
before the last day of the preceding Vesting Computation Period. An
Employee who is credited with the minimum required Hours of Service in
both the Vesting Computation Period under the Plan before the amendment
and the first Vesting Computation Period established under the
amendment must receive credit for 2 Years of Service with respect to
such computation periods.
13.02 DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS. If this Plan is a profit
sharing plan, the Employer shall have the right to completely discontinue
Employer Contributions to the Plan at any time. Upon the complete discontinuance
of Employer Contributions, the rights of each affected Participant to benefits
accrued to the date of discontinuance, to the extent funded, or the rights of
each affected Participant to the amounts credited to his Participant's Account
as of the date of discontinuance, shall be Nonforfeitable. If the Employer is a
single employer, the discontinuance shall be effective no later than the last
day of the Employer's taxable year following the last taxable year for which a
substantial Employer Contribution was made. If more than one employer maintains
this Plan, then the discontinuance shall be effective no later than the last day
of the Plan Year following the Plan Year in which a substantial contribution was
made. The determination as to whether a complete discontinuance of Employer
Contributions has occurred (and the date thereof) shall be made by the Plan
Administrator with regard to all the facts and circumstances in a particular
case.
13.03 PARTIAL TERMINATION. Upon the partial termination of the Plan, the
rights of each affected Participant to benefits accrued to the date of partial
termination, to the extent funded, or the rights of each affected Participant to
the amounts credited to his Participant's Account as of the date of partial
termination, shall be Nonforfeitable. The determination as to whether a partial
termination of the Plan has occurred (and the date thereof) shall be made by the
Plan Administrator with regard to all the facts and circumstances in a
particular case.
13.04 TERMINATION OF THE PLAN AND TRUST. The Employer (or in the event of
the liquidation of the Employer, the Plan Administrator) shall have the right to
terminate this Plan and Trust at any time by written resolution. If this Plan is
a money purchase or target benefit pension plan and it is terminated on a date
any time prior to the last day of a Plan Year, then the Employer shall not be
required to make a contribution for said Plan Year.
Upon the termination of the Plan, the rights of each affected Participant
to benefits accrued to the date of termination, to the extent funded, or the
rights of each affected Participant to the amounts credited to his Participant's
Account as of the date of termination, shall be Nonforfeitable. Any unallocated
Trust Fund assets which are required to be used to satisfy the liabilities with
respect to the Participants and their Beneficiaries shall be allocated in a
nondiscriminatory manner specified by an amendment executed by the Employer
prior to the termination of the Plan. If no such amendment is adopted, then the
unallocated amounts will be allocated under the provisions of Article IV. If,
upon the satisfaction of all liabilities with respect to the Participants and
their Beneficiaries, there still remains any unallocated Trust Fund assets,
including any suspense account created pursuant to the provisions of Section
4.06, such assets may be returned to the Employer pursuant to a written
resolution adopted by the Employer at the time of termination.
The distribution of the Participants' and Beneficiaries' Plan benefits
shall be made in accordance with the provisions of Articles V, VI and VII. If a
Participant or Beneficiary has elected a form of payment other than an immediate
single sum, the Trustee may purchase an annuity contract from an insurance
carrier to provide the Plan benefit. Upon the complete distribution of the Trust
Fund assets, the Trust shall be deemed terminated.
263
<PAGE> 62
ARTICLE XIV
MISCELLANEOUS
14.01 NO RESPONSIBILITY FOR EMPLOYER ACTION. Neither the Trustee nor the
Plan Administrator shall have 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 the Plan. Furthermore, the Plan does not require the Trustee to collect
any contributions required under the Plan, or determine the correctness of the
amount of any Employer contribution. Neither the Trustee nor the Plan
Administrator need inquire into or be responsible for any action or failure to
act on the part of the others. Any action required of a corporate Employer shall
be by its Board of Directors or its duly authorized designate.
14.02 FIDUCIARIES NOT INSURERS. The Trustee, 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 Plan Administrator 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.
14.03 SUCCESSORS. The Plan shall be 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 Plan
Administrator, and their successors.
14.04 EMPLOYMENT AND RIGHTS NOT GUARANTEED. Nothing contained in this
Agreement including any modification or amendment hereto shall give any Employee
or any Beneficiary any right to continued employment or any legal or equitable
right against the Employer, any Employee of the Employer, the Trustee, including
its agents or employees, or the Plan Administrator, except as expressly provided
by the Plan, the Trust, ERISA or by a separate agreement.
14.05 ASSIGNMENT OR ALIENATION. Except as provided in Code section 414(p)
relating to qualified domestic relations orders and Article XI relating to
Participant and Beneficiary loans, neither a Participant nor a Beneficiary shall
anticipate, assign or alienate (either by law or in equity) any benefit provided
under the Plan, and the Trustee shall 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
or subject to liability for the Participant's debts, liabilities or other
obligations.
14.06 EXCLUSIVE BENEFIT. Except as provided under Article III and Article
XIII, the Employer shall have no beneficial interest in any asset of the Trust
and no part of any asset in the Trust shall ever revert to or be repaid to the
Employer, either directly or indirectly, nor shall 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 prior to the satisfaction of all liabilities with respect to
the Participants and their Beneficiaries under the Plan.
14.07 MERGER/DIRECT TRANSFER. The Trustee shall not consent to, nor be a
party to, any merger or consolidation with another plan, nor 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 (as if such Plan had then been terminated) equal to or greater than the
benefit each Participant would have received had this Plan terminated
immediately before the merger or consolidation or transfer.
14.08 LIABILITY OF EMPLOYER. The Employer assumes no obligation or
responsibility to any of its Employees, Participants or Beneficiaries for any
act, or failure to act, on the part of the Trustee, or the Plan Administrator
unless, under the Adoption Agreement, the Employer has been designated as the
Plan Administrator.
14.09 RIGHTS AND REMEDIES LIMITED. No person shall have any legal or
equitable right or claim against the Employer, the Plan Administrator, or the
Trustee unless the right or claim is specifically provided for in this Plan and
Trust Agreement or in applicable provisions of ERISA or the Code. No interested
party may bring any action in any court on any matter concerning this Plan and
Trust, the
264
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determination of which is provided for in this Agreement, until the procedure
provided for herein has been exhausted and a decision made with respect thereto.
14.10 CONSTRUCTION OF THE PLAN AND TRUST AGREEMENT. For all matters
affecting its validity and construction, this Plan and Trust Agreement shall be
governed by the laws of the State of the Employer's principal place of business,
except to the extent inconsistent with the Code or ERISA.
If any provision of this Agreement or any amendment thereto shall be judged
unenforceable or cause the Plan and Trust to be disqualified, said provision
shall be deemed to be not in effect and all other provisions of the Agreement
and any amendment thereto shall nevertheless remain in effect.
14.11 HEADINGS AND GENDER. The headings of articles and the subheadings
and sections in this Plan and Trust Agreement are inserted for convenience of
reference only and are not to be considered in the construction thereof. Any
words used in this Agreement in the masculine gender shall be construed as
though they were also used in the feminine gender in all cases where they would
so apply, and any words used herein in the singular form shall be construed as
though they were also used in the plural form in all cases where they would so
apply.
265
<PAGE> 64
EXHIBIT A
TO ADOPTION AGREEMENT
DEFINED CONTRIBUTION PLAN AND TRUST AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS 1
1.01 Accounting Date............................................. 1
1.02 Accrued Benefit............................................. 1
1.03 Adoption Agreement 1
1.04 Annuity Starting Date....................................... 1
1.05 Beneficiary 1
1.06 Code 2
1.07 Compensation................................................ 2
1.08 Earned Income 4
1.09 Effective Date.............................................. 4
1.10 Elective Deferrals.......................................... 5
1.11 Employee 5
1.12 Employer.................................................... 5
1.13 ERISA 5
1.14 Highly Compensated Employee 5
1.15 Hour of Service 7
1.16 Leased Employee............................................. 8
Safe Harbor Plan Exception 8
1.17 Nonforfeitable 8
</TABLE>
<PAGE> 65
<TABLE>
<S> <C>
1.18 Nontransferable Annuity 8
1.19 Owner-Employee.............................................. 9
Special Rules and Restrictions 9
1.20 Participant 10
1.21 Participant's Account 10
1.22 Plan 10
1.23 Plan Administrator 10
1.24 Plan Year 10
1.25 Related Employer............................................ 10
1.26 Self-Employed Individual 10
1.27 Service/Separation from Service 11
1.28 Shared Employee 11
1.29 Top Heavy Plan/Top Heavy Definitions 12
Definitions 12
Determination Date 12
Top Heavy Ratio 12
Key Employee........................................... 14
Non-Key Employee....................................... 15
Employer 15
Aggregation Group 15
1.30 Trust 15
1.31 Trust Fund 15
1.32 Trustee 15
1.33 Year of Service 16
ARTICLE II PARTICIPATION IN THE PLAN/ENTRY DATE 20
2.01 Eligibility to Participate 20
2.02 Break in Service and Participation 20
2.03 Maternity or Paternity Leave................................ 21
</TABLE>
<PAGE> 66
<TABLE>
<S> <C>
2.04 Participation Upon Re-employment............................... 21
2.05 Election Not to Participate 22
2.06 Failure of Plan to Meet the Coverage
Requirements of Code Section 410(b)
or 401(a)(26).................................................. 22
ARTICLE III CONTRIBUTIONS TO THE PLAN.................................... 24
3.01 Employer Contribution 24
In General. . . . . . . . . . . . . . . . . . . . . . . . . 24
Profit Sharing Plan . . . . . . . . . . . . . . . . . . . . 24
3.02 Employee Contributions 25
Voluntary Employee Contributions. . . . . . . . . . . . . . 26
Employee Rollover Contributions . . . . . . . . . . . . . . 26
Trustee-to-Trustee Transfers. . . . . . . . . . . . . . . . 26
Voluntary Deductible Contributions. . . . . . . . . . . . . 27
Mandatory Employee Contributions. . . . . . . . . . . . . . 28
3.03 Provisions Applicable to 401(k) Plans and to
Plans Permitting Voluntary and Mandatory Employee
Contributions or Employer Matching Contributions 28
Provisions Applicable to Voluntary and
Mandatory Employee Contributions and Employer
Matching Contributions 28
Actual Contribution Percentage Test
28
Special Rules for Highly Compensated
Employees 30
Correction If ACP Test Is Not Satisfied 31
Provisions Applicable to Elective Deferrals
33
Excess Elective Deferrals Under Code Section
402(g) 33
Actual Deferral Percentage Test 34
Special Rules for Highly Compensated
Employees 36
Correction If ADP Test Is Not Satisfied
37
Restrictions on Multiple Use of Alternative
Limitation (Plans Subject to Both 401(k)
and 401(m)). . . . . . . . . . . . . . . . . . . . . . . . . 40
Special Top-Heavy Plan Rules . . . . . . . . . . . . . . . . 40
Definitions 41
Matching Employer Contribution. . . . . . . . . . .
. 41
</TABLE>
<PAGE> 67
<TABLE>
<S> <C>
Qualified Non-Elective Contribution and
Qualified Employer Matching Contribution
41
Compensation 41
Employer 42
Rules Applicable to Partnership Cash or
Deferred Arrangements . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IV PARTICIPANT'S ACCOUNTS AND ALLOCATIONS 43
4.01 Participant's Accounts......................................... 43
4.02 Allocation of Employer Contributions and
Forfeitures 43
4.03 Allocation of Employee Contributions 43
4.04 Allocation of the Trust Fund Earnings.......................... 43
4.05 Limitations on Annual Additions................................ 44
Basic Limitation 44
Amounts Not Considered As Annual Additions
45
Maximum Annual Addition in Short Limitation
Year 45
Limitation for Present or Prior Participation in
Defined Benefit Plan . 46
Definitions................................................ 46
Compensation 46
Employer 46
Defined Contribution Plan 46
Defined Benefit Plan...................................... 47
Defined Benefit Plan Fraction............................. 47
Defined Contribution Plan Fraction 48
Projected Annual Benefit 49
Special Top Heavy Rules 50
4.06 Treatment of Excess Annual Additions 50
ARTICLE V RETIREMENT BENEFITS 52
5.01 Retirement Benefits 52
Early Retirement Benefit 52
Normal Retirement Benefit................................... 52
Deferred Retirement Benefit................................. 52
</TABLE>
<PAGE> 68
<TABLE>
<S> <C>
5.02 Time of Commencement of Retirement Benefit..................... 52
5.03 Form of Retirement Benefit...................................... 53
Qualified Joint and Survivor Annuity 53
Optional Forms of Benefit 53
Election to Receive the Retirement Benefit in
a Form Other Than a Qualified Joint and
Survivor Annuity 54
Written Explanation Requirement. . . . . . . . . . . . . 54
Participant Waiver Election . . . . . . . . . . . . 55
Spousal Consent Requirement . . . . . . . . . . . . 55
Minimum Distribution Requirements 56
5.04 Retirement Benefit Less Than $3,500............................. 57
5.05 Designation of Distribution Made in Accordance
With Section 242(b)(2) of TEFRA................................ 58
5.06 Direct Rollover Requirement . . . . . . . . . . . . . . . . . . 59
ARTICLE VI DEATH BENEFIT 61
6.01 Death Benefit.................................................. 61
6.02 Designation of Beneficiary 61
6.03 Time of Commencement of Death Benefit 61
6.04 Form of Death Benefit 62
Qualified Pre-Retirement Survivor Annuity 62
Election to Waive the QPSA 63
Optional Forms of Benefit................................... 64
6.05 Death Benefit Less Than $3,500 65
6.06 Designation of Distribution Made Prior to January
1, 1984 65
6.07 Irrevocable Distribution Option to Spouse
or Trust for Benefit of Spouse. . . . . . . . . . . . . . . . . 66
ARTICLE VII DISABILITY AND TERMINATION BENEFITS
IN-SERVICE DISTRIBUTIONS..................................... 67
</TABLE>
<PAGE> 69
<TABLE>
<S> <C>
7.01 Disability Benefit 67
7.02 Termination Benefit............................................ 67
7.03 Time of Commencement of Disability or Termination
Benefit 67
7.04 Form of Disability or Termination Benefit . . . . . . . . . . . 67
7.05 Forfeiture and Restoration of Accrued Benefit
68
7.06 Partial Restoration of the Termination Benefit................. 69
7.07 Breaks in Service and Vesting 69
7.08 In Service Distributions 69
Employee Contribution Withdrawal 70
Profit Sharing Distribution 70
Hardship Distribution....................................... 70
Financial Need 71
Distribution Necessary to Satisfy Need
71
7.09 Restriction on Withdrawals of Elective Deferrals
72
7.10 Distribution Under Qualified Domestic Relations
Order 73
ARTICLE VIII BENEFIT CLAIMS AND APPEAL PROCEDURE 75
8.01 Claims Procedure 75
8.02 Claims Review/Approval or Denial by Plan
Administrator 75
8.03 Benefit Denial Procedure 75
Notice of Denial of Benefit Claim 75
Appeal of Decision of Plan Administrator 76
8.04 Standard of Review 77
8.05 Missing or Lost Participant or Beneficiary 77
ARTICLE IX ADMINISTRATION OF THE PLAN 78
</TABLE>
<PAGE> 70
<TABLE>
<S> <C>
9.01 Designation of Named Fiduciary 78
9.02 Discretion of Plan Administrator............................... 78
9.03 Powers and Duties of Plan Administrator 78
9.04 Procedure With Respect to Qualified Domestic
Relations Orders............................................... 80
9.05 Information to Plan Administrator 81
9.06 Funding Policy 82
9.07 Administrative Committee 82
9.08 Resignation and Removal of Plan Administrator
82
9.09 Indemnity of Plan Administrator 82
9.10 Compensation and Expenses of the Plan
Administrator.................................................. 83
ARTICLE X TRUST AGREEMENT................................................ 84
10.01 Establishment of Trust/Appointment of Trustee.................. 84
10.02 Duties of Trustee 84
10.03 Trustee Powers................................................. 84
10.04 Allocation of Fiduciary Responsibility 87
As Between Co-Trustees 87
As Between the Trustee and the Plan
Administrator or Any Other Person.......................... 87
Appointment of Investment Manager 87
Segregated Account/Participant Direction of
Investment 87
10.05 Investment in Group Trust Fund 88
10.06 Resignation/Removal/Appointment of Successor
Trustee 88
Resignation 88
Removal 88
Appointment of Successor Trustee 88
10.07 Fees and Expenses From Fund 89
</TABLE>
<PAGE> 71
<TABLE>
<S> <C>
10.08 Indemnification 89
ARTICLE XI PARTICIPANT AND BENEFICIARY LOANS
ADOPTION OF LOAN ADMINISTRATION POLICIES...................... 90
11.01 Elective Allowance of Participant and
Beneficiary Loans.............................................. 90
11.02 Limit on Amount of Outstanding Loan Balance
After December 31, 1986........................................ 90
11.03 Loan Terms..................................................... 91
11.04 Use of Nonforfeitable Accrued Benefit as
Loan Security.................................................. 91
In General 91
Married Participant............................................. 92
11.05 Loan Administration Policies................................... 93
11.06 Participant Loans Prior to 12/31/86............................ 94
11.07 Participant Loans to Owner-Employee or
Shareholder-Employee Prohibited Without
Administrative Exemption....................................... 94
ARTICLE XII PROVISIONS RELATING TO LIFE INSURANCE 95
12.01 Insurance Benefit.............................................. 95
12.02 Incidental Insurance Benefits . . . . . . . . . . . . . . . . . 95
12.03 Distribution or Discontinuance
of Life Insurance Protection................................... 96
ARTICLE XIII AMENDMENT OR TERMINATION OF THE PLAN AND TRUST.............. 97
13.01 Amendment by Employer/Amendment Procedure...................... 97
Code Section 411(d)(6) Protected Benefits 97
Computation of Nonforfeitable Percentage........................ 97
13.02 Discontinuance of Employer Contributions....................... 98
13.03 Partial Termination............................................ 99
13.04 Termination of the Plan and Trust.............................. 99
</TABLE>
<PAGE> 72
<TABLE>
<S> <C>
ARTICLE XIV MISCELLANEOUS 101
14.01 No Responsibility for Employer Action.......................... 101
14.02 Fiduciaries Not Insurers....................................... 101
14.03 Successors..................................................... 101
14.04 Employment and Rights Not Guaranteed........................... 101
14.05 Assignment or Alienation....................................... 102
14.06 Exclusive Benefit.............................................. 102
14.07 Merger/Direct Transfer......................................... 102
14.08 Liability of Employer.......................................... 102
14.09 Rights and Remedies Limited.................................... 102
14.10 Construction of the Plan and Trust Agreement................... 103
14.11 Headings and Gender............................................ 103
</TABLE>
<PAGE> 73
EXHIBIT A
TO ADOPTION AGREEMENT
DEFINED CONTRIBUTION PLAN AND TRUST AGREEMENT
Pursuant to the resolutions contained in the Adoption Agreement, this defined
contribution plan and trust agreement is adopted for the sole benefit of the
Employees of the Employer and their Beneficiaries:
ARTICLE I
DEFINITIONS
1.01 ACCOUNTING DATE shall mean the last day of the Plan Year or any interim
valuation date, as selected by the Plan Administrator.
1.02 ACCRUED BENEFIT shall mean the value of a Participant's Account as of
any Accounting Date. A Participant shall not accrue any right to any Employer
Contributions or Forfeitures for a Plan Year until the last day of the Plan
Year.
1.03 ADOPTION AGREEMENT shall mean the Adoption Agreement used to adopt this
Plan and establish the Trust set forth herein, including any amendments thereto.
1.04 ANNUITY STARTING DATE shall mean the first day of the first period for
which an amount is payable as an annuity or, in the case of a benefit not
payable in the form of an annuity, the first day on which all events have
occurred which entitle the Participant to such benefit.
<PAGE> 74
1.05 BENEFICIARY shall mean the person (or persons or entity) designated by
a Participant or under the terms of this Agreement to receive all or part of the
Participant's benefit under the Plan upon the Participant's death. A
Beneficiary's right to (and the Plan Administrator's or Trustee's duty to
provide to the Beneficiary) information concerning the Plan does not arise until
the Participant's date of death.
1.06 CODE shall mean the Internal Revenue Code of 1986, as amended.
1.07 COMPENSATION, except as otherwise provided for herein or in the
Adoption Agreement, shall mean the wages received by the Employee from the
Employer as defined in Code section 3401(a) for the purposes of income tax
withholding at the source but determined without regard to any rules that limit
the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in section 3401(a)(2)). For a Self-Employed Individual, Compensation shall
mean Earned Income, as defined under Section 1.08. For a Leased Employee who is
considered an Employee under the provisions of Section 1.16, Compensation shall
mean the 3401(a) wages paid to the Leased Employee by the leasing organization
which are attributable to services performed for the Employer.
In addition, for any determination period, the following shall be
excluded as Compensation for all Employees:
(a) compensation deferred under an eligible deferred
compensation plan within the meaning of Code section
457(b) (deferred compensation plans of state and local
governments and tax exempt organizations)\; and
(b) employee contributions under governmental plans
described in Code section 414(h)(2) that are picked up
by the Employer and thus are treated as Employer
contributions.
For any determination period beginning after December 31, 1988 and
prior to January 1, 1994, Compensation taken into account for any
Employee shall not exceed $200,000, as adjusted at the beginning of
such determination period in the same manner as the dollar limitation
under Code section
<PAGE> 75
415(d). However, with respect to the 1990 through 1993 Plan Years,
the Plan Administrator may elect to use the Compensation limit under
Code section 401(a)(17) in effect on the January 1 within the said
Plan Years.
In addition to other applicable limitations set forth in the Plan,
and notwithstanding any other provision of the Plan to the contrary,
for Plan Years beginning on or after January 1, 1994, the annual
Compensation of each Employee taken into account under the Plan shall
not exceed the OBRA '93 annual compensation limit. The OBRA '93
annual compensation limit is $150,000, as adjusted by the
Commissioner for increases in the cost of living in accordance with
section 401(a)(17)(B) of the Code. The cost-of-living adjustment in
effect for a calendar year applies to any period, not exceeding 12
months, over which Compensation is determined (determination period)
beginning in such calendar year. If a determination period consists
of fewer than 12 months, the OBRA '93 annual compensation limit will
be multiplied by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of which is
12.
For Plan Years beginning on or after January 1, 1994, any reference
in this Plan to the limitation under section 401(a)(17) of the Code
shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current
Plan Year, the Compensation for that prior determination period is
subject to the OBRA '93 annual compensation limit in effect for that
prior determination period. For this purpose, for determination
periods beginning before the first day of the first Plan Year
beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
The above limitation shall apply to the combined Compensation of the
Employee and any family member aggregated with the Employee as set
forth herein who is either the Employee's spouse or the Employee's
lineal descendant who has not attained age 19 as of the last day of
the determination period. If the aforementioned limitation is
exceeded by the Employee and one or more family members, then the
Compensation of any family member who is not benefiting under this
Plan or any other qualified plan maintained by the Employer or any
Related
<PAGE> 76
Employer shall be reduced to "0." If the dollar limitation is still
exceeded, then the Compensation for the remaining family members
including the Participant shall be reduced under one of the following
methods:
(a) By prorating the dollar limitation among each family
member in proportion to his Compensation determined
without regard to the dollar limitation.
(b) If the Employer contribution is allocated taking into
account permitted disparity:
By reducing the Compensation of any family member whose
Compensation exceeds the integration level used for
determining Excess Compensation. The remaining amount
after deducting from the dollar limitation the
Compensation for each family member whose Compensation is
equal to or less than the integration level shall be
prorated among each family member without regard to the
integration level\; or
(c) By reducing the Compensation of the family member with
the highest level of Compensation to the extent necessary
to prevent the dollar limitation from being exceeded.
For any determination period beginning prior to January 1, 1989, the
above referenced $200,000 limitation shall be applied without regard
to the above referenced family aggregation rules and shall apply to
an Employee only if the Plan was a Top Heavy Plan for such
determination period. If the period for determining compensation is
shorter than 12 months, the annual compensation limit is an amount
equal to the otherwise applicable annual compensation limit
multiplied by the fraction, the numerator of which is the number of
months in the short period, and the denominator of which is 12.
1.08 EARNED INCOME shall mean net earnings from self-employment in
the trade or business with respect to which the Employer has
established the Plan, provided personal services of the individual
are a material income producing factor. The Plan Administrator will
determine net earnings without regard to items excluded from gross
income and the deductions allocable to those items. Net earnings
shall be reduced by the deduction allowed to the Self-Employed
<PAGE> 77
Individual under Code section 404 for all contributions made by the
Employer to a qualified plan, including this Plan, and, for Plan
Years beginning after December 31, 1989, the deduction allowed to the
Self-Employed Individual under Code section 164(f) for
self-employment taxes. Any reference in this Plan to Compensation is
also a reference to the Earned Income of any Self-Employed
Individual.
1.09 EFFECTIVE DATE shall mean the effective date of the Plan or
restatement date of the Plan as set forth in the Adoption Agreement.
This date signifies the date on which the Plan and Trust hereunder
take effect either as a new Plan and Trust or as an amendment and
restatement in its entirety to the Plan and Trust previously adopted
by the Employer.
1.10 ELECTIVE DEFERRALS shall mean any Employer Contributions made to the
Plan at the election of the Participant, in lieu of cash compensation, and shall
include contributions made pursuant to a salary reduction agreement or other
deferral mechanism. For any taxable year Elective Deferrals shall be the sum of
any elective contribution made by a Participant under a cash or deferred
arrangement (as defined in Code section 401(k)), any Employer contribution to a
simplified employee pension plan to the extent such contribution is not
includable in the individual's gross income for the taxable year under Code
section 402(h)(1)(B), any Employer contribution to an annuity contract under
Code section 403(b) under a salary reduction agreement, and any Employee
contribution designated as deductible under a trust described in Code section
501(c)(18) to the extent that such contribution is deductible from such
individual's income for the taxable year on account of Code section 501(c)(18).
1.11 EMPLOYEE shall mean any common law employee of the Employer, and shall
also include, if applicable, any Self-Employed Individual and any Leased
Employee deemed to be an employee of the Employer.
1.12 EMPLOYER shall mean the corporation, individual or entity designated in
the Adoption Agreement.
1.13 ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended.
<PAGE> 78
1.14 HIGHLY COMPENSATED EMPLOYEE shall mean an Employee who, during the Plan
Year or the preceding 12-month period:
(a) is a more than 5% owner of the Employer (applying the
constructive ownership rules of Code section 318 and
the principles of Code section 318, for an unincorporated
entity)\;
(b) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year)\;
(c) has Compensation in excess of $50,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year)
and is part of the top-paid 20% group of Employees (based
on Compensation for the relevant year)\; or
(d) has Compensation in excess of 50% of the dollar amount
prescribed in Code section 415(b)(1)(A) (relating to
defined benefit plans) and is an officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in
the Plan Year but not during the preceding 12-month period and does
not satisfy clause (a) in either period, the Employee is a Highly
Compensated Employee only if he is one of the 100 most highly
compensated Employees for the Plan Year. The number of officers taken
into account under clause (d) will not exceed the greater of 3 or 10%
of the total number (after application of the Code section 414(q)
exclusions) of Employees, but no more than 50 officers. If no
Employee satisfies the Compensation requirement in clause (d) for the
relevant year, the Plan Administrator will treat the highest paid
officer as satisfying clause (d) for that year.
The Plan Administrator must make the determination of who is a Highly
Compensated Employee, including the determinations of the number and
identity of the top paid 20% group, the top 100 paid Employees, the
number of officers includable in clause (d) and the relevant
Compensation, consistent with Code section 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
<PAGE> 79
to all plans and arrangements of the Employer. For purposes of
applying any nondiscrimination test required under the Plan or under
the Code, in a manner consistent with applicable Treasury
regulations, the Plan Administrator will treat a Highly Compensated
Employee described in clause (a) of this Section and a family member
(a spouse, a lineal ascendant or descendant, or a spouse of a lineal
ascendant or descendant) of a Highly Compensated Employee described
in clause (a) of this Section, or a family member of one of the ten
Highly Compensated Employees with the greatest Compensation for the
Plan Year, and such Highly Compensated Employee as a single Highly
Compensated Employee by aggregating the total of Compensation and
Plan contributions received by all such individuals for the Plan
Year.
A former Highly Compensated Employee shall be 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 or received Compensation in excess of $50,000 during
either the year of his Separation from Service (or the prior year) or
any year ending after his 54th birthday.
1.15 HOUR OF SERVICE shall mean the following:
(a) Each hour for which an Employee is paid, or is entitled
to payment, for the performance of duties for the
Employer during the applicable computation period.
(b) Each hour for which an Employee is paid, or is entitled
to payment, by the Employer on account of a period during
which no duties are performed (irrespective of whether
the employment relationship has terminated) due to
vacation, jury duty, military duty, or leave of absence.
No more than 501 Hours of Service shall be credited under
this paragraph to an Employee on account of any single
computation period. In addition, no Hours of Service
shall be credited for any payment which is made under a
plan
<PAGE> 80
maintained by the Employer solely for the purpose of
complying with the applicable workers' compensation,
unemployment compensation or disability insurance laws
nor any payment which solely reimburses an Employee for
medical or medically related expenses incurred by the
Employee.
(c) Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the
Employer. These hours shall be credited to the Employee
for the computation period or periods to which the award
or agreement pertains rather than the computation period
in which the award, agreement or payment is made. The
same Hours of Service shall not be credited both under
paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (c).
Hours of Service under paragraphs (b) and (c) shall be determined and
credited according to the provisions of sections 2530.200(b)-2(b) and
(c) of the Department of Labor regulations. An Hour of Service shall
not be credited to an Employee under more than one of the above
paragraphs.
Hours of Service shall be credited according to hourly records
maintained by the Employer. In the absence of maintaining hourly
records for a classification of Employees, Hours of Service shall be
credited according to the equivalency method selected in the Adoption
Agreement, provided the classification is reasonable and consistently
applied.
For purposes of determining Hours of Service, Employer shall mean the
Employer and any Related Employer.
1.16 LEASED EMPLOYEE shall mean 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 related persons within the
meaning of Code section 414(n)(6)) on a substantially full time basis
for at least one year and who performs services historically
performed by employees in the Employer's business field. Unless
covered under the Safe Harbor Plan Exception, a Leased Employee shall
be treated as an Employee. For purposes of Section 1.07, Compensation
of a Leased Employee
<PAGE> 81
shall mean Compensation from the leasing organization which is
attributable to services performed for the Employer. Contributions or
Benefits provided a Leased Employee by the leasing organization which
are attributable to services performed for the Employer shall be
treated as being provided by the Employer.
Safe Harbor Plan Exception. For services performed after December 31,
1986, a Leased Employee shall be treated as an Employee of the
Employer unless 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 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.
For services performed prior to December 31, 1986, the aforementioned
nonintegrated contribution shall be at least 7-1/2%, and the Plan
shall be a safe harbor plan even though prior to application of the
Safe Harbor Plan Exception more than 20% of the Employees are Leased
Employees.
1.17 NONFORFEITABLE shall mean a Participant's or Beneficiary's
unconditional claim, legally enforceable against the Plan, to the
Participant's Accrued Benefit.
1.18 NONTRANSFERABLE ANNUITY shall mean 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 issuing
insurance company. If the Trustee distributes an annuity contract to
a Participant or Beneficiary, the contract must be a Nontransferable
Annuity.
1.19 OWNER-EMPLOYEE shall mean a Self-Employed Individual who, in the
case of a sole proprietorship, is the sole proprietor or, in the case
of a partnership, is a partner who owns more than 10% of either the
capital or profit interest of the partnership.
<PAGE> 82
Special Rules and Restrictions. The following special rules and
restrictions apply to Owner-Employees:
(a) If the Plan provides contributions or benefits for an
Owner-Employee or for a group of Owner-Employees who
controls the trade or business with respect to which this
Plan is established and one or more other trades or
businesses, plans must exist or be established with
respect to all the controlled trades or businesses so
that when the plans are combined they form a single plan
which satisfies the requirements of Code section 401(a)
and Code section 401(d) with respect to the employees of
the controlled trades or businesses.
(b) If the Owner-Employee or group of Owner-Employees
controls any other trade or business, then the
Owner-Employee shall be excluded from this Plan unless
the employees of the other controlled trade or business
participate in a plan which satisfies the requirements of
Code section 401(a) and Code section 401(d). The other
qualified plan must provide contributions and benefits
which are not less favorable than the contributions and
benefits provided for the Owner-Employee or group of
Owner-Employees under this Plan, or if an Owner-Employee
is covered under another qualified plan as an
Owner-Employee, then the plan established with respect to
the trade or business he does control must provide
contributions or benefits as favorable as those provided
under the most favorable plan of the trade or business he
does not control.
(c) For purposes of paragraphs (a) and (b), an Owner-Employee
or group of Owner-Employees controls a trade or business
if the Owner-Employee or Owner-Employees together own the
entire interest in an unincorporated trade or business
or, in the case of a partnership, own more than 50% of
either the capital interest or the profits interest in
the partnership. For purposes of this subparagraph (c),
an Owner-Employee, or two or more Owner-Employees, shall
be treated as owning any interest in a partnership which
is owned directly, or indirectly, by a partnership which
such Owner-Employee, or such two or more Owner-Employees,
are considered to control within the meaning of this
subparagraph (c).
<PAGE> 83
1.20 PARTICIPANT shall mean an Employee who enters the Plan in
accordance with the provisions of this Plan and Trust
Agreement.
1.21 PARTICIPANT'S ACCOUNT shall mean the separate account(s)
which the Plan Administrator or the Trustee shall
maintain for a Participant under the Plan. A separate
subaccount shall be maintained for the Participant's
Employer Contributions and Forfeitures and each type of
Employee Contribution credited on behalf of the
Participant.
1.22 PLAN shall mean this Plan established or continued by the
Employer in the form of this Agreement.
1.23 PLAN ADMINISTRATOR shall be the person or entity
designated as such in the Adoption Agreement.
1.24 PLAN YEAR shall mean the fiscal year of the Plan, as
designated in the Adoption Agreement. The final Plan Year
shall be the designated twelve month period in the
Adoption Agreement, which includes the date of the final
distribution of the Trust Fund assets.
1.25 RELATED EMPLOYER shall mean any corporation, trade or
business (whether or not incorporated) who, along with
the Employer, is part of a controlled group, as defined
under Code sections 414(b) and (c), or is part of an
affiliated service group, as defined under Code sections
414(m) and (o).
1.26 SELF-EMPLOYED INDIVIDUAL shall mean an individual who has
Earned Income (or would have had Earned Income but for
the fact that the trade or business did not have net
profits for the taxable year) from the trade or business
for which the Plan is established.
<PAGE> 84
1.27 SERVICE/SEPARATION FROM SERVICE. Service shall mean 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. Separation from Service shall occur when the
Employee ceases performance of services for the Employer
maintaining the Plan.
In addition, in any case where this Plan is the plan of a predecessor
employer, all service with such predecessor employer shall be treated
as service for the Employer.
1.28 SHARED EMPLOYEE shall mean an individual if, during a Plan
computation period, such individual performs services as an employee
for the Employer and one or more other persons who are not Related
Employers (collectively referred to as employing persons) at one or
more shared business premises of such employing persons or one or
more common locations. With respect to a Shared Employee, this Plan
shall take into account only Hours of Service performed for the
Employer by such Shared Employee.
However, the Employer may elect with respect to all Shared Employees
who perform services of the same type for the Employer and whose
combined hours of service during a Plan computation period at such
shared premises or locations for the Employer equals or exceeds 1,000
Hours of Service to credit each such Employee with 1,000 Hours of
Service for such period.
The Employer may also elect to credit each Shared Employee who is
credited with 1,000 or more hours of service with all employing
persons during a Plan computation period with 1,000 Hours of Service
for said computation period.
An individual shall receive credit for vesting and eligibility
purposes for each Plan Year in which the individual is a Shared
Employee. The Employer Contributions and Forfeitures allocated to a
Shared Employee for a Plan Year shall be determined by multiplying
the contribution calculated under the Plan as if the Shared Employee
was employed exclusively by the Employer and received all
compensation paid to the Shared Employee by all of the employing
persons from the Employer by a fraction, the numerator of which is
the amount of
<PAGE> 85
Compensation paid the Shared Employee by the Employer, and the
denominator of which is the amount of compensation paid the Shared
Employee by all of the employing persons.
1.29 TOP HEAVY PLAN/TOP HEAVY DEFINITIONS. If this Plan is the only
qualified plan maintained by the Employer, the Plan shall be a Top
Heavy Plan for any Plan Year beginning after December 31, 1983 if, on
the Determination Date, the Top Heavy Ratio exceeds 60%. If the
Employer maintains any other qualified plan (including a simplified
employee pension plan) or maintained another such plan which is now
terminated, this Plan shall be a Top Heavy Plan for any Plan Year
beginning after December 31, 1983 if, during the calendar year which
includes the Plan's Determination Date, the Top Heavy Ratio
determined for the Aggregation Group exceeds 60%.
This Plan shall be a Super Top Heavy Plan if the Top Heavy Ratio as
determined above exceeds 90%.
Definitions. For purposes of applying the provisions of this
Section, the following definitions shall apply:
(a) DETERMINATION DATE shall mean the last day of a plan's
preceding plan year, or, in the case of the first plan
year, the last day of such plan year.
(b) TOP HEAVY RATIO shall mean a fraction, the numerator of
which is the sum of the present value of accrued benefits
for Key Employees and the denominator of which is the sum
of the present value of the accrued benefits for all
Employees.
The present value of an Employee's accrued benefit under
any defined contribution plan, including this Plan, shall
be determined as of the Valuation Date. The Valuation
Date shall be the most recent date used for valuing the
accrued benefit which occurred during the 12-month period
ending on the Determination Date. In the case of a profit
sharing plan, including a 401(k) plan, the present value
of the accrued benefit shall include any contributions
actually made after the valuation date but on or before
the Determination Date, except that in the case of the
first plan year, such value shall also include any
contributions made after the Determination Date that are
allocated as of a date during that first plan year. In
the case of a
<PAGE> 86
pension plan, the present value of the accrued benefit
shall include any contributions due as of the
Determination Date which are required under section 412
of the Code as well as any contributions that would be
allocated as of a date not later than the Determination
Date, even though such amounts were not required to be
contributed.
The present value of an Employee's accrued benefit under
a defined benefit plan shall be determined on the
Valuation Date. The Valuation Date is the date used for
computing plan costs for minimum funding purposes which
occurred during the 12-month period ending on the
Determination Date. The present value of the accrued
benefit for a current Employee must be determined as if
the individual terminated service on the Valuation Date,
or, in the case of the first plan year, as if the
individual terminated service on the Determination Date.
The accrued benefit for any Non-Key Employee shall be
determined under the uniform accrual method, if any,
which is used by 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 described in Code section
411(b)(1)(C). For purposes of computing the present value
of the accrued benefit, the uniform actuarial assumptions
specified in all defined benefit plans of the Employer
shall be used, or if the actuarial assumptions specified
are not uniform, an interest assumption of 5% shall be
used in conjunction with the Unisex Pension 1984
Mortality Table as the post-retirement mortality
assumption. The present value of the accrued benefit
shall include the value of nonproportional subsidies and
shall exclude the value of proportional subsidies.
The present value of an Employee's accrued benefit under
both a defined contribution plan and a defined benefit
plan shall include the value of any non-deductible
voluntary or mandatory Employee contributions. In
addition, the present value of the accrued benefit shall
include a distribution paid to the Employee from the plan
during the 5-year period ending on the Determination Date
(including a distribution from a terminated plan which,
if it had not terminated, would have been required to be
included in the Aggregation Group), unless such
<PAGE> 87
distribution was a rollover contribution or
trustee-to-trustee transfer to another plan maintained by
the Employer. Any rollover contribution or
trustee-to-trustee transfer accepted by a plan shall be
included in the present value of the Employee's accrued
benefit unless the rollover contribution or
trustee-to-trustee transfer was from the plan of an
unrelated employer, initiated by the Employee and
accepted by the Plan after December 31, 1983.
In calculating the sum of the present value of the
accrued benefits for a plan, the present value of the
accrued benefit for any Non-Key Employee who was formerly
a Key Employee and the present value of the accrued
benefit for any Employee who has not received credit for
one Hour of Service during the 5-year period ending on
the Determination Date shall not be included.
(c) KEY EMPLOYEE shall mean any Employee, including any
former Employee, who at any time during the 5-year period
ending on the Determination Date is:
(1) an officer of the Employer whose
Compensation for the plan year is greater
than 50% of the dollar limitation in effect
under Code section 415(b)(1)(A) for the plan
year. The number of officers taken into
account under this clause shall not exceed
the greater of 3 or 10% of the total number
of Employees (after application of Code
section 414(q)(8) exclusions), such number
not to exceed 50.
(2) 1 of the 10 Employees owning the largest
interests in the Employer whose
Compensation for the plan year exceeds the
dollar limitation in effect under Code
section 415(c)(1)(A) of the plan year.
(3) a person who owns, if the Employer is a
corporation, more than 5% of the outstanding
stock or stock possessing more than 5% of
the total combined voting power of all stock
of the corporation or, if the Employer is
not a corporation, a person who owns more
than 5% of the capital or profits interest
in the Employer.
<PAGE> 88
(4) a person who meets the requirements of
clause (3) if "1%" is substituted for
"5%" each place it appears in clause (3) and
whose Compensation for the plan year exceeds
$150,000.
For purposes of determining ownership in the Employer,
the constructive ownership rules of Code section 318 (or,
if the Employer is not a corporation, principles similar
to the principles of Code section 318 if capital or
profits interest is substituted for stock) shall apply
except that subparagraph (c) of Code section 318(a)(2)
shall be applied by substituting "5 percent" for "50
percent". However, the rules of subsections (b), (c) and
(m) of Code section 414 shall not apply for purposes of
determining ownership in the Employer.
Compensation shall mean the amount defined under Section
1.07 plus any additional amounts paid by the Employer
which are excludable from the Employee's gross income
under Code sections 125, 402(a)(8), 402(h) or 403(b).
Key Employee shall also mean the Beneficiary of a Key
Employee.
(d) NON-KEY EMPLOYEE shall mean an Employee or Beneficiary
who is not a Key Employee.
(e) EMPLOYER shall mean the Employer that adopts this Plan
and any Related Employer.
(f) AGGREGATION GROUP shall mean:
(1) each qualified plan of the Employer,
including any terminated plan, in which a
Key Employee is a participant during the
5-year period ending on the Determination
Date\;
(2) each other qualified plan of the Employer
which enables any plan described in clause
(1) to meet the requirements of Code
section 401(a)(4) or Code section 410\; and
(3) any other qualified plan maintained by
the Employer, provided such plan and the
plans under clauses (1) and (2) satisfy in
the
<PAGE> 89
aggregate the requirements of Code
section 401(a)(4) and Code section 410.
1.30 TRUST shall mean the separate Trust created
under this Agreement.
1.31 TRUST FUND shall mean all property of every
kind held or acquired by the Trustee under
the Agreement.
1.32 TRUSTEE shall mean the individual(s) or
entity designated in the Adoption Agreement
as Trustee, to be governed by the Trust
provisions herein, or any successor in
office.
1.33 YEAR OF SERVICE shall be the period defined
in the Adoption Agreement.
In the event that the Elapsed Time Method of crediting Service has
been elected in the Adoption Agreement, then the following Section
1.33 shall apply:
YEAR OF SERVICE/MONTH OF SERVICE/ELAPSED TIME METHOD FOR CREDITING
SERVICE. This Plan shall use the elapsed time method of crediting
service for both eligibility and vesting under the Plan. Service
shall be credited in accordance with the provisions of Regulation
1.410(a)-7 including any amendment thereof. In accordance with the
foregoing, crediting of service under the Plan shall be based on the
following:
(a) Calculation of Service. For purposes of determining an
Employee's initial or continued eligibility to
participate in the Plan or the Nonforfeitable interest in
the Participant's Account balance derived from Employer
contributions (except for periods of Service which may be
disregarded on account of the "rule of parity" described
in section 2.02 as to participation and Section 7.02 as
to vesting), an Employee will receive credit for the
aggregate of all time period(s) commencing with the
Employee's first day of employment or reemployment and
ending on the date a Break in Service begins.
<PAGE> 90
The first day of employment or reemployment is the first
day the Employee performs an Hour of Service. An Employee
will also receive credit for any period of severance of
less than 12 consecutive months.
(b) Year of Service for Purposes of Vesting. Assuming no
interruption in employment, an Employee hired on any day
of a given month will have one Year of Service on the
anniversary date of that month in the next following
year, and an additional Year of Service on the
anniversary date in which he was employed in each
succeeding year thereafter.
(c) Months of Service. For purposes of the Elapsed Time
Method, Months of Service shall mean periods of
employment of thirty (30) days (whether or not
consecutive) commencing on the Employee's employment
commencement date (including reemployment) and ending on
the date a Period of Severance begins.
(d) Breaks in Service-"One Year Period of Severance." Breaks
in service will be calculated in consecutive calendar
months and years in accordance with subparagraph (a)
above. A "one year break in service" means the applicable
computation period of twelve consecutive months during
which an Employee fails to accrue a month of service.
Further, solely for purposes of determining whether a
Participant has incurred a one year break in service,
Hours of Service shall be recognized for "authorized
leaves of absence" and "maternity and paternity leaves of
absence." Years of Service and one year breaks in service
shall be measured on the same computation period.
An Employee shall be not be deemed to have incurred a one
year break in service if he completes an Hour of Service
within twelve months following the date his employment
terminated.
In the case of an individual who is absent from work for
maternity or paternity reasons, the 12-consecutive month
period beginning on the first anniversary of the first
date of such absence shall not constitute a Break in
Service. For purposes of this paragraph, an absence from
work for maternity or paternity reasons means an absence
(1) by reason of the pregnancy of the individual, (2) by
reason of
<PAGE> 91
the birth of a child of the individual, (3) by reason of
the placement of a child with the individual in
connection with the adoption of such child by such
individual, or (4) for purposes of caring for such child
for a period beginning immediately following such birth
or placement.
(e) Service Spanning Rules. Service credited through the last
day in which Severance From Service has occurred and
service credited subsequent to the Reemployment
Commencement Date shall be added together for all
purposes under this Plan (including current vested
status), but the intervening times shall be disregarded.
Notwithstanding the preceding paragraph, if a terminated
participant is reemployed within the twelve consecutive
calendar month period following his Severance From
Service Date, he will be credited with service for the
period during which his employment with the Employer was
interrupted. Such Employee will not be regarded as having
incurred a break in service for Plan purposes. In no
event, however, will an Employee who had not yet become a
Participant when said Employee terminated become a
Participant until his Reemployment Commencement Date.
(f) Aggregating Service. All periods of employment shall be
aggregated in determining an Employee's service. In
computing the aggregate, such aggregate shall not include
any service that can be disregarded by reason of a prior
break in service.
If the Employer is a member of an affiliated service
group (under section 414(m)), a controlled group of
corporations (under section 414(b)), a group of trades or
businesses under common control (under section 414(c)) or
any other entity required to be aggregated with the
Employer pursuant to section 414(o), service will be
credited for any employment for any period of time for
any other member of such group. Service will also be
credited for any individual required under section 414(n)
or section 414(o) to be considered an employee of any
employer aggregated under section 414(b), (c), or (m).
(g) Computation of Service While Disabled. Service will
include all periods during which an Employee was deemed
to be totally and permanently disabled as
<PAGE> 92
defined in the Plan provided that if an Employee ceases
to be disabled and does not return to employment within
ninety (90) days thereafter no service credit will be
given from and after the last day of the month during
which such eligibility ceased.
(h) Definitions Applicable to Section 1.33.
(1) Severance From Service Date. A severance from
service shall occur on the earlier of:
(i) The date on which an Employee quits,
retires, is discharged or dies\; or
(ii) The first anniversary of the first
date of a period in which an
Employee remains absent from service
(with or without pay) with the
Employer maintaining the Plan for
any reason other than a quit,
retirement, discharge or death, such
as vacation, holiday, sickness,
disability, leave of absence or
layoff.
(2) Employment Commencement Date. The first
day an Employee performs an Hour of
Service. An Employee will also receive
credit for any period of severance of less
than 12 consecutive months.
(3) Reemployment Commencement Date. The term
"reemployment commencement date" shall mean
the first date, following a period of
severance from service which is not required
to be taken into account under the service
spanning rules herein on which an Employee
performs an Hour of Service as defined in
the Plan for the Employer maintaining the
Plan.
(4) Period of Service. The term "period of
service" shall mean a period of service
commencing on the Employee's employment
commencement date or reemployment
commencement date whichever is applicable,
and ending on the severance from service
date.
<PAGE> 93
ARTICLE II
PARTICIPATION IN THE PLAN/ENTRY DATE
2.01 ELIGIBILITY TO PARTICIPATE. An Employee
shall be eligible to become a Participant
upon satisfying the participation
requirements set forth in the Adoption
Agreement. Each eligible Employee who
satisfies the participation requirements
shall enter the Plan on the Entry Date set
forth in the Adoption Agreement.
The Adoption Agreement may establish one or more categories of
Employees or employment positions which are ineligible to participate
in the Plan. An Employee who is employed in a position described in
the Adoption Agreement as an ineligible category of employment shall
not be eligible to participate until said Employee is employed in a
position of employment that is not an ineligible category. In that
event, said Employee shall enter the Plan on the later of the date
said Employee became employed in an eligible category of employment
or the first Entry Date said Employee would have entered the Plan if
said Employee had been employed in an eligible category. A
Participant who becomes employed in an ineligible category of
employment after having been employed in an eligible category of
employment shall continue to participate in the Plan but shall not
receive credit for any Compensation earned while in an ineligible
category of employment.
2.02 BREAK IN SERVICE AND PARTICIPATION. An Employee shall incur a
Break in Service if he does not complete more than 500 Hours of
Service during a computation period. The computation period for
purposes of determining a Break in Service shall be the same
computation period for determining a Year of Service for eligibility
purposes under the Adoption Agreement.
In the event that the Adoption Agreement shall provide for the
completion of more than one Year of Service as a condition of
participation, then an Employee who incurs a Break in Service before
completing the service condition set forth in the Adoption Agreement
shall be treated as a
<PAGE> 94
new Employee on the date he first performs an
Hour of Service for the Employer after the Break in Service.
In the case of a nonvested Participant who incurs one or more
consecutive Breaks in Service, Years of Service prior to the initial
Break in Service shall not be required to be taken into account for
eligibility purposes if the number of Breaks in Service equals or
exceeds the greater of 5 or the aggregate number of Years of Service
credited to the Participant prior to the initial Break in Service.
Such aggregate number of Years of Service shall not include any Years
of Service disregarded under the preceding sentence by reason of any
prior Breaks in Service.
Except as provided above, all Years of Service prior to a Break in
Service shall be credited to an Employee for purposes of Plan
Participation.
2.03 MATERNITY OR PATERNITY LEAVE. Solely for purposes of determining
whether the Employee incurs a Break in Service under any provision of
this Plan, the Plan Administrator shall credit Hours of Service
during an Employee's unpaid absence period due to maternity or
paternity leave. The Plan Administrator shall consider 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 of an adopted child with the Employee, or the care of the
Employee's child immediately following the child's birth or
placement. The Plan Administrator shall credit Hours of Service under
this paragraph on the basis of the number of Hours of Service the
Employee would have received if he were paid during the absence
period or, if the Plan Administrator cannot determine the number of
Hours of Service the Employee would have received, on the basis of
eight (8) hours per day during the absence period. The Plan
Administrator shall credit only the number of Hours of Service (not
exceeding 501 Hours of Service) necessary to prevent an Employee from
incurring a Break in Service. The Plan Administrator shall credit 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 Plan
Administrator shall credit these Hours of Service to the next
computation period.
<PAGE> 95
2.04 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment
terminates shall re-enter the Plan as a Participant on the date of
his re-employment. An Employee who has satisfied the eligibility
conditions of Section 2.01 but who terminates employment prior to his
Entry Date shall become a Participant in the Plan on the later of the
date of his re-employment or the aforementioned Entry Date. Any other
Employee whose employment terminates and who is subsequently
re-employed shall become a Participant in accordance with the
provisions of Section 2.01.
2.05 ELECTION NOT TO PARTICIPATE. An Employee eligible to
participate, including any present Participant, may elect not to
participate in the Plan. For an election to be effective for a
particular Plan Year, the Employee must file the election in writing
with the Plan Administrator not later than the last day of that Plan
Year. The Plan Administrator shall have the discretion to not honor
said election for any Plan Year where the election may jeopardize the
continued qualification of the Plan. The Employer may not make any
contribution under the Plan for the Employee for any Plan Year for
which the election is in effect. An Employee who elects not to
participate may later elect to participate in the Plan by filing an
election in writing with the Plan Administrator not later than the
end of the Plan Year for which such election is to be effective. If
an Employee is a Self-Employed Individual, the Employee's election
must be effective no later than the date the Employee first would
have become a Participant in the Plan and the election is irrevocable
(except as permitted by Treasury regulations without creating a Code
section 401(k) arrangement with respect to that Self-Employed
Individual). An election timely filed is effective for the entire
Plan Year.
For each Plan Year for which a Participant's election not to
participate is effective, the Participant's Account, if any, shall
continue to share in the allocation of Trust Fund earnings.
Furthermore, the Employee electing not to participate shall receive
credit for eligibility and vesting purposes for each Year of Service
completed during the period the election not to participate is
effective.
2.06 FAILURE OF PLAN TO MEET THE COVERAGE REQUIREMENTS OF CODE SECTION
410(b) OR 401(a)(26). If this is a Plan that would otherwise fail to
meet the requirements of Code sections
<PAGE> 96
401(a)(26) or 410(b) and the Regulations thereunder, the group of
Participants eligible to share in the Employer's Contribution and
Forfeitures for the Plan Year shall be expanded to include the
minimum number of Non-Highly Compensated Employees who would not
otherwise be eligible as is necessary to satisfy such requirements.
The Plan Administrator shall specify which such Non-Highly
Compensated Employees shall share in the allocation of Employer
Contributions and Forfeitures for the Plan Year.
For Plan Years beginning prior to the later of January 1, 1994 or the
effective date of the final regulations under Code section 410(b), if
a Participant failed to receive an allocation of Employer
Contributions and Forfeitures due to his failure to complete a
minimum number of Hours of Service (not to exceed 1,000) during the
Plan Year, or his Separation from Service prior to the end of the
Plan Year, he shall be deemed to have benefited for said Plan Year
under Code section 410(b).
<PAGE> 97
ARTICLE III
CONTRIBUTIONS TO THE PLAN
3.01 EMPLOYER CONTRIBUTION.
(a) In General. The Employer Contribution for a Plan Year
shall be determined under the Employer Contribution
provisions in the Adoption Agreement. Any Employer
Contribution to the Plan shall be conditioned on its
deductibility under Code section 404.
The Trustee, upon request from the Employer, must return
to the Employer the amount of the Employer Contribution
made by a mistake of fact or disallowed as a deduction
under Code section 404. The Trustee shall not return any
portion of the Employer Contribution under the provisions
of this Section more than one (1) year after the date on
which:
(1) the Employer made the contribution by
mistake of fact\; or
(2) the disallowance of the contribution as a
deduction occurs.
The amount which may be returned to the Employer shall be
the excess of the total amount contributed over the
amount that would have been contributed had there not
occurred a mistake of fact or disallowance of deduction.
The amount of the Employer Contribution returnable under
this Section shall not be increased by any earnings
attributable to the contribution but shall be decreased
by any losses attributable to it.
In the event that the Commissioner of Internal Revenue
determines that the Plan is not initially qualified under
the Internal Revenue Code, any contribution made incident
to that initial qualification by the Employer must be
returned to the Employer within one (1) year after the
date the initial qualification is denied, but only if the
application for the qualification is made by the time
prescribed by law for filing the Employer's tax
<PAGE> 98
return for the taxable year in which the Plan is adopted,
or such later date as the Secretary of the Treasury may
prescribe.
(b) Profit Sharing Plan. If this Plan is a profit sharing
plan, the primary limitation on the amount of Employer
Contributions shall be 15% of the aggregate Compensation
of the Participants for the Plan Year. If, in any Plan
Year beginning before January 1, 1987, the Employer
contributed less than 15% of the Participants' aggregate
Compensation, the difference shall be carried forward and
may be contributed in a succeeding Plan Year. However, the
total contribution for any such succeeding Plan Year shall
not exceed the lesser of:
(1) 25% of the Participants' aggregate
Compensation\; or
(2) the sum of the amounts carried forward from
the preceding Plan Years plus the primary
limitation for the Plan Year.
An Employer Contribution received after the close of the
Employer's taxable year may be credited to such year only
if the contribution is treated in the same manner as a
contribution received on the last day of the taxable year
and either the Employer informs the Plan Administrator or
Trustee in writing prior to the due date (including
extensions) of the Employer's tax return that the
contribution is to be applied to such year or the
Employer claims the contribution as a deduction on the
Employer's income tax return for such year. Unless
otherwise designated in writing by the Employer the
contribution for any Plan Year shall equal the
contribution made for the Employer's taxable year ending
within the Plan Year.
In addition, if this Plan is a profit sharing plan, no
Employer Contribution may be made to this Plan for a Plan
Year if the Employer has no current or accumulated net
profits, unless the Employer elects otherwise. Net
profits shall mean the Employer's net income for any
taxable year determined in accordance with generally
accepted accounting practices consistently applied
without regard to any deductions for federal, state and
local income taxes
<PAGE> 99
or for any contributions to this Plan or any other
qualified retirement plan maintained by the Employer.
3.02 EMPLOYEE CONTRIBUTIONS. Employee Contributions shall
be made to the Plan as permitted or required in the
Adoption Agreement. In the event that this Agreement
shall amend or replace a pre-existing plan which
permitted any type of Employee Contribution which is no
longer permitted under this Agreement, then any such
Employee Contribution made by an Employee prior to the
Effective Date of this Agreement shall remain a part of
the Trust Fund and shall be accounted for and distributed
in accordance with the terms and conditions of this
Agreement. Any Employee Contributions credited for Plan
Years beginning after December 31, 1986, together with
any Employer Matching Contributions as defined in section
401(m) of the Code will be limited so as to meet the
nondiscrimination test of section 401(m).
(a) Voluntary Employee Contributions. If allowed under the
Adoption Agreement, an Employee may elect in the manner
and form prescribed by the Plan Administrator the amount
of Voluntary Employee Contributions to be made to the
Plan. Any Voluntary Employee Contributions must meet the
requirements of the ACP and the combined ACP/ADP tests of
Plan Section 3.03.
A Participant's Voluntary Employee Contributions to this
Plan and any other Plan maintained by the Employer for
the Plan Year shall not exceed an amount which, when
added to the sum of all prior Voluntary Employee
Contributions less the sum of all withdrawals of any such
Voluntary Employee Contributions, equals 10% of the
Participant's aggregate Compensation for all Plan years
during which he was a Participant.
(b) Employee Rollover Contributions. If allowed under the
Adoption Agreement, any Employee may contribute cash or
other property to the Trust from another eligible
retirement plan if the contribution is a rollover
contribution as defined in Code section 402(a)(5). The
Employee Rollover Contribution must not include any
voluntary or mandatory employee contributions. Before
accepting a rollover
<PAGE> 100
contribution, the Trustee may require that an Employee
furnish satisfactory evidence that the proposed transfer
is in fact a rollover contribution. If an Employee makes a
rollover contribution to the Trust prior to satisfying the
Plan's eligibility conditions, he shall be treated as a
Participant for all purposes of the Plan except the
Employee shall not share in the allocation of Employer
Contribution and Forfeitures under Section 4.02 until
after his Entry Date.
(c) Trustee-to-Trustee Transfers. If allowed under the
Adoption Agreement, the Trustee shall possess the specific
authority to enter into merger agreements or direct
transfer of assets agreements with the trustees of other
retirement plans described in Code section 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 whether before or after the date the
Employee satisfies the Plan's eligibility condition(s). If
the Trustee accepts a direct transfer of plan assets prior
to the Employee's Plan Entry Date, the Plan Administrator
and Trustee shall treat the Employee as a Participant for
all purposes of the Plan except the Employee shall not
share in the Employer contributions or Forfeitures under
the Plan until he actually enters the Plan.
The Trustee after August 9, 1988 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. A transfer is an elective transfer if:
(1) the transfer satisfies Section 14.07\; (2) the
transfer is a voluntary fully informed election by the
Participant\; (3) the Participant had an alternative to
the transfer to retain his Code section 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 applicable\; (6)
<PAGE> 101
the Participant had a right to an 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.
(d) Voluntary Deductible Contributions. Although the Plan may
have previously permitted Voluntary Deductible
Contributions, no such contributions may be made to the
Plan which are attributable to a Participant's taxable
year beginning after December 31, 1986. For purposes of
Sections 5.04, 6.05 and 7.04, the Participant's benefit
shall not include his Voluntary Deductible Contributions
for Plan Years beginning after December 31, 1988.
(e) Mandatory Employee Contributions. If Mandatory Employee
Contributions are required under the Adoption Agreement,
then the Participant shall contribute the amount specified
therein.
3.03 PROVISIONS APPLICABLE TO 401(k) PLANS AND TO PLANS
PERMITTING VOLUNTARY AND MANDATORY EMPLOYEE CONTRIBUTIONS OR
EMPLOYER MATCHING CONTRIBUTIONS. If the Employer has elected
in the Adoption Agreement to allow for Employee Contributions,
Employer matching contributions or Elective Deferrals under a
401(k) arrangement, the following additional provisions shall
apply:
(a) Provisions Applicable to Voluntary and Mandatory Employee
Contributions and Employer Matching Contributions.
(1) Actual Contribution Percentage Test. For
each Plan Year beginning after December 31,
1986, the Actual Contribution Percentage
(ACP) for Participants who are Highly
Compensated Employees must satisfy one of
the following tests:
<PAGE> 102
(i) the ACP for the Participants who
are Highly Compensated Employees
shall not exceed 1.25 times the
ACP for Participants who are not
Highly Compensated Employees\;
or
(ii) the ACP for Participants who are
Highly Compensated Employees
shall not exceed the lesser of
two times the ACP for the
Participants who are not Highly
Compensated Employees or the ACP
for the Participants who are not
Highly Compensated Employees
plus two percentage points.
The ACP for a group of Participants shall be
equal to the average of the actual
contribution ratios calculated separately
for each Participant in the group. The
actual contribution ratio is the amount of
Aggregate Contributions made by the
Participant for the Plan Year divided by the
Participant's Compensation for the Plan Year
(whether or not the Employee was a
Participant for the entire Plan Year).
Aggregate Contributions shall mean the sum
of the Participant's Voluntary and Mandatory
Employee Contributions, and Employer
Matching Contributions, and Elective
Deferrals and Qualified Non-Elective
Contributions, if any, that are treated as
Employer Matching Contributions. Aggregate
Contributions shall not include Matching
Employer Contributions that are forfeited
either to correct Excess Aggregate
Contributions or because the contributions
to which they relate are Excess Elective
Deferrals, Excess Contributions or Excess
Aggregate Contributions. For purposes of the
ACP test only, a Participant shall be any
Employee who is directly or indirectly
eligible to receive an allocation of
Matching Employer Contributions or to make
Employee Contributions and shall include (1)
an Employee who would be a Participant but
for the failure to make required
contributions, (2) an Employee whose right
to make Employee Contributions or receive
Matching Employer
<PAGE> 103
Contributions has been suspended because of
an election (other than certain one-time
elections) not to participate, and (3) an
Employee who cannot make an Employee
Contribution or receive a Matching Employer
Contribution because Code section 415(c)(1)
or 415(e) prevents the Employee from
receiving additional Annual Additions. A
Participant who is not credited with
Aggregate Contributions for the Plan Year
shall have an actual contribution ratio of
0. The ACP and actual contribution ratio for
each Participant shall be calculated to the
nearest one-hundredth of one percent.
For purposes of calculating the ACP,
Voluntary and Mandatory Employee
Contributions must be paid to the Trustee or
other agent of the Plan by the end of the
Plan Year and deposited to the Trust within
a reasonable period of time thereafter. Any
Employer Matching Contributions must be paid
to the Trust during the Plan Year or within
the 12-month period immediately following
the end of the Plan Year and must be made on
account of the Participant's Elective
Deferrals for the Plan Year. Any excess
Elective Deferral which is recharacterized
as a Voluntary Employee Contribution will be
treated as contributed during the Plan Year
in which such excess is includable in the
Participant's gross Compensation. Any
Qualified Employer Matching Contribution or
Qualified Non-Elective Contribution that is
treated as an Elective Deferral for purposes
of the ADP test shall not be included in
determining the actual contribution ratio.
In the event that this Plan satisfies the
requirements of Code section 410(b) only if
aggregated with one or more other qualified
plans or if one or more other plans satisfy
the requirements of such Code section only
if aggregated with this Plan, then all such
plans including this Plan shall be treated
as a single plan for purposes of the ACP
test. For Plan Years beginning after
December 31, 1989, plans may be aggregated
under this
<PAGE> 104
paragraph only if they have the same Plan
Year. For Plan Years beginning after
December 31, 1988, contributions and
allocations under an ESOP plan (or the ESOP
portion of a plan) may not be combined under
this paragraph with the contributions and
allocations under a non-ESOP plan (or the
non-ESOP portion of a plan).
(2) Special Rules for Highly Compensated
Employees. The actual contribution ratio for
any Participant who is a Highly Compensated
Employee for the Plan Year and who is
eligible to participate under two or more
plans of the Employer to which Employee
Contributions, Matching Employer
Contributions, or Elective Deferrals are
made shall be determined by treating all
such plans as one plan. Notwithstanding the
foregoing, two or more plans shall be
treated as separate plans if they are
required to be disaggregated under
regulations issued under Code section
401(m).
If a Highly Compensated Employee is subject
to the family aggregation rules set forth
herein because such Employee is either a
more than 5% owner or one of the ten most
Highly Compensated Employees during the Plan
Year, the combined actual contribution ratio
for the family group (which shall be treated
as one Highly Compensated Employee) shall be
determined by combining the Aggregate
Contributions and Compensation of all the
eligible family members.
The contributions for all family members
used in determining the ACP for Highly
Compensated Employees shall be disregarded
for purposes of determining the ACP for the
Participants who are not Highly Compensated
Employees. In addition, if a Participant is
required to be aggregated as a member of
more than one family group, all Participants
who are members of those family groups which
include the Participant shall be aggregated
as one family group for purposes of this
section.
<PAGE> 105
(3) Correction If ACP Test Is Not Satisfied. The
Employer shall maintain records sufficient
to demonstrate satisfaction of the ACP test
and the amount of Qualified Non-Elective
Contributions or Qualified Employer Matching
Contributions, or both, used in such test.
If the ACP for the Participants who are
Highly Compensated Employees does not
satisfy the ACP test for a Plan Year, then
any of the following methods (or a
combination thereof) may be used to satisfy
the ACP test:
(i) The Employer may treat Qualified
Non-Elective Contributions or
Elective Deferrals as Employer
Matching Contributions to the
extent necessary to satisfy the
ACP test provided such
contributions satisfy the
requirements of Treasury
Regulation 1.401(m)-1(b)(5).
(ii) Employer Matching Contributions
(and the earnings attributable
to such contributions) that are
not vested (determined without
regard to any increase in
vesting which may occur after
the date of forfeiture) may be
forfeited to the extent
necessary to satisfy the ACP
test. Any amount so forfeited
for an Employee shall not be
included in the calculation of
the Employee's actual
contribution ratio.
(iii) The allocation of Employer
Matching Contributions and
Employee Contributions to a
Participant's account may be
limited to the extent necessary
to satisfy the ACP test.
(iv) The Excess Aggregate
Contributions for a Highly
Compensated Employee, plus
earnings thereon, may be
distributed to the Highly
Compensated Employee at any time
during the 12-month period
immediately following the end of
the Plan Year in which the ACP
test was not satisfied. In such
event, the Employer will notify
adopting
<PAGE> 106
employers who are required to
correct the Excess Aggregate
Contributions. If such Excess
Aggregate Contributions are
composed of both Employee
Contributions and Employer
Matching Contributions, the
distribution shall include the
Employer Matching Contributions
which are attributable to the
distributed Employee
Contributions.
Excess Aggregate Contributions shall mean,
with respect to any Plan Year, the excess of
(1) the total Aggregate Contributions taken
into account in computing the numerator of
the actual contribution ratios for the
Highly Compensated Employees for such Plan
Year, over (2) the maximum Aggregate
Contributions permitted by the ACP test
(determined by reducing contributions made
on behalf of Highly Compensated Employees in
order of their actual contribution ratios
beginning with the highest of such ratios.
The determination of Excess Aggregate
Contributions shall be made after first
determining Excess Contributions pursuant to
Section 3.03(b)(4) of this Agreement.
The amount of Excess Aggregate Contributions
for each Highly Compensated Employee shall
be determined by first reducing the
Aggregate Contributions for the Highly
Compensated Employee with the greatest
actual contribution ratio to the extent
which will either enable the Plan to satisfy
the ACP test or cause such Highly
Compensated Employee's actual contribution
ratio to equal the ratio of the Highly
Compensated Employee with the next highest
actual contribution ratio. This process
shall be repeated until the ACP test is
satisfied. The amount of Excess Aggregate
Contributions so determined for a family
group which is treated as a single Highly
Compensated Employee shall be allocated
among the family members in proportion to
their Aggregate Contributions.
<PAGE> 107
The earnings attributable to the Excess
Aggregate Contributions shall be equal to
the earnings allocable to the Participant's
Aggregate Contributions for the Plan Year
multiplied by a fraction, the numerator of
which is the Participant's excess Aggregate
Contributions for the Plan Year and the
denominator of which is the value of the
Participant's Aggregate Contributions
determined without regard to any earnings
for the year.
For Plan Years which began prior to January
1, 1992, any reasonable method for
determining the earnings attributable to
Excess Aggregate Contributions may be used,
provided such method is applied consistently
to all Participants and for all corrective
distributions for such year.
(b) Provisions Applicable to Elective Deferrals.
(1) Excess Elective Deferrals Under Code Section
402(g). Excess Elective Deferrals shall mean
those Elective Deferrals made by a
Participant which are includable in his
gross income to the extent such Elective
Deferrals for the Participant's taxable year
exceed the dollar limitation in effect under
Code section 402(g) at the beginning of said
taxable year. If a Participant's Elective
Deferrals for his taxable year exceed said
dollar limitation, then the Excess Elective
Deferrals shall be returned to the
Participant. Any such corrective
distribution may only be made if the
Participant designates the distribution as
an excess deferral, the distribution is made
after the date on which the Plan received
the excess deferral, and not later than the
first April 15 following the close of the
taxable year and the Plan designates the
distribution as a distribution of Excess
Elective Deferrals. A Participant shall be
deemed to have designated the distribution
as an excess deferral to the extent the
Participant has excess deferrals for the
taxable year calculated by taking into
account only
<PAGE> 108
elective deferrals under the Plan and other
plans of the same Employer.
A corrective distribution which takes place
after the end of the Employee's taxable year
shall include the earnings attributable to
the Excess Elective Deferrals. Said earnings
shall be equal to the earnings allocable to
the Participant's Elective Deferrals for the
taxable year multiplied by a fraction, the
numerator of which is the Participant's
Excess Elective Deferrals for the year and
the denominator of which is the value of the
Participant's Elective Deferrals including
the Elective Deferrals for the taxable year
determined without regard to any earnings
for the year.
For taxable years which began prior to
January 1, 1992, any reasonable method for
determining the earnings attributable to
Excess Elective Deferrals may be used,
provided that such method is applied
consistently to all Participants and for all
corrective distributions for such year.
The amount of the Excess Elective Deferrals
of a Participant that may be distributed
shall be reduced by any excess contributions
previously distributed or recharacterized
with respect to such Participant for the
Plan Year beginning with or within such
taxable year.
(2) Actual Deferral Percentage Test. For each
Plan Year, the Actual Deferral Percentage
(ADP) for Participants who are Highly
Compensated Employees must
satisfy one of the following tests:
(i) the ADP for the Participants who
are Highly Compensated Employees
shall not exceed 1.25 times the
ADP for Participants who are not
Highly Compensated Employees\;
or
(ii) the ADP for the Participants who
are Highly Compensated Employees
shall not
<PAGE> 109
exceed the lesser of
two times the ADP for the
participants who are not Highly
Compensated Employees or the ADP
for the Participants who are not
Highly Compensated Employees
plus two percentage points.
The ADP for a group of Participants shall be
equal to the average of the actual deferral
ratios calculated separately for each
Participant in the group. The actual
deferral ratio is the amount of the
Participant's Elective Deferrals credited
for the Plan Year divided by the
Participant's Compensation for the Plan
Year. For purposes of calculating the actual
deferral ratio, Elective Deferrals shall
include (1) any Elective Deferrals made
pursuant to the Participant's deferral
election (including Excess Elective
Deferrals of Highly Compensated Employees)
but excluding (i) Excess Elective Deferrals
of non-Highly Compensated Employees that
arise solely from Elective Deferrals made
under the Plan or plans of the Employer and
(ii) Elective Deferrals that are taken into
account under the ACP test (provided the ADP
test is satisfied both with and without
exclusion of these Elective Deferrals) and
(2) at the election of the Employer,
Qualified Non-Elective Contributions and
Qualified Employer Matching Contributions.
An Employee who would be a Participant but
for the failure or inability to make
Elective Deferrals shall be treated as a
Participant on whose behalf no Elective
Deferrals are made and shall have an actual
deferral ratio of 0. The ADP and actual
deferral ratio for each Participant shall be
calculated to the nearest one-hundredth of
one percent.
For purposes of calculating the ADP,
Elective Deferrals, Qualified Non-Elective
Contributions and Qualified Employer
Matching Contributions must be allocated to
the Employee at any time during the Plan
Year and must be contributed to the Trust no
later than the end of the 12-month period
<PAGE> 110
immediately following the end of the Plan
Year. In order to be treated as an Elective
Deferral, a Qualified Non-Elective
Contribution and Qualified Employer Matching
Contribution must satisfy the requirements
of Treasury Regulation 1.401(k)-1(b)(5). In
addition, any Elective Deferral must relate
to Compensation which either would have been
received by the Employee in the Plan Year
but for the Employee's election to defer or
is attributable to Service performed by the
Employee in the Plan Year and would have
been received by the Employee within two and
one-half months following the end of the
Plan Year but for the Employee's election to
defer.
In the event that this Plan satisfies the
requirements of Code sections 401(k),
401(a)(4) or 410(b) only if aggregated with
one or more other qualified plans or if one
or more other plans satisfy the requirements
of such Code sections only if aggregated
with this Plan, then the ADP shall be
determined as if all such plans were a
single plan. For Plan Years beginning after
December 31, 1988, contributions and
allocations under an ESOP plan (or the ESOP
portion of a plan) may not be combined under
this paragraph with the contributions and
allocations under a non-ESOP plan (or the
non-ESOP portion of a plan).
The Employer shall maintain records
sufficient to demonstrate satisfaction of
the ADP test and the amount of Qualified
Non-Elective Contributions or Qualified
Employer Matching Contributions, or both,
used in such test.
(3) Special Rules for Highly Compensated
Employees. The actual deferral ratio for any
Participant who is a Highly Compensated
Employee for the Plan Year and who is
eligible to make Elective Deferrals under
two or more arrangements described under
Code section 401(k) which are maintained by
the Employer and any Related Employer shall
be
<PAGE> 111
determined as if such deferrals were made
under a single arrangement. If the different
cash or deferred arrangements have different
plan years, then all cash or deferred
arrangements ending with or within the same
calendar year shall be treated as a single
arrangement. Notwithstanding the foregoing,
two or more plans shall be treated as
separate plans if they are required to be
disaggregated under regulations issued under
Code section 401(k).
If a Highly Compensated Employee is subject
to the family aggregation rules set forth
herein because such Employee is either a
more than 5% owner or one of the ten most
Highly Compensated Employees during the Plan
Year, the combined actual deferral ratio for
the family group (which shall be treated as
one Highly Compensated Employee) shall be
determined by combining the Elective
Deferrals, Compensation and any other
amounts treated as Elective Deferrals of all
of the eligible family members.
The Elective Deferrals, Compensation, and
other amounts treated as Elective Deferrals
for all family members shall be disregarded
for purposes of determining the ADP for the
Participants who are not Highly Compensated
Employees, except to the extent permitted
above. In addition, if a Participant is
required to be aggregated as a member of
more than one family group, all Participants
who are members of those family groups which
include the Participant shall be aggregated
as one family group for purposes of this
section.
(4) Correction If ADP Test Is Not Satisfied. If
the ADP for the Participants who are Highly
Compensated Employees does not satisfy the
ADP test for a Plan Year, then the Employer
may use one or more of the following methods
to satisfy the ADP test:
(i) Any non-matching Employer
Contributions may be designated
as
<PAGE> 112
Qualified Non-Elective
Contributions and any Employer
Matching Contributions may be
designated as Qualified Employer
Matching Contributions for the
Participants who are not Highly
Compensated Employees to the
extent necessary to satisfy the
ADP test. Said Qualified
Non-Elective Contributions and
Qualified Matching Contributions
shall be allocated to one or
more Non-Highly Compensated
Employees in a nondiscriminatory
manner.
(ii) The Excess Contributions for a
Highly Compensated Employee,
plus earnings thereon, may be
distributed to the Highly
Compensated Employee at any time
during the 12-month period
immediately following the end of
the Plan Year in which the ADP
test was not satisfied. The
amount of the Excess
Contributions for each Highly
Compensated Employee shall be
determined by first reducing the
Elective Deferrals for the
Highly Compensated Employee with
the greatest actual deferral
ratio to the extent which will
either enable the arrangement to
satisfy the ADP test or cause
such Highly Compensated
Employee's actual deferral ratio
to equal the ratio of the Highly
Compensated Employee with the
next highest actual deferral
ratio. This process shall be
repeated until the ADP test is
satisfied. The amount of Excess
Contributions so determined for
a family group which is treated
as a single Highly Compensated
Employee shall be allocated
among the family members in
proportion to their Elective
Deferrals. The amount of
earnings attributable to the
Excess Contributions shall be
equal to the earnings for the
Plan Year attributable to the
Participant's Elective Deferrals
and amounts treated
<PAGE> 113
as Elective Deferrals multiplied
by a fraction\; the numerator of
which is the Participant's
excess contributions for the
Plan Year and the denominator of
which is the subaccount of the
Participant's Account as of the
last day of the Plan Year which
is attributable to his Elective
Deferrals and amounts treated as
Elective Deferrals, less any
earnings allocable to such
subaccount for the Plan Year.
For Plan Years which began prior
to January 1, 1992, any
reasonable method for
determining the earnings
attributable to Excess
Contributions may be used,
provided that such method is
applied consistently to all
Participants and for all
corrective distributions for
such year. Such a method is not
required to take into account
any earnings between the end of
the Plan Year and the date of
distribution.
(iii) If Voluntary Employee
Contributions are permitted
under this Plan, all or any part
of the Excess Contributions
determined under (ii) above may
be recharacterized as Voluntary
Employee Contributions using the
same "leveling method" used for
correcting Excess Contributions
under (ii) above. The amount of
recharacterized Excess
Contributions plus the Highly
Compensated Employee's actual
Voluntary Employee Contributions
must satisfy the ACP test. For
purposes of Code sections 72,
401(a)(4), 401(k)(3) and 6047,
the recharacterized
contributions shall be treated
as Employee contributions. For
all other purposes of the Code,
the recharacterized
contributions shall be treated
as Employer Contributions that
are Elective Deferrals.
<PAGE> 114
Elective contributions may not
be recharacterized after the
later of two and one-half months
following the end of the Plan
Year to which the
recharacterization relates or
October 24, 1988.
Recharacterization will be
deemed to have occurred on the
date on which the last of the
Highly Compensated Employees
with excess contributions to be
recharacterized is notified in
writing of the amount
recharacterized and the
consequences thereof.
Excess Contributions shall mean, with respect to any
Plan Year, the excess of (1) the aggregate amount of
Elective Deferrals taken into account in computing the
actual deferral percentage of the Highly Compensated
Employees for such Plan Year, over (2) the maximum
amount of such contributions permitted by the ADP test
(determined by reducing the Elective Deferrals made on
behalf of the Highly Compensated Employees in order of
the actual deferral percentages, beginning with the
highest of such percentages).
(c) Restrictions on Multiple Use of Alternative Limitation
(Plans Subject to Both 401(k) and 401(m)). If one or
more Highly Compensated Employees is eligible to make
Elective Deferrals and make or receive Aggregate
Contributions under any plan of the Employer including
this Plan, then the sum of the ADP plus the ACP for the
entire group of Highly Compensated Employees for any
Plan Year shall not exceed the aggregate limit. Said
aggregate limit shall be equal to the greater of:
(1) 1.25 times the greater of (a)
the ADP of the group of non-Highly
Compensated Employees for the Plan Year or
(b) the ACP for such group, plus
(2) Two percent plus the lesser of (a) the ADP
of the group of non-Highly Compensated
Employees or (b) the ACP for such group.
However, in no event shall this amount
exceed two times the lesser of (a) or (b)\;
or
<PAGE> 115
(3) The sum obtained by substituting the word
"lesser" for the word "greater" in (1) above
and substituting the word "greater" for the
word "lesser" in (2) above.
The ADP and ACP used in this limitation shall take into
account any corrective measures taken without regard to
this limitation.
If the limitations of this section are exceeded with
respect to any Highly Compensated Employee, then the
Employer shall reduce the actual deferral ratios or the
actual contribution ratios only for those Highly
Compensated Employees who are eligible to make and/or
receive Elective Deferrals and Aggregate Contributions.
The reduction in the Elective Deferrals shall be made in
a similar manner for the purposes of satisfying the ADP
test, and the reduction in Aggregate Contributions shall
be made in a similar manner for satisfying the ACP test.
(d) Special Top-Heavy Plan Rules. Effective for Plan
Years beginning after December 31, 1988, Elective
Deferrals on behalf of Key Employees are treated as
Employer Contributions for purposes of satisfying the
minimum Top-Heavy allocation while Elective Deferrals on
behalf of Non-Key Employees shall not be treated as
Employer Contributions. In addition, Matching Employer
Contributions allocated to Key Employees shall be
treated as Employer Contributions for purposes of
satisfying the minimum Top-Heavy allocation. However, if
the Plan utilizes Employer Contributions allocated to
Non-Key Employees on the basis of Employee Contributions
(including Elective Deferrals) to satisfy the minimum
Top-Heavy allocation, such Employer Contributions shall
not be treated as Matching Employer Contributions for
purposes of applying the requirements of Code sections
401(k) and 401(m) for Plan Years which begin after
December 31, 1988.
Any Qualified Non-Elective Contribution may be treated as
an Employer Contribution for purposes of satisfying the
minimum Top-Heavy allocation.
(e) Definitions. For purposes of this Section, the following
definitions shall apply:
<PAGE> 116
(1) Matching Employer Contribution. Matching
Employer Contribution shall mean an Employer
Contribution made to this or any other
defined contribution plan on behalf of a
Participant on account of an Employee
Contribution or Elective Deferral made by
such Participant under a plan maintained by
the Employer.
(2) Qualified Non-Elective Contribution and
Qualified Employer Matching Contribution. A
Qualified Non-Elective Contribution is an
Employer Contribution other than an Elective
Deferral or Employer Matching Contribution
or Qualified Employer Matching Contribution
which satisfies the vesting and distribution
requirements of an Elective Deferral. A
Qualified Employer Matching Contribution is
an Employer Matching Contribution made on
account of an Employee's Elective Deferrals
or Employee Contributions to the Plan which
satisfies the vesting and distribution
requirement of an Elective Deferral.
(3) Compensation. Compensation shall mean
Compensation as specified under Section
1.07, including any Elective Deferrals made
by the Employee to this Plan or any other
plan. Compensation for an Employee for
purposes of the ADP and ACP tests shall
exclude Compensation prior to the date on
which he was first eligible to make an
Elective Deferral.
(4) Employer. Employer shall mean the Employer
adopting this Plan and any Related Employer.
(f) Rules Applicable to Partnership Cash or Deferred Arrangements.
(1) An individual partner may not make an
Elective Deferral with respect to
Compensation for a partnership taxable year
after the last day of that year. A partner's
Compensation for a partnership taxable year
ending with or within a Plan Year beginning
on or before October 1, 1991 is, however,
deemed not to be currently available until
<PAGE> 117
the due date, including extensions, for
filing the partnership's federal information
return for such taxable year.
(2) Effective for contributions made for Plan
Years beginning after 12/31/88, a cash or
deferred arrangement includes any
arrangement that directly or indirectly
permits individual owners to vary the amount
of contributions made on their behalf. A
one-time irrevocable election to participate
or not to participate in this Plan, if
partners may participate, is not a cash or
deferred election if the election was made
on or before the later of the first day of
the first Plan Year beginning after December
31, 1988 or March 31, 1989. This election
may be made after the commencement of
employment or after the Employee's first
becoming eligible under any Plan of the
Employer. The election may be made even if
the one-time irrevocable election under
Regulation 1.401(k)-1(a)(3)(iv) was
previously made. In addition, the exclusion
of a partner or other Employee from
participation in the Plan due to his
employment in an ineligible class is not a
cash or deferred arrangement.
(3) If a partnership makes Employer Matching
Contributions with respect to an individual
partner's Elective Deferrals, then the
Employer Matching Contributions are treated
as Elective Deferrals made on behalf of the
partner. If, on August 8, 1988, the Plan did
not treat Employer Matching Contributions as
Elective Deferrals, the preceding sentence
only applies to Plan Years beginning after
August 8, 1988.
<PAGE> 118
ARTICLE IV
PARTICIPANT'S ACCOUNTS AND ALLOCATIONS
4.01 PARTICIPANT'S ACCOUNTS. The Plan
Administrator shall establish and maintain
sufficient records to account for each
Participant's and Beneficiary's individual
interest in the Trust Fund. As of each
Accounting Date, allocations shall be made
to the individual accounts as provided for
herein. In no event shall the allocations to
a Participant's Account for any Plan Year
exceed the limitations of Section 4.05.
4.02 ALLOCATION OF EMPLOYER CONTRIBUTIONS AND
FORFEITURES. The Employer Contributions and
Forfeitures for each Plan Year shall be
allocated pursuant to the provisions of the
Adoption Agreement. In any Plan Year in
which this Plan is a Top Heavy Plan, said
allocation to the account of any Participant
who is not a Key Employee shall not be less
than three percent (3%) of said
Participant's Compensation or, if less, the
largest percentage of the Key Employee's
Compensation allocated to the account of any
Key Employee for that Plan Year.
4.03 ALLOCATION OF EMPLOYEE CONTRIBUTIONS. A
Participant's Employee Contributions, as
provided for in the Adoption Agreement,
shall be allocated to the Participant's
Account on the date the contributions are
made. However, any Voluntary or Mandatory
Employee Contribution which is deposited
within 30 days following the Accounting Date
may, at the option of the Participant, be
allocated to the Participant's Account on
such Accounting Date.
Each type of Employee Contribution provided for in the Adoption
Agreement shall be accounted for separately under its own subaccount.
In addition, if the Plan permitted the
<PAGE> 119
withdrawal of any Voluntary Employee Contributions on May 5, 1986,
then an additional subaccount shall be established for any voluntary
contributions received on or before December 31, 1986.
4.04 ALLOCATION OF THE TRUST FUND EARNINGS. Based on the Trustee's
annual or interim report, the Plan Administrator shall determine the
net earnings of the Trust Fund for the allocation period ending on
the Accounting Date. The net earnings shall include any increase or
decrease in the fair market value of the Trust Fund since the last
valuation date. The earnings so determined shall be allocated to each
individual Participant's Account in the proportion that the value of
each such account bears to the total value of all such accounts as of
the prior valuation date. The value of any Segregated Account, as
provided for in Section 10.04 of this Agreement, or any separate
account established as a result of a Qualified Domestic Relations
Order, or any individual insurance contract, as provided for under
Article XII, shall be deducted from the value of the Participant's
Account and shall not be included in the earnings allocation.
Instead, the earnings attributable to a Segregated Account or
individual insurance contract shall be credited directly to the
Participant's Account in whose name the Segregated Account or
individual insurance contract was established.
Prior to allocating the earnings, the Plan Administrator may adjust
the value of the individual Participant's Account on the prior
valuation date to take into account any withdrawals or contributions
made in the interim.
4.05 LIMITATIONS ON ANNUAL ADDITIONS.
(a) Basic Limitation. The total Annual Additions allocated
to a Participant's Account and his account under any
other defined contribution plan maintained by the
Employer during a Limitation Year shall in no event
exceed the lesser of $30,000.00 (or, if greater,
one-fourth of the defined benefit dollar limitation in
effect for the Limitation Year under Code section
415(b)(1)(A)) or 25% of the Participant's Compensation
for the Limitation Year. Annual Additions shall mean the
sum of the following amounts:
<PAGE> 120
(1) Employer contributions\;
(2) Forfeitures\;
(3) all Voluntary and Mandatory Employee
Contributions\;
(4) amounts allocated, after March 31, 1984, to
an individual medical benefit account, as
defined in Code section 415(l)(2), which is
part of a pension or annuity plan maintained
by the Employer and amounts derived from
contributions paid or accrued after December
31, 1985, in taxable years ending after such
date, which are attributable to
post-retirement medical benefits allocated
to the separate account of a key employee
(as defined in Code section 419A(d)(3))
under a welfare benefit fund (as defined in
Code section 419(e))\; and
(5) allocations under a simplified employee
pension.
Annual Additions shall also include excess Elective
Deferrals, excess ADP contributions, or excess Aggregate
Contributions even though such excess deferrals and
contributions are corrected under the terms of the Plan.
Irrespective of the foregoing, excess Elective Deferrals
under Code section 402(g) shall not be considered to be
Annual Additions if the amount designated by the Plan
Participant (or deemed to have been designated in
accordance with the Plan) as an excess Elective Deferral
(and any income allocable to said deferral) is
distributed to the Participant after the date on which
the Plan received the excess Elective Deferral and not
later than the first April 15th following the close of
the Participant's taxable year.
(b) Amounts Not Considered As Annual Additions. For
Limitation Years beginning prior to January 1, 1987,
only the lesser of the Participant's Voluntary and
Mandatory Employee Contributions in excess of 6% of said
Participant's Compensation or one-half of such
<PAGE> 121
Employee Contributions shall be treated as Annual
Additions under (a)(3) above.
If the Employer contributes an amount to a Participant's
Account because of an erroneous failure to allocate
amounts in a prior Limitation Year, the contribution
will be considered an Annual Addition with respect to
such prior Limitation Year rather than the Limitation
Year in which the contribution is made. Furthermore, the
restoration of a Participant's Accrued Benefit pursuant
to the provisions of Section 7.05 shall not be
considered an Annual Addition for the Limitation Year.
(c) Maximum Annual Addition in Short Limitation Year. A
short Limitation Year shall be created by an amendment
to the Plan changing the Limitation Year to a different
12-consecutive month period. The short Limitation Year
shall be the period which begins on the first day of the
current Limitation Year and ends on the day before the
first day of the new Limitation Year. The maximum Annual
Additions allocated to a Participant's Account during
such short Limitation Year shall be the lesser of
one-twelfth of the current dollar limitation in effect
for the Limitation Year times the number of months in
the short Limitation Year or 25% of the Participant's
Compensation for the short Limitation Year.
(d) Limitation for Present or Prior Participation in Defined
Benefit Plan. If a Participant currently participates,
or has ever participated, in a defined benefit plan
maintained by the Employer, then the sum of the defined
benefit plan fraction and the defined contribution plan
fraction for the Participant during any Limitation Year
shall not exceed 1.0. If such sum exceeds 1.0 for any
Limitation Year, then the Plan Administrator shall
either reduce the Participant's Annual Additions under
this Plan pursuant to the provisions of Section 4.06 or
shall reduce the Participant's accrual under the defined
benefit plan only to the extent necessary to satisfy the
1.0 limitation for the Limitation Year, as provided for
in the Adoption Agreement.
<PAGE> 122
(e) Definitions. For purposes of this Section only, the
following definitions shall apply:
(1) Compensation shall mean Compensation
determined under Section 1.07 without regard
to any elective contributions or deferred
compensation under (a), (b) and (c) of that
Section. For Limitation Years beginning
after December 31, 1991, Compensation for a
Limitation Year is the Compensation actually
paid or includable in gross income during
such limitation year.
(2) Employer shall mean the Employer that adopts
this Plan and any Related Employer. Solely
for the purposes of this Section, a Related
Employer will be determined under Code
sections 414(b) and (c) by substituting the
phrase "more than 50 percent" for the phrase
"more than 80%" each place it appears in
Code section 1563(a)(1).
(3) Defined contribution plan shall mean 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 Administrator
may allocate to such participant's account.
The Plan Administrator shall treat all
defined contribution plans (whether or not
terminated) maintained by the Employer as a
single plan. For purposes of the limitations
of this Article IV only, the Plan
Administrator shall treat employee
contributions made to a defined benefit plan
maintained by the Employer as a separate
defined contribution plan. The Plan
Administrator shall treat as a defined
contribution plan an individual medical
benefit account (as defined in Code section
415(l)(2)) included as part of a defined
benefit plan maintained by the Employer and,
for taxable years ending after December 31,
1985, a welfare benefit fund under Code
section 419(e) maintained by the Employer to
<PAGE> 123
the extent there are post-retirement medical
benefits allocated to the separate account
of a key employee (as defined in Code
section 419(d)(3)).
(4) Defined benefit plan shall mean a retirement
plan which does not provide for individual
accounts for Employer contributions. The
Plan Administrator shall treat all defined
benefit plans (whether or not terminated)
maintained by the Employer as a single plan.
(5) Defined benefit plan fraction shall mean a
fraction, the numerator of which is the
projected annual benefit of the Participant
under the defined benefit plan(s) and the
denominator of which is the lesser of (i)
1.25 times the dollar limitation in effect
under Code section 415(b)(1)(A) for the
Limitation Year, or (ii) 1.4 times the
Participant's limitation under Code section
415(b)(1)(B).
The Plan Administrator shall determine the
denominator of this fraction by taking into
account the years of participation and the
years of service the Plan Administrator
reasonably can project the Participant will
have at the time his projected annual
benefit is payable. If the Employee was a
Participant in one or more defined benefit
plans maintained by the Employer which were
in existence on May 5, 1986, the denominator
of this fraction will not be less than 125%
of the Employee's Current Accrued Benefit.
An Employee's Current Accrued Benefit is the
sum of the annual benefits under such
defined benefit plans which the Employee had
accrued as of the end of the last Limitation
Year beginning before January 1, 1987,
determined without regard to any change in
the terms or conditions of the Plan made
after May 5, 1986, and without regard to any
cost of living adjustment occurring after
May 5, 1986. The preceding sentence only
applies if the defined benefit plans
individually and in the aggregate satisfied
the requirements of
<PAGE> 124
Code section 415 as in effect at the end of
the 1986 Limitation Year.
(6) Defined contribution plan fraction shall
mean a fraction, the numerator of which is
the sum of the Annual Additions to the
Participant's Account under the defined
contribution plan(s) and welfare benefit
funds (as defined in Code section 419(e))
for all Limitation Years, and the
denominator of which is the sum of the
lesser of the following amounts determined
for the Limitation Year and for each prior
Limitation Year: (i) 1.25 times the dollar
limitation in effect under Code section
415(c)(1)(A) for the Limitation Year
(determined without regard to the special
dollar limitations for employee stock
ownership plans), or (ii) 35% of the
Participant's Compensation for the
Limitation Year. With respect to any defined
contribution plan in existence on July 1,
1982, the denominator of the defined
contribution plan fraction attributable to
all Limitation Years beginning before
January 1, 1983, at the election of the Plan
Administrator, shall be an amount equal to:
(i) the sum of the lesser of the
dollar limitation in effect
under Code section 415(c)(1)(A)
or 25% of the Participant's
Compensation determined for each
such Limitation Year\; times
(ii) the transition fraction. The
transition fraction shall be
equal to the lesser of $51,875
or 35% of the Participant's
Compensation for the Limitation
Year beginning in 1981\; divided
by the lesser of $41,500 or 25%
of the Participant's
Compensation for the Limitation
Year beginning in 1981.
If the Plan satisfied Code section 415 for
all Limitation Years beginning before
January 1, 1987, the Plan Administrator will
redetermine the defined contribution plan
fraction and the defined benefit plan
<PAGE> 125
fraction as of the end of the Limitation
Year which began in 1986, in accordance with
the limitations of this Section and
disregarding any other changes in the terms
and conditions of the Plan made after May 5,
1986. If the sum of the redetermined
fractions exceeds 1.0, the Plan
Administrator will permanently subtract from
the numerator of the defined contribution
plan fraction an amount equal to the product
of the excess of the sum of the fractions
over 1.0 times the denominator of the
defined contribution plan fraction.
In addition, the Plan Administrator may use
any other transitional rules prescribed by
law to compute a Participant's defined
contribution plan fraction.
(7) Projected Annual Benefit shall mean the
annual retirement benefit (adjusted to an
actuarially equivalent straight life annuity
if the benefit is payable in a form other
than a straight life annuity or qualified
joint and survivor annuity) of the
Participant determined under the terms of
the defined benefit plan using the following
assumptions:
(i) he continues employment until
his normal retirement age (or
current age, if later) as
stated in the defined benefit
plan,
(ii) his compensation continues at
the same rate as in effect in
the Limitation Year under
consideration until the date of
his normal retirement age, and
(iii) all other relevant factors used
to determine benefits under the
defined benefit plan as of the
current Limitation Year remain
constant for all future
Limitation Years.
(f) Special Top Heavy Rules. If a defined benefit plan or
defined contribution plan maintained by the Employer is
determined to be a Top Heavy Plan for a Limitation Year,
a factor of 1.0 shall be
<PAGE> 126
substituted for the factor 1.25 for purposes of
determining the defined benefit plan fraction and the
defined contribution plan fraction. In addition, for
purposes of computing the transition fraction, "$41,500"
shall be substituted for "$51,875". However, no
substitution of factors shall be required if there are
no further benefit accruals on behalf of the Participant
under the defined benefit plan and there are no further
contributions and forfeitures allocated to such
Participant under the defined contribution plan. In
addition, no substitution of factors shall be required
for any Top Heavy Plan which is not a Super Top Heavy
Plan if either the defined contribution plan, including
this Plan, provides for a minimum allocation of Employer
Contributions and Forfeitures of 7.5% of Compensation
for any Participant who is not a Key Employee or the
defined benefit plan provides a minimum accrued benefit
percentage of 3% per year of service, up to a maximum of
10 years, for any Participant who is not a Key Employee.
4.06 TREATMENT OF EXCESS ANNUAL ADDITIONS. In the event the
Annual Additions to a Participant's Account for any
Limitation Year exceed the limitations (including any
earnings on said contributions) of Section 4.05, then
any Voluntary or Mandatory Employee Contributions or
Elective Deferrals included in the Annual Additions
(including any earnings on said contributions) may be
returned to the Participant. If further reductions are
necessary, then the Participant's Annual Additions may
be reduced to the amount necessary to satisfy the
maximum limitation. If the Participant is covered by
another qualified defined contribution plan maintained
by the Employer, then the Annual Additions will be
reduced pursuant to the provisions of the Adoption
Agreement. The amount of the excess Annual Additions
under this Plan shall not be distributed to the
Participant (including former Participants) but shall
instead be treated in accordance with one of the
following methods:
(a) The excess amount attributable to Employer Contributions
and Forfeitures shall be allocated and reallocated in
the Limitation Year to the other Participants. If, after
the allocations are made
<PAGE> 127
and the limitations of Section 4.05 are met with respect
to each Participant, then any remaining excess amount
shall be held in an unallocated suspense account. No
Employer or Employee Contributions which constitute
Annual Additions may be made to the Plan in any
following Limitation Year until the suspense account has
been allocated to the Participant's Accounts.
(b) The excess amount shall be used to reduce Employer
Contributions for the next Limitation Year and each
succeeding Limitation Year, as necessary, for the
Participant provided the Participant is entitled to an
allocation under Section 4.02 for such Limitation Year.
If said Participant is not entitled to an allocation
under Section 4.02 for such Limitation Year, then any
excess amount shall be held in an unallocated suspense
account. The excess amount shall be allocated in
accordance with the provisions of paragraph (a) in the
next Limitation Year and each succeeding Limitation
Year, if necessary, and must be used to reduce Employer
contributions for any such Limitation Year.
(c) The excess amount shall be held in an unallocated
suspense account and shall be allocated and reallocated
to all of the Participant's Accounts in the next
Limitation Year and each succeeding Limitation Year, if
necessary. The excess amount must be used to reduce
Employer contributions for any such Limitation Year.
A suspense account created under one of the above
methods shall not receive any allocation of Trust Fund
earnings under Section 4.04.
<PAGE> 128
ARTICLE V
RETIREMENT BENEFITS
5.01 RETIREMENT BENEFITS.
(a) Early Retirement Benefit. Upon the separation from
Service after the attainment of his Early Retirement
Age, as set forth and if permitted in the Adoption
Agreement, a Participant shall be entitled to receive
100% of his Accrued Benefit.
(b) Normal Retirement Benefit. Upon the attainment of his
Normal Retirement Age, as set forth in the Adoption
Agreement, a Participant shall be entitled to receive
100% of his Accrued Benefit.
(c) Deferred Retirement Benefit. A Participant who remains
in the Service of the Employer after the attainment of
his Normal Retirement Age shall continue to receive
allocations of Employer contributions and Forfeitures
under the terms of the Plan and shall be entitled to
receive 100% of his Accrued Benefit at any time
thereafter.
5.02 TIME OF COMMENCEMENT OF RETIREMENT BENEFIT. At any time
after the attainment of his Normal Retirement Age, or his
Early Retirement Age as stated in the Adoption Agreement,
the Participant can elect to receive distribution of his
Retirement Benefit. The payment of a Participant's
Retirement Benefit shall begin no later than the
Participant's Required Distribution Date, or if earlier,
the 60th day following the last day of the Plan Year
which includes the latest of:
(a) the date on which the Participant attains the earlier of
his Normal Retirement Age or age 65\;
(b) the 10th anniversary of the date the Participant
commenced participation in the Plan\;
(c) the date on which the Participant terminates his
Service\; or
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(d) the date specified in a written election,filed with the
Plan Administrator, which describes the benefit and the
date on which the payment of such benefit shall commence.
The Required Distribution Date for a Participant who attained age
70-1/2 prior to January 1, 1988 and who is not a 5% owner (as defined
under Section 1.29(c)(3) of this Agreement) at any time during the
5-year period prior to attaining age 70-1/2 shall be the April 1st
following the calendar year in which the Participant terminates his
Service. The Required Distribution Date for any other Participant
shall be the April 1st following the calendar year in which the
Participant attains age 70-1/2.
If a Participant does not file a written claim for the commencement
of his Retirement Benefit, the payment of his Retirement Benefit
shall commence on the later of age 62 or the date determined above.
5.03 FORM OF RETIREMENT BENEFIT.
(a) Qualified Joint and Survivor Annuity. Unless elected
otherwise by the Participant with proper spousal consent,
the Participant's Retirement Benefit must be distributed
in the form of a Qualified Joint and Survivor Annuity. A
Qualified Joint and Survivor Annuity (QJSA) is an
immediate annuity which is purchased with the
Participant's Nonforfeitable Accrued Benefit and which is
payable for the life of the Participant with a survivor
annuity payable for the life of the spouse which is equal
to 50% of the amount of the annuity payable during the
joint lives of the Participant and his spouse. For an
unmarried Participant, a QJSA is an immediate annuity
payable for the life of the Participant which is
purchased with the Participant's Nonforfeitable Accrued
Benefit. In determining the amount of the QJSA, the
Participant's Accrued Benefit shall be reduced by any
security interest held by the Plan by reason of a loan
outstanding to the Participant at the time of payment,
provided the security interest is treated as satisfaction
of the loan.
(b) Optional Forms of Benefit. In lieu of receiving his QJSA,
a Participant may elect, with spousal consent,
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to receive his benefit under one of the following
options:
(1) one single-sum payment in cash, securities
or other property as the Plan Administrator
shall determine\;
(2) payments in monthly, quarterly, semi-annual,
or annual installments over a stated period
of time\;
(3) by the purchase of a non-transferable
annuity payable over the life of the
Participant or the joint lives of the
Participant and a designated individual. The
terms of any such annuity contract purchased
and distributed by the Plan to a Participant
or spouse shall comply with the requirements
of the Plan\; or
(4) by the payment of installments over a period
certain not extending beyond the life
expectancy of the Participant or the joint
life expectancy of the Participant and a
designated individual\; such payments to be
made directly from the Plan or by the
purchase of a non-transferable period
certain annuity. The terms of such annuity
contract purchased and distributed by the
Plan to a Participant or spouse shall comply
with the requirements of the Plan.
(c) Election to Receive the Retirement Benefit in a Form
Other Than a Qualified Joint and Survivor Annuity.
(1) Written Explanation Requirement. The Plan
Administrator must provide the Participant
with a written explanation of the QJSA no
less than 30 days and no more than 90 days
before the Annuity Starting Date. The
explanation shall include a general
description of the terms and conditions of
the QJSA\; the circumstances in which the
QJSA will be provided unless the Participant
has elected not to have his retirement
benefit provided in that form\; the
Participant's right to make, and the effect
of, an election to waive the QJSA\; the
rights of the Participant's spouse with
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respect to such an election\; the
Participant's right to make, and the effect
of, a revocation of such an election\; and a
general explanation of the relative
financial effect of the election on the
Participant's annuity. For Plan Years
beginning after December 31, 1988, the
Participant must also be given a general
description of the eligibility conditions
and other material features of the optional
forms of benefit available under
subparagraph (b) above and an explanation of
the relative values of such optional forms.
(2) Participant Waiver Election. Once a
Participant has received the above written
explanation of the QJSA, he can elect to
waive the QJSA and receive his Retirement
Benefit under any of the above optional
forms at any time prior to his Annuity
Starting Date. The election shall be in
writing and clearly indicate that the
Participant is electing to receive all or
part of his Retirement Benefit in a form
other than that of a QJSA and also must
state the specific nonspouse beneficiary, if
any, who may receive a portion of his
benefit. Additionally, a Participant's
waiver of the QJSA shall not be effective
unless the election designates a form of
benefit payment which may not be changed
without spousal consent or the spouse
expressly permits designations by the
Participant without further spousal consent.
Having made an election, a Participant may
nevertheless revoke it or file a new
election any number of times prior to his
Annuity Starting Date or thereafter.
(3) Spousal Consent Requirement. If a
Participant is married on his Annuity
Starting Date, the Participant's spouse must
consent in writing to an election to waive
the QJSA. The spouse's consent shall
acknowledge the effect of the election and
must be witnessed by either a Plan
representative or notary public. If the
spouse is legally incompetent to give
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consent, the spouse's legal guardian (even
if the guardian is the Participant) may give
consent. If it is established to the
satisfaction of the Plan Administrator that
the spouse cannot be located or if the
Participant is legally separated or has been
abandoned (within the meaning of the local
law) and the Participant has a court order
to such effect, spousal consent is not
required unless a Qualified Domestic
Relations Order provides otherwise. Once
given, the spouse's consent cannot be
revoked with respect to a given election.
Any consent by a spouse obtained under this
provision (or establishment that the consent
of a spouse may not be obtained) shall be
effective only with respect to such spouse.
A consent that permits designations by the
Participant without any requirement of
further consent by such spouse must
acknowledge that the spouse has the right to
limit consent to a specific beneficiary, and
a specific form of benefit where applicable,
and that the spouse voluntarily elects to
relinquish either or both of such rights.
(d) Minimum Distribution Requirements. Any form of the
Retirement Benefit must, as of the Participant's Required
Distribution Date, satisfy the minimum distribution
requirements under Code section 401(a)(9) including the
minimum distribution incidental benefit requirements in
the Treasury regulations thereunder including section
1.401(a)(9)-2 of the proposed regulations or the final
form of said regulations. The first distribution year for
the purposes of this section (d) is the calendar year
immediately preceding the Participant's Required
Distribution Date. The minimum distribution for that
calendar year must be paid by the Required Distribution
Date. The required minimum distribution for any
subsequent calendar year must be paid by December 31st of
that year.
The minimum distribution for a calendar year equals the
Participant's Accrued Benefit as of the latest valuation
date during the calendar year immediately
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preceding the distribution calendar year divided by the
Participant's life expectancy or, if applicable, the
joint life expectancy of the Participant and his
designated Beneficiary. The Participant's Accrued Benefit
as determined on the valuation date will be increased by
any contributions and forfeitures allocated after the
valuation date but prior to the distribution calendar
year and will be decreased by any distributions made
after the valuation date but prior to the distribution
calendar year. Any portion of the minimum distribution
for the first distribution year which is made after the
close of the year will be treated as a distribution
during that first year. Life expectancies shall be
computed using Tables V and VI under Treasury Regulation
1.72-9 based on the attained ages of the Participant and
his designated Beneficiary during the calendar year.
For purposes of determining his minimum distribution
amount, a Participant may file an irrevocable written
election with the Plan Administrator prior to his initial
minimum distribution to have his life expectancy or the
combined life expectancy of the Participant and his
designated Beneficiary be either (i) recalculated with
respect to each distribution year or (ii) be equal to the
life expectancy for the initial distribution year, said
life expectancy to be reduced by one for each succeeding
distribution year. The life expectancy for any individual
shall be based on his attained age during the applicable
distribution year. However, the combined life expectancy
of a Participant and a non-spouse designated Beneficiary
may not be recalculated in a manner which takes into
account any adjustments other than the Participant's life
expectancy. Furthermore, if the Participant's spouse is
not his designated Beneficiary, then any distribution to
the Participant after December 31, 1988 and after his
Required Distribution Date shall satisfy the minimum
distribution incidental benefit ("MDIB") requirement
contained in the Treasury Regulations issued under Code
section 401(a)(9). To satisfy this requirement, the
applicable MDIB factor will be substituted for the life
expectancy factor in determining the minimum
distribution. Prior to January 1, 1989, the Plan
satisfies the incidental benefit requirements if the
distributions to the
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Participant satisfy the MDIB requirements or if the
present value of the benefit which is payable solely to
the Participant is greater than 50% of the present value
of the benefit payable to the Participant and his
Beneficiary.
If no written election is filed with respect to a
Participant, his minimum distribution shall be based on
recalculated life expectancy if he is single and the
initial combined life expectancy reduced by one for each
succeeding distribution year if he is married.
If the Participant receives distribution in the form of a
nontransferable annuity contract, the distribution will
satisfy the provisions of this section only if the terms
of the annuity contract comply with the requirements of
Code section 401(a)(9) and applicable proposed or final
regulations.
5.04 RETIREMENT BENEFIT LESS THAN $3,500. Irrespective of
the provisions of this Article, except for the "Direct
Rollover" requirements in Section 5.06 if the
Participant's Retirement Benefit immediately prior to his
Annuity Starting Date is less than $3,500, then the Plan
Administrator may, without Participant or spousal
consent, distribute his Retirement Benefit in the form of
a single-sum payment at any time prior to his Required
Distribution Date.
5.05 DESIGNATION OF DISTRIBUTION MADE IN ACCORDANCE WITH
SECTION 242(b)(2) OF TEFRA. The provisions of Section
5.02 and Section 5.03 of this Article shall not apply to
any distribution made pursuant to the provisions of a
designation if the following requirements are met:
(a) the distribution by the Plan is one which would not have
disqualified the Plan under section 401(a) of the Code,
as in effect on the last day of the Plan Year beginning
prior to January 1, 1984\;
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(b) the distribution is in accordance with a method of
distribution designated by the Participant whose
interest in the Plan is being distributed\;
(c) the designation is in writing, is signed by the
Participant, and is executed prior to January 1, 1984\;
(d) the Participant whose interest is being distributed had a
Participant's Account under the Plan as of December 31,
1983\;
(e) the method of distribution specifies the following:
(1) the form of distribution,
(2) the time at which distribution will commence,
(3) the period over which distributions will be
made, and
(4) in the case of the Participant's death, the
Beneficiaries of the Participant, listed in
order of priority.
The designation must, in and of itself, provide sufficient
information to fix the timing and the formula for the definite
determination of the Plan payments. The designation must be complete
and not allow further choice.
For distributions which commence before January 1, 1984, but continue
after December 31, 1983, the Participant will be presumed to have
designated the method of distribution under which the distribution is
being made if the distribution is specified in writing and satisfies
all the requirements of this section.
If a designation herein described is revoked at any time by the
Participant after December 31, 1983, then the Participant's interest
must be distributed in accordance with the provisions of Section 5.02
and 5.03 of this Article. Any change in the designation will be
deemed to be a revocation of the designation. However, the
substitution or addition of another Beneficiary under the designation
will not be considered a revocation of the designation if such
substitution or addition does not alter the period over which the
distributions are to be made under the designation, either directly
or indirectly, nor
<PAGE> 136
will spousal consent, as required under the terms of this Agreement,
be deemed a revocation of the designation.
In the case of a Participant's Trustee-to-Trustee Transfer from
another qualified plan under which the Participant executed a
designation which satisfied the requirements of this section, such
amount can be distributed under the terms of the election only if the
Employee did not elect to have the amount transferred. Only the
amount transferred, plus earnings thereon, may be distributed under
the election.
5.06 DIRECT ROLLOVER REQUIREMENT. Effective January 1, 1993 any
Distributee including an Alternate Payee under a QDRO who is entitled
to receive an Eligible Rollover Distribution shall be entitled to
elect (pursuant to the procedure established by the Plan
Administrator) to have any portion of said distribution paid directly
to an Eligible Retirement Plan specified by the Distributee as a
Direct Rollover.
Eligible Rollover Distribution: An Eligible Rollover Distribution is
any distribution of all or any portion of the balance to the credit
of the Distributee, except that an Eligible Rollover Distribution
does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Distributee
or the joint lives (or joint life expectancies) of the Distributee
and the Distributee's designated beneficiary, or for a specified
period of ten years or more\; any distribution to the extent such
distribution is required under Code section 401(a)(9)\; and the
portion of any distribution that is not includable in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to Employer securities).
Eligible Retirement Plan: An Eligible Retirement Plan is an
individual retirement account described in Code section 408(a), an
individual retirement annuity described in Code section 408(b), an
annuity plan described in Code section 403(a), or a qualified trust
described in Code section 401(a), that accepts the Distributee'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.
<PAGE> 137
Distributee: A Distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is
the Alternate Payee under a qualified domestic relations order, as
defined in Code section 414(p), are Distributees with regard to the
interest of the spouse or former spouse.
Direct Rollover: A Direct Rollover is a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
<PAGE> 138
ARTICLE VI
DEATH BENEFIT
6.01 DEATH BENEFIT. Upon the death of a Participant who is currently
employed by the Employer, the Death Benefit payable to his
Beneficiary on or after the date of his death shall be 100% of his
Accrued Benefit plus the proceeds of any life insurance purchased on
the Participant's behalf under Article XII of this Agreement. If a
Participant dies after separation from service or after starting to
receive benefits under the Plan but prior to receiving his entire
Plan benefit, then his Beneficiary shall receive the remaining amount
of benefits to which the Participant was entitled at the time of his
death. The Plan Administrator may require such proof of death and
such evidence of the right of any Beneficiary to receive the Death
Benefit, as the Plan Administrator deems necessary.
6.02 DESIGNATION OF BENEFICIARY. A Participant may at any time
designate, in writing, the Beneficiary or Beneficiaries to whom his
Death Benefit under the Plan shall be paid. The designation, which
shall be in such written form as the Plan Administrator requires, may
include contingent or successive Beneficiaries. If a married
Participant designates a nonspouse Beneficiary to receive his Death
Benefit, such designation shall be deemed invalid to the extent it
designates a nonspouse Beneficiary to receive more than 50% of his
Death Benefit unless the Participant and Participant's spouse have
filed an election to waive the QPSA, as provided for under Section
6.04.
If a Participant has not designated a Beneficiary in writing or if
the Beneficiary designated by the Participant predeceases him or dies
before a complete distribution of his portion of the Participant's
Death Benefit, then, subject to the provisions of Section 6.04, the
Participant shall be deemed to have designated the estate of the
Participant as his Beneficiary.
For purposes of this Section only, a Beneficiary shall be deemed to
be a Participant but shall not be subject to the waiver agreement of
the QPSA under Section 6.04.
<PAGE> 139
6.03 TIME OF COMMENCEMENT OF DEATH BENEFIT. If a participant dies
after the distribution of his Nonforfeitable Accrued Benefit begins
but prior to receiving his entire Nonforfeitable Accrued Benefit, the
remaining portion of his benefit shall continue to be distributed to
his Beneficiary over a period which does not exceed the payment
period which had commenced for the Participant. If a Participant dies
before the distribution of his Nonforfeitable Accrued Benefit begins,
then his entire Death Benefit shall be distributed within five years
following the end of the calendar year in which the Participant died
unless:
(a) Any portion of the Participant's Death Benefit is payable
to, or for the benefit of, his designated Beneficiary\;
(b) Such portion will be distributed over a period of time
not exceeding the life expectancy of such Beneficiary\;
and
(c) The distribution of the Participant's Death Benefit shall
commence not later than one year following the end of the
calendar year in which the Participant died, or, if the
Beneficiary is the Participant's spouse, the date on
which the Participant would have attained age 70-1/2.
If the surviving spouse dies before the distribution of the
Participant's Death Benefit is complete, then the spouse shall be
treated as a Participant for purposes of this section.
In lieu of receiving payment of the death benefit on the latest date
determined above, a Beneficiary may file a written election with the
Plan Administrator to have the payment of his portion of the
Participant's Death benefit commence at any time following the
Participant's death. If a Beneficiary does not file a written
election for the commencement of his benefit, then the payment of his
Benefit shall commence on the latest date determined above.
6.04 FORM OF DEATH BENEFIT.
(a) Qualified Pre-Retirement Survivor Annuity. Unless
otherwise elected, 50% of a married Participant's Death
Benefit shall be distributed in the form of a
<PAGE> 140
Qualified Pre-Retirement Survivor Annuity. A Qualified
Pre-Retirement Survivor Annuity (QPSA) is an immediate
annuity payable for the life of the Participant's spouse.
In determining the amount of the QPSA, the Participant's
Accrued Benefit shall be reduced by any security interest
held by the Plan by reason of a loan outstanding to the
Participant at the time of his death, provided the
security interest is treated as satisfaction of the loan.
(b) Election to Waive the QPSA.
(1) Written Explanation. The Plan Administrator
shall provide the Participant with a written
explanation of the QPSA by the later of the
first anniversary of the Participant's Entry
Date or the period beginning with the first
day of the Plan Year in which the
Participant attains age 32 and ending on the
last day of the Plan Year in which the
Participant attains age 34. If a Participant
separates from Service prior to attaining
age 35, then the explanation shall be
provided to the Participant no later than
one year following his date of separation.
The explanation of the QPSA shall be
comparable to the explanation of the QJSA,
as provided under Section 5.03(c) of this
Agreement.
(2) Participant Waiver. Once the Participant has
received the above written explanation of
the QPSA, he may elect to waive the QPSA at
any time prior to his death. The election
shall be in writing and must state the
specific nonspouse beneficiary, if any, who
may receive a portion of his benefit. The
election to waive the QPSA for a Participant
which was filed prior to the first day of
the Plan Year in which the Participant
attained age 35 shall become invalid on the
first day of said Plan Year. The Participant
must then file a new election in order for
the waiver of the QPSA to be effective.
Having made an election, a Participant may
nevertheless revoke it or file a new
election any number of times.
<PAGE> 141
(3) Spousal Consent Requirement. If a
Participant is married, then the
Participant's spouse must consent in writing
to the election to waive the QPSA or any
change in the nonspouse Beneficiary. The
spouse's consent shall acknowledge the
effect of the election and must be witnessed
by either a Plan representative or notary
public. If the spouse is legally incompetent
to give consent, the spouse's legal guardian
(even if the guardian is the Participant)
may give consent. If it is established to
the satisfaction of the Plan Administrator
that the spouse cannot be located or if the
Participant is legally separated or has been
abandoned (within the meaning of the local
law) and the Participant has a court order
to such effect, spousal consent is not
required unless a Qualified Domestic
Relations Order (as defined under Section
7.10) provides otherwise. Once given, the
spouse's consent cannot be revoked with
respect to a given election.
(c) Optional Forms of Benefit. A Beneficiary may, at any time
following the Participant's date of death, file a written
election with the Plan Administrator to receive his
portion of the Participant's Death Benefit under one of
the following options:
(1) one single-sum payment in cash, securities
or other property as the Plan Administrator
shall determine\;
(2) payments in monthly, quarterly, semi-annual,
or annual installments over a stated period
of time\; or
(3) by the purchase of a non-transferable
annuity payable over the life of the
Beneficiary. The terms of any such annuity
contract purchased and distributed by the
Plan to a Participant or spouse shall comply
with the requirements of the Plan\; or
(4) by the payment of installments over a period
certain not extending beyond the life
expectancy of the Beneficiary or the joint
<PAGE> 142
life expectancy of the Beneficiary and a
designated individual\; such payments to be
made directly from the Plan or by the
purchase of a non-transferable period
certain annuity. The terms of such annuity
contract purchased and distributed by the
Plan to a Participant or spouse shall comply
with the requirements of the Plan.
At any time thereafter, a Beneficiary may file a written
request with the Plan Administrator to accelerate payment
of his portion of the Participant's Death Benefit. If no
written election to receive his portion of the
Participant's Death Benefit in an optional form is filed
by the Participant's spouse, then the spouse's portion of
the Participant's Death Benefit shall be distributed in
the form of a QPSA. If no written election is filed by a
nonspouse Beneficiary, then the nonspouse Beneficiary's
portion of the Participant's Death Benefit shall be
distributed in one or more installments.
6.05 DEATH BENEFIT LESS THAN $3,500. Irrespective of the
provisions of this Article, if a Participant dies prior
to his Annuity Starting Date and his Death Benefit is
less than $3,500, then the Plan Administrator may,
without the consent of the Beneficiary, distribute his
Death Benefit in the form of a single-sum payment at any
time during the 5-year period following the Participant's
date of death.
6.06 DESIGNATION OF DISTRIBUTION MADE PRIOR TO JANUARY 1,
1984. The provisions of Section 6.03 and 6.04 shall not
apply to any distribution made pursuant to the provisions
of a designation of a Beneficiary which meets the
requirements of Section 5.05 only if the Beneficiary is
treated as a Participant and the Participant filed a
designation under Section 5.05 which contained the
information required under 5.05(e) with respect to the
distributions to be made upon the death of the
Participant.
<PAGE> 143
6.07 IRREVOCABLE DISTRIBUTION OPTION TO SPOUSE OR TRUST FOR BENEFIT OF
SPOUSE. A Participant may (subject to the spousal consent
requirements of Section 6.04) make an irrevocable election to have
said Participant's death benefit distributed in equal annual
installments to the Participant's spouse or to a trust established by
the Participant pursuant to Code section 2056(b)(7) ("QTIP Trust")\;
or to a trust established by the Participant pursuant to Code section
2056(b)(5) ("Qualified Power of Appointment Trust"). Under the
aforementioned irrevocable election, the Participant's Accrued
Benefit must be distributed to the aforementioned spousal or trust
beneficiary over a period not exceeding the lifetime of the
Participant's spouse, and the income on the undistributed portion of
the Participant's account balance earned during each calendar year
must be distributed to said beneficiary in one or more payments at
least annually by the close of said calendar year. In the event of
the death of the spousal Beneficiary during the calendar year, all
undistributed income accrued to the date of said Beneficiary's death
shall be distributed to the estate of said Beneficiary. On the death
of the Participant's spouse, any undistributed balance of the
Participant's Accrued Benefit will be distributed pursuant to the
Participant's beneficiary designation form or, if applicable,
pursuant to the terms of the above referenced QTIP Trust or Qualified
Power of Appointment Trust, as the case may be.
The aforementioned distributions, however, shall be increased if
necessary to comply with the minimum distribution requirements of
Section 5.03.
<PAGE> 144
ARTICLE VII
DISABILITY AND TERMINATION BENEFITS
IN-SERVICE DISTRIBUTIONS
7.01 DISABILITY BENEFIT. If a Participant becomes disabled, he shall
be entitled to receive 100% of his Accrued Benefit. A Participant
shall be considered to be disabled if he is unable to engage in any
substantial and gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or be of long-continued and indefinite duration. A
Participant shall also be considered disabled if he incurs a
permanent loss of the use of a member or function of the body which
causes him to separate from Service. The Plan Administrator shall
require the Participant to submit to a physical examination or submit
such other proof of disability as the Plan Administrator deems
necessary. The determination of disability by the Plan Administrator
shall be based on uniform principles consistently applied in a
nondiscriminatory manner.
7.02 TERMINATION BENEFIT. If a Participant terminates his Service for
any reason other than Normal, Early or Deferred Retirement, death or
disability, the Participant shall be entitled to receive the full
value of his Accrued Benefit attributable to his Employee
Contributions and, if applicable, Elective Deferrals plus the
Nonforfeitable percentage of the remainder of his Accrued Benefit
based on the vesting provisions of the Adoption Agreement.
7.03 TIME OF COMMENCEMENT OF DISABILITY OR TERMINATION BENEFIT. At
any time after the Participant is disabled or terminates his Service,
he may elect to receive a distribution of his Disability or
Termination Benefit. If a Participant does not file a written claim
for the commencement of his benefit, then the payment of his benefit
shall commence on the date determined under Section 5.02 of this
Agreement.
7.04 FORM OF DISABILITY OR TERMINATION BENEFIT. A Participant's
Disability or Termination Benefit shall be distributed in a form
which satisfies the requirements of
<PAGE> 145
Section 5.03 of this Agreement. If a Participant's Disability or
Termination Benefit is less than $3,500 prior to his Annuity Starting
Date, then the Plan Administrator may distribute his Accrued Benefit
as a single-sum payment without Participant or spousal consent at any
time from the date he is disabled or terminates his Service to the
date determined under Section 5.02 of this Agreement.
7.05 FORFEITURE AND RESTORATION OF ACCRUED BENEFIT. The nonvested
portion of the Participant's Accrued Benefit upon separation from
Service shall become a Forfeiture on the earlier of the date the
Participant receives a distribution of his entire Termination Benefit
or the date on which the Participant incurs 5 consecutive Breaks in
Service as defined in Section 7.07. A nonvested Participant shall be
deemed to have received his entire Termination Benefit on the date of
his separation from Service. Any Forfeiture shall be held in suspense
without Trust Fund earnings and shall be allocated under the
provisions of Article IV as of the end of any Plan Year following the
date on which the Forfeiture occurred, so long as the Forfeiture is
allocated on or before the last day of the Plan Year in which the
Participant incurs 5 consecutive Breaks in Service.
A terminated Participant, who received a distribution of his entire
Termination Benefit which was less than 100% of his Accrued Benefit
and who is subsequently rehired by the Employer before incurring 5 or
more Breaks in Service following the date of distribution, shall have
the right to repay to the Trustee the total amount of the
distribution at any time during the 5-year period commencing on his
initial date of reemployment with the Employer. Only upon the
repayment of his entire distribution shall the Participant's Accrued
Benefit be restored to the dollar amount of his Accrued Benefit at
the time of distribution, determined without regard to any subsequent
gains and losses in the Trust Fund. A nonvested Participant who is
deemed to have received his entire Termination Benefit and is
subsequently rehired by the Employer before incurring 5 or more
Breaks in Service following his date of termination shall be deemed
to have repaid his entire termination benefit on his date of rehire.
The restoration of the Participant's Accrued Benefit shall include
all protected benefits under Code section 411(d)(6). The Trust Fund
earnings during the Plan Year of repayment shall be used to restore
the Participant's Accrued Benefit\; and, if such earnings are not
sufficient to fully restore the Accrued
<PAGE> 146
Benefit, then the Employer Contribution and Forfeitures shall be
utilized. If a deficit still remains, then the Employer shall
contribute the necessary amount by the end of the following Plan Year
in order to provide full restoration of the Accrued Benefit.
7.06 PARTIAL RESTORATION OF THE TERMINATION BENEFIT. In determining
the Termination Benefit at any relevant time for a Participant who
has received a partial distribution of his Nonforfeitable Accrued
Benefit, without forfeiting the nonvested portion of his Accrued
Benefit, the following formula shall be used:
X = P(AB + D) - D\;
where X is the vested portion of the Accrued Benefit attributable to
Employer Contributions and Forfeitures, "P" is the vested percentage
at the relevant time, "AB" is the balance of the Accrued Benefit
attributable to Employer Contributions and Forfeitures, and "D" is
the amount of all distributions attributable to Employer
Contributions and Forfeitures received by the Participant prior to
the relevant time.
7.07 BREAKS IN SERVICE AND VESTING. A Break in Service for vesting
purposes shall be a Vesting Computation Period in which the Employee
completes 500 or fewer Hours of Service. In computing a Participant's
Termination Benefit, all pre-break and post-break service will be
counted except for the following:
(a) In the case of an Employee who has incurred a Break in
Service, Years of Service prior to the Break in Service
shall not be taken into account until he has completed
one Year of Service after his return\;
(b) In the case of an Employee who has incurred 5 or more
consecutive Breaks in Service, any Year of Service after
the last Break in Service shall not be used in
determining the vested percentage of his Accrued Benefit
which accrued prior to the initial Break in Service\; and
(c) In the case of a nonvested Participant whose number of
consecutive Breaks in Service equals or exceeds the
greater of 5 or his aggregate number of Years of
<PAGE> 147
Service prior to the initial Break in Service, Years of
Service prior to the initial Break in Service shall not
be taken into account in determining the Participant's
current vested percentage under the Plan.
7.08 IN SERVICE DISTRIBUTIONS. A distribution may be made to
an Employee while still in the Service of the Employer
and prior to the attainment of the Early or Normal
Retirement Age only if the form of the distribution meets
the requirements of Section 5.03, and the distribution is
one of the following:
(a) Employee Contribution Withdrawal. Any portion of a
Participant's Accrued Benefit which is attributable to
his Employee Contributions (excluding Mandatory and
401(k) Contributions) may be withdrawn at any time by the
Participant after filing a written election with the Plan
Administrator.
(b) Profit Sharing Distribution. If permitted in the Adoption
Agreement, a Participant may file a written election with
the Plan Administrator to withdraw any portion of his
Nonforfeitable Accrued Benefit which is attributable to
Employer Contributions and Forfeitures (other than
Qualified Non-Elective Contributions and Qualified
Employer Matching Contributions) which were allocated to
his Participant's Account at least 2 years prior to the
date of distribution.
(c) Hardship Distribution. If this is a profit sharing plan
and if permitted in the Adoption Agreement, a Participant
shall have the right to request a distribution of any
portion of his Nonforfeitable Accrued Benefit, and the
Plan Administrator shall grant such request only if the
Plan Administrator determines that such distribution is
necessary to satisfy an immediate and heavy financial
need of the Participant as determined herein and the
regulations under Code section 401(k)(2)(B). Any such
request shall be made in writing, shall set forth in
detail the nature of such hardship and the amount of the
distribution needed as a result of such hardship, and
shall state that the need cannot reasonably be relieved
(i) through reimbursement or compensation by insurance or
otherwise\; (ii) by liquidation of
<PAGE> 148
the Participant's assets, or (iii) by cessation of
elective deferrals or by Employee contributions under the
Plan or (iv) by other distributions or nontaxable (at the
time of the loan) loans from plans maintained by the
Employer or by any other Employer, or by borrowing from
commercial sources on reasonable commercial terms in an
amount sufficient to satisfy the need and shall be
supplemented with such additional information as the Plan
Administrator requests. Unless the Employer has actual
knowledge to the contrary, the Plan Administrator may
rely on the Participant's written certificate and of the
amount necessary to alleviate such need. If the Plan
Administrator grants such request, such application shall
be processed and such distribution shall be made in a
single sum as soon as administratively feasible.
Financial Need. An immediate and heavy financial need shall
mean:
(1) deductible medical expenses described in
Code section 213(d) previously incurred by
the Participant, his spouse or his
dependents (as defined in Code section 152),
or necessary for those persons to obtain
medical care described in Code section
213(d),
(2) the purchase of (but not the mortgage
payments for) a principal residence of the
Participant,
(3) the payment of tuition and related
educational fees for the next twelve months
of post-secondary education for the
Participant, his spouse, his children or his
dependents (as defined in Code section 152),
or
(4) the prevention of the eviction of the
Participant from his principal residence
or the foreclosure on the mortgage of the
Participant's principal residence.
Distribution Necessary to Satisfy Need. A
distribution shall be deemed to be necessary
to satisfy an immediate and heavy financial
<PAGE> 149
need only if all of the following
requirements are satisfied:
(1) the distribution is not in excess of the
amount of such need. The amount of an
immediate and heavy financial need may
include any amounts necessary to pay any
federal, state or local income tax or
penalties reasonably anticipated to result
from the distribution\;
(2) the Participant has obtained all
distributions (other than hardship
distributions) and all nontaxable loans
currently available under this Plan and
other plans maintained by the Employer or a
Related Employer\; and
(3) the Participant's Employee Contributions
under this Plan and his deferrals and
employee contributions under all other plans
maintained by the Employer or a Related
Employer shall be suspended for the 12 month
period following the date of receipt of such
hardship distribution.
(4) the Participant's elective deferrals under
this Plan and all other plans maintained by
the Employer shall for the next taxable year
of the Employee be limited to the applicable
limit under Code section 402(g) for that
year minus the Participant's elective
contributions for the year of the hardship
distribution.
7.09 RESTRICTION ON WITHDRAWALS OF ELECTIVE
DEFERRALS. A Participant's Elective
Deferrals, Qualified Non-Elective
Contributions and Qualified Employer
Matching Contributions, plus earnings
thereon, may not be distributed to a
Participant prior to his Separation from
Service, death, or disability, except in the
following circumstances:
(a) the termination of the Plan without the establishment of
another defined contribution plan
<PAGE> 150
other than an employee stock ownership plan (as defined
in Code section 4975(e) or Code section 409) or a
simplified employee pension plan as defined in Code
section 408(k).
(b) the disposition of the Employer, if incorporated, of
substantially all of its assets (within the meaning of
Code section 409(d)(2) of the Code) to an unrelated
corporation, where the Employer continues to maintain the
Plan, but only with respect to Employees who become
employed by the corporation acquiring the assets.
(c) the disposition by the Employer, if incorporated, of its
interest in a subsidiary (within the meaning of Code
section 409 (d)(3)), where the Employer continues to
maintain the Plan, but only with respect to the Employees
who continue employment with the subsidiary.
(d) the Participant's attainment of age 59-1/2.
(e) if elected in the Adoption Agreement and subject to the
requirements of Section 7.08, the financial hardship of
the Participant. Any such hardship distribution shall not
include any earnings credited to the Participant's
Account after the later of December 31, 1988 or the last
Plan Year ending before July 1, 1989.
All distributions that may be made pursuant to one or more of the
foregoing distributable events are subject to the spousal and
Participant consent requirements (if applicable) contained in Code
sections 411(a)(11) and 417. In addition, distributions after March
31, 1988, that are triggered by any of the first three events
enumerated above must be made in a lump sum.
7.10 DISTRIBUTION UNDER QUALIFIED DOMESTIC RELATIONS ORDER. Nothing
contained in this Plan shall prevent the Trustee, in accordance with
the direction of the Plan Administrator, from complying with the
provisions of a qualified domestic relations order (as defined in
ERISA section 206(d)(3)(B)(i)). 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
<PAGE> 151
retirement age (as defined under ERISA) under the Plan. "Alternate
Payee" for this purpose shall be as defined under ERISA section
206(d)(3)(K). 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 provides for
the earlier distribution pursuant to an agreement between the Plan
and the Alternate Payee\; and (2) if the present value of the
Alternate Payee's benefits under the Plan exceeds $3,500, the
Alternate Payee consents to any distribution occurring prior to the
Participant's attainment of earliest retirement age. Nothing in this
Section shall permit a Participant to receive a distribution at a
time otherwise not permitted under the Plan nor shall it permit the
Alternate Payee to receive a form of benefit not permitted under the
Plan.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the Plan Administrator is making its
determination of the qualified status of the domestic relations
order, the Plan Administrator shall direct the Trustee to make a
separate accounting of the amounts payable. If the Plan Administrator
determines the order is a qualified domestic relations order within
eighteen (18) months of the date amounts first are payable following
receipt of the order, the Plan Administrator shall direct the Trustee
to distribute the payable amounts in accordance with the order. If
the Plan Administrator does not make its determination of the
qualified status of the order within the eighteen (18) month
determination period, the Plan Administrator shall direct the Trustee
to distribute the payable amounts in the manner the Plan would
distribute if the order did not exist and shall apply the order
prospectively if the Plan Administrator later determines the order is
a qualified domestic relations order.
The reasonable costs of the Plan Administrator in determining the
qualified status of the order (including the cost of counsel's
opinion) shall be chargeable to the account of the Participant and
shall be recoverable from the Participant and the Alternate Payee
from sums due to the Alternate Payee and/or the Participant in the
discretion of the Plan Administrator.
To the extent it is not inconsistent with the provisions of the
Qualified Domestic Relations Order, the Plan Administrator may direct
the Trustee to invest any
<PAGE> 152
partitioned amount in a separate account. Such separate account shall
remain a part of the Trust, but it alone shall share in any income it
earns, and it alone shall bear any expense or loss it incurs. The
Trustee shall make any payments or distributions required under this
Section by separate benefit checks or other separate distribution to
the Alternate Payee.
<PAGE> 153
ARTICLE VIII
BENEFIT CLAIMS AND APPEAL PROCEDURE
8.01 CLAIMS PROCEDURE. Except as provided in Article V, VI or VII, no
benefit shall be paid under this Plan unless a Participant or
Beneficiary ("Claimant") shall file a claim for his benefit in
writing setting forth such information as shall be reasonably
requested by the Plan Administrator for the determination of the
Claimant's benefit.
8.02 CLAIMS REVIEW/APPROVAL OR DENIAL BY PLAN ADMINISTRATOR. The Plan
Administrator shall inform the Claimant within 60 days (the claim
review period) following receipt of the written benefit claim of the
approval or denial of the benefit claim. If, due to special
circumstances, an extension of time for processing the claim is
required, the Plan Administrator shall provide the Claimant with a
written notice of the extension prior to the end of the initial
60-day period. Such notice shall indicate the special circumstances
requiring an extension of time and the date by which a final decision
will be rendered. In no event shall any extension of time exceed a
period of 60 days from the end of the initial period.
8.03 BENEFIT DENIAL PROCEDURE.
(a) Notice of Denial of Benefit Claim. In the event that a
claim for benefits is denied, in whole or in part, the
Plan Administrator shall notify the Claimant in writing
of such denial within the claims review period (or, in
the event of an extension, within the extension period).
Such written notice shall set forth specific reasons for
such denial\; specific references to pertinent Plan
provisions on which the denial is based\; a description
of any additional material or information necessary for
the Claimant to perfect his claim\; an explanation of why
such material or information is necessary\; and an
explanation of the Plan's review procedure. The notice
must further advise the Claimant that his failure to
appeal the action in writing within 60 days following
receipt of the notice will render the denial of benefits
final, binding and conclusive.
<PAGE> 154
(b) Appeal of Decision of Plan Administrator.
(1) Referral to Plan Administrator. Any Claimant
who has been denied a benefit or has any
other claim relating to the Plan shall be
entitled to request the Plan Administrator
to give further consideration to his claim
by filing with the Plan Administrator (on a
form acceptable to the Plan Administrator) a
request for a hearing. Such a request,
together with a written statement of the
reasons the Claimant believes his claim
should be allowed, shall be filed with the
Plan Administrator no later than sixty (60)
days after receipt of written notification
of denial of his claim. The Plan
Administrator shall then conduct a hearing
within the next sixty (60) days, at which
the Claimant may be represented by an
attorney or other representative of his
choosing and at which the Claimant shall
have an opportunity to submit written and
oral evidence and arguments in support of
his claim. Either the Claimant or the Plan
Administrator may cause a court reporter to
attend the hearing and record the
proceedings. In such event, a complete
written transcript of the proceedings shall
be furnished to both parties by the court
reporter. The full expense of any such court
reporter and such transcripts shall be borne
by the party causing the court reporter to
attend the hearing. A final decision as to
the allowance of the claim shall be made by
the Plan Administrator within sixty (60)
days of hearing of the appeal. Said decision
shall include specific reasons for the
decision and specific references to the
pertinent Plan provisions on which the
decision is based and shall be binding and
conclusive on all parties.
(2) Optional Referral to Arbitration. At the
option of either the Claimant or the Plan
<PAGE> 155
Administrator, and in lieu of review of a
claim by the Plan Administrator as set forth
above, the Plan Administrator or the
Claimant may elect arbitration of said claim
in accordance with the arbitration
provisions of the American Arbitration
Association or under arbitration provisions
under applicable state law. Said election
shall be made by the Claimant when filing
the appeal of his claim with the Plan
Administrator, or by the Plan Administrator
within thirty (30) days of receiving said
written appeal. If the arbitration
proceeding is invoked, it shall be binding
upon the parties and shall be arbitrated
before an arbitrator selected in accordance
with the aforementioned procedure and the
award of said arbitrator may be enforced in
accordance with said provisions and in
accordance with applicable state law. All
fees and costs of the arbitrator shall be
borne by the party electing the arbitration
proceeding.
8.04 STANDARD OF REVIEW. The denial of a benefit
claim shall be upheld upon review by either
the Plan Administrator or an arbitration
proceeding unless a determination is made
that the Plan Administrator's denial of the
benefit claim was arbitrary and capricious.
8.05 MISSING OR LOST PARTICIPANT OR BENEFICIARY.
If, after reasonable effort, the Plan
Administrator cannot locate a Participant or
Beneficiary who is entitled to a benefit
under the Plan, then the benefit shall
either be forfeited and allocated under the
provisions of Section 4.02 or be deposited
in the name of the Participant or
Beneficiary in an investment which meets the
distribution requirements of Article V or
Article VI.
If a Participant or Beneficiary whose benefit has been forfeited
under the provisions of this Section later files a claim with the
Plan Administrator for the forfeited benefit, then the benefit shall
be restored pursuant to the provisions of Section 7.05.
<PAGE> 156
The decision as to how to treat the benefit of a missing or lost
Participant or Beneficiary shall be made by the Plan Administrator
under uniform principles consistently applied in a nondiscriminatory
manner and in accordance with regulations issued by the Internal
Revenue Service.
<PAGE> 157
ARTICLE IX
ADMINISTRATION OF THE PLAN
9.01 DESIGNATION OF NAMED FIDUCIARY. The individual(s) or entity
appointed in the Adoption Agreement as the Plan Administrator shall
be the Named Fiduciary of this Plan and shall be subject to the
fiduciary responsibilities set forth in Title I of ERISA. The Plan
Administrator shall make such rules, interpretations, and
computations and shall take such other action to administer the Plan
as deemed appropriate, provided that all such action shall be done in
a nondiscriminatory manner consistent with the requirements of the
Code and ERISA. The Plan Administrator shall have all powers
necessary to accomplish his duties under this Plan.
9.02 DISCRETION OF PLAN ADMINISTRATOR. The Plan Administrator shall
administer the Plan solely in the interests of the Plan Participants
and for the exclusive purpose of providing benefits to Participants
and providing for the costs of reasonable administrative expenses.
The Plan Administrator shall, however, administer this Plan in
accordance with the reasonable discretion of the Plan Administrator.
All powers as set forth in Section 9.03 shall be exercised in
accordance with the Plan Administrator's discretion, and the
determination of the Plan Administrator shall be final, conclusive
and binding on all parties unless shown to be arbitrary and
capricious.
9.03 POWERS AND DUTIES OF PLAN ADMINISTRATOR. The Plan Administrator
shall have the following powers and duties in addition to any other
power or duty granted under the Plan:
(a) To determine the eligibility of an Employee to
participate in the Plan, the value of a Participant's
Accrued Benefit and the Nonforfeitable percentage of such
Participant's Accrued Benefit\;
(b) 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\;
<PAGE> 158
(c) To interpret and enforce the terms of this Agreement and
the rules and regulations it adopts\;
(d) To direct the Trustee with respect to the crediting and
distribution of the Trust Fund\;
(e) To exercise discretion to review and render decisions
respecting a claim for (or denial of a claim for) a
benefit under the Plan\;
(f To engage the services of agents whom it may deem
advisable to assist it with the performance of its
duties\;
(g) To engage the services of an Investment Manager or
Managers (as defined in ERISA section 3(38)), who shall
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\;
(h) To establish procedures for determining whether any order
issued by a state court shall meet the requirements for
treatment as a Qualified Domestic Relations Order
("QDRO") pursuant to ERISA section 206(d)(3)(B)(i). In
this connection, the procedure set forth in Section 9.04
shall apply to the determination of the validity and
effect of a court order and its compliance with ERISA
requirements. The Plan Administrator may treat as
qualified any domestic relations order entered prior to
January 1, 1985, irrespective of whether it satisfies all
the requirements described in ERISA section
206(d)(3)(B)(i)\;
(i) To take such corrective action with respect to
restoration of plan accounts, coverage, allocations to
accounts and such other actions as shall be in accordance
with Code section 7805(b) relief under the Employee Plans
Restoration Guidelines issued by the Internal Revenue
Service and such other corrective action as shall be
desirable in the discretion of the Plan Administrator so
as to assure continued qualification of this Plan, said
corrective action to be effective as of the date the
deficiency arises or such earlier date as shall be
necessary to assure the qualification of the Plan at all
times.
<PAGE> 159
(j) To adopt such procedures as shall be necessary to allow a
distributee of any Eligible Rollover Distribution to
elect a Direct Rollover of such distribution to an
Eligible Retirement Plan. Said procedure shall be in
accordance with temporary or final regulations
promulgated under Code section 401(a)(31).
9.04 PROCEDURE WITH RESPECT TO QUALIFIED DOMESTIC RELATIONS ORDERS. The
Plan Administrator shall have the responsibility to determine whether
any court order contains the provisions necessary to a Qualified
Domestic Relations Order ("QDRO").
Promptly upon receiving a court order which creates, assigns or
recognizes the right of any party to a Participant's Benefit under
this Plan, the Plan Administrator shall:
(a) Notify the Participant and any alternate payee of the
receipt by the Plan Administrator of the court order and
of the procedure set forth herein.
(b) Make a determination (within 60 days of receipt of the
court order) of whether the court order complies with the
requirements of ERISA section 206(d)(3)(B)(i). The Plan
Administrator may obtain the assistance of counsel in
making the determination, including the obtaining of a
written opinion of counsel if deemed necessary by the
Plan Administrator.
(c) After receipt of the court order, the Plan Administrator
shall direct the Trustee to separately account for the
sum which would be payable under the order if said order
were determined to be a QDRO. To the extent it is not
inconsistent with the provisions of the Qualified
Domestic Relations Order, the Plan Administrator may
direct the Trustee to invest any partitioned amount in a
separate account. Such separate account shall remain a
part of the Trust, but it alone shall share in any income
it earns, and it alone shall bear any expense or loss it
incurs. The Trustee shall make any payments or
distributions required under this Section by
<PAGE> 160
separate benefit checks or other separate distribution to
the Alternate Payee.
(d) Within 60 days from receipt of the court order, the
Plan Administrator shall notify (in a manner consistent
with Department of Labor Regulations) the Participant and
each Alternate Payee of the Plan Administrator's
determination as to the qualification of the court order
as a QDRO.
A determination that the order is a QDRO shall state that the Plan
Administrator will commence any payments currently due under the Plan
to the person or persons entitled thereto after the expiration of a
period of 60 days commencing on the day of the mailing of the notice
unless prior thereto the Plan Administrator receives a notice of the
institution of legal proceedings disputing the determination. The
Plan Administrator shall, as soon as practical after such 60 day
period, ascertain the dollar amount currently payable to each payee
pursuant to the Plan and, if the order is determined to be a QDRO,
disburse any such amounts.
18 Month Determination Period--Treatment of Segregated Account:
During the 18 month period beginning with the date on which the first
payment would be required to be made under the order the segregated
account shall be treated as follows:
(a) If, within the 18 month period, the order is determined
to be a QDRO the Plan Administrator shall pay the
segregated sum and earnings thereon to the person
entitled thereto under the order.
(b) If, within said period the order is determined not to be
a QDRO or the issue as to whether the order is a QDRO is
not resolved, then the Plan Administrator shall pay the
segregated sum and earnings thereon to those persons who
would be entitled thereto had there been no order.
(c) Any determination that an order is a QDRO which is made
after the close of the 18 month period shall be applied
prospectively.
The reasonable costs of the Plan Administrator in determining the
qualified status of the order (including the cost of counsel's
opinion) shall be chargeable to the
<PAGE> 161
account of the Participant and shall be recoverable from
the Participant and the Alternate Payee from sums due to
the Alternate Payee and/or the Participant in the
discretion of the Plan Administrator.
9.05 INFORMATION TO PLAN ADMINISTRATOR. The Employer shall supply
information to the Plan Administrator 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 Plan
Administrator considers necessary to perform the above powers and
duties. The Employer's records as to such information shall be
conclusive as to all persons.
9.06 FUNDING POLICY. The Plan Administrator shall direct the Trustee to
invest the Trust Assets in a manner which shall satisfy the Plan's
short-term and long-term financial needs. This funding policy shall
be consistent with the objectives of the Plan and the requirements
of ERISA.
9.07 ADMINISTRATIVE COMMITTEE. In the event an administrative committee
has been appointed as the Plan Administrator, a decision of the
majority of the committee shall be final and binding on all parties
and on committee members as to all matters upon which they may act
hereunder. Any action may be taken either by a vote at a meeting or
in writing without a meeting.
The committee shall appoint a Secretary, who shall be one of the committee,
to keep all records of its meetings and actions. Unless the committee
decides otherwise, the Secretary shall be authorized to execute and deliver
on behalf of the committee any instrument required or deemed necessary
under this Agreement.
9.08 RESIGNATION AND REMOVAL OF PLAN ADMINISTRATOR. The Plan Administrator,
or any member of the administrative committee, may resign at any time by
delivering to the Employer a written notice of resignation to take effect
at
<PAGE> 162
a date specified therein, which shall not be less than 15 days from the
date of delivery, unless such notice shall be waived.
The Employer may remove the Plan Administrator, or any member of the
administrative committee, with or without cause, by delivery of a written
notice of removal to take effect at a date specified therein, which shall
not be less than 15 days from the date of delivery, unless such notice
shall be waived.
Upon the resignation or removal of the Plan Administrator or member of the
administrative committee, the Employer may name a successor Plan
Administrator or successor administrative committee member who must
acknowledge acceptance of this position in writing. In the event no
successor Plan Administrator is appointed, the Employer shall be the Plan
Administrator until a new Administrator has been nominated and has accepted
such appointment.
9. INDEMNITY OF PLAN ADMINISTRATOR. The Employer shall indemnify and hold
harmless the Plan Administrator from and against any and all loss resulting
from liability to which the Plan Administrator may be subjected by reason
of any act or conduct (except willful misconduct or gross negligence) in
the administration of this Plan, including all expenses reasonably incurred
for defense of any legal claim, in case the Employer fails to provide such
defense.
9.10 COMPENSATION AND EXPENSES OF THE PLAN ADMINISTRATOR. The Plan
Administrator shall be permitted to receive from the Trust Fund reasonable
compensation and reimbursement of expense for services rendered as Plan
Administrator. In addition the Plan Administrator is authorized to direct
the Trustee to pay the fees and costs from the Trust Fund in connection
with the administration of the Plan. However, no full time employee of the
Employer may be compensated for services rendered as Plan Administrator or
as an agent of the Plan Administrator.
<PAGE> 163
ARTICLE X
TRUST AGREEMENT
10.01 ESTABLISHMENT OF TRUST/APPOINTMENT OF TRUSTEE. The Trust
Agreement set forth in this Article shall govern the duties and
responsibilities of the Trustee appointed in the Adoption Agreement
or any successor Trustee. All assets of the Plan shall be held in
trust, pursuant to the provisions hereof. The Trustee may be one or
more individuals, a bank, trust company or any other corporation
authorized under state law to have trustee powers.
10.02 DUTIES OF TRUSTEE. The sole duty of the Trustee shall be to
assume title and to hold all assets of the Plan and to invest said
assets at the direction of the Plan Administrator and in accordance
with the funding policy adopted by the Plan Administrator. In
addition, the Trustee shall render an accounting of the assets of the
Trust as of each Accounting Date. The Trustee shall furnish to the
Employer and the Plan Administrator a statement of account as of each
Accounting Date showing the condition of the Trust Fund and all
investments, receipts, disbursements and other transactions effected
by the Trustee during the period covered by the statements and also
stating the fair market value of the Trust Fund on the Accounting
Date. Such statement shall be conclusive on all persons with respect
to valuation of the Trust Fund. The Employer or Plan Administrator
may file with the Trustee written exceptions with respect to any
transaction, act or computational error within 90 days of the receipt
of the statement or such longer period as authorized under ERISA.
The Trustee and Employer may agree, by separate instrument, for the
assumption of additional duties by the Trustee, including the
assumptions of investment responsibilities. The Trustee shall be
accountable to the Employer for the funds contributed to it by the
Employer, but shall have no duty to see that the contributions
received comply with the provisions of the Plan. The Trustee shall
not be obliged to collect any contributions from the Employer.
Except as set forth in this Agreement no additional duties shall be
imposed on the Trustee.
<PAGE> 164
10.03 TRUSTEE POWERS. The Trustee is authorized and empowered, but not by
way of limitation, with the following powers, rights and duties:
(a) To invest any part or all of the Trust Fund in any common
or preferred stocks, open-end or closed-end mutual funds, and
to buy or sell options with or without holding the underlying
stock and other securities, corporate bonds, debentures,
convertible debentures, commercial paper, and any 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
the United States, limited partnerships, insurance contracts
of any type and life insurance policies pursuant to the
provisions of Article XII herein, mortgages, notes or other
property of any kind, real or personal, as a prudent man would
do under like circumstances with due regard for the purposes
of this Plan\;
(b) In the case of a profit sharing plan in any amount and
in the case of a money purchase or target benefit plan
in an amount of up to 10% of the Trust Fund, the
Trustee is specifically authorized to invest in
qualifying Employer real property and in qualifying
Employer securities within the meaning of Section
407(d)(4) and (5) of ERISA\;
(c) To retain any cash held in the Trust Fund in an account
at reasonable interest. If a bank is acting as Trustee,
specific authority to invest in any type of deposit of
the Trustee (or of a bank related to the Trustee)
within the meaning of Code section 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 section 584 which the
Trustee (or an affiliate of the Trustee, as defined in
Code section 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
<PAGE> 165
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 shall decide\;
(e) To credit and distribute the Trust as directed by the Plan
Administrator. The Trustee shall not be obligated 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 shall be accountable only to the
Plan Administrator for any payment or distribution made by it
in good faith on the order or direction of the Plan
Administrator\;
(f) To compromise, contest, arbitrate or abandon claims and
demands in its discretion:
(g) To have with all respect to all assets of the Trust all
of the rights of an individual owner including the
power to give proxies, to participate in any voting
trusts, mergers, consolidations of liquidations, and to
exercise or sell stock subscriptions or conversion
rights\;
(h) 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\;
(i) To hold any securities and other property in the name
of the Trustee or its nominee, with depositories or
agent depositories or in other form as it may deem
best, with or without disclosing the trust
relationship\;
(j) 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 Fund\;
(k) 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
<PAGE> 166
adjudication is made by a court of competent
jurisdiction\;
(l) To file all tax returns required of the Trustee\;
(m) To begin, maintain or defend any litigation necessary
in connection with the administration of the Trust,
except that the Trustee shall not be obliged or
required to do so unless indemnified to its
satisfaction\;
(n) To make distribution under the Plan in cash or
property, or partly in each, at its fair market value
as determined by the Trustee\;
(o) To 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.
10.04 ALLOCATION OF FIDUCIARY RESPONSIBILITY.
(a) As Between Co-Trustees. In the event that two or more
Trustees have been appointed, they shall jointly manage
and control the assets of the Plan, however, the
Trustees may allocate specific duties, responsibilities
and obligations among themselves by filing a written
agreement with the Plan Administrator. The signature of
the specified number of trustees in the Adoption
Agreement may be accepted by an interested party as
conclusive evidence that all Trustees have duly
authorized the actions therein set forth. No interested
party acting in good faith and in reliance on the
Adoption Agreement shall be obliged or held liable to
ascertain the validity of such action.
(b) As Between the Trustee and the Plan Administrator or
Any Other Person. The Plan Administrator shall be the
Named Fiduciary with respect to the Plan. In addition,
the Plan Administrator, the Trustee or any other person
may make such additional allocation or delegation of
responsibilities or assumption of duties as shall be
provided by written instrument subsequent to the date
of this
<PAGE> 167
Agreement and agreed upon by the parties and filed with
the Plan Administrator.
(c) Appointment of Investment Manager. In the event that an
Investment Manager (or Managers) is appointed by the
Plan Administrator or Trustee to manage the assets of
the Plan (including the power to acquire and dispose of
any assets of the Plan), then no Trustee shall be
liable for the acts or omissions of such Investment
Manager or Managers.
(d) Segregated Account/Participant Direction of Investment.
If permitted under the Adoption Agreement, a
Participant may file a written election with the Plan
Administrator to have the right to direct the Trustee
with respect to the investment of all or a portion of
the assets comprising the Participant's Accrued
Benefit. That portion of the Trust Fund under the
direction of the Participant shall constitute a
Segregated Account. In addition, the Plan Administrator
may adopt a written policy allowing for Participant
control over all or a portion of the assets comprising
the Participant's Accrued Benefit in compliance with
the provisions of section 404(c) of ERISA. In the event
of establishment of said policy the Participant shall
not be deemed to be a fiduciary by reason of his
exercise of control over investment of said assets and
no person who is otherwise a fiduciary shall be liable
for any loss which results from said exercise of
control.
10.05 INVESTMENT IN GROUP TRUST FUND. The Plan Administrator
may direct the Trustee, for collective investment
purposes, to combine into one (1) trust fund the Trust
Fund created under this Plan with the trust fund
created under any other qualified retirement plan.
However, the Plan Administrator shall maintain separate
records of account for the assets of each Trust in
order to reflect properly each Participant's Accrued
Benefit under the Plan in which he is a Participant.
10.06 RESIGNATION/REMOVAL/APPOINTMENT OF SUCCESSOR TRUSTEE.
<PAGE> 168
(a) Resignation. A Trustee may resign upon thirty (30) days
written notice to the Employer. Concurrent with the
effective date of resignation, the Trustee shall
furnish to the Plan Administrator a written statement
of account as to all assets of the Trust held by the
Trustee as of the effective date of resignation.
(b) Removal. A Trustee may be removed upon five (5) days
written notice from the Employer.
(c) Appointment of Successor Trustee. The Employer may, by
written instrument, appoint a Successor Trustee in the
event of the resignation or removal of an incumbent
Trustee, or in the event that an incumbent Trustee
shall be unable for any reason to continue to serve as
Trustee. Said appointment shall become effective on or
before the effective date of the resignation, removal
or other termination of service of the incumbent
Trustee. In the event the Employer shall fail to
appoint a successor Trustee, the Employer shall be
treated as having appointed the Employer (or in the
case of an incorporated Employer, the board of
directors) as Trustee.
10.07 FEES AND EXPENSES FROM FUND. The Trustee shall receive
reasonable compensation as may be agreed upon from time
to time between the Employer and the Trustee. The
Trustee shall pay all fees and expenses reasonably
incurred by the Plan Administrator and Trustee in the
administration of the Plan from the Trust Fund unless
the Employer pays the fees and expenses. The Employer
shall have the discretion to treat any fee or expense
paid, directly or indirectly, by the Employer as an
Employer Contribution. However, no person so serving
who already receives full-time pay from an employer or
an association of employers, whose employees are
participants in the Plan, or from an employee
organization whose members are Participants in the Plan
shall receive compensation from the Plan, except for
reimbursement of expenses properly and actually
incurred.
<PAGE> 169
10.08 INDEMNIFICATION. The Employer will indemnify and hold
the Trustee harmless from any liability, loss, cost or
expense arising from or in any way connected with his
acting upon the directions of the Plan Administrator,
Investment Manager, or Participant or for failing to
act because of the lack of any direction from the Plan
Administrator, Investment Manager, or Participant,
except due to the willful misconduct of the Trustee or
to the extent such indemnification is prohibited by law
or where the Trustee has assumed the role of Investment
Manager and/or Plan Administrator.
<PAGE> 170
ARTICLE XI
PARTICIPANT AND BENEFICIARY LOANS
ADOPTION OF LOAN ADMINISTRATION POLICIES
11.01 ELECTIVE ALLOWANCE OF PARTICIPANT AND BENEFICIARY
LOANS. The loan provisions herein apply only in the
event that the Employer has elected in the Adoption
Agreement to allow loans to Participants and
Beneficiaries based upon their benefit under the Plan.
If the Employer has not elected in the Adoption
Agreement to allow for Participant and Beneficiary
loans, then this Article shall not be implemented, and
no such loans shall be allowed under this Plan.
11.02 LIMIT ON AMOUNT OF OUTSTANDING LOAN BALANCE AFTER
DECEMBER 31, 1986. The aggregate amount of all loans
granted to a Participant or Beneficiary (hereinafter
referred to as "Borrower") on January 1, 1987 and
thereafter (or any renegotiation of a loan outstanding
prior to said date) shall not exceed the greater of:
(a) $10,000\; or
(b) one-half of the Borrower's Nonforfeitable Accrued
Benefit calculated on the date a loan is to be made, up
to a maximum of $50,000, with said maximum to be
reduced by the excess (if any) of:
(1) The highest outstanding balance of loans
from the Plan during the one year period
ending on the day before the date on which
such loan was made, over
(2) The outstanding balance of loans from the
Plan on the date on which such loan was
made.
In determining whether the limitations of this section have been
exceeded at any date, all loans made at any time from the Plan (or
from any other qualified plans maintained by the Employer or by a
Related Employer) to the Borrower and still outstanding on such
date shall be aggregated, and the Borrower's vested interest in all
<PAGE> 171
qualified plans maintained by the Employer or a Related Employer,
shall be aggregated.
11.03 LOAN TERMS. All loans granted under this Article shall be
evidenced by the Borrower's promissory note and shall be based upon
the following terms:
(a) The loan shall bear a reasonable rate of interest. In
this regard, the interest rate determined by the Plan
Administrator under the procedures established in
Section 11.05 herein shall be deemed to be a reasonable
rate of interest.
(b) The loan agreement shall call for at least
substantially level amortization with payments,
inclusive of principal and interest, not less
frequently than quarterly.
(c) Said loan shall, by its terms, be required to be repaid
within a period not greater than five (5) years from
the date of the loan unless the Borrower shall
demonstrate to the satisfaction of the Plan
Administrator that said loan shall be used to acquire a
principal residence of the Borrower within a reasonable
period of time after the date the loan is made. In such
case the loan may, at the discretion of the Plan
Administrator, bear a maturity date commensurate with
the maturity dates of loans made by institutional
lenders located in the geographic area in which the
borrower resides.
(d) Said loan shall be adequately secured by the Borrower's
vested interest under the Plan or by any real or
personal property that is acceptable to the Plan
Administrator. In the event that a Borrower's vested
interest under the Plan is to be used as security, the
provisions of Section 11.04 herein shall be complied
with in all respects.
(e) The Borrower shall satisfy the Plan Administrator that
he is creditworthy and financially able to repay such
loan.
11.04 USE OF NONFORFEITABLE ACCRUED BENEFIT AS LOAN SECURITY.
<PAGE> 172
(a) In General. Pursuant to the restrictions herein, a loan
may be secured by the Nonforfeitable Accrued Benefit of
the Borrower. However, after October 19, 1989 no more
than 50% of the Nonforfeitable Accrued Benefit of the
Borrower may be used as security. Said security
arrangement shall be pursuant to a written assignment
or other instrument sufficient to create the security
interest under state law, and shall be perfected in the
manner called for under the Uniform Commercial Code as
adopted under state law.
The loan shall be a lien on all interests of the
Borrower in the Trust. If a Borrower's benefit becomes
payable under Articles V, VI or VII prior to repayment
in full of any such loan and interest due thereon, the
full amount of the loan shall be due and payable
pursuant to the terms of the promissory note. In the
event the loan is not repaid in full, the amount to be
paid to the Borrower under Articles V, VI or VII shall
be reduced by the outstanding balance of any such loan
and interest due thereon.
In the event of default, the Participant's
Nonforfeitable Accrued Benefit will be offset at the
time the Trustee otherwise would distribute the
Participant's Nonforfeitable Accrued Benefit.
(b) Married Participant. The use of the Nonforfeitable
Accrued Benefit by a Participant who is married on the
date of the loan (or any renegotiation of said loan)
shall be subject to the following additional
restrictions:
(1) The Participant may not pledge any portion
of the Accrued Benefit as security for a
loan made after August 18, 1985, unless,
within the 90 day period ending on the date
the pledge becomes effective the
Participant's spouse, at the time of the
loan or any modification thereof consents
to the security or, by separate consent, to
an increase in the amount of security. Any
such Spousal Consent shall acknowledge the
possibility that a subsequent amount to be
paid under Articles V, VI or VII might be
reduced as set forth above by the amount of
<PAGE> 173
the outstanding balance of the loan and
interest due thereon. If such Spousal
Consent is given at the time that the loan
is made, any such subsequent reduction of a
distribution shall be made (without any
Spousal Consent), even if the Borrower is
married to a different spouse at the time
of the subsequent reduction. If an
unmarried Borrower agrees to a subsequent
reduction of a distribution at the time
that the loan is made, any such reduction
shall be valid, even if the Borrower is
married when the distribution is reduced.
(2) The Spousal Consent called for herein shall be
in writing and shall comply with the Spousal
consent requirements set forth in Article VI with
respect to spousal consent to a Participant's
waiver of the QPSA.
11.05 LOAN ADMINISTRATION POLICIES. This Article specifically
authorizes the Trustee, when directed
by the Plan Administrator, to grant loans to
Participants and Beneficiaries on a
nondiscriminatory basis in accordance with the loan
policy established under this Section. Loans shall
be made available to all Participants on a
reasonably equivalent basis. For Plan Years
beginning in 1989 and thereafter, the loan policy
of the Plan Administrator shall include and be
governed by the administrative policies set forth
herein:
(a) The Plan Administrator shall administer the
Participant Loan program. In this respect, the Plan
Administrator may adopt such additional written
loan guidelines, including establishment of a
minimum loan restriction, as shall be consistent
with Department of Labor Regulations, Section
2550.408.
(b) Any Plan Participant or Beneficiary may make
application for a loan with the Plan Administrator.
(c) Loans shall be approved on a nondiscriminatory
basis, based upon the information provided by the
Borrower as well as any information bearing upon
the creditworthiness of the Borrower.
<PAGE> 174
(d) The Plan Administrator shall determine the interest
rate to be charged for the loan. Said interest rate
shall be commensurate with the interest rates being
charged at the date of the loan by financial
institutions in the immediate geographic area of
the Borrower for loans comparable to the proposed
loan.
(e) All loans shall be adequately secured. In this
connection, both real and personal property may be
used as collateral for a loan.
(f) A loan shall be in default if the terms set forth
in the promissory note have not been met and the
Plan Administrator has determined that the
principal and interest will not be repayable to the
Trust. The Plan Administrator shall take possession
of the collateral for the loan in accordance with
the terms of the security agreement. In the case of
a loan secured by the Nonforfeitable Accrued
Benefit of the Borrower, the Plan Administrator
shall reduce the Borrower's Accrued Benefit in full
discharge of the loan on the earliest date a
distribution may be made.
11.06 PARTICIPANT LOANS PRIOR TO 12/31/86. Participant
loans prior to December 31, 1986 shall be governed
by the rules in effect on the date of said loan.
Any such loan which is modified or extended after
December 31, 1986 shall be treated as a new loan as
of the date of modification or extension.
11.07 PARTICIPANT LOANS TO OWNER-EMPLOYEE OR
SHAREHOLDER-EMPLOYEE PROHIBITED WITHOUT
ADMINISTRATIVE EXEMPTION. If the Employer is an
unincorporated trade or business, a Participant who
is an Owner-Employee may not receive a loan from
the Plan. Further, if the Employer is an "S
Corporation", a Participant who is a
shareholder-employee (an employee or an officer
who, at any time during the Employer's taxable
year, owns more than 5%, either directly or by
attribution under Code section 318(a)(1), of the
Employer's outstanding stock) may not receive a
loan from the Plan.
<PAGE> 175
ARTICLE XII
PROVISIONS RELATING TO LIFE INSURANCE
12.01 INSURANCE BENEFIT. The Employer may elect to provide
incidental life insurance benefits for insurable
Participants who consent to life insurance benefits by
signing the appropriate insurance company forms.
The Plan Administrator shall direct the Trustee as to the insurance
company and insurance agent through which the Trustee is to
purchase the insurance contracts, the amount of the coverage and
the type of insurance contract. Each application for a policy, and
the policies themselves, shall designate the Trustee as sole owner
and beneficiary, with the right reserved to the Trustee to exercise
any right or option contained in the policies, subject to the terms
and provisions of this Agreement. Proceeds of insurance contracts
paid to the Participant's Account under this Article XII shall be
subject to the distribution requirements of Article VI. The Trustee
shall not retain any such proceeds for the benefit of the Trust. In
the event of any conflict between the terms of this Plan and Trust
Agreement and the terms of any life insurance contract purchased
hereunder, the provisions of this agreement shall control.
The premiums on any life insurance contract covering the life of a
Participant shall be deducted from the Participant's Account during
the Plan Year in which the premiums are paid. The Trustee shall
hold all insurance contracts issued under the Plan as assets of the
Trust. The cash surrender value of the policy shall be considered
to be a part of the Participant's Account.
12.02 INCIDENTAL INSURANCE BENEFITS. The aggregate of life insurance
premiums paid for the benefit of a Participant, at all times, must
be less than the following percentages of the aggregate of the
Employer's Contributions and Forfeitures allocated to the
Participant's Account: (i) 50% in the case of the purchase of
ordinary life insurance contracts\; or (ii) 25% in the case of the
purchase of term life insurance contracts. If the Trustee purchases
a combination of an ordinary life insurance contract and a term
life insurance contract on behalf of the Participant,
<PAGE> 176
then the sum of one-half of the premiums paid for the ordinary life
insurance contract and the premiums paid for the term life
insurance contract must be less than 25% of the aggregate Employer
Contributions and Forfeitures allocated to the Participant's
Account.
If the Trustee purchases another form of life insurance contract on
behalf of a Participant, such contract shall be considered a term
life insurance contract, but only with respect to the term
insurance portion of the contract.
Notwithstanding anything to the contrary contained above, if this
is a Profit Sharing Plan, contributions and forfeitures which have
remained in the Trust for two (2) or more years may be used for the
purchase or continuation of life insurance policies without regard
to the above limitations.
12.03 DISTRIBUTION OR DISCONTINUANCE OF LIFE INSURANCE PROTECTION.
The Trustee shall not continue any life insurance protection for
any Participant beyond notification from the Plan Administrator of
termination of employment. If the Trustee holds any insurance
contract on the life of a Participant when he terminated his
employment (other than by reason of death), the Participant shall
be given the option to retain such insurance contract by:
(a) transferring ownership of the insurance contract to the
Participant as part of his distribution under the Plan,
or
(b) allowing the Participant to purchase the policy by paying
the Trustee the cash surrender value of the policy at the
time of the purchase.
The Trustee shall not distribute any contract without satisfying
the provisions of Section 5.03.
If the Participant chooses not to retain the insurance contract,
then the Trustee shall surrender the contract, and the proceeds, if
any, shall be credited to the Participant's Account.
The Employer shall have the right to discontinue the purchase of
insurance at any time, and the Participant
<PAGE> 177
shall be given the right to purchase the policy as above. If the
Participant does not purchase the contract, then the insurance
policy shall be surrendered and the proceeds credited to the
Participant's Account.
<PAGE> 178
ARTICLE XIII
AMENDMENT OR TERMINATION OF THE PLAN AND TRUST
13.01 AMENDMENT BY EMPLOYER/AMENDMENT PROCEDURE. The Employer shall
have the right at any time to amend this Agreement in any manner,
including any amendment deemed necessary or advisable in order to
qualify or maintain the qualification of the Plan and Trust under
the appropriate provisions of the Code.
Plan amendments shall be effected by a resolution by the board of
directors if the Employer is a corporation. If the Employer is a
sole proprietor or partnership, amendments shall be effected by a
declaration of a sole proprietor, or in the case of a partnership,
a resolution of the requisite members of said partnership.
Any amendment adopted by the Employer shall be in writing and shall
state the date on which it is effective. The Employer shall not
make any amendments which affect the rights, duties or
responsibilities of the Trustee or the Plan Administrator without
the written consent of the Trustee or Plan Administrator.
(a) Code Section 411(d)(6) Protected Benefits. An amendment
(including the adoption of this Agreement as a
restatement of an existing plan) may not decrease a
Participant's Accrued Benefit, except to the extent
permitted under Code section 412(c)(8), and may not
reduce or eliminate Code section 411(d)(6) protected
benefits by either eliminating or reducing an early
retirement benefit or a retirement-type subsidy, as
defined in Treasury Regulations, or eliminating an
optional form of benefit, except to the extent
permitted under Treasury Regulations. The Plan
Administrator must disregard an amendment to the extent
application of the amendment would fail to satisfy this
paragraph. If the Plan Administrator must disregard an
amendment because the amendment would violate the
provisions of this paragraph, then the Plan shall
continue to provide the early retirement options or
other optional forms of benefit for the affected
Participants.
<PAGE> 179
(b) Computation of Nonforfeitable Percentage. If an
amendment affects the computation of the Nonforfeitable
percentage of a Participant's Accrued Benefit, then in
no event shall the Nonforfeitable percentage for any
Employee who is a Participant on the later of the
amendment's adoption date or effective date be less
than his percentage computed on such date without
regard to the amendment.
In addition, any Participant who has completed 3 Years
(or, for Plan Years beginning before January 1, 1989, 5
Years) of Service prior to 60 days following the later
of:
(1) the date the amendment is adopted\;
(2) the date the amendment is effective\; or
(3) the date the Participant receives written
notice of the Plan amendment,
shall have his Nonforfeitable percentage calculated
with or without regard to the Plan amendment, whichever
produces the greatest percentage.
If an amendment changes the Vesting Computation Period,
then the first Vesting Computation Period established
under the amendment must begin before the last day of
the preceding Vesting Computation Period. An Employee
who is credited with the minimum required Hours of
Service in both the Vesting Computation Period under
the Plan before the amendment and the first Vesting
Computation Period established under the amendment must
receive credit for 2 Years of Service with respect to
such computation periods.
13.02 DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS. If this
Plan is a profit sharing plan, the Employer shall have
the right to completely discontinue Employer
Contributions to the Plan at any time. Upon the
complete discontinuance of Employer Contributions, the
rights of each affected Participant to benefits accrued
to the date of discontinuance, to the extent funded, or
the rights of each affected Participant to the amounts
<PAGE> 180
credited to his Participant's Account as of the date of
discontinuance, shall be Nonforfeitable. If the
Employer is a single employer, the discontinuance shall
be effective no later than the last day of the
Employer's taxable year following the last taxable year
for which a substantial Employer Contribution was made.
If more than one employer maintains this Plan, then the
discontinuance shall be effective no later than the
last day of the Plan Year following the Plan Year in
which a substantial contribution was made. The
determination as to whether a complete discontinuance
of Employer Contributions has occurred (and the date
thereof) shall be made by the Plan Administrator with
regard to all the facts and circumstances in a
particular case.
13.03 PARTIAL TERMINATION. Upon the partial termination
of the Plan, the rights of each affected Participant to
benefits accrued to the date of partial termination, to
the extent funded, or the rights of each affected
Participant to the amounts credited to his
Participant's Account as of the date of partial
termination, shall be Nonforfeitable. The determination
as to whether a partial termination of the Plan has
occurred (and the date thereof) shall be made by the
Plan Administrator with regard to all the facts and
circumstances in a particular case.
13.04 TERMINATION OF THE PLAN AND TRUST. The Employer
(or in the event of the liquidation of the Employer,
the Plan Administrator) shall have the right to
terminate this Plan and Trust at any time by written
resolution. If this Plan is a money purchase or target
benefit pension plan and it is terminated on a date any
time prior to the last day of a Plan Year, then the
Employer shall not be required to make a contribution
for said Plan Year.
Upon the termination of the Plan, the rights of each affected
Participant to benefits accrued to the date of termination, to the
extent funded, or the rights of each affected Participant to the
amounts credited to his Participant's Account as of the date of
termination, shall be Nonforfeitable. Any unallocated Trust Fund
assets
<PAGE> 181
which are required to be used to satisfy the liabilities with
respect to the Participants and their Beneficiaries shall be
allocated in a nondiscriminatory manner specified by an amendment
executed by the Employer prior to the termination of the Plan. If
no such amendment is adopted, then the unallocated amounts will be
allocated under the provisions of Article IV. If, upon the
satisfaction of all liabilities with respect to the Participants
and their Beneficiaries, there still remains any unallocated Trust
Fund assets, including any suspense account created pursuant to the
provisions of Section 4.06, such assets may be returned to the
Employer pursuant to a written resolution adopted by the Employer
at the time of termination.
The distribution of the Participants' and Beneficiaries' Plan
benefits shall be made in accordance with the provisions of
Articles V, VI and VII. If a Participant or Beneficiary has elected
a form of payment other than an immediate single sum, the Trustee
may purchase an annuity contract from an insurance carrier to
provide the Plan benefit. Upon the complete distribution of the
Trust Fund assets, the Trust shall be deemed terminated.
<PAGE> 182
ARTICLE XIV
MISCELLANEOUS
14.01 NO RESPONSIBILITY FOR EMPLOYER ACTION. Neither the Trustee
nor the Plan Administrator shall have 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 the Plan. Furthermore, the Plan does not require
the Trustee to collect any contributions required under the Plan,
or determine the correctness of the amount of any Employer
contribution. Neither the Trustee nor the Plan Administrator need
inquire into or be responsible for any action or failure to act on
the part of the others. Any action required of a corporate Employer
shall be by its Board of Directors or its duly authorized
designate.
14.02 FIDUCIARIES NOT INSURERS. The Trustee, 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 Plan Administrator 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.
14.03 SUCCESSORS. The Plan shall be 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 Plan Administrator, and their
successors.
14.04 EMPLOYMENT AND RIGHTS NOT GUARANTEED. Nothing contained in
this Agreement including any modification or amendment hereto shall
give any Employee or any Beneficiary any right to continued
employment or any legal or equitable right against the Employer,
any Employee of the Employer, the Trustee, including its agents or
<PAGE> 183
employees, or the Plan Administrator, except as expressly provided
by the Plan, the Trust, ERISA or by a separate agreement.
14.05 ASSIGNMENT OR ALIENATION. Except as provided in Code section
414(p) relating to qualified domestic relations orders and Article
XI relating to Participant and Beneficiary loans, neither a
Participant nor a Beneficiary shall anticipate, assign or alienate
(either by law or in equity) any benefit provided under the Plan,
and the Trustee shall 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 or subject to liability for the
Participant's debts, liabilities or other obligations.
14.06 EXCLUSIVE BENEFIT. Except as provided under Article III and
Article XIII, the Employer shall have no beneficial interest in any
asset of the Trust and no part of any asset in the Trust shall ever
revert to or be repaid to the Employer, either directly or
indirectly, nor shall 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 prior to the satisfaction of
all liabilities with respect to the Participants and their
Beneficiaries under the Plan.
14.07 MERGER/DIRECT TRANSFER. The Trustee shall not consent to, nor
be a party to, any merger or consolidation with another plan, nor
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 (as if such Plan
had then been terminated) equal to or greater than the benefit each
Participant would have received had this Plan terminated
immediately before the merger or consolidation or transfer.
14.08 LIABILITY OF EMPLOYER. The Employer assumes no obligation or
responsibility to any of its Employees, Participants or
Beneficiaries for any act, or failure to act, on the part of the
Trustee, or the Plan Administrator
<PAGE> 184
unless, under the Adoption Agreement, the Employer has been
designated as the Plan Administrator.
14.09 RIGHTS AND REMEDIES LIMITED. No person shall have any legal
or equitable right or claim against the Employer, the Plan
Administrator, or the Trustee unless the right or claim is
specifically provided for in this Plan and Trust Agreement or in
applicable provisions of ERISA or the Code. No interested party may
bring any action in any court on any matter concerning this Plan
and Trust, the determination of which is provided for in this
Agreement, until the procedure provided for herein has been
exhausted and a decision made with respect thereto.
14.10 CONSTRUCTION OF THE PLAN AND TRUST AGREEMENT. For all matters
affecting its validity and construction, this Plan and Trust
Agreement shall be governed by the laws of the State of the
Employer's principal place of business, except to the extent
inconsistent with the Code or ERISA.
If any provision of this Agreement or any amendment thereto shall
be judged unenforceable or cause the Plan and Trust to be
disqualified, said provision shall be deemed to be not in effect
and all other provisions of the Agreement and any amendment thereto
shall nevertheless remain in effect.
14.11 HEADINGS AND GENDER. The headings of articles and the
subheadings and sections in this Plan and Trust Agreement are
inserted for convenience of reference only and are not to be
considered in the construction thereof. Any words used in this
Agreement in the masculine gender shall be construed as though they
were also used in the feminine gender in all cases where they would
so apply, and any words used herein in the singular form shall be
construed as though they were also used in the plural form in all
cases where they would so apply.
<PAGE> 185
CEMAX-ICON, INC.
EMPLOYEES' 401(k) SAVINGS PLAN AND TRUST
ADOPTION AGREEMENT
The undersigned Employer hereby establishes a 401(k) profit sharing plan and
trust as set forth herein pursuant to the following action by unanimous consent:
RESOLVED, the Plan and Trust Agreement, consisting of this Adoption Agreement
and the CDA Benefit Consultants, Inc. Defined Contribution Plan and Trust
Agreement attached as Exhibit A hereto, is hereby adopted for the benefit of all
qualified employees of the Employer.
RESOLVED FURTHER, that any officer or director of the Employer is authorized and
directed for and on behalf of the Employer to take all actions necessary to
implement this Plan and this Trust and to prepare, execute and file all such
documents as are necessary to establish and operate the Plan and Trust and to
take whatever steps deemed necessary or advisable to ensure the qualification of
the Plan and Trust under the Internal Revenue Code.
RESOLVED FURTHER, that for purposes of section 415 of the Internal Revenue Code,
the Limitation Year shall be the 12-consecutive-month period designated
hereunder.
RESOLVED FURTHER, that the adoption of this Plan and Trust shall constitute a
total amendment and restatement of the CEMAX, Inc. 401(k) Savings Plan and Trust
which were effective February 15, 1990.
PROVISIONS RELATING TO ARTICLE I (DEFINITIONS)
1. COMPENSATION (1.07).
Compensation shall include only Compensation actually received by the
Employee.
Compensation shall include elective contributions that are made by the
Employer on behalf of the Employee that are not includable in income under
Code sections 125, 402(a)(8)/402(e)(3), 402(h), or 403(b).
The determination period for Compensation shall be the Plan Year.
2. EFFECTIVE DATE (1.09).
The Effective Date of this Plan and Trust is June 13, 1995.
3. EMPLOYER (1.12). Employer shall mean:
Name of Employer: CEMAX-ICON, Inc. (formerly CEMAX, Inc.)
EIN: 77-0103865
<PAGE> 186
Date of Incorporation: March 9, 1982
Employer Fiscal Year: January 1st to December 31st.
For purposes of crediting Hours of Service for vesting and eligibility,
Employer shall also include ICON Medical Systems, Inc.
4. HIGHLY COMPENSATED EMPLOYEE (1.14).
In determining the Highly Compensated Employees for the Plan Year, the
Employer shall use the Plan Year as the determination period.
5. HOUR OF SERVICE (1.15): EQUIVALENCY METHOD FOR CERTAIN JOB CATEGORIES.
If the Employer does not maintain hourly records for a classification of
Employees, then Hours of Service shall be credited on the basis of days
worked. An Employee shall be credited with 10 Hours of Service for each day
in which he is credited with at least one Hour of Service.
6. PLAN NAME (1.22).
The name of the Plan shall be the CEMAX-ICON, Inc. Employees' 401(k)
Savings Plan. For identification purposes the Employer has assigned the
following three digit number to this Plan: 001.
7. PLAN ADMINISTRATOR (1.23).
The Plan Administrator shall be the Employer.
8. PLAN YEAR (1.24).
The Plan Year shall be the period beginning on February 15, 1990 and ending
on December 31, 1990 and each 12-consecutive-month period ending on
December 31st thereafter.
9. TRUST (1.30). The name of the Trust shall be the CEMAX-ICON, Inc.
Employees' 401(k) Savings Trust. The tax identification number assigned to
the Trust by the Internal Revenue Service is 77-0242695.
10. TRUSTEE (1.32). The following individual is hereby appointed as the
Trustee: Greg Patti.
11. ELAPSED TIME METHOD. (1.33) Service shall not be determined under the
Elapsed Time Method under Section 1.33 of the Plan.
PROVISIONS RELATING TO ARTICLE II (PARTICIPATION)
1. ELIGIBLE EMPLOYEES/INELIGIBLE CATEGORY OF EMPLOYMENT (2.01).
An Employee who is an Employee who is included in a unit of Employees
covered by a collective bargaining agreement between Employee
representatives (within the meaning of Code section 7701(a)(46)) and one or
more employers, including the Employer, under which retirement benefits
have been the subject of good faith bargaining between such Employee
representatives and such
<PAGE> 187
employer or employers shall be excluded from participation in the Plan. Any
other Employee who meets the Participation Requirements shall be eligible
to participate in the Plan. An Employee who moves from an ineligible
category of employment to an eligible category of employment shall
participate in the Plan in accordance with the provisions of Section 2.01.
2. PARTICIPATION REQUIREMENTS (2.01).
(a) ELIGIBILITY TO MAKE ELECTIVE DEFERRALS.
An Eligible Employee may elect to make Elective Deferrals at any time
following his date of hire.
The above eligibility requirements shall apply only to persons who
are Employees on September 30, 1995. Any other Employee may elect to
make Elective Deferrals at any time following the first day of the
calendar quarter which is coincident with or next following his date
of hire.
(b) ELIGIBILITY TO SHARE IN THE ALLOCATION OF EMPLOYER CONTRIBUTIONS AND
FORFEITURES.
An Eligible Employee shall be eligible to share in the allocation of
Employer Contributions (other than Employer Matching Contributions)
on the first day of the calendar quarter which is coincident with or
next following the date on which he completes 1 Year of Service.
(c) YEAR OF SERVICE.
For purposes of eligibility, a Year of Service shall mean the
completion of 1,000 or more Hours of Service during the Eligibility
Computation Period.
3. ELIGIBILITY COMPUTATION PERIOD (2.01 AND 2.02).
For purposes of determining Years of Service and Breaks in Service with
regards to eligibility, the initial computation period shall be the 12
consecutive month period which began on the date the Employee first
performed an Hour of Service. Thereafter, the computation period shall be
the Plan Year, commencing with the Plan Year in which the initial
computation period ends. For purposes of crediting Years of Service for
eligibility, Plan Year shall be determined as though the Plan had been in
effect at all times.
4. ENTRY DATE (2.01).
An Eligible Employee shall enter the Plan on the earlier of the date he
first makes an Elective Deferral to the Plan or the date on which he is
eligible to share in the allocation of Employer Contributions and
Forfeitures.
5. ELECTION NOT TO PARTICIPATE (2.05).
An Employee shall not be permitted to file an election not to participate
in this Plan.
PROVISIONS RELATING TO ARTICLE III (CONTRIBUTIONS)
<PAGE> 188
1. ELECTIVE DEFERRALS.
Elective Deferrals shall be permitted under this Plan. Unless otherwise
specified in this Plan, Elective Deferrals shall be deemed to be Employer
Contributions.
An Employee shall elect in the manner and form prescribed by the Plan
Administrator the amount of Elective Deferrals to be made to the Plan. Such
election must specify the percentage or amount of the Elective Deferral.
Having made an election, an Employee may nevertheless revoke it or modify
it at least once each calendar year according to rules established by the
Plan Administrator which are applied in a uniform and nondiscriminatory
manner.
Any Elective Deferral must meet the requirements of Plan Section 3.03.
2. EMPLOYER CONTRIBUTIONS (3.01).
EMPLOYER MATCHING CONTRIBUTION:
For each Plan Year, the Employer shall contribute an Employer Matching
Contribution on behalf of each Participant who is eligible to receive an
allocation of Employer Matching Contributions for the Plan Year in an
amount equal to a percentage of each Participant's Elective Deferrals,
subject to a maximum dollar amount, for the Plan Year. Said percentage and
maximum dollar amount shall be determined at the discretion of the
Employer.
Said Employer Matching Contribution shall be reduced by forfeitures, if
any, to be applied for the Plan Year.
EMPLOYER DISCRETIONARY CONTRIBUTION:
The Employer shall determine any additional amount of Employer
contributions to be deposited to the Trust fund with respect to such Plan
Year.
3. EMPLOYEE CONTRIBUTIONS (3.02) (3.03).
(a) VOLUNTARY EMPLOYEE CONTRIBUTIONS
Voluntary Employee Contributions shall not be permitted under this
Plan.
(b) EMPLOYEE ROLLOVER CONTRIBUTIONS
Employee Rollover Contributions shall be permitted under this Plan.
(c) TRUSTEE-TO-TRUSTEE TRANSFERS
Trustee-to-Trustee Transfers shall be permitted under this Plan.
PROVISIONS RELATING TO ARTICLE IV (ALLOCATIONS)
<PAGE> 189
1. ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES (4.02).
Any Employer Matching Contributions shall be allocated during the Plan Year
on a monthly, quarterly, semi-annual or annual basis to any Participant who
has Elective Deferrals during the period for which the matching
contributions are being made, regardless of the Participant's Hours of
Service during the Plan Year.
NON-INTEGRATED ALLOCATION.
NON-TOP HEAVY PLAN. If this Plan is not a Top Heavy Plan for a Plan Year,
then, after the restoration of any benefits required under Section 7.05 and
matching the Participant's Elective Deferrals within the limits set forth
in Section III(2) of this Adoption Agreement, any remaining Employer
Contributions and Forfeitures for the Plan Year shall be allocated in the
same ratio that each Covered Participant's Compensation bears to the total
Compensation of all Covered Participants for the Plan Year.
TOP HEAVY PLAN. If this Plan is a Top Heavy Plan for a Plan Year, then,
after the restoration of any benefits required under Section 7.05, any
remaining Employer Contributions and Forfeitures for the Plan Year shall be
allocated in the following manner:
(1) in the same ratio that each Covered Participant's Compensation for
the Plan Year bears to the total Compensation of all Covered
Participants for the Plan Year, up to a maximum allocation of 3% of
each Participant's Compensation. For purposes of this initial
allocation only, Covered Participant shall include any Participant
who is still employed on the last day of the Plan Year, regardless of
the number of Hours of Service credited during the Plan Year. This
initial Top Heavy Plan allocation shall be reduced by any allocation
on behalf of a Covered Participant on the accounting date under any
other qualified retirement plan maintained by the Employer.
(2) after matching the Participant's Elective Deferrals within the limits
set forth in Section III(2) of this Adoption Agreement, any remaining
Employer Contributions and Forfeitures will be allocated in the same
ratio that each Covered Participant's Compensation bears to the total
Compensation of all Covered Participants for the Plan Year.
COMPENSATION for purposes of the allocation of Employer Contributions and
Forfeitures shall mean the Participant's Compensation for the determination
period.
COVERED PARTICIPANT shall mean any Participant who has completed 1,000 or
more Hours of Service during the Plan Year and who is employed with the
Employer on the last day of the Plan Year. Covered Participant shall also
include any Participant who became disabled or died during the Plan Year,
regardless of the number of Hours worked during the Plan Year. For Plan
Years beginning after December 31, 1993, Covered Participant shall also
include nonhighly compensated Participants who have completed more than 500
Hours of Service during the Plan Year, but only to the extent the Plan
Administrator determines is necessary to satisfy the requirements of Code
sections 401(a)(26) and 410(b) in accordance with the procedure in Plan
Section 2.06.
2. LIMITATION YEAR (4.05).
The Limitation Year shall be each 12-consecutive-month period ending on
December 31st.
<PAGE> 190
3. LIMITATION FOR PARTICIPATION IN DEFINED BENEFIT PLAN (4.05).
If the sum of a Participant's defined benefit plan fraction plus the
defined contribution plan fraction exceeds 1.0 during a Limitation Year,
then the Participant's Annual Additions under this Plan for the Limitation
Year shall be reduced to the extent necessary to prevent the limitation
from being exceeded.
4. EXCESS ANNUAL ADDITIONS (4.06).
If a Participant's Annual Additions during a Limitation Year exceed the
limitations of Section 4.05 and the Participant is covered by another
qualified defined contribution plan maintained by the Employer, then his
Annual Additions under this Plan shall be reduced to the extent necessary
to prevent the limitations from being exceeded.
PROVISIONS RELATING TO ARTICLE V (RETIREMENT BENEFITS)
1. EARLY RETIREMENT AGE (5.01).
Early Retirement Age shall be the later of age 55 or the completion of 7
Years of Service for vesting purposes.
2. NORMAL RETIREMENT AGE (5.01).
Normal Retirement Age shall be the later of age 65 or the Participant's age
on the 5th anniversary of his Entry Date.
PROVISIONS RELATING TO ARTICLE VII
(TERMINATION BENEFITS AND IN-SERVICE DISTRIBUTIONS)
1. VESTING (7.02).
A Participant shall always be fully vested in that portion of his Accrued
Benefit which is attributable to his Employee Contributions, Elective
Deferrals, Qualified Non-Elective Contributions, and Employer Matching
Contributions. The remaining portion of his Accrued Benefit shall vest
under the following schedule:
<TABLE>
<CAPTION>
Years of Service Nonforfeitable Percentage
---------------- -------------------------
<S> <C>
1 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%.
</TABLE>
<PAGE> 191
Irrespective of the above schedule, a Participant who was an Employee on
September 30, 1995 shall have his Nonforfeitable percentage calculated
under the following schedule:
<TABLE>
<CAPTION>
Years of Service Nonforfeitable Percentage
---------------- -------------------------
<S> <C>
1 30%
2 60%
3 or more 100%.
</TABLE>
2. YEAR OF SERVICE FOR VESTING PURPOSES.
A Year of Service for vesting purposes shall mean a Vesting Computation
Period in which the Employee completes 1,000 or more Hours of Service. The
Vesting Computation Period shall be the Limitation Year.
3. YEARS OF SERVICE TAKEN INTO ACCOUNT FOR VESTING PURPOSES.
In computing the Employee's Nonforfeitable percentage, all Years of Service
shall be credited.
4. IN-SERVICE DISTRIBUTIONS (7.08).
In-service distributions other than withdrawals of Employee Contributions
shall not be permitted under the Plan.
5. WITHDRAWALS OF ELECTIVE DEFERRALS (7.09).
Financial hardship distribution of a Participant's Elective Deferrals will
be allowed.
PROVISIONS RELATING TO ARTICLE X
1. SIGNATURE OF TRUSTEE [10.04(a)].
If more than one Trustee has been appointed under this Adoption Agreement,
then the signature of one Trustee may be accepted by an interested party as
conclusive evidence that all Trustees have duly authorized the actions set
forth therein.
2. SEGREGATED ACCOUNTS [10.04(d)].
Segregated Accounts shall be permitted under this Plan.
PROVISIONS RELATING TO ARTICLE XI (PARTICIPANT LOANS)
1. PARTICIPANT LOANS (11.01).
<PAGE> 192
Participant loans shall be permitted under this Plan.
SIGNATURES BY ADOPTING EMPLOYER AND TRUSTEE
On behalf of the Employer, this Plan and Trust Agreement is hereby adopted this
______ day of October, 1995 to be effective as of the date specified in this
Adoption Agreement.
__________________________________
TERRY ROSS
President
CONSENT TO TERMS OF TRUST AGREEMENT BY TRUSTEE
The undersigned hereby accepts the terms of this Plan and Trust Agreement as of
the Effective Date.
__________________________________
GREG PATTI
Trustee
<PAGE> 1
Exhibit 10.6
SUPPLY AGREEMENT
BETWEEN
CEMAX-ICON, INC.
47281 MISSION FALLS COURT
FREMONT, CA 94539-0000
HEREINAFTER CALLED: CEMAX-ICON, INC.
AND
BUYER
EASTMAN KODAK COMPANY,
THROUGH ITS HEALTH SCIENCES DIVISION
ROCHESTER, NEW YORK 14652 UNITED STATES
HEREINAFTER CALLED: BUYER
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 2
CONTENTS:
<TABLE>
<S> <C>
Preamble.............................................................................
1. Definition, Parts of the Agreement..............................................
2. Supply of Contractual Products..................................................
3. Marketing Rights................................................................
4. Purchase of Contractual Products, Forecast......................................
5. Modification of Contractual Products............................................
6. New Products....................................................................
7. Maintenance for Contractual Products............................................
8. Lead Times......................................................................
9. Late Deliveries/Force Majeure...................................................
10. Prices and Terms of Payment, Discounts..........................................
11. Shipping, Title, Risk of Loss, Export License...................................
12. Quality Assurance, Product Labeling.............................................
13. Approval........................................................................
14. Warranty........................................................................
15. Liability.......................................................................
16. Technical Documentation.........................................................
17. Patent Indemnification..........................................................
18. Confidentiality.................................................................
19. Term and Termination............................................................
20. Supply after Termination of the Agreement.......................................
21. Dispute Resolution and Substantive Law..........................................
22. Miscellaneous...................................................................
23. Effective Date, Signatures......................................................
</TABLE>
2
<PAGE> 3
PREAMBLE
This Supply Agreement is entered into by Eastman Kodak Company through its
Health Sciences Division, (individually and collectively "BUYER"), a New Jersey
U.S.A. corporation and CEMAX-ICON, Inc. a California, U.S.A. corporation,
"CEMAX-ICON," under the following terms and conditions.
One purpose of this Agreement is to provide the structure under which a
subsidiary of BUYER can order products from CEMAX-ICON, on terms which give
BUYER or the BUYER subsidiary an agreed-upon discount for purchase or
maintenance agreements in accordance with the terms set forth herein.
Except as to sales directly between BUYER and CEMAX-ICON which are governed by
the terms herein, the governing contract will at all times be between the
purchasing and selling entities except as specified herein.
It is expected that any other governing contract(s) between BUYER and CEMAX-ICON
will be substantially in the form of this Agreement, except to the extent that
BUYER and CEMAX-ICON agree to replace all or part of the document with their own
governing contract.
WHEREAS, CEMAX-ICON makes and offers for sale certain medical networking,
software and hardware products.
WHEREAS, BUYER wishes to purchase on an OEM basis such medical networking,
software and hardware products for integration into its medical diagnostic
imaging product line for resale.
THEREFORE, the parties agree to the following:
1. DEFINITION, PARTS OF THE AGREEMENT
1.1 The term "Contractual Product(s)" shall mean the medical imaging
equipment as described in Enclosure I hereto.
1.2 "Term" or "Term of this Agreement" shall mean the period of time
commencing on the "Effective Date" and ending upon termination of this
Agreement under Section 19 or as otherwise provided herein.
1.3 "Effective Date" shall mean the date on which this Agreement enters into
force, i.e. the date on which this Agreement is duly signed by both
parties hereto.
1.4 "Date of Delivery" shall mean the agreed upon shipping date from
CEMAX-ICON, Fremont, CA, USA.
1.5 "Specifications" shall mean the Contractual Product specifications listed
in Enclosure I, which may be amended from time to time to reflect changes
to Contractual Products.
1.6 "Spare Parts" shall mean all of CEMAX-ICON's replacement components,
sub-assemblies, and assemblies of the Contractual Products which BUYER
uses to perform maintenance on the Contractual Products.
1.7 "BUYER Systems" shall mean hardware and/or software systems designed and
manufactured by or for BUYER, incorporating some of the Contractual
Products or any portion or combination thereof.
1.8 "CEMAX-ICON" shall mean CEMAX-ICON, Inc. as identified on the front page
hereof "CEMAX-ICON" shall also mean CEMAX-ICON, Inc. authorized agents,
consultants, and independent contractors who are necessary for any
specific performance under this Agreement, but only with regard to terms
and conditions relating to each such performance. Each such corporation,
agent, consultant, and independent contractor shall be bound by such terms
and conditions of this Agreement as if it were named herein in the place
of CEMAX-ICON, and the performance of each such corporation, agent,
consultant, and independent contractor is ensured by CEMAX-ICON.
Notwithstanding the above, CEMAX-ICON shall not include any direct or
indirect competitors of BUYER in any specific performance under this
Agreement.
1.9 "BUYER" shall mean BUYER, as identified on the front page hereof. "BUYER"
shall also mean BUYER's authorized agents, consultants, and independent
contractors who are necessary for any specific performance under this
Agreement, but only with regard to terms and conditions relating to each
such performance. Each such corporation, agent, consultant, and
independent contractor shall be
3
<PAGE> 4
bound by such terms and conditions of this Agreement as if it were named
herein in the place of BUYER, and the performance of each such
corporation, agent, consultant, and independent contractor is ensured by
BUYER.
1.10 "Technical Documentation" shall mean any and all other documents, tools,
diagnostic software, etc. provided by CEMAX-ICON to BUYER pursuant to this
Agreement or in connection with the sale of Contractual Products by
CEMAX-ICON to BUYER hereunder, or maintenance of Contractual Products by
BUYER.
1.11 Enclosures
1.11.1 The following Enclosures attached to this Agreement form an integral part
hereof:
<TABLE>
<S> <C>
Enclosure I: a) Contractual Products/Spare Parts
b) Specifications Version 1.
Enclosure II: Price list for Contractual Products/Spare Parts
Enclosure III: Shipping Instructions
Enclosure IV: Maintenance Responsibilities
Enclosure V: Product Labeling
</TABLE>
2. SUPPLY OF CONTRACTUAL PRODUCTS
CEMAX-ICON shall supply to BUYER Contractual Products in accordance with
and during the Term of this Agreement. General or special conditions of
sale by CEMAX-ICON or general or special conditions of purchase by BUYER
shall not apply unless and to the extent expressly agreed between the
parties in writing.
3. MARKETING RIGHTS
3.1 BUYER shall have the non-exclusive right to use, sell, lease, market or
otherwise dispose of the Contractual Products purchased from CEMAX-ICON.
This right shall apply only to Contractual Products to be connected to
existing or new BUYER Systems. CEMAX-ICON and BUYER will agree to
cooperate in good faith when marketing to common customers as listed and
outlined in Enclosure VII.
Such marketing right shall also apply at all times after termination of
this Agreement except in the event of a material breach of this Agreement
by BUYER.
3.2 BUYER is entitled to exercise its marketing rights through its
distributors (subsidiaries, agents, representatives or other sales
outlets), which agree to substantially similar conditions to this
Agreement.
3.3 BUYER is free to establish its own price policy and prices for sales of
Contractual Products to third parties. Recommended list pricing is
identified in Enclosure II.
3.4 Notwithstanding any statement to the contrary herein, CEMAX-ICON, is free
to sell CEMAX-ICON products to any third parties.
3.5 CEMAX-ICON and BUYER will discuss and agree upon methods in which to
jointly market Contractual Products with respective product offerings.
4. PURCHASE OF CONTRACTUAL PRODUCTS BY BUYER, FORECAST
4.1 THE CONTRACTUAL PRODUCTS. During the Initial Term and each Renewal Term
of this Agreement, CEMAX-ICON, agrees to sell the Contractual Products to
BUYER, and BUYER agrees to purchase the Contractual Products from
CEMAX-ICON, subject to the purchase requirements described below and to
all other terms and conditions of this Agreement.
Purchase and delivery of Contractual Products shall be made pursuant to
individual Purchase Orders that are issued in writing by BUYER and shall
be acknowledged and accepted, if reasonable according to the forecast
process described below, in writing by BUYER. Individual Purchase Orders
shall identify the quantities of Contractual Products ordered, the price
indicated in Enclosure-II, shipping schedule, and shipping instructions
indicated in Enclosure III, destinations, and packaging require-
4
<PAGE> 5
ments if other than as provided for herein, Purchase Order number and
date, and authorized signature. All Purchase Orders shall be sent to the
address indicated in Section 22.2
Individual Purchase Orders for Contractual Products will be placed a
minimum of 30 days prior to the scheduled shipment date.
At least once during each year of this Agreement, CEMAX-ICON and BUYER
agree to discuss and consider in good faith alternative purchasing
processes if the above process is not reasonably satisfying both parties'
needs.
4.2 If BUYER purchases over a [ * * ] period [*] of CEMAX-ICON's sales
volume of new products, then CEMAX-ICON agrees to give BUYER top priority
in the delivery of current products and development of new products.
5. MODIFICATION OF CONTRACTUAL PRODUCTS
5.1 CEMAX-ICON, is entitled to modify the Contractual Products prior to
delivery and to the extent such modifications do not adversely affect
form, fit or function, reliability, performance or maintainability.
CEMAX-ICON, shall notify such modifications to BUYER in writing at least
[ * * ] prior to first delivery of modified Contractual Products.
5.2 From time to time, CEMAX-ICON, and BUYER may wish to enter into joint
development programs dealing with product enhancements and/or extensions.
CEMAX-ICON's and BUYER's rights and obligations under any joint
development program will be covered by a separate agreement, which shall
include a mutually agreeable means for both parties to recover their
respective costs and a reasonable profit related to their respective
development effort.
5.3 As a producer of medical devices, CEMAX-ICON, and BUYER are obliged by
law to make product observations. BUYER and CEMAX-ICON, shall inform each
other of all relevant safety problems concerning the Contractual Products,
identify which units are involved, when the required modifications will be
completed and meet any other FDA requirements.
6. NEW PRODUCTS
CEMAX-ICON agrees to keep BUYER informed of new product offerings it has
planned by written notification to BUYER at least [ * * ] prior to
product availability. If during the term of this Agreement, CEMAX-ICON,
announces a product, including software, designated by CEMAX-ICON, as a
replacement or follow-up model in place of Contractual Products or
designed or fit to supersede the Contractual Products, BUYER may request
and CEMAX-ICON, shall substitute the new product or model for future
orders, subject to reasonable and fair prices and respective
specifications.
Notwithstanding the above, BUYER may, however, as its option select to
continue to buy Contractual Products listed and specified in the
Enclosures I and II for the duration of this Agreement in addition to such
new products, as long as such Contractual Products are generally available
for sale.
New software upgrade releases for products will be provided at [ *
* ] price when Buyer sells new Software release to Buyer's installed
CEMAX-ICON base.
7. MAINTENANCE FOR CONTRACTUAL PRODUCTS
Respective maintenance obligations of CEMAX-ICON, and BUYER during this
Agreement and after termination of this Agreement for Contractual Products
are described in Enclosure IV. CEMAX-ICON and BUYER agree that any changes
to these respective maintenance obligations for Contractual Products will
be specifically set forth in an amendment to Enclosure IV or in a separate
writing agreed upon by both parties.
8. LEAD TIMES
Lead times for shipment of finally-configured Contractual Products shall
be according to the Purchase Order Process described in Section 4.
Availability dates for Contractual Products as indicated in Enclosure I
will be adhered to. Penalties for Late Delivery will be imposed for
non-delivery [ * * ]
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 6
beyond the scheduled delivery. Such penalties will be in the form of a [*]
discount [ * * ] for deliveries beyond such [ * * ] period.
For Emergency Orders of Contractual Products, any justified, reasonable,
incremental manufacturing or handling costs will be passed to BUYER.
CEMAX-ICON agrees to notify BUYER of any relevant shipping data by telefax
prior to shipment. For purposes hereunder, Emergency Orders are any
Purchase Orders which require faster delivery or an increased number of
units than that which is specified in the Purchase Order process.
9. LATE DELIVERIES, FORCE MAJEURE
9.1 CEMAX-ICON shall not be liable under this Section 9 or otherwise for
failure to perform or for delay in performance due to fire, flood, strike,
act of God, act or omission of any governmental authority, riot, sabotage,
embargo, or due to any cause beyond its reasonable control. In the event
of a delay in performance due to any such cause, the date of shipment and
time for completion of the performance will be extended for a reasonable
period of time. If such delay lasts for more than two months, BUYER may
cancel the respective order.
10. PRICES AND TERMS OF PAYMENT, DISCOUNTS
10.1 The prices for Contractual Products, unless otherwise agreed by the
parties, are stated in Enclosure II to this Agreement. They are in US
dollars ($) and are calculated FCA (Free Carrier), CEMAX-ICON shipping
dock, Fremont, CA (Incoterms 1990), and include appropriate overseas
packaging. CEMAX-ICON will pre-pay for overseas packaging, approved by
Buyer, with Buyer's reimbursement upon receipt.
10.2 Payment shall be made for Contractual Products per Enclosure II, in
addition to VAT and any other statutory taxes or charges, within a period
of thirty (30) days following the date of invoice and delivery to the FCA
point, Fremont, CA/Acceptance as defined in Section 12.1. In case
CEMAX-ICON ships BUYER's orders for Contractual Products directly to
BUYER's customers, CEMAX-ICON shall provide BUYER with the bill of
delivery as described in Section 22.2.
10.3 Prices according to each Enclosure II are valid for [ * * ] starting
with the written agreement of any new or revised Enclosure II.
10.4 If CEMAX-ICON sells contractual products at a lower price to any third
party at similar volumes (excluding government contract sales), then
CEMAX-ICON agrees to promptly reduce Buyer's price and allow buyer to
continue paying a reduced price as long as CEMAX-ICON is selling the
contractual product at the reduced price to a third party. Enclosure II
will be amended to reflect the reduced price. BUYER reserves the right to
examine business records of CEMAX-ICON through a 3rd Party auditor during
normal business hours and at BUYER's sole expense. The purpose of such
audit will be to determine CEMAX-ICON's compliance with this paragraph.
11. SHIPPING, TITLE, RISK OF LOSS, EXPORT LICENSE
11.1 CEMAX-ICON, shall furnish BUYER with the following:
-- P.O. number
-- BUYER part number or CEMAX-ICON, catalogue # at billing level packing
list
-- packing list
-- transportation information
-- serial number of the Contractual Products.
Exact product identification shall also be stated on the packaging,
especially BUYER part No. and P.O. No. Shipping Instruction details shall
be defined in Enclosure III.
11.2 Title as well as risk of loss or damage shall pass to BUYER when the
Contractual Products are delivered to the FCA point.
11.3 This Agreement, and any technical information supplied during the term of
this Agreement, is made subject to any restrictions concerning the export
of products or technical data from the United States of America which may
be imposed by the Government of the United States of America. Furthermore,
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 7
BUYER agrees that at no time, either during the term of this Agreement or
thereafter, will it knowingly export, directly or indirectly, any United
States source technical data acquired from CEMAX-ICON, or any of its
affiliated companies, or any direct product of that technical data, to any
country for which the United States Government or any agency of that
government at the time of export requires an export license or other
government approval, when required by applicable United States law. As of
the effective date of this Agreement, those countries in which the United
States Government forbids doing business include Cuba, Haiti, Iraq, Libya,
North Korea, and the former Yugoslavia.
For purposes of this Agreement, BUYER shall use reasonable efforts to
obtain the necessary export/re-export licenses to be issued by U.S.
government authorities. CEMAX-ICON, will provide BUYER with copies of the
relevant export licenses. BUYER will cooperate with CEMAX-ICON, as
appropriate, in applying for these licenses.
12. QUALITY ASSURANCE, PRODUCT LABELING
12.1 ISO CERTIFICATION/GMP
CEMAX-ICON represents that it has or will obtain at least [ * * ]
certification or that its operations meet Good Manufacturing Practices
("GMP") as defined by the Food and Drug Administration ("FDA").
12.2 AUDIT RIGHTS
At a time acceptable to both parties during CEMAX-ICON's normal business
hours, BUYER shall have the right to conduct an audit of CEMAX-ICON's
appropriate records and operations to ensure compliance with GMP. Within
ten (10) days after such audit, BUYER will provide written notification of
any non-compliance issues. CEMAX-ICON agrees to use its best efforts to be
in compliance within sixty (60) days following such written notification.
12.3 CEMAX-ICON agrees to follow the standards listed in Enclosure I. As
CEMAX-ICON has made best efforts to achieve [ * * ] certification with
regard to the manufacture of Contractual Products hereunder prior to
delivery hereunder, BUYER shall check the Contractual Products on delivery
solely with regard to their class of goods and any external damage to the
packing or to the goods clearly seen to have occurred in transit. In all
other respects BUYER is released from any duty imposed by law to examine
and to make a complaint in regard to such defect immediately on receipt of
goods. Therefore acceptance of the Contractual Products by BUYER will
occur after CEMAX-ICON, has delivered the Contractual Products to the FCA
point, Fremont, CA.
12.4 The Contractual Products will be labeled according to Enclosure V.
13. APPROVAL
CEMAX-ICON, [ * * ], agrees to obtain all necessary approvals
for the Contractual Products, including without limitation FDA 510K
approval and European CE Mark. Notwithstanding the foregoing, CEMAX-ICON
and BUYER may agree in writing to have BUYER obtain any or all such
approvals necessary for BUYER to sell the Contractual Products in Buyer
Systems, and in such case, CEMAX-ICON will provide to BUYER all required
documentation on the Contractual Products. The obtaining of any other
required approvals must be agreed between the Parties and defined in
Enclosure I.
14. WARRANTY
14.1 CEMAX-ICON warrants that CEMAX-ICON will deliver to BUYER good title to
the Contractual Products free and clear of all liens and encumbrances.
14.2 CEMAX-ICON warrants Contractual Products sold hereunder according to the
terms and conditions included in Enclosure IV.
15. LIABILITY
15.1 BUYER agrees to indemnify, defend and hold harmless CEMAX-ICON from and
against any claims, actions, demands, losses, expenses, damages,
liabilities, costs and judgments caused directly by:
7
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 8
(1) the fault or gross neglect of BUYER, its officers, employees,
distributors, subcontractors, or agents, or (2) any failure by BUYER to
comply with applicable laws and regulations regarding its conduct under
this Agreement, or (3) relating to the sale or use of BUYER products sold
or supplied in conjunction with Contractual Products supplied to BUYER by
CEMAX-ICON.
15.2 CEMAX-ICON agrees to indemnify, defend and hold harmless BUYER from and
against any claims, actions, demands, losses, expenses, damages,
liabilities, costs and judgments caused by:
a) the gross negligence of CEMAX-ICON, its officers, employees or agents,
or
b) any alleged hazard or defect, whether manufacturing, design, or
otherwise, or any failure to warn of a product hazard or defect
relating in any way to Contractual Products, or
c) any failure by CEMAX-ICON to maintain required FDA registration in
accordance with Section 13 thereof.
This indemnification does not apply to any damage or injury due in
whole or in part to misuse or abuse of Contractual Products. This
indemnification shall not apply to Contractual Products which have been
altered, modified, or changed in any manner from as-manufactured
condition (ordinary wear-and-tear excepted), including incorporation of
Contractual Products into or with other products or systems sold or
supplied by BUYER.
15.3 Neither party shall, if not expressly otherwise stated in this Agreement,
be liable for any incidental, indirect, special, or consequential damages
of any nature (including, without limitation, lost business, lost
production, interrupted operations, lost profits, cost of substitute
equipment or services, and loss of data or information), except where
mandated by statute, as in cases of damage to privately used property or
in cases of willful intent or gross negligence.
15.4 ENVIRONMENTAL REGULATIONS. It is understood by both parties that any and
all Contractual Products, consumables, materials and packing materials
delivered by CEMAX-ICON to BUYER pursuant to this Agreement shall be in
accordance with the statutory product requirements valid in the territory,
in particular those relating to environmental protection and recycling,
and also be of a type to enable disposal within the scope of the latest
standards of technology and science at the time of delivery of Contractual
Products to BUYER.
Upon execution of this Agreement each party shall appoint one or more of
its employees to direct and execute a program to fulfill the above
requirements under the following responsibilities:
a) both parties shall research and determine what statutory product
requirements are valid in the territory.
b) both parties shall have meeting(s) to discuss and determine the
necessary actions to be taken by each party to fulfill the statutory
product requirements.
c) each party shall bear full responsibility in accomplishing such
actions determined through the above meeting(s).
Should any additional statutory product requirements become valid in the
territory in the future, both parties shall follow the above procedures a)
through c) to fulfill such requirements.
15.5 The obligations contained in this Section shall continue in full force
and effect after the termination of this Agreement.
16. TECHNICAL DOCUMENTATION
16.1 During this Agreement CEMAX-ICON may find it necessary to provide
Technical Documentation to BUYER to be used only for purposes hereunder.
DELIVERY. Upon execution of this Agreement, or as soon thereafter as
possible, CEMAX-ICON shall provide certain Technical Documentation,
specifically one (1) copy of the Service manuals for Contractual Products.
CEMAX-ICON owns all rights, including copyrights in such Technical
Documentation, and grants to BUYER a nonexclusive license to reproduce
them in accordance with Section 16.2 and 16.3 and to use the information
only to maintain specific, mutually-agreed units, as
8
<PAGE> 9
identified by serial numbers, of its own Contractual Products purchased
from CEMAX-ICON and located at BUYER's facilities, or as otherwise
specified in writing. This license will remain in force as long as BUYER
needs it for the purposes described above or unless earlier terminated in
accordance with Section 19.2. Upon expiration or termination of this
license, BUYER agrees to return to CEMAX-ICON or certify the destruction
of the Technical Documentation. BUYER is specifically not permitted to
service the Contractual Products of its customers purchased hereunder
unless BUYER obtains the right to do so from CEMAX-ICON in writing.
16.2 REPRODUCTION AND DISTRIBUTION. Technical Documentation delivered
pursuant to this Agreement and all information contained therein may be
used only for purposes described herein or otherwise specified in writing
by CEMAX-ICON, and may be disclosed, delivered, and disseminated only to
employees, agents or subcontractors of BUYER who have executed an
appropriate non disclosure agreement.
16.3 REPRODUCTION FOR CUSTOMERS. Technical Documentation may not be
reproduced, excerpted from, or disseminated to third parties.
16.4 COPYRIGHT NOTICE. As a condition of the right to reproduce, excerpt
from, and distribute documentation as provided herein, BUYER agrees to
include its or CEMAX-ICON, as the case may be, copyright notice in a
conspicuous place on all documentation prepared pursuant to this
Agreement.
16.5 CEMAX-ICON shall provide a mechanism to assure that BUYER's contact for
Technical Matters listed in Section 22.2 receives documentation updates on
a timely basis.
17. PATENT INDEMNIFICATION
CEMAX-ICON shall indemnify, defend, and hold harmless BUYER from any and
all claims or suits, costs and expenses, including reasonable attorneys'
fees and expenses, insofar as such actions arise from a claim that any
product manufactured by CEMAX-ICON and sold to BUYER hereunder infringes
any third party's Letters Patent, trade secrets, or copyrights.
BUYER shall indemnify, defend, and hold harmless CEMAX-ICON from any and
all claims or suits, costs and expenses, including reasonable attorney's
fees and expenses, insofar as such actions arise from a claim that the
manufacture, use, or sale of Contractual Products in conjunction with
product(s) manufactured or supplied by BUYER infringes any third party's
Letters Patent, trade secrets, or copyrights.
The obligation to indemnify hereunder shall arise only if the party
against whom the obligation is asserted (i) is given reasonable notice of
the infringement claim; (ii) is granted in writing exclusive control over
the defense and settlement of the claims; and (iii) the party to be
indemnified cooperates with all reasonable requests of the other party in
the defense or settlement of such claims. The party to be indemnified
shall have the right, at its option and expense, to participate in the
defense of any suit or proceeding through counsel of its own choosing. the
obligation hereunder covers only products as sold and does not extend to
any correction, modification, or addition made to products.
The party against whom this indemnification is asserted shall have the
right at that party's option, (i) to procure a license at that party's
cost from the person claiming or likely to claim infringement; (ii) to
modify the product, as appropriate and at that party's cost, to avoid the
claims of infringement, as long as the modification is substantially and
functionally equivalent to the product as originally sold; or (iii) if
neither (i) or (ii) can be accomplished at reasonable cost, to accept the
return of the product and refund the price paid for the product.
The remedies set forth in this section shall be the sole and exclusive
remedies for any claim of infringement.
18. CONFIDENTIALITY
Both BUYER and CEMAX-ICON agree to keep confidential respect to third
parties any information, e.g. technical records, data, drawings, or
documents furnished and transmitted by one Party to the other under this
Agreement and marked as confidential with the same degree of care with
which they treat and protect their own proprietary information. This
applies both during the term of this Agreement and for a period of [ *
* ] years thereafter with the exception that both BUYER and
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 10
CEMAX-ICON may disclose such information to their respective subsidiaries,
agents, consultants, and independent contractors in consistency with the
terms of this Agreement.
No press-release or any publication of the existence of this Agreement
shall be allowed unless first approved by the other Party in writing.
Any information which
-- is known or is in the possession of the receiving Party prior to
transmission by the disclosing Party, or
-- becomes available to the receiving Party from a source other than
disclosing Party or is in or passes into the public domain other than
by breach of this Agreement, or
-- is developed independently by the receiving Party, or
-- disclosure of which is authorized by the disclosing Party shall not be
subject to this confidentiality provision.
This section also applies to data contained within returned Contractual
Products for repairs, warranty repairs and refurbishments.
OBJECT CODE LICENSE FOR CONTRACTUAL PRODUCTS COMPRISING SOFTWARE INCLUDED
AS PART OF HARDWARE
BUYER acknowledges that the Contractual Products contain proprietary
software which belongs to CEMAX-ICON and its licensors. CEMAX-ICON grant
to BUYER an irrevocable, fully-paid, non-exclusive license to use the
object code versions of such software and to sublicense to its end-user
customers the right to use such object code versions only for the normal
operation of the Contractual Products but not for servicing or repairing
such Contractual Products, unless otherwise agreed in writing by
CEMAX-ICON.
OBJECT CODE LICENSE FOR CONTRACTUAL PRODUCTS COMPRISING SOFTWARE OFFERED
W/O HARDWARE
BUYER acknowledges that the Contractual Products are composed of
proprietary software which belongs to CEMAX-ICON and its licensors.
CEMAX-ICON grants to BUYER an irrevocable, fully-paid or royalty-bearing
(as indicated in the attached relevant Enclosure II for each particular
software Contractual Product), non-exclusive license to use and copy the
object code versions of such software, to incorporate such software with
BUYER's own software and distribute such software with or for use in BUYER
Systems, and to sublicense to its end-user customers the right to use the
object code versions of such software as part of BUYER Systems.
SOURCE CODE LICENSE OR ESCROW
[ *
* ]
If source code is not supplied by CEMAX-ICON, CEMAX-ICON and BUYER agree
to enter into an escrow agreement ("Escrow Agreement"), in the form
attached as Enclosure IV to this Agreement, with an escrow holder mutually
acceptable to CEMAX-ICON and BUYER.
Any other software disclosed hereunder will be governed by the terms and
conditions of respective software license(s) to be negotiated separately.
19. TERM AND TERMINATION
19.1 This Agreement shall enter into force on the Effective Date and shall
initially continue in effect for a period of [*] years.
Thereafter the Term of this Agreement may be extended for periods of (1)
year, upon agreement of the parties in writing to each such extension.
19.2 Notwithstanding the Term hereof, this Agreement or the license stated in
Section 16.1 may by written notice be terminated and canceled at the
option of the party having such right as herein provided --
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<PAGE> 11
and save of any other rights such party may have -- upon the occurrence of
either one or more of the following events stated below:
-- by either party in the event that the other party voluntarily files a
petition in bankruptcy or has such a petition involuntarily filed
against it (which petition is not discharged within thirty (30) days
after filing), or is placed in an insolvency proceeding, or if an order
is entered appointing a receiver or trustee for or a levy attachment is
made against a substantial portion of its assets which order shall not
be vacated, set aside or stayed within thirty (30) days from date of
entry, or if any assignment for the benefit of its creditors is made.
-- by either party in the event that the other shall have failed
substantially to perform any material covenant, representation or
warranty made or to be performed hereunder, or shall have violated any
material covenant, Agreement or representation or warranty herein
contained, provided that such default is of a substantial nature and
shall not have been remedied to the other party's satisfaction, within
[ * * ] after written notice to the other party specifying the
nature of such default and requiring remedy of the same.
A waiver of any default by either party of any of the terms and conditions
of this Agreement shall not be deemed to be a continuing waiver or a
waiver of any other default, but shall apply solely to the instances to
which such waiver is granted. The non-defaulting party may terminate this
Agreement by written notice to the other at any time after expiration of
such [ * * ] period.
20. SUPPLY AFTER TERMINATION OF THE AGREEMENT
After termination of this Agreement, CEMAX-ICON shall, according to the
terms of this agreement, continue to supply to BUYER Contractual Products
which BUYER needs in order to fulfill contractual obligations which have
been entered into on the basis of quotations prior to termination of this
Agreement and which have been ordered by BUYER prior to the termination of
this Agreement, provided that all shipments are scheduled within one (1)
year of termination. In addition to the final order in effect at
termination, BUYER may place one final order at the time of termination up
to two times the quantity of Contractual Products ordered by BUYER over
the previous twelve (12) months for deliveries to be made over the next
twelve (12) months on a mutually agreeable schedule to be negotiated if
not in breach by BUYER.
21. DISPUTE RESOLUTION and SUBSTANTIVE LAW
22.1 For the orders place by BUYER no other conditions than those specified in
this Agreement shall be applicable. All changes and amendments to this
Agreement must be in writing and signed by an authorized representative of
BUYER and a corporate officer of CEMAX-ICON to be valid. This requirement
of written form can only be waived in writing.
22.2 Notices and communications between CEMAX-ICON and BUYER shall be given in
writing or by FAX to the following addresses of the parties or to such
other address as the party concerned may subsequently notify in writing to
the other party:
23. MANUFACTURING RIGHTS
23.1 CEMAX-ICON may from time to time, in its sole discretion, but in no event
shall CEMAX-ICON be required to, negotiate or continue negotiation with
BUYER, for such period as may be mutually determined, the terms of an
irrevocable, non-exclusive, fully paid-up, worldwide license with respect
to all present and future patents held or acquired by CEMAX-ICON covering
the Product, any sublicensing rights under any exclusive license held by
CEMAX-ICON covering the Product, and all of CEMAX-ICON's manufacturing
proprietary rights necessary for the manufacture, use and sale of said
Product. If, however, CEMAX-ICON shall fail to supply BUYER with BUYER's
"reasonable requirements" (as defined below) of Product under the terms of
this Agreement, BUYER shall give CEMAX-ICON written notice of such
failure, specifying the same in reasonable detail in such notice, and
shall offer CEMAX-ICON a period of not less than [ * * ] after
receipt by CEMAX-ICON of such notice to cure such failure. In the event
CEMAX-ICON to grant to BUYER a non-exclusive, royalty-bearing, worldwide
license, but with no right of assignment or sublicense,
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<PAGE> 12
under such "manufacturing proprietary rights" (as defined below) of
CEMAX-ICON as are reasonably necessary for BUYER to manufacture or have
manufactured, use and sell the Product. Such license shall be in
consideration of a reasonable royalty to be negotiated in good faith,
based upon industry standards for the particular type of Contractual
Products to be licensed (hardware, software or combination), to be paid
for each product covered thereby and sold or otherwise distributed to
BUYER's customers.
(a) For purposes of the foregoing provision, CEMAX-ICON shall be deemed to
have met BUYER's "reasonable requirements" of CEMAX-ICON shall have
delivered, in the aggregate, within the most recent three (3) month
period, a quantity of Contractual Products equal to not less than
seventy-five percent (75%) of the aggregate quantity of Product
required to be delivered in such (3) month period pursuant to Purchase
Orders issued by BUYER and accepted by CEMAX-ICON in accordance with
the terms of this Agreement and which meet all the published
specifications.
(b) For purposes hereof, the term "manufacturing proprietary rights" shall
mean copyrights, patents and patent applications and, to the extent
reasonably available, designs, production drawing, standards,
specifications and other written manufacturing processes and
procedures, vendors' names and addresses and price history data and
other technical information reasonably necessary for the manufacture
and assembly of the Product.
(c) CEMAX-ICON reserves the right to license from BUYER any modifications
made by BUYER to correct CEMAX-ICON's source code, for a reasonable
royalty to be negotiated in good faith based upon industry standards,
to be paid for each product covered and sold or otherwise distributed
to CEMAX-ICON's customers.
For Contractual matters:
If to CEMAX-ICON to:
Terry Ross
President and CEO
CEMAX-ICON
47281 Mission Falls Court
Fremont, CA 94539
Phone: (510) 770-8612
Fax: (510) 770-8555
If to BUYER to:
Kenneth C. Scism, Manager, Strategic Alliance Development
Eastman Kodak Company
18325 Waterview Parkway
Dallas, Texas 75252
Phone: (214) 994-4168
Fax: (214) 994-4110
For Purchase Order (Forecast)/Invoicing:
If to CEMAX-ICON to:
Vice President Finance
Greg Patti
If to BUYER to:
Nicki Trice, Materials Procurement
Eastman Kodak Company
18325 Waterview Parkway
Dallas, Texas 75252
Phone: 214-454-1461
Fax: 214-454-1477
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<PAGE> 13
For Technical Matters:
If to CEMAX-ICON to:
Vice President Marketing
Oran Muduroglu
If to BUYER to:
Carol Sandusky, Product Line Manager
Eastman Kodak Company
18325 Waterview Parkway
Dallas, Texas 75252
Phone: 214-994-1361
Fax: 214-994-4180
22.3 No right or interest in this Agreement shall be assigned by either
CEMAX-ICON or BUYER without the written consent first obtained from the
other party, and any attempted assignment, whether voluntary or
involuntary, shall be wholly void, totally ineffective, and of no force
and effect, and shall not confer any rights of any kind upon the intended
assignee.
22.4 Should individual provisions of this Agreement be legally ineffective or
be unenforceable for legal reasons then, unless the basic intentions of
the parties under this Agreement are substantially jeopardized, the
validity of the remaining provisionsof this Agreement shall not be
affected thereby. In such a case the parties shall come to an Agreement
approximately as close as possible to the arrangement originally envisaged
in this Agreement.
22.5 This Agreement shall not constitute BUYER as an agent of CEMAX-ICON nor
shall it constitute CEMAX-ICON as an agent of BUYER, and neither party
shall make any statements to the contrary by advertising, signs,
letterheads, or otherwise. No contracts, commitments, statements, or
representations made by or on behalf of either party to a third party
shall be binding in any respects on the other party.
22.6 The titles to the sections in this Agreement are for convenience or
reference only and are not part of this Agreement and shall not in any way
affect the interpretation thereof.
22.7 When this Agreement becomes effective, it shall constitute the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof, and shall supersede and cancel all previous
agreements, negotiations and commitments, either oral or written with
respect to this subject.
23. EFFECTIVE DATE/SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized officers on the day and
year mentioned below.
Effective Date: January 5, 1996.
<TABLE>
<S> <C>
CEMAX-ICON BUYER
By: By:
Name: Name:
Title: Title:
Date: Date:
</TABLE>
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<PAGE> 14
ENCLOSURE I
CONTRACTUAL PRODUCTS, SPECIFICATIONS (DETAIL)
IMAGE OUTPUT SIZES
TRUE SIZE IMAGING: Must have the capability of printing and displaying images in
a true size (i.e. as true in size as images acquired on a screen film system).
Must be able to use both printed and workstation images for measurements (Scale
on or within the image) in print mode must be capable of printing two different
images on one film.
Product Delivery Schedule (Detail)
DELIVERY DEFINITION OF TERMS
Alpha release: Includes all functions as specified in the product
functional specification. Any known error conditions should be
documented with workarounds, as available, to enable preliminary
integration and testing. Release to be used exclusively for Kodak
internal testing and integration.
Beta release: Includes all functions as specified in the product
functional specification. Software product has been formally Q.A. tested
and documented. No severity level 1 errors as defined in Enclosure IV
occurred during formal Q.A. testing.
General release: Includes all functions as specified in the product
functional specification. Software product has been formally Q.A. tested
and documented. No severity level 1 or 2 errors as defined in Enclosure
IV. No more than [*] severity level 3 errors as defined in Enclosure IV.
of which [ * * ] result in poor perception of image quality by the
customer and [ * * ] result in workarounds which cause a noticeable and
repeatable inconvenience or disruption to normal workflow.
AUTORAD [*] SOFTWARE
In addition to all currently available features, release includes at a
minimum:
1. The following [ ** ] DICOM Service Classes:
[ *
* ]
2. True Size Imaging which, at minimum, meets the above specification
BUYER engineering consultation for design specification will be
made available, if needed.
3. Software releases meet the following schedule:
Alpha release available to BUYER no later than [ ** ]
Beta release available to BUYER no later than [ ** ]
General release available to BUYER no later than [ ** ]
4. Product line will have FDA 510K listing.
5. Support for BUYER trade dress.
6. Draft user and service product documentation available to BUYER in
electronically readable form with each software release.
Alpha release available to BUYER no later than [ ** ]
Beta release available to BUYER no later than [ ** ]
General release available to BUYER no later than [ ** ]
7. Product Functional Specification Document available to BUYER as
follows:
Draft specification due [ * * ].
Final specification due [ ** ].
RAD-ACCESS [*] SOFTWARE
In addition to all currently available features, release includes at a
minimum:
14
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 15
1. The following [ ** ] DICOM Service Classes:
[ *
* ]
2. True Size Imaging which, at minimum, meets the above display
specification (no printing).
3. Software releases meet the following schedule:
Alpha release available to BUYER no later than [ ** ]
Beta release available to BUYER no later than [ ** ]
General release available to BUYER no later than [ ** ]
4. Product line will have FDA 510K listing.
5. Support for BUYER trade dress
6. Draft user and service product documentation available to BUYER in
electronically readable form with each software release:
Alpha release available to BUYER no later than [ ** ]
Beta release available to BUYER no later than [ ** ]
General release available to BUYER no later than [ ** ]
7. Product Functional Specification Document available to BUYER as
follows:
Draft specification due [ * * ].
Final specification due [ ** ].
CLINICAL VIEW [*] SOFTWARE
In addition to all currently available features, release includes at a
minimum:
1. The following [ ** ] DICOM Service Classes:
[ *
* ]
Basic Print User
2. True Size Imaging which, at minimum, meets the above specification.
3. Software releases meet the following schedule:
Alpha release available to BUYER no later than [ ** ]
Beta release available to BUYER no later than [ ** ]
General release available to BUYER no later than [ ** ]
4. Product line will have FDA 510K listing.
5. Support for BUYER trade dress.
6. Support for international language translation no later than Beta
release date of [ ** ].
7. Draft user and service product documentation available to BUYER in
electronically readable form with each software release:
Alpha release available to BUYER no later than [ ** ]
Beta release available to BUYER no later than [ ** ]
General release available to BUYER no later than [ ** ]
8. Product Functional Specification Document available to BUYER as
follows:
Draft specification due [ * * ].
Final specification due [ ** ].
15
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 16
TELERADIOLOGY GATEWAY
In addition to all currently available features, release includes at a
minimum:
1. The following [ ** ] DICOM Service Class:
[ * * ]
2. Software releases meet the following schedule:
Alpha release available to BUYER no later than [ ** ]
Beta release available to BUYER no later than [ ** ]
General release available to BUYER no later than [ ** ]
3. Support for BUYER trade dress
4. Draft user and service product documentation available to BUYER in
electronically readable form with each software release:
Alpha release available to BUYER no later than [ ** ]
Beta release available to BUYER no later than [ ** ]
General release available to BUYER no later than [ ** ]
5. Product Functional Specification Document available to BUYER as
follows:
Draft specification due [ * * ].
Final specification due [ ** ].
VIDEO CARDS
Power P.C. PCI Based video cards as follows:
1. Single card support for [ * * ] resolution monitors available
for alpha testing no later [ ** ] with production quantity available
no later than [ ** ]. Video card specification documentation shall
preceed delivery of hardware by no less than [ * * ] of alpha and
production available dates.
2. Single card support for [ * * ] resolution monitors available for
alpha testing no later than [ ** ] with production quantity available
no later than [ ** ]. Video card specification documentation shall
preceed delivery of hardware by no less than two weeks of alpha and
production availability dates.
<TABLE>
<S> <C>
Accepted and Agreed: Accepted and Agreed:
BUYER CEMAX-ICON
By: By:
Name: Name:
Title: Title:
Date: Date:
</TABLE>
16
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 17
ENCLOSURE II
PRICE LIST
Pricing stated herein is based upon minimum total quarterly volume from Buyer of
[ * * ] (U.S. dollars). Guaranteed quarterly volume requirements will not be
effective until the calendar quarter following the date in which the product has
reached shipping approval status according to Enclosure I. The [ * * ] (U.S.
dollars) minimum quarterly volume requirements is dependent on [ *
* ] being available for [ * * ] products. Continuation of the
[ * * ] (U.S. dollars) minimum quarterly volume requirement is dependent on
[ * * ] and DICOM print functionality by [ * ]. Should
[ * * ] and DICOM print functionality not be available by [ * ]
then all minimum quarterly purchase requirements for buyer shall be [ *
* ]. The stated minimum volume in sales will be representative of
Eastman Kodak Company and subsidiaries total sales.
PLEASE SEE CEMAX-ICON LIST PRICE PAGES
&
BUYER TRANSFER PRICING ENCLOSED
<TABLE>
<S> <C>
Accepted and Agreed: Accepted and Agreed:
BUYER CEMAX-ICON
By: By:
Name: Name:
Title: Title:
Date: Date:
</TABLE>
17
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 18
<TABLE>
<CAPTION>
PRODUCT NAME TRANSFER PRICE
- -------------------------------------------------------------------------------- --------------
<S> <C>
TELERADIOLOGY PRICING
Telemax for Home Mac/PC SW Only................................................. $ [ *
Telemax 8 on Video Acquisition 1-4 Inputs
Std. Line Rate NuBus.......................................................... $
1-4, Res. NuBus............................................................... $
Std. Line Rate -- PCI DVI 3................................................... $
Hl. Res. NuBus -- PCI/DVI 3................................................... $
Video Acq SW & ImageCam SW (supports V.34 Modem).............................. $
Remote Switch (required to expand Vid. Acq. to 4 nodes)....................... $
Options
Support for remote Wide HUB................................................... $
Transceivers (1 to 4) Keyboard/monitor not include............................ $
ISDN support per receive system............................................... $
ISDN support transmit......................................................... $
Telerad LINX Gateway.......................................................... $
DIGITIZER ACQUISITION AND SEND SOFTWARE AND BIT FOR TELERADIOLOGY
Vidar Film Scanner SW and ImageCom SW (V.34 Modem).............................. $
Lumisya 50, 75, 150 SW and ImageCom SW (V.34 Modem)............................. $
Sheet feeder support for 75..................................................... $
ISON support for above.......................................................... $
/MINI PACS (12 BITS)
Clinical View SW Only........................................................... $
RadAccess 1600 X 1280 SW Only................................................... $
Lumisya 50, 75, 150 SW AutoCom.................................................. $
Sheet feeder 75................................................................. $
AutoRad SW -- 4 Head 1600 X 1280................................................ $
AutoRad SW -- 2 Head 2000 X 2000................................................ $
AutoRad SW -- 1.6K to 2K dual SW upgrade........................................ $
AutoRad SW Acquisition Node..................................................... $
Hi Res. Digital or Analog Video Board......................................... $
Stealth Hardware -- Bob. Tap. Key Pad......................................... $
Acquisition software.......................................................... $
AutoRad Distribution Software................................................. $
Lumisya Acq. 12 Bu and Dist. SW. Only......................................... $
StudyServer SW Only........................................................... $
Registration Sta. SW Only..................................................... $
Admin Sta. SW Only............................................................ $
Teleradiology Gateway SW Only................................................. $
Full CR QAstation SW Only....................................................... $ * ]
</TABLE>
18
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 19
<TABLE>
<CAPTION>
PRODUCT NAME TRANSFER PRICE
- -------------------------------------------------------------------------------- --------------
<S> <C>
Hardware Display Cards
2 Head 1600 X 1280 Disp. Crd. -- NuBus........................................ $ [ *
1 Head 2K X 2K -- NuBus (Ltd. Supply)......................................... $
2 Head SMP -- PCI............................................................. $
1 Head 1600 X 1280 PCI........................................................ $
Laserlink -- Direct Filming..................................................... $
ImageServer 1.0 SW Only......................................................... $
HIS/RIS Gateway SW Only......................................................... $ * ]
</TABLE>
- ---------------
(1) A minimum volume commitment of [ * * ] per year.
(2) A commitment to develop a favorable upgrade plan for existing PDS users to
migrate to AutoRad.
(3) Kodak's exclusive use of Cemax icon [ * * ] for new AutoRad and
RadAccess installations.
19
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 20
ENCLOSURE IIA
PRICE LIST
Cemax-Icon agrees to provide a [ * * ] pricing solution to BUYER specifically
for the purpose of upgrading existing PDS installations that have been installed
through the period of [ * * ]. The number of PDS installations will not be
greater than [ * * ] stations to be divided between Autorad and RadAccess
software. This software will operate on Power PC hardware and one earlier
version of Apple Macintosh hardware to be selected by BUYER. All systems must
be upgraded to operating system 7.5.1 or later.
The minimum cost to upgrade workstations, exclusive of hardware, support,
installation or training will be [ * * ]. Each copy of Autorad software will
be credited toward this amount at a rate of [ * * ] per copy. Each copy of
RadAccess will be credited towards this amount at a rate of [ * * ] per copy.
Buyer has the right to credit any of the installed base licences above towards
unrestricted "new" licences of any product type.
Payment would be due as follows:
[ *
* ]
[*
*]
Pricing does not include any hardware, support, installation, site visits or
customer training by CEMAX-ICON.
This [ * * ] pricing solution is not intended to reduce the guaranteed
quarterly minimum purchases of [ * * ]. This solution is contingent on BUYER
validation to Cemax-Icon that this software can only be used to replace PDS
stations installed no later than [ * * ], i.e., it will not be used to add
stations to existing customer sites or networks and will not be used for new
sales.
<TABLE>
<S> <C>
ACCEPTED AND AGREED: ACCEPTED AND AGREED:
BUYER CEMAX-ICON
By: By:
(authorized signature) (authorized signature)
Name: Name:
(print or type) (print or type)
Title: Title:
Date: Date:
</TABLE>
20
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 21
ENCLOSURE III
SHIPPING INSTRUCTIONS
Delivery of Products shall be made pursuant to individual Purchase Orders that
shall be issued in writing or that may be issued electronically by BUYER.
Individual Purchase Orders shall identify Product description, and applicable
specifications or prints and/or electronic files. Revision level, the quantities
of Products ordered, the price, delivery schedule and instructions,
destinations, containerization quantities, and packaging requirements (other
than as provided for herein), and such other terms of sale not covered by this
Agreements as may be acceptable to CEMAX-ICON and BUYER.
ANY DEVIATIONS FROM THE ORIGINALLY NEGOTIATED CONTRACT MUST BE MUTUALLY AGREED
UPON BY BUYER AND CEMAX-ICON AND DOCUMENTED WITH A PURCHASE ORDER CHANGE NOTICE.
DELIVERY AND SHIPPING
CEMAX-ICON is solely responsible for meeting agreed upon delivery dates to the
designated receiving location. On-time delivery shall be considered accomplished
upon signature for receipt by BUYER on the delivery date or within five (5)
business days prior to that date, unless otherwise specified on the Purchase
Order.
CEMAX-ICON is responsible to insure that Products are turned over to BUYER
preferred carrier far enough in advance to meet agreed upon delivery dates.
Failure to do so may require premium transportation charges at CEMAX-ICON's
expense if such failure to meet agreed upon delivery dates is due to the fault
of supplier.
CEMAX-ICON will have in place such systems and procedures necessary to assure
accurate tracking of orders during production, packing and shipment such that
routine expediting and follow-up by BUYER will not be required.
Requests for delivery or expediting information shall be answered as soon as
possible and always 24 hrs. of such request.
ACCEPTANCE
The CEMAX-ICON products and documentation delivered under this Agreement shall
be considered accepted by BUYER unless, within sixty (60) days after delivery to
BUYER, BUYER notifies CEMAX-ICON that products and/or documents do not conform
to the specification set forth in Exhibit B hereto, or that CEMAX-ICON Products
do not execute as specified in the Documentation or that an excessive number of
Errors are found in the CEMAX-ICON Product or that CEMAX-ICON Product
performance on BUYER Systems is inadequate for BUYER's intended use. In such
event, CEMAX-ICON shall have thirty (30) days after such notice to make and
submit to BUYER such changes as shall be reasonably required to correct the
deficiencies, and BUYER shall have a similar period to retest and evaluate the
Product and review the Documentation. If the deficiencies have not been
corrected within ninety (90) days after the initial delivery date, BUYER may
terminate this Agreement with respect to such Products. In such latter case,
unless otherwise specified herein, all prior payments and advances, if any,
shall be returned to BUYER within ten (10) days.
PACKAGING AND PACKING REQUIREMENTS
Software Packaging shall be in accordance with Good Commercial Practice or as
specified by BUYER. The Product shall be packaged to protect it from shipping,
stocking, and handling damage or loss. All efforts will be made to reduce
packaging and excessive handling. We will review containerization option on an
annual basis.
Each package (to the intermediate level) shall be marked on the outside of the
carton with the manufacturer's name. BUYER's Item ID numbers, unless otherwise
specified on the Purchase Order or BUYER drawing, shall appear on all shipping
documents and cartons.
21
<PAGE> 22
<TABLE>
<S> <C>
ACCEPTED AND AGREED: ACCEPTED AND AGREED:
BUYER CEMAX-ICON
By: By:
(authorized signature) (authorized signature)
Name: Name:
(print or type) (print or type)
Title: Title:
Date: Date:
</TABLE>
22
<PAGE> 23
Enclosure IV
Maintenance Responsibilities for CEMAX-ICON/BUYER
(including warranty/installation issues)
Warranty Support-Software warranty period for CEMAX-ICON is to be 6 months.
CEMAX-ICON warrants that the Products will meet the specifications set forth in
Enclosure I during the term of this Agreement. If a Licensed Product fails to
conform to specifications and if BUYER so notifies CEMAX-ICON, CEMAX-ICON will
promptly correct any such errors, at no cost to BUYER. Except as otherwise
specified herein, CEMAX-ICON makes no warranty, express or implied, including
the implied warranties of merchantability and fitness for a particular purpose.
Licensor agrees to provide software maintenance for all Licensed Products
for both the current and immediately preceding release of the Licensed
Product from the date of delivery. Licensor also agrees to provide the
following support services for the products at no charge: prompt verbal and
written communications detailing operational instructions, problem
reporting and technical advice; and access to at least one knowledgeable
Licensor technical person. BUYER will be responsible for reasonable travel
and living expenses related to such support services, provided that it has
been approved by BUYER in advance. Licensor also agrees, at BUYER's option,
to provide software maintenance to BUYER for a period of at least two years
after the termination of this Agreement for fees which are consistent with
similar services provided to other similar Licensor customers. Maintenance
shall consist of the correction of Errors and their prompt incorporation
into releases of the Licensed Products. Error corrections to the Licensed
Products and Documentations mean that they are made to conform to each
other (except that it is unacceptable to change the Documentation to
significantly alter major features which influenced the used to buy the
Licensed Product). When requesting correction of Errors, BUYER shall
stipulate the severity level it has associated with the Error using the
following severity level guidelines:
Severity Level 1 Emergency. The Licensed Product cannot be used by an End
User to perform any useful work for which the Current Software was intended.
Safety and efficacy of systems are impacted.
Severity Level 2 Severely Impacted. The Licensed Product cannot be used by an
End User to perform all functions, but some useful work can be performed.
Severity Level 3 Limited Function. The Error is not critical, but is an annoying
defect that can circumvented or avoided on a temporary basis.
Severity Level 4 Circumvented Problem. The Error is a minor problem and can be
easily circumvented by the End User. Licensor shall use its best efforts to
provide Licensee with corrections to Errors within the time periods defined
below:
Severity Level 1 [ * * ]
Severity Level 2 [ * * ]
Severity Level 3 [ * * ]
Severity Level 4 -- Corrections shall be included in the next release of
the Licensed Product or as soon thereafter as
reasonable
23
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 24
<TABLE>
<S> <C>
ACCEPTED AND AGREED: ACCEPTED AND AGREED:
BUYER CEMAX-ICON
By: By:
(authorized signature) (authorized signature)
Name: Name:
(print or type) (print or type)
Title: Title:
Date: Date:
</TABLE>
24
<PAGE> 25
ENCLOSURE IVA
MAINTENANCE RESPONSIBILITIES FOR CEMAX-ICON
1.0 DOCUMENTATION AND TRAINING:
1.1 CEMAX-ICON agrees to provide a troubleshooting guide and flowchart to be
used by our technical support staff.
1.2 CEMAX-ICON agrees to provide the service manual and user documentation for
all applicable products in electronic format if available, if not available
in electronic format hard copy substitution agreed to by CEMAX-ICON and
BUYER (e.g. Frame, Framemaker). The user documentation should be translated
to the local country's language for countries requiring the CE mark for all
applicable products. The service documentation should include (but not
limited to) installation instructions, diagnostic manual, error code list
and explanation, network configuration instructions, recommended hardware
list. The service manual and user documentation will be available on an
agreed upon country priority.
1.3 CEMAX-ICON agrees to provide a detailed, engineering level "Theory of
operation" to BUYER.
1.4 CEMAX-ICON agrees to provide two regular and ongoing product service
training to BUYER employees (phone support and second level engineering
support employees). The scheduled "Train the Trainer" product service
training courses will be mutually agreeable to both CEMAX-ICON and BUYER.
2.0 TECHNICAL SUPPORT:
2.1 CEMAX-ICON will designate a knowledgeable engineer to provide support to the
Kodak Technical Support Center and the Kodak Field Service Organization.
The designated contact will be available with an average 30 minute response
time, not to exceed one hour during normal working hours, (8-5 PM Pacific
Time). During all other times including weekends and holidays a
knowledgeable engineer will be provided that can be reached via pager. The
pager response time will average one hour and not exceed two hours.
2.2 CEMAX-ICON agrees to, if asked to provide 7 X 24 on-call, after hours
telephone support including remote access to the product. CEMAX-ICON will
provide mutually agreed upon contractual and/or per call pricing to BUYER
for said coverage.
2.3 CEMAX-ICON agrees to provide technical onsite support according to mutually
agreed upon contractual and/or per call pricing to BUYER for said coverage.
2.4 CEMAX-ICON agrees to provide technical support after manufacturing
discontinuance for 5 years.
2.5 CEMAX-ICON agrees to provide BUYER, via electronic access, bug fixes,
patches, software updates (during life of contract), and technical notices.
This service will stay in effect for a period of 5 years after
manufacturing discontinuance of product regardless of contractual status.
2.6 CEMAX-ICON agrees to provide BUYER with logins and passwords for e-mail
access to their bug tracking system database (DDTS).
3.0 SERVICE PARTS:
3.1 CEMAX-ICON agrees to provide a complete parts and parts price listing for
all applicable products.
3.2 CEMAX-ICON agrees to meet parts availability/quantity requirements for Trade
Trial, Limited Shipping Approval, and Shipping Approval.
3.3 CEMAX-ICON agrees to provide BUYER parts for all applicable products for 5
years after the last product is shipped to BUYER.
3.4 CEMAX-ICON agrees to provide BUYER a minimum of [ * * ] notice of intent to
discontinue the manufacture and sale of parts to BUYER due to
part/component obsolescence and provide BUYER with an all time order
quantity purchase.
3.5 CEMAX-ICON agrees to make any existing special tooling, drawings,
specifications, and licensing information available to BUYER at
manufacturing discontinuance for non-commercially available parts.
25
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 26
3.6 CEMAX-ICON agrees to target [ * * ] quality for service parts and work with
BUYER to resolve quality problems. BUYER reserves the right to approve all
test plans for spare parts, shipment and release.
3.7 CEMAX-ICON agrees to package parts to assure quality is maintained between
CEMAX-ICON and the field engineer (ESD protection). All parts to be
considered D.F.S. (Defective From Stock) by BUYER will be shipped and
repaired at CEMAX-ICON's expense. Replacement of those parts will be
expedited at CEMAX-ICON's expense.
3.8 CEMAX-ICON agrees to provide BUYER lead-time requirements for routine parts
orders. CEMAX-ICON agrees to pay airbill if parts not delivered within
normal lead-times.
3.9 CEMAX-ICON agrees to respond to emergency parts orders within 24 hours
[ ** ] days a week.
3.10 CEMAX-ICON agrees to repair parts identified as "exchange" in an
expeditious fashion BUYER's requirement is 30-35 days depending upon
complexity of exchanged part.
3.11 CEMAX-ICON agrees to provide BUYER a [ ** ] month warranty on all parts
purchased by the CES parts organization. Based on install date not to
exceed one year from date of shipment to BUYER.
3.12 CEMAX-ICON agrees to address engineering changes initiated by CEMAX-ICON or
BUYER.
4.0 TERM AND TERMINATION
4.1 This Agreement is co-terminous with the Supply Agreement.
4.2 Either party may terminate this Agreement according to the termination
provisions of the Supply Agreement.
5.0 CUSTOMER COMPLAINT HANDLING
5.1 CEMAX-ICON will provide in writing a corrective action plan within [ * * ]
of receipt for customer calls determined to be customer complaints as
defined by the FDA or Kodak Standard Operating Procedure.
<TABLE>
<S> <C>
ACCEPTED AND AGREED: ACCEPTED AND AGREED:
BUYER CEMAX-ICON
By: By:
(authorized signature) (authorized signature)
Name: Name:
(print or type) (print or type)
Title: Title:
Date: Date:
</TABLE>
26
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 27
ENCLOSURE V
PRODUCT LABELLING
<TABLE>
<S> <C>
ACCEPTED AND AGREED: ACCEPTED AND AGREED:
BUYER CEMAX-ICON
By: By:
(authorized signature) (authorized signature)
Name: Name:
(print or type) (print or type)
Title: Title:
Date: Date:
</TABLE>
27
<PAGE> 28
ENCLOSURE VI
ESCROW AGREEMENT
THIS AGREEMENT, effective ____________, 19 __ , is made by and between
________________________("CEMAX-ICON" herein) and Eastman Kodak Company, a New
Jersey corporation ("BUYER") and ________________________("ESCROW AGENT")
herein):
A. BUYER develops and licenses software;
B. CEMAX-ICON owns and sells computer software designed for use in conjunction
with computer hardware;
C. CEMAX-ICON and BUYER have entered into an agreement ("OEM Software Licensing
Agreement") date ___________________ whereby BUYER may distribute certain
computer software owned by CEMAX-ICON;
D. Under the terms of the OEM Software Licensing Agreement CEMAX-ICON is
responsible for providing technical support to BUYER.
E. BUYER and CEMAX-ICON wish to ensure that users of CEMAX-ICON's software
continue to receive technical support in the event CEMAX-ICON fails to
fulfill its support obligations as set forth in the OEM Software Licensing
Agreement;
F. ESCROW AGENT is an independent party and will act as a conduit to BUYER of
CEMAX-ICON's software in the event CEMAX-ICON fails to fulfill its
technical support obligations.
NOW, THEREFORE, the parties agree as follows:
1.0 PRODUCT
The product governed by this Agreement is a computer software program(s)
titled ________________________ described in Attachment B attached hereto
and made a part hereof ("Product") owned by CEMAX-ICON or provided to
CEMAX-ICON under a valid sublicense from the owner. For purposes of this
Agreement only, the Product includes machine readable program source code,
instructions for generating each object code version of the Product, all
reference and use manuals and aids, and all program design documents
necessary to provide technical support for the Product.
2.0 ESCROW OF PRODUCT
2.1 Within thirty (30) days of the effective date of this Agreement, CEMAX-ICON
agrees to deliver to ESCROW AGENT in a sealed envelope or container a copy
of the Product. Throughout the term of the escrow, CEMAX-ICON shall ensure
that the copy of the Product as well as Alpha version of product, which is
in the custody of the ESCROW AGENT shall be the most current version of the
Product as it may be updated, enhanced, modified or revised by CEMAX-ICON
from time to time. Failure of CEMAX-ICON to provide ESCROW AGENT with
updated versions of the Product within 60 days of the release of such
versions shall be grounds for termination of escrow and distribution of the
Product as set forth herein.
2.2 ESCROW AGENT agrees to accept deposit of the Product and to act as its
custodian until this agreement is terminated. ESCROW AGENT shall establish
under the control of a designated escrow officer a secure receptacle for
the storage of the Product provided to it by CEMAX-ICON ESCROW AGENT shall
not permit any party access to the items therein except as may necessary to
perform its functions as ESCROW AGENT or as may be otherwise provided
herein. In no event are any copies to be made of any items deposited with
ESCROW AGENT except as specifically provided herein.
3.0 RELEASE OF ESCROW HOLDINGS
3.1 The occurrence of any one of the following events shall cause ESCROW AGENT
to release and distribute in accordance with Paragraph 3.4 the items
deposited with it:
a. CEMAX-ICON is adjudged a bankrupt by any court of competent
jurisdiction;
28
<PAGE> 29
b. Except as may be otherwise provided in the Federal Bankruptcy Laws.
CEMAX-ICON becomes insolvent, makes a general assignment for the benefit
of creditors, or has a receiver appointed for all or substantially all
of its business or assets;
c. CEMAX-ICON is liquidated, dissolved or ceases to do business in the
normal course;
d. CEMAX-ICON ceases or fails to offer maintenance and support services
for the Product as required under the OEM Software Licensing Agreement;
or
e. CEMAX-ICON fails to provide ESCROW AGENT with updated or modified
versions of the Product.
3.2 Any of the events set forth in Paragraph 3.1 (d) or (e) shall be deemed to
have occurred if within [ * * ] after receipt by CEMAX-ICON of
written notice of said occurrence the situation is not cured.
3.3 (a) In the event BUYER notifies the ESCROW AGENT in writing of CEMAX-ICON's
failure of cure under Paragraph 3.2, ESCROW AGENT shall so notify
CEMAX-ICON in writing and shall provided, upon ESCROW AGENT's receipt of
same, a copy of BUYER's notice sent to ESCROW AGENT. Unless CEMAX-ICON has
provided Contrary Instructions to ESCROW AGENT within fifteen (15) days of
CEMAX-ICON's receipt of a copy of BUYER's notice, ESCROW AGENT shall
deliver the items deposited with it then in escrow to BUYER within the next
five (5) business days.
(b) "Contrary Instructions" for the purposes of this escrow agreement means
a notarized affidavit executed by an officer of CEMAX-ICON stating that the
failure of support has not occurred, or has been cured.
(c) Upon receipt of such Contrary Instructions, ESCROW AGENT shall not
release the items deposited with it then in escrow, but shall continue to
store the items deposited with it until otherwise directed by BUYER and
CEMAX-ICON jointly, or until resolution by a court of competent
jurisdiction.
3.4 ESCROW AGENT shall make copies of all items deposited with it under this
Agreement and distribute a complete set of those copies to BUYER.
CEMAX-ICON shall be liable for any copying and distribution costs incurred
but as between BUYER and ESCROW AGENT. BUYER agrees to promptly reimburse
ESCROW AGENT for any such costs incurred.
3.5 The escrow shall terminate regardless of the happening of any of the above
events seven (7) years from its effective date.
3.6 BUYER and CEMAX-ICON may terminate the escrow by mutual written agreement.
ESCROW AGENT reserves the right to resign as escrow holder upon thirty (30)
days prior written notice to BUYER and CEMAX-ICON. Upon termination of
escrow, if ESCROW AGENT has not distributed the items deposited with it,
ESCROW AGENT shall return all items deposited to CEMAX-ICON, except if
ESCROW AGENT resigns as escrow holder the items then on deposit shall be
delivered to a substitute escrow holder or designated third party mutually
agreeable to CEMAX-ICON and BUYER.
4.0 WARRANTY AND INDEMNITY
4.1 CEMAX-ICON warrants that it owns the Product and all portion thereof, that
it shall deposit with ESCROW AGENT under this Agreement and that it has
fully power to allow the deposit, copying, release and distribution of
those Products as set forth herein.
4.2 CEMAX-ICON warrants that the Product it shall deposit with ESCROW AGENT
under this Agreement does not infringe or violate any patent, copyright,
trademark, trade secret or other property right of any third party.
4.3 CEMAX-ICON agrees to indemnify and save BUYER and ESCROW AGENT, jointly and
severally, entirely harmless from and against nay and all loss, cost,
claim, damage, settlement or judgment, including any expenses or reasonable
attorneys' fees arising out of or in any way related to any breach or
alleged breach of any of the above warranties.
5.0 FEES
29
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 30
5.1 In consideration for performing its function as escrow holder, ESCROW AGENT
shall be compensated as follows:
$ _______ -- Acceptance Fee (including first year's holding fee)
$ _______ -- Yearly hold -- open fee
BUYER shall be responsible for payment of the above fees.
5.2 The above fees are for ESCROW AGENT's ordinary services as escrow holder. In
the event ESCROW AGENT is required to perform any additional or
extraordinary services as a result of being escrow holder, including
intervention in any litigation or proceeding, ESCROW AGENT shall receive
reasonable additional compensation for such services and be reimbursed for
costs incurred, including reasonable attorneys' fees. BUYER and CEMAX-ICON
agree jointly and severally, to pay such sums to ESCROW AGENT. As between
BUYER and CEMAX-ICON, the prevailing party in any litigation or proceeding
shall be entitled to recover all costs, expenses and attorneys' fees
incurred in addition to any other relief which may be granted.
6.0 MISCELLANEOUS PROVISIONS
6.1 ESCROW AGENT shall not be liable for the failure of any of the conditions of
the escrow, for damage caused by the exercise of its discretion, or for any
other reason, except its negligence.
6.2 This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
6.3 This Agreement may be modified only by a writing executed by all parties.
30
<PAGE> 31
ENCLOSURE VI
ESCROW AGREEMENT
AGREED TO:
<TABLE>
<S> <C>
CEMAX-ICON EASTMAN KODAK COMPANY
By: By:
(Signature) (Signature)
Name Name
(Type or Print) (Type or Print)
ESCROW AGENT
By:
(Signature)
Name
(Type or Print)
</TABLE>
31
<PAGE> 32
ENCLOSURE VII
CEMAX-ICON AND KODAK SALES POLICY
In named KODAK accounts listed in Enclosure VII where KODAK has an ongoing
annual film revenue of over [ * * ].
CEMAX-ICON will:
[ * * ] the accounts for business.
Will [ * * ] if the account calls CEMAX-ICON for product information.
Will recommend that the account [ * * ].
Will [ * * ] sales people for any new sales into these said
accounts by KODAK.
If these named accounts continue to contact CEMAX-ICON directly stating
that they want to buy CEMAX-ICON products directly from CEMAX-ICON and not
through Kodak, then CEMAX-ICON [ *
* ].
If one of these named accounts is strongly considering a vendor other than KODAK
for the provision of an Image Management System, CEMAX-ICON will aggressively
[ * * ] KODAK within the account or to win the business directly
CEMAX-ICON will bid [ * * ].
[ * * ].
Certain CEMAX-ICON products are sold by third party organizations such as 3M,
GE, etc., CEMAX-ICON has no control over the distribution by these third parties
and as such can not warrant that they will follow the above described protocol
or any recommendations of CEMAX-ICON.
A number of the listed accounts will include current DEMAX-ICON customers. It is
not the intent of CEMAX-ICON to cease doing business with our existing customers
and may desire to expand or upgrade these said accounts. CEMAX-ICON will provide
a response to the KODAK list of [ * * ] film accounts pointing out the
current CEMAX-ICON accounts that CEMAX-ICON would continue supporting directly.
A list of CEMAX-ICON accounts is provided in Enclosure VII. A second list of
active CEMAX-ICON prospects is provided in Enclosure VII. These accounts are
considered active in that they are forecasted to close [ * * ].
After said date, CEMAX-ICON will recommend the account [ * * ]
[ * * ]. Both CEMAX-ICON and KODAK will manage any potential conflict in these
accounts on an account by account basis.
32
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 33
EASTMAN KODAK COMPANY -- HEALTH SCIENCES DIVISION
CONSUMERS WITH MEDICAL FILM PURCHASES [ * * ] FROM 11/94-10/95
<TABLE>
<CAPTION>
ID NUMBER NAME ADDRESS CITY STATE ZIP CODE
- --------- ---- ---------------------------- ------------------ ---- --------
<C> <S> <C> <C> <C> <C>
[ *
* ]
</TABLE>
33
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 34
EASTMAN KODAK COMPANY -- HEALTH SCIENCES DIVISION
CONSUMERS WITH MEDICAL FILM PURCHASES [ * * ] FROM 11/94-10/95
<TABLE>
<CAPTION>
ID NUMBER NAME ADDRESS CITY STATE ZIP CODE
- --------- ---- ---------------------------- ------------------ ---- --------
<C> <S> <C> <C> <C> <C>
[ *
* ]
</TABLE>
34
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 35
EASTMAN KODAK COMPANY -- HEALTH SCIENCES DIVISION
CONSUMERS WITH MEDICAL FILM PURCHASES [ * * ] FROM 11/94-10/95
<TABLE>
<CAPTION>
ID NUMBER NAME ADDRESS CITY STATE ZIP CODE
- --------- ---- ---------------------------- ------------------ ---- --------
<C> <S> <C> <C> <C> <C>
[ *
* ]
</TABLE>
35
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 36
EASTMAN KODAK COMPANY -- HEALTH SCIENCES DIVISION
CONSUMERS WITH MEDICAL FILM PURCHASES [ * * ] FROM 11/94-10/95
<TABLE>
<CAPTION>
ID NUMBER NAME ADDRESS CITY STATE ZIP CODE
- --------- ---- ---------------------------- ------------------ ---- --------
<C> <S> <C> <C> <C> <C>
[ *
* ]
</TABLE>
36
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 37
EASTMAN KODAK COMPANY -- HEALTH SCIENCES DIVISION
CONSUMERS WITH MEDICAL FILM PURCHASES [ * * ] FROM 11/94-10/95
<TABLE>
<CAPTION>
ID NUMBER NAME ADDRESS CITY STATE ZIP CODE
- --------- ---- ---------------------------- ------------------ ---- --------
<C> <S> <C> <C> <C> <C>
[ *
* ]
</TABLE>
37
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 38
EASTMAN KODAK COMPANY -- HEALTH SCIENCES DIVISION
CONSUMERS WITH MEDICAL FILM PURCHASES [ * * ] FROM 11/94-10/95
<TABLE>
<CAPTION>
ID NUMBER NAME ADDRESS CITY STATE ZIP CODE
- --------- ---- ---------------------------- ------------------ ---- --------
<C> <S> <C> <C> <C> <C>
[ *
* ]
</TABLE>
38
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 39
EASTMAN KODAK COMPANY -- HEALTH SCIENCES DIVISION
CONSUMERS WITH MEDICAL FILM PURCHASES [ * * ] FROM 11/94-10/95
<TABLE>
<CAPTION>
ID NUMBER NAME ADDRESS CITY STATE ZIP CODE
- --------- ---- ---------------------------- ------------------ ---- --------
<C> <S> <C> <C> <C> <C>
[ *
</TABLE>
* ]
39
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 40
ENCLOSURE VII
CEMAX-ICON AND KODAK SALES POLICY
<TABLE>
<S> <C>
ACCEPTED AND AGREED: ACCEPTED AND AGREED:
BUYER CEMAX-ICON
By: By:
(authorized signature) (authorized signature)
Name: Name:
(print or type) (print or type)
Title: Title:
Date: Date:
</TABLE>
40
<PAGE> 1
Exhibit 10.7
SALES AGREEMENT
This Agreement dated June 13, 1995, is between CEMAX/ICON, INC., a
California corporation with is principal place of business at 47281 Mission
Falls Court, Fremont, California 94539 ("CEMAX/ICON"), and MINNESOTA MINING AND
MANUFACTURING COMPANY, a Delaware corporation with its principal place of
business at 3M Center, P.O. Box 33428, St. Paul, Minnesota 55133 ("3M").
1. BACKGROUND AND PURPOSE
3M currently manufactures and markets products for the medical
diagnostic imaging market, including Picture Archive and Communication Systems
("PACS"). CEMAX/ICON is in the business of developing medical imaging and
networking software, and designs, manufactures and markets PACS related
software. IN order to better meet the customer needs in the PACS area, 3M is
willing to stop manufacturing and marketing of its current PACS products and
refer customer leads to CEMAX/ICON on a global basis. CEMAX/ICON is willing to
pursue 3M-provided customer leads on a global basis and sell, service and
support products. 3M and CEMAX/ICON, therefore, agree to terms and conditions
stated in this Agreement.
2. 3M OBLIGATIONS
A. If in the course of 3M conducting its business it has contact
with a customer that may have an interest in CEMAX/ICON products, 3M will handle
the customer lead as follows:
1) The 3M employee will give the potential customer basic
information regarding available CEMAX/ICON products and
provide the potential customer with CEMAX/ICON sales
literature as appropriate.
2) The 3M sales person will contact the 3M Sales Liason about the
potential customer and coordinate the introduction of
CEMAX/ICON to the customer.
3) The 3M Sales Liason will qualify the customer lead. 3M will
use reasonable commercial efforts to ensure the CEMAX/ICON
products can meet the potential customer's requirements and
that the potential customer is financially positioned to make
a purchase. 3M and CEMAX/ICON will mutually agree in writing
on the criteria for lead qualification.
4) 3M will then provide the lead information in writing to
CEMAX/ICON, c/o Vice President of Sales and Marketing.
B. By fifteen (15) days after completion of each calendar quarter
during the term of this Agreement, 3M will provide to CEMAX/ICON a written
non-binding forecast of projected sales of CEMAX/ICON systems into 3M accounts
by month for the following year. CEMAX/ICON
<PAGE> 2
understands that these forecasts are non-binding and are 3M estimates only. 3M
provides the forecasts to CEMAX/ICON to assist CEMAX//ICON in anticipating
possible future business opportunities. CEMAX/ICON assumes all risk and
responsibility for its use of the 3M non-binding forecasts.
C. During the term of this Agreement, 3M will maintain a 3M
employee to function as the 3M Sales Liason. The 3M Sales Liason will be
responsible for lead qualification and coordination between the 3M and
CEMAX/ICON sales organizations. 3M and CEMAX/ICON agree to discuss the
possibility of co-locating the 3M Sales Liason at CEMAX/ICON's facility.
D. During the terms of this Agreement, 3M will compensate its
sales force for CEMAX/ICON sales leads generated under this Agreement.
E. 3M will not disparage CEMAX/ICON products or cast CEMAX/ICON
products in an unfavorable light, and will not misrepresent, either directly or
by omission, the capabilities, qualifies or characteristics of CEMAX/ICON
products.
F. Nothing in this Agreement prevents 3M from manufacturing,
marketing, selling or servicing PACS related products.
3. CEMAX/ICON OBLIGATIONS
A. CEMAX/ICON will use best efforts to follow up on the
3M-provided customer leads and to sell CEMAX/ICON products. If the potential
customer is in a location that is impractical for CEMAX/ICON to support,
CEMAX/ICON and 3M will mutually agreed whether CEMAX/ICON should pursue that
lead.
B. Under this Agreement, CEMAX/ICON has all responsibility for
marketing, sales, site planning, installation, service and support of any
CEMAX/ICON products purchased by customers following a 3M-provided lead, and all
responsibility for billing and account collections for CEMAX/ICON products.
C. On a quarterly basis, CEMAX/ICON will provide to 3M written
reports on its sales of products based on 3M-provided leads. Each report will
list CEMAX/ICON sales by account name, location, system sold, hardware price,
software price and net selling price. CEMAX/ICON will provide each report within
ten (10) days of the conclusion of each calendar quarter during the term of this
Agreement.
D. CEMAX/ICON will develop a distribution plant for CEMAX/ICON
product sales and service in Europe. 3M and CEMAX/ICON will mutually agree to a
European plan in writing by July 1, 1995.
-2-
<PAGE> 3
E. CEMAX/ICON will provide, and 3M will permit, general education
regarding its product line to the 3M sales and marketing organization in the
U.S. The education will focus on product features and solutions, and will be
conducted periodically during the term of this Agreement.
F. CEMAX/ICON will provide to 3M reasonable amounts of
CEMAX/ICON's product literature for 3M's use and distribution, as requested by
3M. In addition, CEMAX/ICON will provide to 3M, on at least a quarterly basis,
the current CEMAX/ICON published product price list.
G. CEMAX/ICON warrants that the CEMAX/ICON products meet all
applicable federal, state and local laws and regulatory requirements in North
America. In addition, CEMAX/ICON will use its best efforts to meet all
applicable federal, state and local laws and regulatory requirements in Europe.
CEMAX/ICON and 3M agree to target introduction of CEMAX/ICON products in Europe
in September of 1995.
H. Nothing in this Agreement restricts CEMAX/ICON from
introducing or discontinuing production or sale of any product, from changes in
list prices of product or other terms and conditions of sale from CEMAX/ICON.
I. CEMAX/ICON will not disparage 3M products or cast 3M products
in an unfavorable light, and will not misrepresent, either directly or by
omission, the capabilities, qualities or characteristics of 3M products.
4. 3M COMMISSION PAYMENTS
A. For sales of CEMAX/ICON products resulting from 3M-provided
leads, CEMAX/ICON will pay to 3M a commission of [* *] of
CEMAX/ICON's actual sale price of the software portion of the sale. 3M's
commission accrues when CEMAX/ICON receives payment for the sale. CEMAX/ICON
will pay 3M commissions due on a quarterly basis. Within ten (10) days after the
conclusion of each calendar quarter. CEMAX/ICON will pay to 3M all commissions
due from sales made the previous quarter.
B. Solely for the purpose of verifying CEMAX/ICON sales reports
and commission payments, 3M may confirm the accuracy of CEMAX/ICON's reports and
audit CEMAX/ICON's records at CEMAX/ICON's offices during normal business hours
after giving CEMAX/ICON reasonable notices.
5. TERM AND TERMINATION
A. The initial term of this Agreement begins on the date of this
Agreement and will continue for a period of three (3) years. For customer leads
existing as of June __, 1995, 3M and CEMAX/ICON will mutually agree how to
handle the sales and credit for each potential customer on a case-by-case basis.
CEMAX/ICON will perform all installations occurring after June __, 1995. Any
customer leads existing as of June __, 1995 but without a customer purchase
order by September 1, 1995, will be governed under the terms of this Agreement.
-3-
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 4
B. Either party may terminate this Agreement if the other party
is in breach by giving the other party at least thirty (30) days prior written
notice, and opportunity to cure. If the breaching party cures the breach within
the thirty (30) day period, this Agreement will continue.
C. After the initial term of this Agreement, either party may
terminate this Agreement without cause by giving the other party at least ninety
(90) days prior written notice.
D. Even after termination or expiration of this Agreement, the
provisions of this Agreement sill apply to any work performed, payments made,
events occurring, charges incurred or obligations arising before the termination
or expiration date.
6. CEMAX/ICON PURCHASE OF 3M PACS INVENTORY
A. As of the date of this Agreement, 3M has an inventory of PACS
products, as listed in Exhibit A. CEMAX/ICON will use its best efforts to
purchase this inventory by October 1, 1995, as CEMAX/ICON has a need for the
inventory items. The purchase price for the inventory will be the fair market
value of the item on the CEMAX/ICON purchase date.
B. When CEMAX/ICON has a need for inventory item, CEMAX/ICON will
notify the 3M Sales Liason in writing. CEMAX/ICON may use CEMAX/ICON's standard
purchase order from to notify 3M. Acceptance of any order placed by CEMAX/ICON
on its standard purchase order form, either by written acknowledgment or by
shipment of items, does not constitute acceptance by 3M of any of the terms and
conditions of those orders, except as to identification and quantity of items
involved. All orders are governed by the provisions of this Agreement.
C. 3M will send the item to CEMAX/ICON or CEMAX/ICON's designated
location FOB 3M's location. 3M will invoice CEMAX/ICON for the item on shipment.
CEMAX/ICON will pay the invoice within thirty (30) days of receipt.
D. CEMAX/ICON purchases the 3M inventory items "AS IS" and
without warranty of any kind. The extent 3M is able, 3M will pass through to
CEMAX/ICON any manufacturer's warranty on each inventory item. CEMAX/ICON
understands 3M is not a merchant of the inventory items as the term merchant is
defined in Article 2-104(1) of the Uniform Commercial Code. 3M NEITHER EXPRESSES
ANY WARRANTIES AS TO THE QUALITY OR CONDITION OF THE INVENTORY ITEMS AND
EXPRESSLY DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. 3M EXPRESSLY DISCLAIMS ANY REPRESENTATIONS ABOUT THE
CONDITION, QUALITY, CAPACITY OR OTHER CHARACTERISTICS OF THE INVENTORY ITEMS.
7. ASSIGNMENT OF 3M SERVICE AND WARRANTY OBLIGATIONS
A. As of the date of this Agreement, 3M has installed PACS
products at the site locations stated in Exhibit B. 3M assigns and CEMAX/ICON
agrees to assume responsibility for warranty service and service agreements for
these sites. The effective dates of transfer of site responsibility for
-4-
<PAGE> 5
these sites will be mutually agreed on in writing by 3M and CEMAX/ICON on a
case-by-case basis, but all transfers will be made by October 1, 1995.
B. In consideration of CEMAX/ICON's assumption of service and
warranty obligations under this Paragraph 7, 3M agrees to pay CEMAX/ICON the
amount of [* *]. 3M will pay this amount in twelve (12)
installments of [* *] each beginning July 1, 1995 and ending June 31,
1996.
C. To assist CEMAX/ICON in performing site installations,
warranty service, service and field support, CEMAX/ICON may use the services of
two (2) 3M service personnel from the date of this Agreement through December
31, 1995. CEMAX/ICON will pay 3M [* *] for the time (including salary
and benefits) and expenses of the 3M service personnel on a monthly basis for
work performed for CEMAX/ICON. Within ten (10) days after the conclusion of each
month, 3M will invoice CEMAX/ICON for the time and expenses of the 3M service
personnel, showing itemization for hours worked, transportation, lodging and
meal expenses, materials and parts charges, and mileage. CEMAX/ICON will pay
3M's invoice within thirty (30) days of receipt.
8. REVIEW MEETINGS
Each calendar quarter during the term of this Agreement, 3M and
CEMAX/ICON will meet to review activities under this Agreement. Subjects of each
meeting will include review of the sales lead generation process, actual sales
volume, forecast of anticipated sales leads and actual sales. Participating in
these review meetings for 3M will be a member of 3M sales management.
Participating in these review meetings for CEMAX/ICON will be the Vice President
for Sales and Marketing.
9. LIMITATION OF LIABILITIES; TIME FOR FILING ACTION
A. NEITHER PARTY WILL UNDER ANY CIRCUMSTANCES BE LIABLE TO THE
OTHER FOR DAMAGES OF ANY KIND, INCLUDING WITHOUT LIMITATION, INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO, LOSS
OF PROFITS, REVENUE OR BUSINESS) RESULTING FROM OR IN ANY WAY RELATED TO
PRODUCTS, THIS AGREEMENT, OR THE TERMINATION OF THIS AGREEMENT. This limitation
applies regardless of whether the damages or other relief are sought based on
breach of warranty, breach of contract, negligence, strict liability in tort, or
any other legal or equitable theory. This limitation does not apply to direct
damages caused by breach of a material obligation under this Agreement (except
breach of warranty) or to claims for personal injury by a third party.
B. Any action for breach of obligation under this Agreement must
be commenced within one (1) year after the breach occurs.
-5-
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 6
10. CONFIDENTIAL INFORMATION
A. 3M may, during the course of this Agreement, have access to or
will have disclosed to it information which is identified as confidential by
CEMAX/ICON. 3M agrees not to use CEMAX/ICON confidential information for its own
benefit except to perform this Agreement, to keep such information confidential
and not to disclose to third parties without CEMAX/ICON's consent. 3M will
protect the disclosed information by using the same degree of care, but no less
than a reasonable degree of care, to prevent the unauthorized disclosure of the
Information, as 3M used to protect its own confidential information of a like
nature.
B. CEMAX/ICON may, during the course of this Agreement, have
access to or will have disclosed to it information which is identified as
confidential by 3M. CEMAX/ICON agrees not to use 3M confidential information for
its own benefit except to perform this Agreement, to keep such information
confidential and not to disclose to third parties without 3M's consent.
CEMAX/ICON will protect the disclosed information by using the same degree of
care, but no less than a reasonable degree of care, to prevent the unauthorized
disclosure of the Information, as CEMAX/ICON used to protect its own
confidential information of a like nature.
C. The obligations stated in Paragraphs 10A and B will not apply
to information which:
- is or becomes generally known to the general public or is
independently developed by each other; or
- either party can show was known at the time of disclosure; or
- either party can show it rightfully learned from a third party
without an obligation of confidence.
D. 3M and CEMAX/ICON agree to maintain the other's confidential
information as confidential for a period of three (3) years after the
termination or expiration of this Agreement.
11. NOTICES
All notices required by this Agreement must be in writing and sent by
certified mail, with return receipt requested, Federal Express or other
overnight service. The date of a notice is the date it is received. CEMAX/ICON
will send all notices under this Agreement to:
Vice President
3M Medical Imaging Systems Division
3M Center, Building 223-2SW-03
P.O. Box 33428
St. Paul, MN 55133
-6-
<PAGE> 7
3M will send all notices under this Agreement to:
President
CEMAX/ICON, Inc.
47281 Mission Falls Court
Fremont, California 94539
A party may designate in writing other individuals to receive notice.
12. DISPUTE RESOLUTION
A. The parties agree to attempt in good faith to resolve any
dispute arising out of or relating to this Agreement promptly by negotiations.
1) Either party may give the other party written notice of any
dispute not resolved in the normal course of business.
Executives of both parties at levels one step above the
project personnel who have previously been involved in the
dispute will meet at a mutually acceptable time and place
within ten (10) days after delivery of the notice, and
thereafter as often as they reasonably deem necessary. The
purpose of this meeting is for the executives to exchange
relevant information and to attempt to resolve the dispute.
2) If the matter has not been resolved by the executives within
thirty (30) days of the notice, or if the parties fail to meet
within the ten (10) day period, the dispute will be referred
to senior executives of both parties who have authority to
settle the dispute to attempt to resolve the dispute. If the
matter has not been resovled within thirty (30) days from the
referral of the dispute to the senior executives, or if no
meeting has taken place within fifteen (15) days after
referral to the senior executives, either party may initiate
mediation or other mutually agreed to alternate dispute
resolution mechanism.
3) If the dispute has not been resolved by negotiation as stated
above, the parties agree to attempt to settle the dispute by
mediation using a third party neutral.
B. The procedures stated in Paragraph 12-A will be the sole and
exclusive procedures for the resolution of disputes between the parties arising
out of or relating to this Agreement. The procedures stated in Paragraph 12-A
must be exhausted prior to the initiation of any litigation. A party, however,
may seek a preliminary injunction or other provisional judicial relief if in its
judgment such action is necessary to avoid irreparable damage or to preserve the
status quo. Despite such action, the parties will continue to participate in
good faith in the procedures specified in this Paragraph 12.
C. Any questions, claims, disputes or litigation arising from or
related to this Agreement are governed by the law of the state of Minnesota,
without regard to conflicts of law.
-7-
<PAGE> 8
13. GENERAL TERMS
A. Neither party is liable to the other for damages caused by
delays in delivery or performance due to acts of God or other caused beyond its
control.
B. The relationship of the parties under this Agreement is that
of independent contractors. Nothing in this Agreement authorizes either party to
act for the other as an agent. CEMAX/ICON is not an agent or franchisee of 3M
and has not authority to bind 3M, transact any business in 3M's name or on its
behalf in any manner, or make any promises or representation on behalf of 3M. 3M
is not an agent or franchisee of CEMAX/ICON and has not authority to bind
CEMAX/ICON, transact any business in CEMAX/ICON's name or on its behalf in any
manner, or make any promises or representation on behalf of CEMAX/ICON.
C. Neither party may assign any of its rights or delegate or
subcontract any of its duties under this Agreement without first getting the
other party's permission in writing.
D. This Agreement states the complete Agreement between 3M and
CEMAX/ICON on this subject and replaces any previous understandings,
representations or communications, whether oral or written. THIS AGREEMENT IS
INTENDED BY THE PARTIES TO BE THE FINAL, COMPLETE AND EXCLUSIVE STATEMENT OF ALL
TERMS AND CONDITIONS OF THE AGREEMENT. This Agreement can be amended only by a
writing signed by both parties. No oral modification is possible. A party's
failure to exercise a right in one or many instances does not waive that right
as to any later instance. A course of dealing or performance does not effect a
modification or a waiver unless ratified in writing by the party to be bound.
ACCEPTED AND AGREED TO:
MINNESOTA MINING AND CEMAX/ICON, INC.
MANUFACTURING COMPANY
("3M") ("CEMAX/ICON")
By __________________________ By ________________________
Clifford T. Pinder Tom Ross
Vice President CEO
Medical Imaging Systems Division
Exhibit A -- List of 3M Inventory
Exhibit B -- List of Existing 3M PACS Sites
-8-
<PAGE> 9
<TABLE>
Exhibit A
LIST OF 3M INVENTORY
<CAPTION>
COST
QUANTITY EACH TOTAL COST
HARDWARE/SOFTWARE LIST ON-HAND (EST.) (EST.) VENDOR VENDOR PART #
---------------------- ------- ------ ------ ------ -------------
[HARDWARE]
----------
<S> <C> <C> <C>
SPARC 20/50 Server 3 [* TPSI S20S-50-32-P69
32 Mb Additional Mem
1.05 Gb Disk
Fast SCSI II
4 SBus Slots
SPARC 5/70-Server 7 TPSI S5S-70-32-P46
32 Mb Mem.
1.05 Gb Disk
Fast SCSI II
3 SBus Slots
HomeView Telerouter PC 1 Image Data Corp.
PC Compatible HV Receiver 1 Ameridata
32 Mb Mem. Exp. (SPARC5) 7 TPSI X132M
32 Mb Mem. Exp. (SPARC20) 3 TPSI X12P
1.44 Mb Floppy Drive (SPARC) 10 TPSI X560A
TurboGXplus 4Mb frame buffer 5 TPSI #501-2253
1KX1K Monitor 5 Image Systems M24PMAX
2KX2K Monitor 3 Image Systems M21P2KMAX
6ft 13W3 Male to 4 BNC cable [5] 5 Cable Connection RGB-0406
SCSI II Mini 50 Pin Male to Centronix 2 Cable Connection S-50M50C-0x(x=Lg)
17" color monitor 4 TPSI X322A
GXTRA 2K Display Driver, Frame 3 Tech-Source GXTRA/2000 SBus
Buffer, cable & S/W
Type 5 Country Kit-U.S. 7 Sun Microsystems X3500A
ATM Interface Board 4 TPSI
Direct Film Option (LaserLink) 4 Cemax 100-2026-000
Modems US Robotics/Hayes OPTIMA 3 Anixter
External CD ROM Drive 1 TPSI X579A
5 GByte 8mm Tape System 2 Exabyte
4 GB RAID Storage Array? 1 Tower Systems
UPS (Approx. 600 VA) [3] 5 Finex
UPS (Approx. 1000 VA) 2 Fore
Lumisys Digitizer 2 Lumysis
Spare Disk Drives 1.05GB 9 TPSI X649A
62.5/125 Multimode Fiber 2 Strand 6 Anixter
Cable w/ST connectors
10Base-T Cable w/RJ45 connectors 16 Anixter
(UTP Cat 5)
Cable Shelves 2 Anixter
HomeView Phone Sim. Box 1 *] Procter Assoc.
</TABLE>
CONFIENDTIAL TREATMENT REQUESTED
<PAGE> 10
<TABLE>
<CAPTION>
COST
QUANTITY EACH TOTAL COST
HARDWARE/SOFTWARE LIST ON-HAND (EST.) (EST.) VENDOR VENDOR PART #
---------------------- ------- ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
[SOFTWARE]
----------
Solaris 2.3-O.S. Licenses 4 [*
Solaris 1.1.1 Ver. B-O.S. Licenses 6 Sun Microsystem SC-L
Solaris 1.1.1 Ver. B-O.S. Sftwr/CD 1 Sun Microsystem SC-L
SUN NetManager 1 SunSoft/Cabletron
CV Station Software 2 Cemax 700-2012-000
DV Station Software 1 Cemax 700-2041-000
Archive Manager Software 1 Cemax 700-2045-00
Net Film Svr (for HV) Software 1 Cemax 700-2014-000
HomeView Receive PC Software 1 Image Data
QA Station Software 1 Cemax 700-2039-000
Ntwork Filmg Option License 4 *] Cemax 700-2030-000
IMS HW/SW SUM TOTAL
</TABLE>
-2-
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 11
Exhibit B
IMS SITES
5/23/1995
[*
*]
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 12
Exhibit 4.4
RESTATED REGISTRATION RIGHTS AGREEMENT
This Restated Registration Rights Agreement (the "Agreement") is
entered into as of January 9, 1995, among Cemax/ICON, Inc., a California
corporation (the "Company"), and the persons listed on Exhibit A attached hereto
(the "Shareholders").
RECITALS
Whereas, the Company has recently granted registration rights with
respect to Series A Preferred Stock pursuant to that certain Series A Preferred
Stock Purchase Agreement dated June 13, 1995 (the "1995 Series A Agreement"),
between the Company and the Purchasers listed on the Schedule of Purchasers
attached to the 1995 Series A Agreement as Exhibit A;
Whereas, the Company has previously granted registration rights with
respect to Common Stock issued in May 1995 upon conversion of the former Series
A Preferred, Series B Preferred, Series C Preferred, and Series D Preferred;
Whereas, the Company has previously granted registration rights with
respect to Common Stock issued in May 1992 upon conversion of the original
Series C Preferred, Series D Preferred, Series E Preferred, Series F Preferred,
and Series G Preferred;
Whereas, the Company has previously granted registration rights with
respect to Common Stock issued in May 1992 upon conversion of the original
Series A Preferred and Series B Preferred;
Whereas, the Company has previously granted registration rights with
respect to Common Stock issued to certain founders of the Company;
Whereas, the Company wishes to grant registration rights with respect
to certain of the Common Stock issued to the former majority shareholder of ICON
Medical Systems, Inc. ("ICON"), Jeremy B. Rubin, in connection with the
Agreement and Plan of Reorganization, dated April 12, 1995, and the Agreement
and Plan of Merger, dated June 12, 1995; and
Whereas, this Agreement restates and incorporates all such registration
rights into a single document;
NOW, THEREFORE, in consideration of the Recitals and the mutual
covenants and conditions set forth herein, the parties hereto agree as follows:
AGREEMENT
SECTION 1
1.1 RESTRICTIONS ON TRANSFERABILITY. The Restricted Securities
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Section 1, which conditions are intended to ensure compliance
with the provisions of the Securities Act. Each Purchaser
<PAGE> 13
will cause any proposed purchaser, assignee, transferee, or pledgee of the
Restricted Securities held by a Purchaser to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Section 1.
1.2 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities
Act.
"Conversion Stock" shall mean the Common Stock issuable upon
conversion of the Series A Preferred issued pursuant to the 1995 Series
A Agreement.
"Founders' Stock" means (i) certain shares of Common Stock
originally issued to Thomas P. Quinn (170 shares), David N. White (230
shares), E. N. Kaplan (156 shares), Edgar Greenbaum (98 shares), Carol
Lefcourt (33 shares), Vanguard Associates II (239 shares) and B. J.
Cassin (367 shares); (ii) any shares of Common Stock subsequently
acquired by such persons other than Vanguard Associates II; and (iii)
any Common Stock of the Company issued or issuable with respect to such
shares of Common Stock upon any stock split, stock dividend,
recapitalization or similar event.
"Holder" shall mean any person originally granted rights under
this Section 1.2 holding Registrable Securities or securities
convertible into Registrable Securities and any person holding such
securities to whom the rights under this Section 1.2 have been
transferred in accordance with Section 1.14 hereof.
"Initiating Holders" shall mean any Holder or Holders who in
the aggregate hold greater than 50% of the Registrable Securities.
"Registrable Securities" means (i) the Conversion Stock, (ii)
1,000,000 shares of Common Stock issued in June 1995 upon conversion of
the former capital stock of ICON held by the former majority
shareholder of ICON, Jeremy B. Rubin, (iii) the 200,299 shares of
Common Stock issued in May 1992 upon conversion of the original Series
C Preferred, Series D Preferred, Series E Preferred, Series F
Preferred, and Series G Preferred (the "Original Preferred"), (iv) the
5,421,882 shares of Common Stock issued in May 1995 upon conversion of
the former Series A Preferred, Series B Preferred, Series C Preferred,
and Series D Preferred (the "Recent Preferred") and (v) any Common
Stock otherwise issued or issuable with respect to any of the foregoing
shares, provided, however, that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so
long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities
transaction, or (B) (i) sold in or may not all be immediately sold in a
transaction exempt under Rule 144 of the Commission, in the opinion of
counsel to the Company, from the registration and prospectus delivery
requirements of the Securities Act
-2-
<PAGE> 14
and (ii) do not exceed 5% of the total number of shares of the Company
then outstanding, so that all transfer restrictions and restrictive
legends with respect thereto are removed upon the consummation of such
sale. For purposes of the registration rights granted to holders of
Company securities pursuant to Section 1.7 hereof and for purposes of
the obligations imposed upon holders of Registrable Securities under
Sections 1.4, 1.11, and 1.15 hereof, but not for purposes of the
definition of Initiating Holders, "Registrable Securities" shall
include, in addition to the above, 913 shares of Common Stock issued in
May 1992 upon conversion of the original Series A Preferred and Series
B Preferred issued in 1984 and the Founders' Stock.
The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with
Sections 1.6, 1.7 and 1.8 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company and of one
special counsel for the participating Holders, blue sky fees and
expenses, the expense of any special audits incident to or required by
any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the
Company).
"Restricted Securities" shall mean the securities of the
Company required to bear the legend set forth in Section 1.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the
time.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the
securities registered by the Holders and all reasonable fees and
disbursements of counsel for any Holder.
1.3 RESTRICTIVE LEGEND. Each certificate representing (i) the
Series A Preferred, (ii) the Conversion Stock, (iii) the Registrable Securities,
and (iv) any other securities issued in respect of the Series A Preferred, the
Conversion Stock, or the Registrable Securities upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of Section 1.4 below) be stamped
or otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD
-3-
<PAGE> 15
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF
THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
Each Purchaser and Holder consents to the Company making a
notation on its records and giving instructions to any transfer agent of the
Series A Preferred or the Conversion Stock in order to implement the
restrictions on transfer established in this Section 1.3.
1.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 1.4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge (except
that if such holder or any successor thereto is a partnership, no such notice
described below shall be necessary for a transfer by such holder to a partner of
such holder). Each such notice shall describe the manner and circumstances of
the proposed transfer, sale, assignment or pledge in sufficient detail, and
shall be accompanied, at such holder's expense by either (i) an unqualified
written opinion of legal counsel who shall, and whose legal opinion shall be,
reasonably satisfactory to the Company addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear, except if such transfer is made pursuant to Rule 144,
the appropriate restrictive legend set forth in Section 1.3 above, except that
such certificate shall not bear such restrictive legend if in the opinion of
counsel for such holder and in the reasonable opinion of the Company such legend
is not required in order to establish compliance with any provision of the
Securities Act.
1.5 REMOVAL OF RESTRICTIONS ON TRANSFER OF SECURITIES. Any legend
referred to in Section 1.3 hereof stamped on a certificate evidencing (i) the
Series A Preferred, (ii) the Conversion Stock, (iii) the Registrable Securities,
or (iv) any other securities issued in respect of the Series A Preferred, the
Conversion Stock, or the Registrable Securities upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event and the stock
transfer instructions and record
-4-
<PAGE> 16
notations with respect to such security shall be removed and the Company shall
issue a certificate without such legend to the holder of such security if such
security is registered under the Securities Act, or if such holder provides the
Company with an opinion of counsel (which may be counsel for the Company)
reasonably acceptable to the Company to the effect that a public sale or
transfer of such security may be made without registration under the Securities
Act or (iii) such holder provides the Company with reasonable assurances, which
may, at the option of the Company, include an opinion of counsel satisfactory to
the Company, that such security can be sold pursuant to paragraph (k) of Rule
144 under the Securities Act.
1.6 REQUESTED REGISTRATION.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to not less than 50% of
the number of shares (appropriately adjusted for recapitalizations) of
Registrable Securities held by the Initiating Holders whose anticipated
aggregate offering price, net of underwriting discounts and commissions, would
exceed $5,000,000, the Company will:
(i) within ten days of the receipt by the
Company of such notice, give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts
to effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within 20 days after receipt of such
written notice from the Company;
Provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 1.6:
(A) In any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) Prior to the earlier of (i) January
1, 1996, or (ii) three months after the effective date of the Company's first
registered public offering of its stock (the "Initial Offering");
-5-
<PAGE> 17
(C) During the period starting with the
date sixty (60) days prior to the Company's estimated date of filing of, and
ending on the date three (3) months immediately following the effective date of,
any registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction, or registration with
respect to an employee benefit plan or with respect to the Company's first
registered public offering of its stock), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;
(D) After the Company has effected two
such registrations pursuant to this subparagraph 1.6(a), and such registrations
have been declared or ordered effective; provided, however that in the event
that any legal restriction or prohibition shall result in the inability of the
Holders participating in a registration pursuant to this subparagraph 1.6(a) to
sell at least 75% of the Registrable Securities included in such registration
within 180 days of the effectiveness thereof, then the Holders shall be entitled
to demand an additional registration pursuant to this subparagraph 1.6(a).
(E) If the Company shall furnish to
such Holders a certificate signed by the President of the Company stating that
in the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its shareholders for a registration statement to
be filed in the near future, then the Company's obligation to use its best
efforts to register, qualify or comply under this Section 1.6 shall be deferred
for a period not to exceed 90 days from the date of receipt of written request
from the Initiating Holders, provided that this right may only be exercised once
in any twelve (12) month period.
Subject to the foregoing clauses (A) through (E), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, after receipt of the request or
requests of the Initiating Holders.
(b) Underwriting. In the event that a registration
pursuant to Section 1.6 is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part of the notice
given pursuant to Section 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 1.6, and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company and reasonably acceptable to a majority of the Holders proposing
to distribute their securities through such underwriting. Notwithstanding any
other provision of this Section 1.6, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
holders of Registrable Securities and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated as follows:
-6-
<PAGE> 18
first, among all Holders of the Common Stock issued upon conversion of the 1995
Series A Preferred, the Recent Preferred, the Original Preferred, and the first
500,000 shares of the 1,000,000 shares of Registrable Securities issued to
Jeremy B. Rubin, in proportion, as nearly as practicable, to the respective
amounts of such Registrable Securities held by such Holders at the time of
filing the registration statement; second, the original Series A Preferred and
Series B Preferred, in proportion, as nearly as practicable, to the respective
amounts of such Registrable Securities held by such Holders at the time of
filing the registration statement; third, the second 500,000 shares of the
1,000,000 shares of Registrable Securities issued to Jeremy B. Rubin, in
proportion, as nearly as practicable, to the respective amounts of such
Registrable Securities held by such Holder at the time of filing the
registration statement; and fourth, among all Holders of Founders' Stock, in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. No Registrable Securities excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such registration.
To facilitate the allocation of shares in accordance with the above provisions,
the Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to 90 days after the effective date
of such registration, or such other shorter period of time as the underwriters
may require.
1.7 COMPANY REGISTRATION.
(a) Notice of Registration. If at any time or from time
to time the Company shall determine to register any of its securities, either
for its own account or the account of a security holder or holders, other than
(i) a registration relating solely to employee benefit plans, (ii) a
registration relating solely to a Commission Rule 145 transaction or (iii) a
registration pursuant to Section 1.6 hereof, the Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within 20 days after receipt of such written
notice from the Company, by any Holder.
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 1.7(a)(i). In such event the right of any
Holder to registration pursuant to Section 1.7 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of Registrable
Securities in the underwriting to the extent provided
-7-
<PAGE> 19
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
1.7, if the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
may limit the Registrable Securities and other securities to be distributed
through such underwriting; provided, however, that the number of Registrable
Securities to be included in such underwriting (other than the initial offering)
shall not be reduced to less than thirty percent (30%) of the aggregate
securities included therein without the prior written consent of the Holders of
a majority of such Registrable Securities. The Company shall so advise all
Holders distributing their securities through such underwriting of such
limitation and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated as follows:
first, among all Holders of the Common Stock issued upon conversion of the 1995
Series A Preferred, the Recent Preferred, the Original Preferred, and the first
500,000 shares of the 1,000,000 shares of Registrable Securities issued to
Jeremy B. Rubin, in proportion, as nearly as practicable, to the respective
amounts of such Registrable Securities held by such Holders at the time of
filing the registration statement; second, the original Series A Preferred and
Series B Preferred, in proportion, as nearly as practicable, to the respective
amounts of such Registrable Securities held by such Holders at the time of
filing the registration statement; third, the second 500,000 shares of the
1,000,000 shares of Registrable Securities issued to Jeremy B. Rubin, in
proportion, as nearly as practicable, to the respective amounts of such
Registrable Securities held by such Holder at the time of filing the
registration statement; and fourth, among all Holders of Founders' Stock, in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocated to any Holder
or holder to the nearest 100 shares. If any Holder disapproves of the terms of
any such underwriting, he may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall not
be transferred in a public distribution prior to 90 days after the effective
date of the registration statement relating thereto, or such other shorter
period of time as the underwriters may require.
(c) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 1.7 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 1.9 hereof.
1.8 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders of Registrable Securities
request that the Company file a registration statement on Form S-3 (or any
successor form to Form S-3), or any similar short-term registration statement,
for a public offering of not less than 20% of the number of shares
(appropriately adjusted for Recapitalizations) of the Registrable Securities,
the reasonably anticipated
-8-
<PAGE> 20
aggregate price to the public of which, net of underwriting discounts and
commissions, would exceed $500,000 and the Company is a registrant entitled to
use Form S-3 to register the Registrable Securities for such an offering, the
Company shall use its best efforts to cause such Registrable Securities to be
registered on such form for the offering and to cause such Registrable
Securities to be qualified in such jurisdictions as the Holder or Holders may
reasonably request; provided, however, that the Company shall not be required to
effect more than one registration pursuant to this Section 1.8 in any six (6)
month period. After the Company's first public offering of its securities, the
Company will use its best efforts to qualify for Form S-3 registration or a
similar short-form registration. The provisions of Section 1.6(b) shall be
applicable to each registration initiated under this Section 1.8. The number of
registrations which may be requested by the Holders under this Section 1.8 shall
not be limited; provided, however, that the Company's obligation to pay the
Registration Expenses for registrations pursuant to this Section 1.8 shall be
limited to three (3) such registrations.
(b) Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this Section 1.8: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act; (ii) if
the Company, within ten (10) days of the receipt of the request of the
initiating Holders, gives notice of its bona fide intention to effect the filing
of a registration statement with the Commission within ninety (90) days of
receipt of such request (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities); (iii) during the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date
three (3) months immediately following, the effective date of any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or
(iv) if the Company shall furnish to such Holder a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the Company or its shareholders
for registration statements to be filed in the near future, then the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed 90 days from the receipt of the request to
file such registration by such Holder.
1.9 EXPENSES OF REGISTRATION.
(a) All Registration Expenses incurred in connection with
registrations pursuant to Sections 1.6 and 1.7 and three registrations pursuant
to Section 1.8 shall be borne by the Company. All Selling Expenses relating to
securities registered on behalf of the Holders shall be borne by the holders of
securities included in such registration pro rata with the Company and among
each other on the basis of the number of shares so registered.
-9-
<PAGE> 21
(b) All Registration Expenses (other than Registration
Expenses for three such registrations) and Selling Expenses incurred in
connection with a registration pursuant to Section 1.8 shall be borne pro rata
by the Holder or Holders requesting the registration on Form S-3 and by any
other participants in such registration on the basis of the ratio of the number
of Registrable Securities included in such registration for each such holder to
the total number of Registration Securities included in such registration.
1.10 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the Registration
Statement has been completed;
(b) Furnish to the Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities.
1.11 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 1.11, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of the Securities Act or any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on
-10-
<PAGE> 22
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder, controlling person or
underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein. Notwithstanding the foregoing, the
liability of each Holder under this subsection (b) shall be limited in an amount
equal to the initial public offering price of the shares sold by such Holder,
unless such liability arises out of or is based on willful conduct by such
Holder.
(c) Each party entitled to indemnification under this
Section 1.11 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1.11 unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's ability
to defend such action and provided further, that the Indemnifying Party shall
not assume the defense for matters as to which there is a conflict of interest
or separate and different defenses. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
-11-
<PAGE> 23
1.12 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualifi cation or compliance referred to in this Section 1.
1.13 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended.
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (at any time
after it has become subject to such reporting requirements);
(c) So long as a Purchaser owns any Restricted Securities
to furnish to the Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934 (at
any time after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company as a Purchaser may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Purchaser
to sell any such securities without registration.
1.14 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted Holders under Sections 1.6, 1.7 and 1.8
may be assigned to a transferee or assignee reasonably acceptable to the Company
in connection with any transfer or assignment of Registrable Securities by a
Holder provided that: (i) such transfer may otherwise be effected in accordance
with applicable securities laws, and (ii) such assignee or transferee of rights
under Section 1.6 acquires at least 25% of the shares of Registrable Securities
purchased by the original Holder (appropriately adjusted for any subsequent
recapitalizations or the like).
1.15 STANDOFF AGREEMENT. Each Holder agrees, so long as such Holder
holds at least one percent (1%) of the Company's outstanding voting equity
securities, in connection with the Company's initial public offering of the
Company's securities, upon request of the Company or the underwriters managing
any underwritten offering of the Company's securities, not to sell, make any
-12-
<PAGE> 24
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any Registrable Securities (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed one hundred twenty (120)
days) from the effective date of such registration as may be requested by the
underwriters; provided, that the officers and directors of the Company who own
stock of the Company also agree to such restrictions.
1.16 REGISTRATION RIGHTS OF FUTURE ISSUES OF SECURITIES.
(a) From and after the date of this Agreement, the
Company shall not enter into any other agreement with any holder or prospective
holder of any securities of the Company which would: (i) provide that such
holder or prospective holder may require the Company to initiate any
registration of any securities of the Company, the effective date of the
registration statement for which shall be before the time that Initiating
Holders are entitled to request demand registration pursuant to Section 1.6, or
(ii) provide for the granting to such holder of registration rights unless such
agreement permits the Holders to include shares of Registrable Securities in the
Registrations requested pursuant to such registration rights and contains
provisions substantially similar to those contained in Section 1.6 and 1.7 with
respect to the allocation of securities to be included in an underwritten public
offering if marketing factors require a limitation on the number of such
securities to be included.
(b) Notwithstanding subparagraph (a) above, the Company
may, from time to time with the approval of its Board of Directors but without
obtaining the consent of the then-existing Holders, grant to such holders or
prospective holders registration rights equivalent to those granted to the
Holders of Registrable Securities hereunder.
SECTION 2
2.1 ADDITIONAL ACTIONS AND DOCUMENTS. The parties hereto
shall execute and deliver such further documents and instruments and shall take
such other further actions as may be required or appropriate to carry out the
intent and purposes of this Agreement.
2.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective successors and
assigns, provided, however, that the Shareholders shall not make any assignment
of any of their rights hereunder except as otherwise provided herein or unless
the Company shall otherwise consent.
2.3 AMENDMENTS AND WAIVERS. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with the written consent of the Company and the holders of a
majority of the outstanding shares of Registrable Securities and securities
convertible into Registrable Securities. Any amendment or waiver effected in
accordance with this Section 2.3 shall
-13-
<PAGE> 25
be binding upon each holder of any Registrable Securities or securities
convertible into Registrable Securities, each future holder of all such
securities, and the Company.
2.4 NOTICES, ETC. All notices and other communications
required or permitted hereunder shall be deemed given if in writing and mailed
by registered or certified mail, postage prepaid, or otherwise delivered by
hand, by messenger, or by telecopy, and properly addressed, to the party as
follows: (a) if to a Holder, at such Holder's last address or facsimile number
shown in the Company's records, or (b) if to any other holder of any Registrable
Securities, at such address or facsimile number as such holder shall have
furnished the Company in writing, or, until any such holder so furnishes an
address or facsimile number to the Company, then to and at the address or
facsimile number of the last holder of such Registrable Securities who has so
furnished an address or facsimile number to the Company, or (c) if to the
Company, at the address or facsimile number of its principal offices and
addressed to the attention of the Corporate Secretary and with a copy to Wilson,
Sonsini, Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California
94304-1050, facsimile number 415-493-6811, Attention: Michael J. O'Donnell, or
at such other address or facsimile number as the Company shall have furnished to
the Shareholders. All notices and other communications so sent shall be
effective as follows: (i) if sent by hand, messenger or by mail, upon delivery;
(ii) if sent by telecopy, upon receipt of confirmation of transmission (provided
such notice is sent on a business day during the hours of 9:00 a.m. and 6:00
p.m. local time of recipient, but if not, then immediately upon the beginning of
the first business day after being transmitted). Any party may change its
address or facsimile number for the purpose of this Section 2.4 by giving the
other parties written notice of its new address or facsimile number in
accordance herewith.
2.5 GOVERNING LAW AND VENUE. The rights and regulations
of the parties hereto shall be governed by, and this Agreement shall be
construed in accordance with, the laws of the State of California, except where
federal law may apply. All disputes arising out of this Agreement shall be
subject to the exclusive jurisdiction and venue of the California state courts
of Santa Clara County, California or the United States District Court for the
Northern District of California and the parties consent to the personal and
exclusive jurisdiction and venue of these courts.
2.6 ENTIRE AGREEMENT. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. This Agreement supersedes all prior written and
oral agreements and understandings between the parties hereto with respect to
the subject matter hereof.
2.7 SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
2.8 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall constitute
one instrument.
-14-
<PAGE> 26
2.9 EFFECTIVENESS. This Agreement shall become effective
upon execution by the Company and the holders of a majority of the outstanding
shares of Registrable Securities and the securities convertible into Registrable
Securities as set forth in the prior agreements granting registration rights to
such holders.
-15-
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"COMPANY" CEMAX/ICON, INC.
a California corporation
By:_____________________________________
Title:__________________________________
"SHAREHOLDERS"
________________________________________
Print Name
________________________________________
Signature
By:_____________________________________
Title:__________________________________
-16-
<PAGE> 28
EXHIBIT A
SCHEDULE OF SHAREHOLDERS
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Type of Shares
- ----------------------------- ---------------- --------------
<S> <C> <C>
David B. Apfelberg 64 shares Common
Arrow Family Trust 123 shares Common
Doris M. Bachrach 222 shares Common
George E. Backus, as Trustee 3 shares Common
UDT dated 10/24/85
George E. Backus 47 shares Common
Backus Family Trust 123 shares Common
Alfred L. & Sherill L. Bailey 27 shares Common
Donald E. & Patricia Barrick 30 shares Common
Donald L. Bebensee 67 shares Common
C. Gordon Bell 186 shares Common
Berthold Family Trust 245 shares Common
BFG II 72 shares Common
Susan S. Blumenthal 3 shares Common
Roberta Brosnahan 11 shares Common
Charles F. Brothers 474 shares Common
Lewis J. Brown III & 31 shares Common
Felicia D. Brown, JTWROS
Lawrence A. Brown, Jr. 38 shares Common
Joseph R. & Joan Ann Bugado 27 shares Common
Ian R.N. Bund 156 shares Common
Capform II Investment Fund 695 shares Common
Capform III Investment Fund 1,461 shares Common
Alfred R. Cartier Trust 64 shares Common
UDT July 31, 1987
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Type of Shares
- ----------------------------------- ---------------- --------------
<S> <C> <C>
B.J. Cassin 92,229 shares Common
Barbara Castagner 2 shares Common
Richard Castagner 2 shares Common
Collagen Corporation 318,163 shares Common
Richard N. Coppin 245 shares Common
Courtland Associates 1981-3 113 shares Common
Crane Family Trust 123 shares Common
Thomas M. Crawford 42 shares Common
Richard E. Davison 346 shares Common
Diversifund 1983-1 467 shares Common
John Douglas Dunn 15 shares Common
Henry M. Duque 42 shares Common
Saul Eisenstat, M.D. 42 shares Common
Enterprise Partners 575,779 shares Common
Jean M. Epstein 98 shares Common
Leslie B. Foster 10 shares Common
The First National Bank of Chicago, 275 shares Common
Trust for Robert J. Greenebaum
GC & H Partners 275 shares Common
Elinor F. Giffen 23 shares Common
Mark Gilford 257 shares Common
Michael Gold 123 shares Common
Janice S. Good 287 shares Common
Robert J. Greenebaum & William H. 1,430 shares Common
Schield, Jr., Co-Trustees of the
Edgar N. Greenebaum Jr. Living
Trust dated 12/3/94
Roger J. Guidi 30 shares Common
</TABLE>
-2-
<PAGE> 30
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Type of Shares
- ------------------------------------- ---------------- --------------
<S> <C> <C>
Kenneth & Donna Lee Harris 13 shares Common
Robert Harrington 13 shares Common
Harvest Technology Partners 371,758 shares Common
David Hirshfeld 245 shares Common
William A. Hockett, Jr. 72 shares Common
Terri D. Homer 210 shares Common
John D. & Betty Jo Hooker 42 shares Common
1982 Trust
Robert L. & Donna J. Huebner 123 shares Common
Donald M. & Laddie W. Hughes 13 shares Common
The Donald M. & Laddie W. 152 shares Common
Hughes Trust dated 5/9/79
Institutional Venture Management III 28,886 shares Common
Institutional Venture Partners 2,401 shares Common
Institutional Venture Partners III 1,915,325 shares Common
Arlene J. Kaplan 64 shares Common
Ernest N. Kaplan, M.D. 1,061 shares Common
The Kaplan Children's Trust 149 shares Common
Thomas A. King & Valeria M. 245 shares Common
Szigeti
K.S. & N. Investments Partnership 36 shares Common
The Kulp 1983 Revocable Trust 152 shares Common
Eugene K. & Charlotte N. Lamson 101 shares Common
Edwin & Carol Lefcourt 96 shares Common
Henry F. & Nora M. Lenartz 64 shares Common
Levi Revocable Living Trust 216 shares Common
dated 11/5/90
Louis & Ellen Levitas 117 shares Common
</TABLE>
-3-
<PAGE> 31
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Type of Shares
- ---------------------------------- ---------------- ------------------
<S> <C> <C>
John A. & Belinda J. Lipa 54 shares Common
Andrew B. Lipton 42 shares Common
Morton & Julia Maser 57 shares Common
Heidi B. Mason 11 shares Common
Garry G. & Karla J. Mathiason 123 shares Common
Irving B. Mayer 140 shares Common
MBW Venture Partners L.P. 930,447 shares Common
Philip E. McCarthy Pension Fund 25 shares Common
Glen McLaughlin 44 shares Common
Minnesota Mining and Manufacturing 1,985,878 shares Series A Preferred
Company
Michigan Investment Fund L.P. 204,245 shares Common
Harry Mittleman, M.D. 501 shares Common
Jack B. Murray 42 shares Common
Robert Nedd 541 shares Common
New Enterprise Associates IV 8,197 shares Common
Arthur A. & Katheryn N. Newfield, 7 shares Common
JTWROS
Arthur A. Newfield 57 shares Common
Newtek Ventures 11,190 shares Common
Pacific Coast Cardiac & Vascular 16,667 shares Common
Surgeons, a Medical Corporation
Profit Sharing Plan & Trust FBO
Perry M. Shoor
Louis & Marlene Palatella, JTWROS 100 shares Common
Peter J. & Janet L. Palmerson 42 shares Common
Paul J. & Sheila M. Pearce 64 shares Common
Richard B. & Carolee D. Peoples 32 shares Common
Carolee D. Peoples 5 shares Common
</TABLE>
-4-
<PAGE> 32
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Type of Shares
- ------------------------------------- ---------------- --------------
<S> <C> <C>
Richard B. Peoples 5 shares Common
Robert R. & Edith J. Peronto 49 shares Common
Robert A. Peterson 123 shares Common
Philips Medical Systems, Inc. 10,125 shares Common
William J. & Pamela J. Pinkerton 101 shares Common
J. David Pollard 42 shares Common
Thomas P. Quinn 445 shares Common
Jay Rouse 42 shares Common
Jeremy B. Rubin 1,000,000 shares Common
William H. Schield, Jr. 958 shares Common
Micki Schneider 23 shares Common
Arthur Schneiderman 28 shares Common
James Selover 123 shares Common
Harold F. & Bettie Shields 533 shares Common
Perry & Barbara Shoor 37 shares Common
John S. Smolowe 64 shares Common
James S. Stanford, as Trustee for the 8,824 shares Common
Stanford Family Revocable Trust of
December 19, 1990
Roger K. Summit 27 shares Common
Jack Sunseri 59 shares Common
Howard Swidler 2 shares Common
Technology Funding Partners I, L.P. 169,819 shares Common
Technology Funding Partners II, 203,147 shares Common
L.P.
Technology Funding Private Reserve, 391,137 shares Common
L.P.
Thomas A. & Rosemary S. Tisch 30 shares Common
Trust UDT 10/31/80
</TABLE>
-5-
<PAGE> 33
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Type of Shares
- --------------------------------- ---------------- --------------
<S> <C> <C>
James E. & Dee Tozer 42 shares Common
Transcorp c/f Ernest N. Kaplan 230 shares Common
TPS Account
James Valerio 42 shares Common
Vanguard Associates II 353,187 shares Common
Arthur Vassiliadis 1,035 shares Common
Venturn Partners 1,434 shares Common
W.S. Investment Company 86 248 shares Common
Wendy A. Wagner 15 shares Common
Anne Gray Walrod 42 shares Common
Jaroy Weber, Jr. 7 shares Common
James R. & Mary H. Weersing, 156 shares Common
Trustees of the Weersing Family
Trust U/D/T dated 4/24/91
Max Weil 2 shares Common
Michael W. & Barbara Weiner 59 shares Common
The Weiner Family Trust dated 1 share Common
6/30/89, Albert & Rita Weiner,
Co-Trustees
Ned M. Weinshenker Money 19 shares Common
Purchase Pension Plan
Westwind Development, Inc. 245 shares Common
Profit Sharing Plan
David N. White 893 shares Common
Patricia B. Wolf 42 shares Common
A.R. Woolworth 32 shares Common
Penny M. Woolworth 33 shares Common
Najib Yamini 15 shares Common
Barry M. Zide, M.D. 162 shares Common
</TABLE>
-6-
<PAGE> 1
Exhibit 10.8
COOPERATION AGREEMENT
This Cooperation Agreement ("Agreement") is made effective September 28, 1995
(the "Effective Date"), between CEMAX-ICON, Inc. ("CEMAX"), a California
corporation, and HEWLETT-PACKARD COMPANY ("HP"), a California corporation.
WHEREAS HP desires to become, and is entering into this Agreement for the sole
purpose of expediting the availability of CEMAX's existing products on HP
platforms and becoming the OEM platform of choice for all CEMAX products, and is
relying upon CEMAX entering into an OEM agreement with HP in furtherance of that
objective;
WHEREAS CEMAX likewise desires to establish, and is entering into this Agreement
with the intention of ensuring the availability of CEMAX products on HP
platforms, establishing the HP platform as CEMAX's development platform,
supporting HP as the preferred OEM partner for all of CEMAX products, and
entering into an OEM agreement with HP; and
WHEREAS both HP and CEMAX recognize that making CEMAX's existing and upcoming
products available for use on HP platforms as soon as possible is the critical
objective.
NOW THEREFORE in consideration of the foregoing recitals and commitments
contained herein, HP and CEMAX agree as follows:
1. PORTING ENHANCEMENTS
1.1. CEMAX is in the business of developing and has developed diagnostic
imaging/medical image networking software, as more particularly described
in EXHIBIT A (the "Programs").
1.2. HP and CEMAX desire to have the Programs ported to run on the HP Series
9000 computer systems in all their supported configurations and with all
associated peripherals (the "HP Products").
1.3. CEMAX shall port the Programs to the HP Products in accordance with the
deliverables, specifications, development schedule, and other requirements
contained in EXHIBIT A, using its best reasonable efforts to resolve any
technical issues which might prevent CEMAX from complying with such
development schedule.
1.4. In order to assist CEMAX in its porting obligations under this Agreement,
HP shall provide access to HP Products in accordance with EXHIBIT B.
1.5. CEMAX shall make any releases, modifications, updates, upgrades, and
error corrections, developed by CEMAX for the Programs ("Enhancements")
commercially available on the HP Products no later than the date by which
each such Enhancement is commercially available on CEMAX's present
development platform, using best reasonable efforts to resolve any
technical issues presented which might prevent CEMAX from meeting that
date. However, any new CEMAX products ("Products") as well as any new
versions of the Programs (those versions which contain new features and/or
new functionalities) shall be made commercially available by CEMAX on the
HP Products prior to, or at the same time as, the Products are made
commercially available on any other unix or pc platform.
1.6. Except to the extent of any performance limiting features of an HP
Product, all ported Programs and Enhancements shall perform on the HP
Products with features, functionality, and speed no less than that of the
performance of the Programs and Enhancements on competitive workstation
platforms.
1.7. CEMAX will adapt all Programs and Enhancements to operate on object code
compatible revisions, releases and successors to the HP Products, using
best reasonable efforts to resolve any technical difficulties presented
which might prevent CEMAX from fully complying with this provision.
1.8. CEMAX shall perform whatever tests are necessary and/or required in order
to verify that the Programs, Products and Enhancements, as ported to the
HP platforms in accordance with the requirements of this Agreement, meet
their respective technical specifications as defined in Exhibit A, and
meet all requirements for FDA testing. Only when the Programs,
Enhancements and Products fully comply with their respective technical
specifications may the performance tests and FDA testing
177
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 2
be commenced. HP shall be entitled to require written certification of
such compliance. The performance tests, including FDA tests as required,
will be conducted on each ported Program and Enhancement consistent with
the criteria and procedures specified in EXHIBIT C, but in any event, in a
manner and by means which are the same as those used to test the Programs
which have already received FDA approval. When a Program or Enhancement
successfully passes those tests, CEMAX shall deliver to HP a copy of the
Program or Enhancement, together with the test results and all other
deliverables required under this Agreement. With regard to FDA testing of
the Programs and/or Enhancements, CEMAX represents that any and all 510K
FDA filings with regard to these Programs and Enhancements for CEMAX's
current development platform cover other UNIX-based platforms similar to
the HP platform. Accordingly, it is expected that a minimal amount of FDA
testing of these same products on the HP platform will be required.
1.9. For purposes of HP's right to obtain a refund of the monies paid to CEMAX
pursuant to Subparagraphs 1a., b, and d of Exhibit D, each port shall be
complete when the ported Program or Enhancement operates on the HP
Products in accordance with sections 1.3 and 1.6 above. Accordingly, no
FDA testing shall commence, and HP shall not be obligated to pay for such
testing until each port is "complete" as defined herein.
1.10. Except as provided in section 1.4 above and in EXHIBIT D, CEMAX shall
bear all costs and expenses with respect to performing its obligations
under this Agreement.
2. MARKETING
2.1. CEMAX shall be solely responsible for all marketing and distribution of
Programs, Products, and their respective Enhancements. Subject to the
provisions of paragraph 1.5, CEMAX shall market and distribute all
Programs, Products and their respective Enhancements on the HP Products to
the same extent and for the same duration as on comparable non-HP
Platforms.
2.2. CEMAX shall promote all Programs, Products and their respective
Enhancements in a commercially reasonable fashion. Such promotion shall
include a statement in CEMAX's literature of the availability of the
Programs, Products, and their respective Enhancements on the HP Products.
2.3. Except as expressly provided in this Agreement, neither HP nor CEMAX has
made any promise or other representation regarding any Program or
Enhancements, including with respect to the success of any Program or
Enhancement in the marketplace.
2.4. Upon completion of the port of the Programs initially ported pursuant to
sections 1.3, 1.8, and 1.9 above or earlier, HP and CEMAX intend to enter
into an OEM agreement which, among other things, will address which
provisions of this Agreement or the OEM agreement will take precedence.
3. SUPPORT
3.1. CEMAX shall be solely responsible for all maintenance and support of
Programs, Products and their respective Enhancements on the HP Products,
which maintenance and support shall be at least equal to that which CEMAX
provides on all other platforms. At a minimum, CEMAX shall:
(a) Cure defects in the Programs, Products, and their respective
Enhancements, and associated documentation pursuant to the requirements
set forth in Exhibit C;
(b) Maintain a telephone number for HP and end-users to call during
CEMAX's business hours to report defects and to otherwise receive
assistance; and
(c) Coordinate problem resolution with HP when operational problems appear
traceable to HP Products.
3.2. CEMAX and HP have designated, in EXHIBIT E, Account Managers to
facilitate communication between CEMAX and HP. The Account Managers may be
changed by either party upon notice to the other.
178
<PAGE> 3
3.3. CEMAX shall support each Program, Product, and their respective
Enhancements for three years after the date that CEMAX discontinues
distributing the Program, Product, or their respective Enhancement on the
HP Products.
4. WARRANTY AND INDEMNITY
4.1. CEMAX warrants that:
(a) It has all rights necessary to perform this Agreement, without
restriction; and
(b) The Programs, Enhancements, and associated documentation and
intellectual property do not, and as to the Products will not, violate
or infringe any third party's intellectual property rights.
4.2. As used in this Agreement, the term "intellectual property" means all
patents, tradenames, trade secrets, trademarks, service marks, copyrights,
and other similar proprietary rights.
4.3. CEMAX shall defend at its sole expense any claim, suit, or proceeding
brought against HP or end-users that any Program, Products, and their
respective Enhancements, or associated documentation violates or infringes
any third party's intellectual property right (collectively "Infringement
Action"). HP shall give CEMAX the authority, information, and assistance
(at CEMAX's expense) to defend the Infringement Action; however, CEMAX
shall in no event have the authority to make any representations or enter
into any settlements which would obligate HP, monetarily or otherwise.
CEMAX shall pay all damages and costs awarded, as well as all legal fees,
in any Infringement Action against HP or end-users. The foregoing shall
not be deemed to in any way limit CEMAX's right and ability to modify the
Program and/or Enhancement to be non-infringing but functionally
equivalent, or to buy a license under the intellectual property right(s)
infringed so that HP can continue to exercise its license unencumbered.
4.4. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY SHALL BE
LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
(INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS) ARISING OUT OF ANY
PERFORMANCE OF THIS AGREEMENT OR IN FURTHERANCE OF THE PROVISIONS AND
OBJECTIVES OF THIS AGREEMENT. THE FOREGOING EXCLUSION OF DAMAGES SHALL
APPLY REGARDLESS OF WHETHER SUCH DAMAGES ARE BASED ON TORT, WARRANTY,
CONTRACT, OR ANY OTHER LEGAL THEORY, EVEN IF ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
5. MISCELLANEOUS
5.1. All notices under this Agreement shall be in writing and shall be
considered given as of twenty-four hours after sending by electronic means
(such as telecopy) or by air courier service, or as of forty-eight hours
after deposit in the U.S. Mail (certified, return receipt requested). All
notices shall be sent to the respective Account Manager at the address
listed in EXHIBIT E.
5.2. Neither party may, without the prior written consent of the other party,
publicize or otherwise disclose the terms or existence of this Agreement
to any third party.
5.3. Neither party shall assign or otherwise transfer any rights or
responsibilities set forth in this Agreement.
5.4. The following Exhibits are fully incorporated in this Agreement by the
first reference herein to each such Exhibit:
(a) EXHIBIT A, the Programs, program Specifications, and Deliverables;
(b) EXHIBIT B, Access to HP Products;
(c) EXHIBIT C, Performance Criteria and Error Definitions;
(d) EXHIBIT D, Payment Milestones; and
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(e) EXHIBIT E, Account Managers
5.5. The remedies contained in this Agreements are in addition to any other
remedies available at law or in equity.
5.6. In order to achieve the mutually desired objectives stated within this
Agreement, CEMAX and HP intend to enter into an OEM agreement for CEMAX's
acquisition of HP platforms. CEMAX and HP agree to use all reasonable
efforts to execute such OEM agreement within [ * * ] of the
execution date of this Agreement.
5.7. This Agreement represents the entire understanding and agreement between
the parties as to the matters set forth. Any representation, promise, or
condition not explicitly set forth in this Agreement shall not be binding
on either party.
5.8. In the event that either party is unable to perform any of its
obligations under this Agreement or to enjoy any of its benefits because
of natural disaster, actions or decrees of governmental bodies or
communications line failure not the fault of the affected party
(hereinafter referred to as a "Force Majeure Event"), the party who has
been so affected shall give written notice to the other party within
thirty (30) days and shall do everything possible to resume performance.
Upon receipt of such notice, this Agreement shall immediately be
suspended. If the period of nonperformance exceeds [ * * ] from
the receipt of notice of the Force Majeure Event, the party whose ability
to perform has not been so affected may by giving written notice terminate
this Agreement. However, delays in delivery due to Force Majeure Events
shall automatically extend the delivery date for a period equal to the
duration of such events, and HP's obligation to pay shall be
correspondingly extended.
5.9. This Agreement may only be modified by a writing signed by authorized
representatives of both CEMAX and HP.
5.10. This Agreement is made under and shall be construed in accordance with
the laws of the State of California.
CEMAX:
By:
Typed Name:
Title:
HEWLETT-PACKARD COMPANY
By:
Typed Name:
Title:
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EXHIBIT A
PROGRAMS, PROGRAM SPECIFICATIONS, AND DELIVERABLES
<TABLE>
<S> <C> <C>
1. PROGRAMS TO BE PORTED:
[ * RSNA DEMO:
Clinical View 1.3
QA Station 1.3
Archive Manager 2.0
Diagnostic View 1.3
* ]
PRODUCTS TO BE PORTED:
[ *
* ]
</TABLE>
Notwithstanding the above, any given Program(s) may be substituted for
another Program, deleted, or Programs may be added, to the extent both HP
and Supplier mutually agree.
<TABLE>
<S> <C> <C>
2. PROGRAM SPECIFICATIONS:
a.) Features Per attached Product Data Sheets (See Attachment A).
b.) Functionality (Product Specifications for [ * * ] and [ * * ] are
c.) Performance currently not complete. CEMAX shall provide HP with the final
product specifications for these products upon completion, which
shall occur no later than [ * * ].)
3. DELIVERABLES:
Software on 8mm tape or 4mm tape or CD Clinical feedback (beta) tests)
Software licenses interface Service documentation
Necessary hardware Operator's manuals
Test and validation plans and results DICOM 3.0 Conformance Statements
Product release notes Marketing literature
FDA, GMP, ISO 9000 documentation
</TABLE>
4. SCHEDULE OF DEVELOPMENT: Per attached "Schedule of Development"
(Attachment B):
-[*
* ] Port of latest rev. to be
complete and ready for FDA testing by [ *
* ].
[ * * ] -- Port estimated to be complete by [ * * ].
[ *
* ], referenced in "Programs to be Ported" above, shall be available for
purposes of demonstration at the RSNA show in November, 1995. The Programs
shall demonstrate features, functionality, and performance at least
equivalent to that demonstrated by the same Programs on CEMAX's existing
development platform. HP recognizes that this level of completion may not
be possible if and to the extent HP fails to provide CEMAX with the
necessary HP platforms and engineering support, as set forth in this
Agreement, within a period of time sufficient to complete the port.
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EXHIBIT B
HP RESOURCES
1. To assist CEMAX in its porting obligations under the Agreement, HP will
[ * * ] CEMAX the following HP products; [ *
* ]
Products"); in accordance with the terms and conditions of HP's Equipment
[ * * ] Agreement.
2. HP shall provide a maximum of [ * * ]-months of technical consulting to
assist CEMAX with regard to the RSNA port with the understanding and
requirement that:
a. any such assistance shall be provided by H.P. and be utilized by CEMAX
by [ * * ].
b. any such assistance which requires the use of or access to HP
confidential information, such as HPUX source code will be performed
only by such HP technical consultant.
c. any services performed by such HP technical consultant will be limited
to those which do not require access to CEMAX confidential information
and can be performed by any consultant not having more than three (3)
years of general practical experience.
3. HP shall provide a technical/engineering resource to aid CEMAX in
completing [ * * ] and [ * * ] Interface Drivers.
4. On completion by CEMAX of all ports in accordance with this Agreement, HP
will transfer HP's rights, title and interest in the HP products identified
above, to CEMAX.
EXHIBIT C
PERFORMANCE CRITERIA AND ERROR DEFINITIONS
1. PERFORMANCE CRITERIA:
Per attached Product Data Sheets
2. TEST PROCEDURES:
Since CEMAX is the manufacturer by FDA definition, CEMAX shall use and
follow the processes already in place and successfully used for the
porting, validation and FDA testing for those Programs which received
Pre-market clearance from the FDA pursuant to section 510K of the Food,
Cosmetics and Drug Act.
3. ERROR DEFINITIONS:
(a) SEVERITY 1 ERROR - Produces an emergency situation in which the
Program or Enhancement is unusable: produces incorrect results; loses
information or data; or fails catastrophically in response to internal
errors, use errors, or incorrect input files.
(b) SEVERITY 2 ERROR - Produces a detrimental or serious situation in
which performance (throughput and response) of the Program or
Enhancement degrades such that there is a severe impact on use; the
Program or Enhancement is usable but incomplete; one or more commands or
functions are inoperable; or the use of the Program or Enhancement is
otherwise significantly impacted.
(c) SEVERITY 3 ERROR - Produces an inconvenient situation in which the
Program or Enhancement is usable but does not provide a function in the
most convenient or expeditious manner, and the use of the Program or
Enhancement suffers little or no significant impact.
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(d) SEVERITY 4 ERROR - Produces a notice situation in which the use of the
Program or Enhancement is affected in some way which is correctable by a
temporary documentation change or workarounds to be permanently
corrected in the next scheduled release.
4. PROCEDURE FOR REMEDYING ERRORS:
Severity 1 and 2 errors: A corrective action plan within [ * * ] of the
problem report, a daily progress report and every reasonable effort made to
resolve the issue as soon as possible.
Severity 3 and 4 errors: A corrective action plan within [ * * ]
and to use best efforts to eliminate all defects within a reasonable time.
EXHIBIT D
PAYMENT MILESTONES
1. In consideration for CEMAX's performance of the Agreement, HP shall pay
CEMAX the amounts specified below:
(a) [ * * ] man-months of dedicated on-site technical consulting and
project administration (i.e. dedicated solely to this project) at a cost
to HP of [ * * ] for completion of the port of all Programs.
(b) Design and fabrication of the [ * * ] and software and
firmware at an aggregate cost to HP of [ * * ].
(c) Based upon Cemax's representation that no previously conducted FDA
testing may be utilized in connection with the testing and qualification
of the subject Programs, HP agrees to reimburse Cemax for costs incurred
for the FDA testing and qualification for these Programs provided that
the cost to HP shall not exceed [ * * ]. HP shall be entitled to
audit whatever records are necessary for HP to verify such cost.
(d) Re-write the manuals for all Programs at an aggregate cost to HP of
[ * * ].
(e) HP agrees to fund an engineering resource to expedite the port of
[ * * ] Product at a cost of [ * * ].
(f) HP agrees to pay for [ * * ] support of software licenses transferred
from CEMAX's present development platform to Hewlett Packard platform at
a cost to HP of [ * * ].
2. In the event CEMAX fails to perform its obligations under Exhibit A,
despite best reasonable efforts, of the Agreement by [ * * ],
CEMAX shall immediately refund to HP a negotiated sum based on percentage
of Programs ported and available for sale. Such refund shall be reduced to
reflect the extent to which any such failure was caused by HP.
3. In the event CEMAX fails to perform its obligations under Exhibit A,
despite best reasonable efforts, of the Agreement by [ * * ], CEMAX
shall immediately refund to HP a negotiated sum based on percentage of
Products ported and available for sale. Such refund shall be reduced to
reflect the extent to which any such failure was caused by HP>
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EXHIBIT E
ACCOUNT MANAGERS
<TABLE>
<CAPTION>
CEMAX HP
---------------------------------- ----------------------------------
<S> <C> <C> <C>
Name: Jean-Luc Chatelain Name: Dan Berg
Title: V.P., Engineering Title: Account Manager
Address: 47281 Mission Falls Court Address: 2025 West Larpenteur
Fremont, CA 94539 St. Paul, MN 55113-5598
Telephone: (510) 770-8612, Ext. 3376 Telephone: (612) 641-9638
Fax: (510) 770-8555 Fax: (612) 641-9737
</TABLE>
ACCOUNTING CONTACT
<TABLE>
<CAPTION>
CEMAX HP
------------------------------------ --------------------------------
<S> <C> <C> <C>
Name: Greg Patti Name: Holly Aprahamian
Title: V.P., Finance Title: Sr. Contracts Specialist
Address: 47281 Mission Falls Court Address: 300 Apollo Drive
Fremont, CA 94539 Chelmsford, MA 01824
Telephone: (510) 770-8612, Ext. 3333 Telephone: (508) 436-5172
Fax: (510) 770-8555 Fax: (508) 436-5177
</TABLE>
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<PAGE> 9
Exhibit 10.11
PURCHASE AGREEMENT NO. 900000
This Agreement is made this 15th day of May, 1995 between GE Medical
Systems business including corporate affiliates worldwide ("Buyer") and CEMAX
Inc. ("Seller").
Whereas Buyer wishes to have Seller use its expertise to manufacture
products for Buyer in accordance with the following requirements of Buyer:
- Purchase Specification (2127534PSP, Revision 1, May 8, 1995) attached to
this Agreement as Attachment A.
Now therefore Seller and Buyer agree as follows:
1. INTRODUCTION
(a) SCOPE. This Agreement including all attachments states the terms on
which Seller will sell to Buyer software applications and hardware
interfaces ("Products") which will be manufactured in strict compliance
with Attachment A. Buyer and Seller agree that Buyer will sell single
monitor personal computer based products which may perform some of the
functions of Products supplied by the Seller. The parties agree that
those products are not part of this Agreement.
(b) DOCUMENTS. If a conflict exists between this Agreement and its
attachments, the order of precedence will be:
1. This Agreement
2. Attachment E (Proprietary Information & Confidentiality)
3. Attachment A (Purchase Specification)
4. Attachment C (Patent Indemnity)
5. Attachment D (Product(s) Cost and Lead Time)
6. Attachment F (Buyer's Standard Purchase Order)
(c) CHANGES. The parties may modify this Agreement as it applies to a
specific purchase order release as long as the modification is in
writing and signed by both parties.
2. TERM
(a) INITIAL TERM. The term of this Agreement is from May 15, 1995 through
[ * * ].
(b) EXTENSIONS. If Buyer and Seller mutually agree, this Agreement can be
extended for 1 year periods. Buyer must notify Seller in writing of its
intention to extend the term by January 31st, of any terminating year.
(c) EXCLUSIVITY. If Seller meets the pricing, delivery, and quality
requirements defined in this agreement and its attachments, Buyer agrees
not to purchase Products, as defined in Attachment A, from a source
other than the Seller until at least [* *]. However, at any time
during the term of this agreement, the Buyer retains the right to
internally develop and sell a competing product.
3. SPECIAL CONDITIONS
(a) Buyer and Seller agree to the terms of Attachment C, "Patent
Indemnity".
(b) Buyer and Seller agree to the terms of Attachment E, "Proprietary
Information and Confidentiality" for the term of this agreement and
three years after termination.
(c) Buyer and Seller agree to the terms of Attachment D, "Product(s) Cost
And Lead Time".
(d) Seller acknowledges that Buyer and Seller are in the same business and
that Buyer is capable of developing like Product(s). Seller agrees to
hold Buyer harmless, if Buyer develops like Product(s), according to
Attachment A, in the future.
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4. PRICING
(a) SOFTWARE. The prices include a paid-up worldwide license for Buyer
and its customers to use in the operation, maintenance and repair of the
Products any related software which is furnished to purchasers of the
Products. Buyer and Seller agree that over time features will be added
to Products and even though Seller's part numbers may change the pricing
will be as defined in Attachment D.
Seller agrees to implement a process within 2 weeks of signing this
agreement which provides Buyer the capability of generating software
licenses by remote log-in on a 24 hour basis.
As new revisions of Products are developed by adding features and/or
problem solutions, Seller agrees to provide those upgrades [ *
* ] to Buyer for those Products which Buyer has purchased, in order
for Buyer to implement a "Field Upgrade". Seller agrees to provide those
upgrades using the same License Number which was originally issued.
(b) COST REDUCTIONS. Buyer and Seller will have a goal to achieve
reductions in Product cost by utilizing cost-effective design, lower
cost components that use new technology, productivity improvements, and
automation of the main manufacturing process.
5. PRODUCT ROAD MAP AND FIELD UPGRADES
(a) PRICING. Buyer and Seller agree that as Seller develops and issues
additional revisions of Products pricing defined in Attachment D.
6. PURCHASE ORDER RELEASES
(a) CONTENTS. Purchase order releases for Products, spare parts and
service tools may consist of hard copies of Attachment F, electronic
messages as set forth in Article 15 or other written communications from
Buyer which state specific delivery requirements. Specific delivery
dates will be confirmed in writing by Seller. The releases will be
processed as follows:
(i) Buyer will issue individual purchase order releases which
reference the number of this Agreement and state delivery dates and
quantities to be released for delivery within the lead times
specified in Attachment D. Regardless of form, every purchase order
release will be deemed to include Buyer's Standard Conditions of
Purchase located on Attachment F.
(ii) The shipping documents prepared by Seller will reference the
applicable purchase order release number. The return goods (RG)
number will also be referenced on spare repairs.
(iii) As Buyer's business requirements are further defined, it may
change the quantities and delivery dates on individual purchase
order releases without penalty as long as Buyer notifies Seller of
the changes in accordance with the lead times specified on
Attachments D.
(iv) No individual purchase order release will be binding upon Seller
unless and until accepted in writing by Seller, but such acceptance
will not be unreasonably withheld.
7. DOCUMENTATION
(a) CUSTOMER COPIES. Seller will deliver two hard copies and two soft
copies of User Manual and Service Manual containing necessary
information for initial set-up and operation of the Product(s) with each
product release. Seller agrees that Buyer will have the right to
duplicate, microfiche, or electronically copy and/or modify in whole or
part any documentation provided for the purpose of distribution to
Buyer's customers and service personnel.
(b) BUYER'S COPY. Seller will deliver to the Buyer [ ** ] copies of
Field Diagnostics/Service Manuals to support maintenance which is
limited to Field Replaceable Unit (FRU's).
(c) REVISION CONTROL. Seller will maintain master documentation for all
product manuals; Buyer may purchase additional copies of the User
Manuals or Field Diagnostics/Service Manuals from the
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<PAGE> 11
Seller. If changes to any Manuals are required, Seller will update the
master documentation and provide to the Buyer change pages in support of
those manuals previously delivered, for which the changes apply.
8. TRAINING
For every [ ** ] Software Licenses purchased by Buyer, Seller agrees to
provide one Service, applications, or "application train the trainer" class free
of charge to buyer's personnel or customers. For every major software release,
Seller agrees to provide one application training class to Buyer's personnel or
customers. Training will be held at Seller's facility. Each class to accommodate
a maximum of 6 students. Additional training sessions can be arranged at the
expense of the Buyer. Travel costs for attendees will be at the responsibility
of the Buyer.
9. TESTING AND SERVICE CAPABILITY
(a) TESTING. Testing Plans and procedures will be standardized based on
Sellers manufacturing plan for test of the repaired product and spare
items, consistent with best commercial practice.
(b) DURATION. Seller will provide standard commercial support for [ ** ]
years from the date of shipment of the last Product(s).
10. TRANSPORTATION
Seller will make shipments according to the terms below for shipments from
Seller's loading dock to Buyer's loading dock. Additional terms relating to
transportation, insurance, risk of loss and title are contained in Attachment F.
1) For all Product(s) less than 150 pounds, Seller will ship Federal
Express using Buyers in-bound account number 0532-00109.
2) For all Product(s) greater than 150 pounds, Seller will ship
Burlington Express collect.
3) For Product(s) requiring an "air-cushioned ride", Buyer and Seller
will work together to arrange for such.
11. INVOICES/PAYMENT
(a) CONTENTS. Seller's invoices will contain at least the purchase order
release number, item number on the release, invoice quantity, unit of
measure, unit price and total invoice amount.
(b) PAYMENT. If an invoice is consistent with this Agreement, Buyer will
settle the invoice within 30 calendar days after receiving both the
proof of shipment and the invoice. Seller agrees to invoice once at the
end of each month for the number of licenses Buyer ships during that
month.
12. WARRANTY/REPAIR
(a) TERMS. The terms of Seller's warranty for hardware purchases are
[ ** ] months from installation at customer site or [ ** ] months from
delivery, whichever is earliest.
(b) NO NOTICE. Buyer may return in-warranty and out-of-warranty defective
Products without providing advance notice to Seller.
(c) FREIGHT/RISK OF LOSS. A defective item will be returned to Seller's
facility or authorized service center with transportation charges paid
by Seller. Risk of loss passes to Seller when the item is delivered to
the carrier.
(d) REPAIR. Unless Buyer elects to return a warranty item for credit
only, Seller will test and repair or replace any returned defective item
within 14 calendar days after receiving it or such shorter time
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agreed on by Buyer and Seller. Items under warranty will be repaired at
no cost to Buyer, and items out-of-warranty will be repaired at the
prices listed in Attachment D.
(e) CREDIT. Seller will promptly credit Buyer for any payment Buyer made
for an item which becomes defective during the warranty period and is
not repaired or replaced under warranty. Buyer may elect to take such
credit on any open invoices of Seller.
13. PERFORMANCE MEASUREMENTS
HARDWARE:
(a) PRODUCT QUALITY. (i) The quality goal for all Products is a
rejection rate of [ * * ] parts per million [ * * ]. This rate will be
calculated monthly by Buyer for each Product received as one million
multiplied by a quotient (1) whose numerator is the quantity of Product
rejected due to any nonconformity with mutually agreed upon
specifications and acceptance criteria and (2) whose denominator is the
total quantity of a Product received by Buyer during a rolling 3 or 12
month period.
(ii) If the rejection rate for a Product exceeds [ * * ] parts per
million [ * * ], Seller will at Buyer's request submit a written
corrective action plan which at a minimum contains an analysis of
the first root cause(s) and specific actions taken or planned to
correct the problem.
(b) DELIVERY. (i) The delivery goal for all Products is [ * * ] on-time
delivery. This rate will be calculated periodically by Buyer as the
number of deliveries during a rolling 3 month period which arrive at
their destination point within 7 calendar days prior to the scheduled
delivery date divided by the total number of deliveries during the same
period.
(ii) If on-time delivery falls below [ * * ] and the trend is negative,
Buyer and Seller will hold discussions to develop a corrective
action plan.
SOFTWARE:
(a) PRODUCT QUALITY. The quality goal for all software Product(s) and
intermediate deliverables as identified in the Purchase Specification is
zero defects.
(b) For software that SELLER makes available to BUYER, SELLER commits to
BUYER to support software with new releases, as needed, in order to
respond to problem reports and bugs per Article 13, Paragraph C, of this
Software section.
(c) BUYER shall categorize reports of software problems into five severity
levels as follows:
1) Catastrophic and unrecoverable. No work-around. Causes total system
failure or unrecoverable data loss. Example system crash or lost
data.
2) Seriously impaired function. Possible work-around. System is usable
but use is unsatisfactory for clinical use. Example: can't use
major product function.
3) Non critical impaired function. Satisfactory work-around. Could be
placed in clinical use if documented, but will cause some user
dissatisfaction. Example: user data must be modified to work.
4) Minor. Work-around exists, or if not, functional impairment is
slight. Could be placed in clinical use. Most users would be
unaware of impairment or would be slightly dissatisfied. Example:
error messages aren't very clear.
5) Very minor. Example: bad layout or misuse of grammar in
documentation.
(d) RELEASE FOR EVALUATION: For software Product(s), SELLER shall conduct
a formal test process (hereinafter referred to as the "Quality
Assurance" test) prior to release to BUYER for evaluation.
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The content of the Quality Assurance test plan will be agreed upon by
the Buyer and Seller. The Quality Assurance test shall be conducted
entirely by SELLER's personnel, at SELLER's premises, but may be
witnessed on request, by BUYER's personnel. To aid Seller in the design
of its internal test process, Buyer agrees to provide to Seller the
software test procedures Buyer uses to evaluate software purchased from
Seller. Seller shall record all problems encountered during the Quality
Assurance test and prioritize them for correction using the categories
listed in Article 13.c.
Seller agrees not to release a software Product to the Buyer for
evaluation unless the results of its Quality Assurance test indicate
there are no Severity 1 problems and a corrective action plan exists for
Severity 2 problems.
(e) QUALITY CRITERIA FOR SOFTWARE PRODUCTS RELEASED TO BUYER FOR
EVALUATION. On receipt of Quality Assurance tested software Product,
BUYER can at it's option conduct acceptance testing (hereinafter
referred to as the "Beta" test), at BUYER's or BUYER's customers' sites,
in order to qualify the Product(s) for acceptance. Any deficiencies
noted during the Beta test shall be recorded and prioritized using the
categories listed in Article 13.3. The Product release will be
acceptable if Buyer's Beta test results in five (5) or fewer Severity 1
and 2 problems.
(f) FINAL RELEASE FOR CUSTOMER SHIPMENT. Before release to Buyer for
ongoing shipment to end use customers, SELLER shall conduct its Quality
Assurance test prior to first shipment of the final version of the
Product. Seller shall record all problems encountered during the Quality
Assurance test and prioritize them for correction using the categories
listed in Article 13.c.
Seller agrees not to release a software Product to the Buyer for
shipment to end use customers unless the results of its Quality
Assurance test indicate there are no Severity 1 or 2 problems and a
corrective action plan exists for Severity 3 through 5 problems.
(g) QUALITY CRITERIA FOR SOFTWARE PRODUCTS RELEASED TO BUYER FOR SHIPMENT
TO END USE CUSTOMERS. On receipt of Quality Assurance tested software
Product, BUYER can at it's option conduct acceptance testing, at BUYER's
or BUYER's customers' sites, in order to qualify the Product(s) for
acceptance. Any deficiencies noted during this evaluation test shall be
recorded and prioritized using the categories listed in Article 13.c.
The Product release will be acceptable if Buyer's test results in zero
(0) Severity 1 and 2 problems and a corrective action plan is received
for Severity 3, 4, and 5 problems.
(h) RESPONSE TO FIELD PROBLEMS: After Products have been released to end
use customers for either Beta testing or as a final released product and
problems are reported to the Seller, Seller agrees to the following
corrective action protocol:
SEVERITY 1 AND 2 PROBLEMS: a corrective action plan within [ * * ] of
the problem report, a daily progress report and every reasonable effort
made to resolve the issue and provide to BUYER a validated bug fix
release as soon as possible.
SEVERITY 3, 4 AND 5 PROBLEMS: a corrective action plan in accordance
with BUYER's priorities, and to use its best efforts to eliminate all
defects against Product(s) "Purchase Specification" by the date
specified for each product release in Attachment A of this agreement or
in a reasonable time frame.
(i) PROBLEM REPORTING METHOD: BUYER and SELLER agree to use DDTS as the
mutually agreed upon method for tracking and resolving software
problems.
14. REGULATORY COMPLIANCE
(a) The Product(s) shall comply with applicable FDA and FCC regulations.
(b) Seller agrees to achieve ISO [ * * ] registration by [ * * ] and
maintain that registration on an ongoing basis.
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15. CHANGES IN PURCHASE SPECIFICATIONS
(a) PROCESS. Buyer or Seller may propose changes in Attachment A by
submitting proposed changes to the other party's contract manager. If
Buyer is proposing the changes, it will identify those changes which it
deems mandatory to make the Product(s) suitable for its use and Seller
will respond in writing to Buyer's contract manager within 30 calendar
days with the following information:
(i) Lead time required to implement proposed changes.
(ii) Impact of proposed changes on pricing of Product, parts and tools.
(iii) Impact of proposed changes on scrap material and work in process.
(iv) Non-recurring engineering charges to implement proposed changes.
Within no more than 30 calendar days after Buyer receives Seller's response
to Buyer's proposed changes or receives the changes proposed by Seller, the
parties will begin negotiations to agree on the changes to Attachment A and
any related changes to price and delivery schedules.
(b) BUYER APPROVAL. After Buyer has accepted the first unit of Product,
Seller may not make any engineering change to the Product affecting
form, fit, function, reliability, serviceability, performance,
functional interchange ability or interface capability without obtaining
Buyer's written approval at least 60 calendar days before the change is
implemented.
(c) COST REDUCTION. If Buyer or Seller proposes a change which reduces
Seller's costs of providing an item to Buyer, Buyer and Seller will
negotiate a revised price on items incorporating the change, which will
distribute the cost savings between Buyer and Seller.
16. ELECTRONIC DATA INTERCHANGE
(a) ACCESS. Buyer may, at its sole discretion, permit Seller to have
on-line access to designated computer systems of Buyer in order to
facilitate Seller's ability to perform its obligations under this
Agreement. If such access is granted, Seller will give Buyer the names
of Seller's employees who will have access to Buyer's computer systems,
and Buyer will provide a separate user identification code for each
person. Seller will at its own expense provide and maintain any
hardware, telecommunications services and software not furnished by
Buyer which are needed to communicate reliably with Buyer's computer
systems. Buyer may terminate Seller's access to Buyer's computer network
at any time.
(b) USE RESTRICTIONS. Seller will ensure that (i) computer access is
limited to its employees with a legitimate business need, and (ii) its
employees with access agree to keep any information so obtained strictly
confidential, to use such information only to perform Seller's contract
obligations to Buyer, and to cease accessing Buyer's computer systems
when no longer requirement to perform work under this Agreement. Seller
will promptly notify Buyer if it becomes aware of any unauthorized
access to Buyer's computer systems or unauthorized use of the
information on the systems.
(c) LEGAL EFFECT. Any document properly transmitted by computer access
will be considered a writing in connection with this Agreement.
Electronic documents will be considered signed by a party if they
contain an agreed upon electronic identification symbol or code.
Electronic documents will be deemed received by a party when accessible
by the recipient on the computer system.
17. TERMINATION
(a) MARKET CONDITIONS. Buyer may cancel any open hardware purchase order
release in whole or in part upon [ * * ] written notice to
Seller, if Buyer determines that its market for Products does not
support the quantities it has ordered from Seller. Buyer may cancel any
open software purchase order release in whole or in part [ * * ].
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 15
(b) SELLER'S BREACH. If Seller materially breaches this Agreement in
whole or in part, upon written notice to Seller, and if Seller fails to
correct the breach within 90 calendar days after receiving notice, Buyer
may then terminate this Agreement without liability except for the price
of any items previously delivered and accepted by Buyer. A material
breach includes without limitation failure to comply with Attachment A,
the Quality Requirements specified in Article 13 of this agreement, or
delivery schedules.
18. DISPUTE RESOLUTION
If a dispute arises between the parties which cannot be resolved by
negotiation, Buyer and Seller agree to participate in at least four hours
of mediation before pursuing any other legal remedies such as commencing
litigation. The mediation shall be conducted by the Milwaukee office of
United States Arbitration & Mediation, Inc. or another mutually acceptable
service with the costs of the mediator equally split by the parties.
Mediation involves each side of a dispute sitting down with an impartial
person to attempt to reach a voluntary settlement, with no formal court
procedures or rules of evidence and with the mediator having no power to
render a binding decision or force an agreement on the parties.
19. CONTRACT MANAGER/NOTICES
(a) MANAGERS. Each party will appoint a contract manager as the point of
contact for all matters relating to performance of this Agreement.
(b) ADDRESSES. Any notice required under this Agreement will be sent by
fax or first-class mail to:
<TABLE>
<S> <C>
Buyer GE Medical Systems
P.O. Box 414
Milwaukee, WI 53201
Attention: Greg Sinner, W-732
Fax: 414-544-3293
Seller CEMAX Inc.
47281 Mission Falls Ct.
Fremont, CA 94539
Attention: Bruce Olson
Fax: 510-770-8555
</TABLE>
20. GENERAL MATTERS
(a) The relationship between Buyer and Seller is that of independent
contractors. Neither party will do anything which has the effect of
creating an obligation by the other party to a third party. If one party
breaches this commitment, it indemnifies the other party for all damages
and costs the injured party incurs which arise from the breach.
(b) Seller will not issue any press release, use any of Buyer's products
or its name in promotional activity, or otherwise publicly announce or
comment on this Agreement without Buyer's prior written consent.
(c) This Agreement becomes effective when it is signed by an authorized
representative of each party. It may later be modified only by a writing
signed by the contract managers for both parties.
191
<PAGE> 16
<TABLE>
<S> <C>
CEMAX Inc. GENERAL ELECTRIC COMPANY
By By
Title Title
Date Date
By By
Title Title
Date Date
</TABLE>
192
<PAGE> 17
(LOGO)G
GE MEDICAL SYSTEMS WORKSTATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GE COMPANY PROPRIETARY
2127534PSP
ATTACHMENT A
------------------------------------------------------------------------
WORKSTATION PURCHASE SPECIFICATION
FOR NETWORK PRODUCTS & SERVICES
Author: Sharon Works
Revision: Rev 1
Date: 8-May-95
- --------------------------------------------------------------------------------
- ----------
- --------------------------------------------------------------------------------
- ----------
- --------------------------------------------------------------------------------
<PAGE> 18
DATE: 8-May-95
REVISION NUMBER: Rev 1
SOFTWARE RELEASE NUMBER:n/a
PERSON UPDATING
DOCUMENT: Sharon Works
SOFTWARE SETS AFFECTED:
SECTIONS CHANGED: BRIEF DESCRIPTION OF CHANGES:
Section 1 INTRODUCTION
Referenced Purchase Agreement number
Section 2.2.1 PORTABLE
Should be solaris 2.4 not 4.2
Section 2.3.3.3 CAMERA SUPPORT
Shall support new Kodak and Dupont cameras for 14x17
Laser Film
Section 2.10 PRODUCT ROADMAP
Updated schedule
Section 2.10.2 RELEASE 1.3
Updated 1.3 content
194
<PAGE> 19
DATE: 8-May-95
REVISION NUMBER: Rev 1
SOFTWARE RELEASE NUMBER:n/a
PERSON UPDATING
DOCUMENT: Sharon Works
SOFTWARE SETS AFFECTED:
SECTIONS CHANGED: BRIEF DESCRIPTION OF CHANGES:
Issues addressed in Vendor's Response; Exception List, Rev. 0.3.1, GE's Response
to CEMAX Exception List Rev. 0.3.1 and new developments are addressed in the
sections listed below
Section 2.2.1 PORTABLE
Vendor will support [ * * ] display boards (single SBUS
slots) for 1K and 2K monitors (based on availability).
Section 2.2.3 LICENSE AND LICENSING PROCEDURE
License will be tied to Host ID and will be valid
through release 2.99.
Section 2.2.5 PERFORMANCE
Performance for release 1.0 will be measured against
vendor's qualified configuration. Some performance
specifications for release [ ** ] are defined.
Section 2.3.1.1.1 DISPLAY FUNCTIONALITY
The set criteria for auto delete is first in first out.
Section 2.3.1.1.3 DICOM 3.0 CONFORMANCE
Release 1.0 will support Merge [ ** ] protocol.
Postpone support of Merge [ ** ] box until [ ** ].
Remove request for DICOM 3.0 Q/R SCP.
Section 2.3.2.1 DISPLAY FUNCTIONALITY
The set criteria for auto delete is first in first out.
Section 2.3.2.3 DICOM 3.0 CONFORMANCE
Release 1.0 will support Merge [ ** ] protocol.
Postpone support of Merge [ ** ] box until 1.x. Remove
request for DICOM 3.0 Q/R SCP.
Section 2.3.3.1 FILMING FUNCTIONALITY
Moved list of Camera/Auxiliary Device to section 2.3.3.3
Camera Support.
Section 2.3.3.2 CAMERA SUPPORT (NEW SECTION)
Updated list to include DuPont cameras and new 3M camera
Removed Agfa and Konica cameras from list. Added request
for camera validation and configuration information.
Added procedure to validate unvalidated cameras in
"clinical" environment.
Section 2.4.1 SERVICE TOOLS
Added note that this will be revisited and addressed in
release [ ** ].
Section 2.4.2 SERVICE SUPPORT
Added detail to the level of Service Support expected.
Section 2.5.1 REGULATORY APPROVALS AND PROCESS REQUIREMENTS
Vendor shall receive ISO [ * * ] certification by [ *
* ] GE will upon request make information
pertaining to how certain standards apply to vendor.
Section 2.5.2 HARDWARE DESIGN REQUIREMENTS
Per conversation between Safety and Regulatory and
vendor, nothing needed to be changed.
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<PAGE> 20
Section 2.5.3.1 OPERATOR INTERFACE
Localization will be supported in release [*]. Details
discussed in section [ ** ] Release [*].
Section 2.5.3.2 CLINICAL MEASUREMENTS AND CALCULATIONS
Analytic tools; only 2D measurement and 2D angle will be
supported in version [*].
Section 2.5.3.3 PATIENT FILE MANAGEMENT
Unsuccessful transfers are indicated no successful
transfers.
Section 2.5.4 REFERENCED DOCUMENTATION AND STANDARDS
Documents shall be available upon request.
Section 2.7.1 FDA, GMP, ISO 9000 DOCUMENTATION
ISO 9000 documentation shall be provided to GE by
[ * * ].
Section 2.7.2 SERVICE DOCUMENTATION
Added statement that documentation shall be based on
vendor's standard configuration.
Section 2.7.2.1 REQUIRED DOCUMENTATION CONTENT
Added statement "if applicable".
Section 2.7.2.3 OTHER REQUIREMENTS
Documentation shall be in FrameMaker 4.0 or greater.
Section 2.7.3 OPERATOR'S MANUAL
Added statement that documentation shall be based on
vendor's standard configuration.
Section 2.7.3.1 REQUIRED DOCUMENTATION CONTENT
Added statement "if applicable".
Section 2.10 PRODUCT ROADMAP
Schedule includes a quick follow on release (release
1.x) to release 1.0 and dates for alpha, beta, and fcs
releases of [*].
Section 2.10.2 RELEASE 1.X (NEW SECTION)
Added features for release 1.x [ * * ].
Section 2.10.2 RELEASE 2.0 (CHANGED TO SECTION 2.10.3)
Section 2.10.2 is now Release [*].
Section 2.10.3 RELEASE 2.0 (FORMER SECTION 2.10.2)
Items have been added and subtracted from release [*].
Section 2.10.4 RELEASE X.X (FORMER SECTION 2.10.3)
Section 4.4 WARRANTY
References the Purchase agreement document.
OPEN ISSUES:
<TABLE>
<CAPTION>
SECTION: PERSON RESP: RESOLUTION DATE: BRIEF DESCRIPTION OF ISSUE:
- -------- ------------ ---------------- -----------------------------------------
<S> <C> <C> <C>
2.10 Sharon Works 4/7/95 Agree on Schedule and release of contents
</TABLE>
196
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 1
Exhibit 10.9
AGREEMENT LGC950D
FOR THE
LICENSE, SUBLICENSE, AND MAINTENANCE OF SOFTWARE
BETWEEN
CEMAX, INC.
AND
AT&T, CORP.
This Agreement is entered into by and between CEMAX, INC., a California
corporation, having a place of business at 47281 Mission Falls Court, Fremont,
CA 94539, and AT&T CORP., a New York corporation, having a place of business at
I85 and Mount Hope Church Road, Greensboro, NC 27420, effective as of this 15th
day of September, 1994 ("Effective Date") to facilitate the
license/Sublicense/distribution of the Software as defined below and the
maintenance of the Software in accordance with the terms and conditions
contained herein. The parties agree as follows:
1. PARTIES
The term "Supplier" refers to CEMAX, INC., the party to whom an Order (as
defined in the clause ORDER) is issued. The term "Company" refers to the
party issuing the Order, which may be AT&T CORP.
2. REPRESENTATIVES
Company's Purchasing Representative under this Agreement shall be C.C.
ISLEY, Purchasing Manager. Company's Technical Representative under this
Agreement shall be MIKE FOLEY, Director of Operations, or other such person
as designated by Company's Purchasing Representative per the provisions of
the clause NOTICES. Supplier's representative under this Agreement shall be
DOUGLAS MERK, Director of Operations, or other such person as designated by
Supplier per the provisions of the clause NOTICES.
3. EFFECTIVE DATE AND TERM OF AGREEMENT
This Agreement shall become effective as of the Effective Date and shall
continue in effect for a period of three (3) years thereafter, unless
terminated earlier in accordance with the provisions of this Agreement.
Thereafter, this Agreement may be renewed prior to expiration by written
Agreement of the parties for additional successive one (1) year terms.
Notwithstanding the foregoing, Company may terminate this Agreement upon
thirty (30) days' prior written notice to Supplier. The amendment or
termination of this Agreement shall not affect the obligations of the
Company or Supplier under any then existing Order issued under this
Agreement, but said Order, unless terminated, shall continue in effect as
though this Agreement had not been amended or terminated, as the case may
be, and were still in effect with respect to said Order. Furthermore,
subject to the terms and conditions of this Agreement, Company shall retain
the right to obtain licenses for additional copies for any Software (as
defined in the clause titled LICENSE GRANT below), which was ordered under
this Agreement before such amendment or termination by Company for
convenience pursuant to this Section 3.
4. ORDER
The term "Order" shall mean Company's form of purchase order or schedule
used for the purpose of ordering the license or maintenance of Software.
Each Order shall reference this Agreement thereby incorporating the terms
and conditions of this Agreement in such Order. Orders shall be subject to
Supplier's written acceptance. If notice of rejection of an Order is not
received by Company within
102
<PAGE> 2
twenty (20) days from the date of Supplier's receipt of an Order, such
Order shall be deemed to have been accepted by Supplier.
5. CONTENTS OF ORDER
An Order for the license, Sublicense or maintenance of Software shall be
written on Company's form of purchase order or schedule and shall contain
the following:
1. The incorporation by reference of this Agreement;
2. A complete list of the Software to be included in the license,
including a reference to and incorporation of the applicable Basic
Materials;
3. The fee for the Software furnished and license granted;
4. The location or locations at which the Software is to be delivered and
invoiced;
5. Maintenance in accordance with this Agreement including Company's
Centralized Support Organization, if applicable;
6. Any other special terms and conditions agreed upon by both parties.
6. ORDER TERMINATION
An Order may be terminated by Company, at no charge, at least sixty (60)
days prior to shipment by Supplier to Company. Company shall notify
Supplier in writing of any such termination. Company may at any time under
this Agreement, change the purchase order quantity only in accordance with
the schedule below:
<TABLE>
<S> <C>
Number of Days Prior to Scheduled Shipment
Date that Supplier Receives Written Notice Allowable Increase/Allowable Decrease of
of Cancellation Purchase Order Quantity
0-30 [ *
31-60
61-90 * ]
</TABLE>
In the event Company cancels an order for Software, Company will pay the
following cancellation charges:
<TABLE>
<S> <C>
Number of Days Prior to Scheduled Shipment
Date that Supplier Receives Written Notice Cancellation Charge as a Percentage of
of Cancellation Supplier's then current Software list fee
0-30 [ *
31-60
61 or more * ]
</TABLE>
If Company cancels an order which has been rescheduled the cancellation
charge will be determined using the originally scheduled delivery date.
Company may reschedule an order only once.
7. INVOICES AND TERMS OF PAYMENT
Invoices for the charges specified in an Order shall be submitted by
Supplier to the address specified in the Order. Invoices for the initial
released Software shall not be rendered prior to acceptance of the
Software. Thereafter Supplier may issue invoices to Company for Company
Orders upon Supplier's shipment of Software. Invoices shall be paid net
thirty (30) days from the date of receipt of invoice by Company unless
payment terms more favorable to Company are on Supplier's invoices and
Company elects to pay on such terms. All payments shall be made by check or
wire transfer.
8. LICENSE GRANT
A. Supplier hereby grants to Company a perpetual, nonexclusive,
nontransferable (except as expressly set forth in this Agreement) license
(without right to sublicense) to Use for internal Company purposes only the
Software, including all media on which it may be recorded or stored, which
license shall be subject to
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 3
License Fees (as defined herein below). Company will have the right to copy
the Software for its internal Use pursuant to this Section titled LICENSE
GRANT, provided that Company's Use of the Software will be subject to
Supplier's issuance of a license key to Company subsequent to Company's
payment of the applicable License Fees for the copies of the Software
generated by Company. For purposes of this Agreement, the term "Software"
shall mean the computer software program and firmware specified in
Attachment A in machine executable object code format, Updates to the
Software as defined in the clause titled SUPPLIER MAINTENANCE, and the
Basic Materials defined in the clause SOFTWARE AND PROGRAMMING AIDS AND
BASIC MATERIAL.
B. For purposes of this Section titled LICENSE GRANT, "Use" shall mean use
by employees, agents and contractors of Company having authorized access to
the computer on which the Software is permitted to be operated by Company,
which use is in accordance with the terms and conditions of the software
license agreement that Company uses to license Company's software of a
similar nature to end users and that prohibits time sharing. Contractors of
Company shall be permitted to use the Software solely for the purpose of
assisting Company in supporting the Software pursuant to the clause titled
CENTRALIZED MAINTENANCE of this Agreement and only if Company enters into
written agreements with such contractors binding them to the provisions of
a software license agreement that Company uses to license Company's
software of a similar nature to end users and that prohibits time sharing.
C. Company may Use one backup copy of the Software for the sole purpose of
implementing a Company restoration plan or for the purpose of testing a
Company restoration plan.
9. DISTRIBUTION/SUBLICENSE BY COMPANY
A. Supplier hereby grants to Company the non-exclusive right to sublicense
the Software only to End Users ("Sublicense") and to make copies of the
Software for Sublicenses pursuant to this Section titled
DISTRIBUTION/SUBLICENSE, provided that Company's Sublicense of the Software
will be subject to Supplier's issuance of a license key to Company
subsequent to Company's payment of the applicable License Fees for the
copies of the Software generated by Company in accordance with this Section
titled DISTRIBUTION/SUBLICENSE. All obligations, undertakings and
indemnifications by Supplier under this Agreement that have a material
affect on use of Software by End Users in accordance with this Agreement
shall run and inure to the benefit of Company and such End Users. For
purposes of this Agreement "End Users" shall mean Company customers that
obtain the Software only for their own internal use and not for relicense,
distribution, or transfer to third parties (for purposes of this Agreement,
"End Users"). Company shall have the right to distribute the Software
together with other Company or third party products or services as part of
a total product offering or alone after an earlier total product and/or
service offering by Company which adds value to the Software. Company shall
have no right to distribute the Software through subdistributors,
resellers, or any third party without the prior written consent of
Supplier, except through centralized purchasing agents of End Users, where
such agents are Sublicensing the Software for distribution to End Users
within a health care provider network ("Health Care Purchasing Agent") and
only provided that such Health Care Purchasing Agents agree in writing to
be bound by all applicable provisions of this Agreement, and further
provided that Company guarantees such Health Care Purchasing Agent's
performance and makes Supplier a direct and intended third party
beneficiary of such agreements. No Sublicense shall release Company from
its obligations under this Agreement. Supplier further grants to Company a
non-exclusive, royalty-free license (i) to use [ * * ] copies of the
Software solely for the purposes of acceptance testing by Company; (ii) to
use (1) copy of the Software solely for the purpose of demonstrating the
Software during Company's marketing and promotion of the Software and
training of End Users in the Software's use; (iii) to make copies of the
Software only as required for backup or archival purposes; and (iv) to use
copies of the Software in accordance with Section 15, CENTRALIZED
MAINTENANCE, solely for Software maintenance.
B. TRIAL SUBLICENSES
Company is entitled to grant to End Users, at no charge, up to [ * * ]
temporary evaluation Sublicenses at any one time which Sublicenses shall be
subject to the terms and conditions of the Sublicense
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<PAGE> 4
Agreement (as defined below). Such Sublicenses shall be for evaluation
purposes only and shall be for a period not to exceed [ * * ] days with
respect to any one End User. After the [ * * ] day period, Company
shall secure the return from or destruction by the trial Sublicensee of the
temporary evaluation Software, or issue an Order for the payment of License
Fees to Supplier. Software provided to End Users under such evaluation
Sublicenses is provided by Supplier "AS IS", and Company shall Sublicense
Software for evaluation on an "AS IS" basis.
C. REQUIRED PROVISIONS OF SUBLICENSE
Each Sublicense must be in the form of a written agreement. Every
Sublicense agreement shall contain terms and conditions substantially
similar to the terms and conditions Company uses to license Company's
Software of a similar nature to Company's end user customers ("Sublicense
Agreement"). Sublicense Agreements shall state that Supplier is a direct
and intended third party beneficiary under each Sublicense Agreement.
D. TRANSLATIONS
Supplier also grants Company the right to translate into languages other
than English the following: the End User documentation and promotional
material.
10. LICENSE AND MAINTENANCE FEES
The license fees set forth in Attachment A attached hereto less the
discounts set forth in Attachment B to this Agreement equals the license
fee payable by Company for each Software Sublicense ordered by Company
under an Order issued pursuant to this Agreement. Supplier's list fees
shall not exceed the list fees set forth in Attachment A for the [ *
* ] period immediately following the Effective Date. Thereafter,
Company shall pay Supplier's standard list fees then in effect for such
Software less the discounts set forth in Attachment B. Company's license
fees payable with respect to the Software are hereinafter referred to as
"License Fees". Supplier will notify Company in writing at least [ *
* ] days in advance of any increase or decrease in Supplier's list fees.
A separate License Fee shall be payable for each copy of the Software
licensed to an End User for use on a single designated computer and for
each concurrent user licensed to use the Software in a network. Except for
the provisions contained in the clause PRICE ADJUSTMENT of this Agreement,
all License Fees shall remain firm and fixed for the [ * * ]
period immediately following the Effective Date. During the [ *
* ] period immediately following the Effective Date, the fees for the
maintenance described in the clause titled SUPPLIER MAINTENANCE below shall
be included in the License Fee. Thereafter, Company shall pay Supplier's
standard maintenance fees then in effect for such Software maintenance
("Maintenance Fees"). The difference between Company's fees to End Users
and the sum of Supplier's License Fees and Maintenance Fees shall be
Company's sole remuneration for distribution and maintenance of the
Software.
11. SOFTWARE AND PROGRAMMING AIDS AND BASIC MATERIAL
On the delivery date, Supplier shall furnish to Company, at no additional
charge, at least the following Basic Materials:
1. Ordered software in machine executable object code format (the fully
compiled or assembled series of instructions, written in machine language,
ready to be loaded into the computer), stored in a medium compatible with
the equipment supported by Supplier as set forth in the Specifications (as
defined below), or if different, as described in an accepted Order;
2. End User documentation and installation and system administration
documentation and relevant support documentation procedures;
3. The Software Specifications, as well as the required machine
configuration;
4. With respect to Software ordered, sample data output, such as
printouts or typical screen displays, and any other programs, routines,
subroutines, utility or service programs, flow charts, logic diagrams
and listings, descriptive specifications and acceptance specifications
or related material that Supplier
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<PAGE> 5
may have which is necessary or useful for full implementation and use of
the Software and which Supplier normally furnishes to users of the
Software without additional charge.
12. SPECIFICATIONS
The term "Specifications" shall mean Supplier's then current published
specifications and End User documentation for the Software. For each new
version of the Software that requires a change to Supplier's published
specifications, Supplier will provide to Company a copy of such revised
specification during Supplier's alpha testing process as well as final
production Software Documentation.
13. STANDARD OF PERFORMANCE AND ACCEPTANCE OF SOFTWARE
A. The intent of this clause is to establish that Supplier's
Specifications have been met before the Software is accepted by Company.
B. The Software, when accepted by the Company shall be deemed to have met
Supplier's Specifications. If Company has not provided written notice of
rejection of the Software within [ * * ] days after delivery of the
Software to Company, the Software shall be deemed accepted. Company shall
have the right to reject the Software for a material nonconformity with the
Specifications. If Company finds such a nonconformity in the Software,
Company shall notify Supplier promptly of its rejection in a writing
specifying the nonconformity in detail and sufficiently for Supplier to
reproduce the nonconformity. If Supplier confirms the nonconformity,
Supplier will use commercially reasonable efforts to correct the
nonconformity and deliver to Company a corrected version of the Software
within [ * * ] days after confirmation by Supplier of the
nonconformity. The parties then shall repeat the foregoing acceptance
procedure.
C. The Software need not be accepted and Company shall not have any
obligations under this Agreement or an Order unless the Software is
accepted by Company.
14. WARRANTY
A. Supplier warrants to Company and End Users that the Software will
substantially conform to and perform in accordance with the Specifications
when used properly in accordance with the End User documentation for a
period of [ * * ] after installation of the Software for the End User,
but in no event more than [ * * ] after delivery of the
Software license key to Company by Supplier. Supplier also warrants that
the media containing the Software will be free from defects in material and
workmanship for the shorter of (i) a period of [ * * ] days after
delivery of the Software by Company to an End User, or (ii) [ *
* ] days after delivery of the Software to Company by Supplier. Supplier
also warrants that, if the Specifications state that the Software is to be
used in conjunction with certain data processing equipment, the Software
only shall be compatible with that equipment. In the event that the
Software does not conform to the foregoing express limited warranty, during
the applicable warranty period stated above in this Section 14.A Company
promptly shall notify Supplier of such defect in writing, specifying in
detail the nonconformity and information sufficient for Supplier to
reproduce such nonconformity. Company shall be responsible for and shall
coordinate all communication with End Users concerning warranty claims and
maintenance and support requests. Supplier's sole liability and Company and
its End Users' exclusive remedy for Supplier's breach of the foregoing
warranty shall be that Supplier will use commercially reasonable efforts to
correct such nonconformities and restore the Software to conforming
condition without additional charge to Company or End Users if Supplier
confirms that the Software, or any portion thereof, contains a material
nonconformity. Supplier further warrants that to the best of Supplier's
knowledge, (i) as to Software to which Supplier does not have title,
Supplier has a license in the Software sufficient to permit the license of
the Software to Company and End Users, and (ii) Supplier has full right,
power and authority to license the Software to Company and End Users as
provided in this Agreement, provided that Company and its End Users'
exclusive remedy and Supplier's sole liability for breach of the warranty
stated in this sentence shall be as set forth in Section 32 below. Unless
otherwise prohibited by applicable law, Company shall not pass on to its
End Users a warranty with respect to the Software of greater scope or
protection than that set forth in this Section 14 without Supplier's prior
written consent and shall pass on
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<PAGE> 6
to End Users the limited remedies set forth in this Section 14.A and the
warranty disclaimer and limitation of liability set forth in Sections 14.C
and 34. All warranties shall survive inspection, acceptance and payment.
B. Company acknowledges that the Software contains a software lock and
certain disabling devices described in Attachment D which may be activated
if the Software is not used in accordance with the terms and conditions of
this Agreement and the Specifications. Except as set forth in the preceding
sentence, Supplier warrants that to its knowledge Supplier has not
intentionally inserted into the Software any computer virus, computer worm,
or computer time bomb. Supplier shall promptly advise Company, in writing,
upon reasonable suspicion or actual knowledge that the Software provided
under this Agreement contains such a computer virus, computer worm or
computer time bomb other than those disclosed herein.
C. EXCEPT FOR THE WARRANTIES OF TITLE AND AGAINST INFRINGEMENT SET FORTH
IN SECTION 14.A AND THE OTHER EXPRESS WARRANTIES SET FORTH IN SECTION 14.A,
SUPPLIER MAKES NO WARRANTIES, EXPRESS, IMPLIED, STATUTORY, ORALLY OR
OTHERWISE WITH RESPECT TO THE SOFTWARE AND SUPPLIER SPECIFICALLY DISCLAIMS
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE
15. CENTRALIZED MAINTENANCE
A. All Software maintenance, including Updates provided by Supplier shall
be provided only to the Company's Centralized Support Organization and
Supplier will, in that event, only respond to maintenance requests which
emanate from the Company's Centralized Support Organization. This
Organization will be responsible for maintenance and support and
distribution of the Software to all licensed installations. Subject to
Section 15.B below, Supplier grants Company the right to transmit Updates
to the Software to End Users by means of data links from Company's
Centralized Support Organization to each licensed installation.
B. Supplier agrees to provide one (1) maintenance copy of the Software to
Company at [ * * ] and additional maintenance copies of the Software as
needed in response to Company's written requests subject to Company's
payment of License Fees for each such additional copy of the Software.
Company agrees that the maintenance copies provided to Company will be used
only to perform Software maintenance and support to End Users in accordance
with Attachment C attached hereto and the other terms and conditions of
this Agreement. Company may incorporate Software into a Company maintenance
system or Company application support software solely for debugging
purposes, provided that if Company decides to incorporate the Software as
described in this sentence, Company shall notify Supplier in advance and
shall pay to Supplier Supplier's then current license fees for such use of
the Software.
C. Company shall offer to all End-Users maintenance service with respect
to the Software. Software maintenance shall be provided by Company to
End-Users under Software maintenance agreements incorporating terms and
conditions consistent with Company and Supplier's maintenance obligations
set forth in this Agreement ("Software Maintenance Agreements"). Supplier
will provide back-up maintenance to Company in accordance with the
provisions of the clause titled SUPPLIER MAINTENANCE set forth below.
D. Company agrees that Company is responsible for supporting all Software
it distributes. Company shall maintain staff support personnel sufficiently
knowledgeable with respect to the Software to answer End-User questions
regarding the use and operation of Software marketed by Company. Company
shall ensure that all End-User questions regarding the use or operation of
Software marketed by Company are initially addressed to and answered by
Company. Supplier will provide training and support to Company in
accordance with the clause titled TRAINING below, but Company shall not
represent to any third party that Supplier is available to answer questions
from any End-User or other customer directly.
E. Company shall incorporate all Updates into all Software provided by
Company to an End User pursuant to a Software Maintenance Agreement. All
Updates, support services, problem resolutions, and
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the like shall be performed by Company and Supplier in accordance with the
procedures and policies contained in ATTACHMENT C to this Agreement.
Company's designated internal maintenance organization as of the Effective
Date is ________________________ . Company shall be responsible for
notifying Supplier in writing immediately of any change to such maintenance
organization.
16. SUPPLIER MAINTENANCE
Supplier shall promptly furnish to Company during the term of this
Agreement, error corrections, bug fixes, work-arounds, and other similar
modifications to the Software, in each case that Supplier generally makes
available to its customers free of charge ("Updates") but not including
modifications to the Software that add significant new features or
functionality and shall provide to Company any revisions made by Supplier
to the Basic Materials to reflect the Updates. All such Updates shall be
considered Software subject to the terms and conditions of this Agreement.
All Updates, support services, problem resolutions, and the like shall be
performed by Supplier in accordance with the procedures and policies
contained in ATTACHMENT C to this Agreement. Supplier will support only the
then-current version of the Software incorporating the most recent Update
and one (1) prior version of the Software incorporating the immediately
previous Update.
17. PRODUCT RETURNS
Supplier shall notify Company, in writing, of any decision to discontinue
production, marketing, licensing or other distribution of the Software for
any reason including, without limitation, the availability of a new version
of the Software that contains significant new features or functionality as
determined by Supplier ("Upgrade") within [ * * ] of said decision
("Notice of Discontinuation"). Company may exchange such discontinued
undistributed Software that (i) Company obtained from Supplier within
[ * * ] prior to Company's receipt of the Notice of
Discontinuation, (ii) is in its original packaging, and (iii) for which
Company has paid Supplier the License Fees, for an Upgrade to such Software
if Supplier has made such an Upgrade generally available to End Users or
its other distributors. In addition, Company may cancel, [ *
* ] , any or all outstanding Orders for such discontinued Software.
18. REPORTING AND AUDITS
A. REPORTS. Company agrees to provide Supplier with a quarterly report
showing, at a minimum, date Sublicensed, quantity of each type of Software
Sublicensed, Software license identification number, CPU serial number, and
the End Users' names and addresses. This report must be forwarded to
Supplier within five (5) days of the close of each quarter. Such report
shall also include all Company Maintenance Fees that accrued to Supplier
under Section 10 during such month together with a reasonably detailed
calculation of such Company Maintenance Fees and payments.
B. MEDICAL DEVICE REPORTING. Pursuant Medical Device Reporting (MDR)
Regulations, the Supplier is required to report to the FDA any information
that reasonably suggests that one of its marketed devices may have caused
or contributed to a death or serious injury or has malfunctioned and that
the device would be likely to cause or contribute to a death or serious
injury if the malfunction were to recur. Company agrees to supply any such
information to the Supplier within twenty-four (24) hours after becoming
aware of it so that the Supplier can comply with the FDA reporting
requirements. Company agrees to use its best efforts to investigate the
information as requested by the Supplier and supply to the Supplier details
of the event that are necessary in order to complete the report. Supplier
shall maintain and manage a complaint and return file comprised of any and
all Software complaints and returns received by the Company in connection
with the Software subject to this Agreement. Company shall cooperate with
and assist Supplier in locating and retrieving if necessary, recalled
Software from End Users. Company shall maintain records of Sublicenses of
Software to End Users and shall make such records available to the Supplier
as needed, upon request from the Supplier.
C. AUDITING. Company agrees to make and to maintain complete and accurate
books, records and accounts regarding Software Sublicenses (including
without limitation, whether the Sublicense is
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a single-user license or a network license, and if the latter, the number
of concurrent users permitted under the Sublicense), Company's Software
Sublicenses and payments due Supplier hereunder. Such records shall include
all End User names, addresses, license identification number, CPU serial
number, type and number of Software acquired, as well as a complete record
of all End Users who have subscribed for maintenance or support service.
Supplier shall have the right, exercisable not more than once every
calendar quarter, at its expense to have an independent certified public
accountant examine such books, records and accounts during Company's normal
business hours to verify Company's reports on the amount of payments due
Supplier under this Agreement. If any such examination discloses a
shortfall in payment to Supplier, Company agrees to promptly pay Supplier
for such shortfall and, if such shortfall is more than five percent (5%)
for any month, to promptly reimburse Supplier for its auditing expense upon
written request by Supplier. Company will deliver one (1) copy of all such
records to Supplier promptly upon termination or expiration of this
Agreement.
19. GOVERNMENT CONTRACT PROVISIONS
If Company is acquiring Software on behalf of any part of the United States
Government, Company shall sublicense the Software only with Supplier's
prior written consent and the following provisions will apply. Use,
duplication or disclosure of the Software by the United States Government
is subject to restrictions as set forth in subparagraph (c)(1)(ii) of the
Department of Defense Regulations Supplement 252.227-7013, Rights in
Technical Data and Computer Software, or Federal Acquisition Regulation
52.227-14, Rights in Data-General, including Alternate III, or Federal
Acquisition Regulations 52.227-19, each as applicable; Contractor is CEMAX,
Inc., 47281 Mission Falls Court, Fremont, California 94539. Subject to the
foregoing and Supplier's prior review and approval, if an Order contains a
notation that the Software is intended for use under a Government Contract,
it shall be subject to the then current Government Contract Provisions
printed on or attached to such Order and the Supplier will mark the
Software with the appropriate legend or notice.
20. FOB
The Software shall be shipped FOB, Fremont, CA.
21. RISK OF LOSS
If any Software is lost, damaged or made invalid during shipment, Supplier
will promptly replace the Software and Software storage media at no
additional charge to Company. If any Software is lost or damaged while in
the possession of Company, Supplier will promptly replace the Software at
the established charge for the Software storage media unless such is
provided by Company.
22. ASSIGNMENT
BY SUPPLIER OR COMPANY
Neither party shall assign any right or interest under this Agreement or an
Order (excepting monies due or to become due) nor delegate any work or
other obligation to be performed or owed by such party under this Agreement
or an Order without the prior written consent of the other party, except as
expressly stated in this Section 22. Supplier shall have the right to
assign this Agreement and delegate its duties to successors to all or
substantially all of the business or assets of Supplier concerning the
subject matter hereof, whether by merger, reorganization, acquisition,
asset sale, or otherwise. Supplier will provide Company with written notice
of any such permitted assignment. Except for assignment to a successor, any
assignment of monies shall be void and ineffective to the extent that (1)
Supplier shall not have given Company at least thirty (30) days' written
notice of such assignment or (2) such assignment attempts to impose upon
Company obligations to the assignee additional to the payment of such
monies, or to preclude Company from dealing solely and directly with
Supplier in all matters pertaining to this Agreement or an Order including
the negotiation of amendments or settlements of charges due. Upon an
assignment by Supplier or Company to a successor in interest in accordance
with this Section 22, all references herein to Supplier or Company shall be
deemed to include such successor in interest.
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The assignment shall neither affect nor diminish any rights or duties that
Supplier or Company may then or thereafter have as to Software Orders
submitted by Company and accepted by Supplier prior to the effective date
of the assignment, provided that upon the acceptance of the assignment and
assumption of the duties under this Agreement or the Order by the assignee,
the assigning party shall be released and discharged, to the extent of the
assignment, from all further duties under this Agreement or the Order as to
Software so assigned. Any attempted assignment or delegation in
contravention of the above provisions shall be void and ineffective.
BY COMPANY
Notwithstanding the foregoing provision of the first paragraph of this
Section 22, ASSIGNMENT, Company shall have the right to assign this
Agreement or an Order and to assign its rights and delegate its duties
under this Agreement or an Order either in whole or in part ("assignment"),
at any time and without Supplier's consent, to any of its present or future
Affiliated Companies, or to any combination of the foregoing. Company shall
give Supplier written notice of any assignment. For purposes of this
Agreement, "Affiliated Companies" shall mean any corporation or other
business entity during the term of this Agreement in which, but only for so
long as, Company owns or controls directly or indirectly, more than fifty
percent (50%) of the outstanding stock or other voting rights entitled to
elect directors, or such lower percentage if required by law. Upon an
assignment by Company to an Affiliated Company in accordance with this
Section 22, all references herein to Company shall be deemed to include
such successor in interest or Affiliated Company.
23. CHOICE OF LAW
The construction, interpretation and performance of this Agreement, Orders
issued pursuant to this Agreement and all transactions under either of them
shall be governed by the laws of the State of New Jersey, excluding its
choice of law rules and excluding the Convention for the International Sale
of Goods. The parties agree that the provisions of Article 2 "Sales" of the
New Jersey Uniform Commercial Code apply to this Agreement and an Order and
all transactions under either of them, including agreements and
transactions relating to the furnishing of services, the lease or rental of
material, and the license of Software.
24. COMPLIANCE WITH LAWS
Supplier and all persons furnished by Supplier shall comply with the Fair
Labor Standards Act and the Occupational Safety and Health Act and all
other applicable federal, state, county and local laws, ordinances,
regulations and codes, including compliance with United States Food and
Drug Administration laws and regulations and the identification and
procurement of required permits, certificates, approvals and inspections,
in the performance of an Order. Supplier shall indemnify Company from any
loss or damage that may be sustained by reason of any failure to do so.
25. DEFAULT
A. If either party defaults or breaches any of the material terms and
conditions or covenants of this Agreement, and if the breach or default
shall continue for a period of [ * * ] days after the nonbreaching
party gives the breaching party written notice thereof then, in addition to
all other rights and remedies which the nonbreaching party may have at law
or equity or otherwise, the nonbreaching party shall have the right to
cancel this Agreement and, if the nonbreaching party is Company, any Orders
placed by Company without any charge to, or obligation or liability to
Company with respect to such Orders. If Company cancels this Agreement
and/or any such Orders for default of Supplier, then Company shall have no
obligation to make any payments accruing after such cancellation.
B. If this Agreement expires or is terminated for any reason the licenses
granted under this Agreement are terminated, except that:
1. Company may continue to exercise its rights under the licenses
stated in the clause entitled LICENSE GRANT to the extent necessary
for Company to fulfill its support and maintenance obligations, if
any, to its then existing customers; and
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2. Sublicenses granted by Company to End Users prior to termination of
this Agreement, and Company's payment obligations, if any, with
respect to Software ordered and received prior to expiration or
termination, shall survive.
Upon expiration or termination of this Agreement under this clause DEFAULT,
Company shall have the right to [ *
* ]
26. FORCE MAJEURE
Neither Company nor Supplier shall be responsible for any delay or failure
in performance of any part of this Agreement or an Order to the extent that
such delay or failure is caused by fire, flood, explosion, war, strike,
embargo, government requirement, civil or military authority, act of God,
act or omission of carriers or other similar causes beyond the control and
without the fault or negligence of the delayed or nonperforming party or
its subcontractors.
27. HARMONY
Each party shall be entirely responsible for all persons furnished by such
party working in harmony with all others when such party is working on the
other party's premises.
28. IDENTIFICATION
Except upon request of Company's Technical Representative or with Company's
Technical Representative's prior consent, Supplier shall make no use of any
identification of Company or its Affiliated Companies in Supplier's
advertising or promotional efforts in reference to activities undertaken by
Supplier under this Agreement or an Order. The term" identification"
includes any trade name, trademark, service mark, insignia, symbol or any
simulation thereof, and any code, drawing, specification or evidence of
Company's inspection. Supplier shall remove any such identification prior
to any sale, use or disposition of Software rejected or not purchased by
Company, and shall indemnify Company and its Affiliated Companies against
any claim arising out of Supplier's failure to do so. This clause does not
modify the USE OF INFORMATION clause. Notwithstanding the above Supplier
may announce the existence of this Agreement and that Supplier is a
Supplier to Company of the Software furnished under this Agreement.
29. INSIGNIA
Upon Company's written request, "Insignia," including certain trademarks,
trade names, insignia, symbols, decorative designs or packaging designs of
Company, or evidences of Company's inspection will be properly affixed by
Supplier to the Software furnished or its packaging. Such insignia will not
be affixed, used or otherwise displayed on the Software furnished or in
connection therewith without written approval by Company. Company shall
retain all right, title and interest in any and all packaging designs,
finished artwork and separations furnished to Supplier by Company. This
clause does not reduce or modify Supplier's obligation under the
IDENTIFICATION and USE OF INFORMATION clauses.
30. USE OF SUPPLIER'S TRADE NAME
A. Company may use Supplier's trademarks, trade names and tradedress
specified in Attachment E (hereafter "trade name") in marketing the
Software under the following conditions:
In order to enable Supplier to maintain control of the use of its trade
name, Company agrees to comply with Supplier's reasonable guidelines
regarding Supplier's trade name or will use trade names that are exact
copies in design, color, and other detail of Supplier's use of trade names
and shall submit samples of the usage of said trade name to Supplier for
its review and approval which approval will not be unreasonably withheld.
Software distributed by Company will be consistent with samples reviewed by
Supplier. The rights of Company to use any trade name of Supplier will
cease at the termination of this Agreement.
Use of Supplier trade names by Company will bear no royalty. Supplier shall
supply Company a list of the countries where Supplier's right to use a
trade name have been established by registration or other
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appropriate official procedures and will update such list as appropriate
during the term of this Agreement; (and if no registration has been made in
any country, Supplier shall so state). Subject to Supplier's prior written
consent, Company shall have the option at its own expense, to seek such
registration in any country on behalf of Supplier in Supplier's name.
Company shall not use Supplier's trade name in countries where a
registration has not been filed in Supplier's name. Company shall have the
right to substitute an alternative mark for Supplier's trade name upon
written notice to Company.
All rights and goodwill in any Supplier trade name will remain with
Supplier (except the rights specifically licensed in this Agreement) and
any use by Company of any such trade name will inure to the benefit of
Supplier.
31. INDEMNITY
All persons furnished by Supplier shall be considered solely Supplier's
employees or agents, and Supplier shall be responsible for payment of all
unemployment, social security and other payroll taxes, including
contributions when required by law. Supplier agrees to indemnify and save
harmless Company, its affiliates and its customers and their officers,
directors, employees, successors and assigns (all hereinafter referred to
in this clause as "Company") from and against any losses, damages, claims,
demands, suits, liabilities and expenses (including reasonable attorneys'
fees) that arise out of or result from: (1) injuries or death to persons or
damage to property, including theft, in any way arising out of or
occasioned by, caused or alleged to have been caused by or on account of
the performance of the work or services performed by Supplier or persons
furnished by Supplier, (2) assertions under Workers' Compensation or
similar acts made by persons furnished by Supplier or by any subcontractor,
or by reason of any injuries to such persons for which Company would be
responsible under Workers' Compensation or similar acts if the persons were
employed by Company, (3) any failure on the part of Supplier to satisfy all
claims for labor, equipment, materials, and other obligations relating
directly or indirectly to the performance of the Work; or (4) any failure
by Supplier to perform Supplier's obligations under this clause or the
INSURANCE clause. Supplier agrees to defend Company, at Company's request,
against any such claim, demand or suit. Company agrees to notify Supplier
within a reasonable time of any written claims or demands against Company
for which Supplier is responsible under this clause.
32. INFRINGEMENT
The following terms apply to any third party claim of infringement of any
U.S. patent or trademark, and any copyright, trade secret or other
proprietary interest existing in the territory in which Company distributes
Software which is based on the use or Sublicense of any Software furnished
to Company under this Agreement or in contemplation of this Agreement.
Subject to the limitations of this Section 32 titled INFRINGEMENT as set
forth below, Supplier shall defend and/or settle third party claims brought
against Company or End Users alleging infringement by the Software of any
U.S. patent or trademark, or copyrights, trade secrets or other proprietary
rights existing in the territory in which Company distributes the Software
to the extent based upon such a claim, and will pay any settlement amounts
or damages finally awarded against Company or End Users (including
reasonable attorneys fees and court costs) on such issue in any claim
defended by Supplier, except where such infringement or claim arises solely
from Supplier's adherence to Company's written instructions or directions.
Each party shall notify the other promptly of any claim of infringement for
which the other is responsible, shall cooperate with the other in every
reasonable way to facilitate the defense of any such claim, and for claims
for which Supplier is responsible, Company shall give Supplier sole control
over the defense and/or settlement of such claims. Each party shall defend
or settle, at its own expense, any action or suit against the other for
which it is responsible under this clause.
If Company or the End User's use of the Software shall be prevented by
injunction or court order because of any such infringement or if Supplier
reasonably believes that the Software may be infringing, Supplier may, at
its option and with no expense to Company or its customers, (1) replace
such Software with equally suitable software free of infringement, or (2)
modify such Software so that it will be free of infringement and no less
capable than the Software originally furnished, or (3) by license or other
release from claim of infringement procure for Company's and the End Users'
benefit the right to use such
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Software, or (4) after Supplier has demonstrated its good faith to achieve
the foregoing without success, remove from distribution and accept the
return of the Software from Company and End Users and refund to Company any
charges paid therefor, less a reasonable amount for use.
Notwithstanding any conflicting provision set forth above in this clause
titled INFRINGEMENT, unless it is the result of written methods or
procedures made by Supplier, Supplier shall have no liability for (i)
claims for infringement covering completed software, products, components,
or equipment or any assembly, circuit, combination, method or process in
which the Software may be used when the infringement would not result from
the Software when used alone; or (ii) infringements involving the
modification of the Software unless such modifications were made by
Supplier.
THE FOREGOING PROVISIONS OF THIS SECTION 32 TITLED INFRINGEMENT STATE THE
ENTIRE LIABILITY AND OBLIGATIONS OF COMPANY AND SUPPLIER AND THE EXCLUSIVE
REMEDY OF EACH PARTY, WITH RESPECT TO ANY ALLEGED INFRINGEMENT OF PATENTS,
COPYRIGHTS, TRADE SECRETS, TRADEMARKS, OR OTHER INTELLECTUAL PROPERTY
RIGHTS BY ANY SOFTWARE OR SERVICES LICENSED OR SOLD TO COMPANY BY SUPPLIER
PURSUANT TO THIS AGREEMENT.
33. INSURANCE
Supplier shall maintain and cause Supplier's subcontractors to maintain
during the term of this Agreement (1) Workers' Compensation insurance as
prescribed by the law of the state or nation in which the work is
performed; (2) employer's liability insurance with limits of at least
$300,000 for each occurrence; (3) comprehensive automobile liability
insurance if the use of motor vehicles is required, with limits of at least
[ * * ] combined single limit for bodily injury and property damage for
each occurrence; (4) Comprehensive General Liability ("CGL") insurance,
including Blanket Contractual Liability and Broad Form Property damage,
with limits of at least [ * * ] combined single limit for personal
injury and property damage for each occurrence; (5) if the furnishing to
Company (by sale or otherwise) of products or materials is involved, CGL
insurance endorsed to include products liability and completed operations
coverage in the amount of [ * * ] for each occurrence; and (6) Errors
and Omissions Insurance in the amount of at least [ * * ] per claim with
an annual aggregate of at least [ * * ] inclusive of legal defense
costs. All CGL insurance shall designate Company, its affiliates and their
officers, directors, and employees (all hereinafter referred to in this
clause as "Company") as an additional insured. All such insurance must be
primary and required to respond and pay prior to any other available
coverage. Supplier and Supplier's subcontractors shall furnish prior to the
start of work certificates or adequate proof of the foregoing insurance
including, if specifically requested by Company, copies of the endorsements
and insurance policies. Company shall be notified in writing at least
thirty (30) days prior to cancellation of or and change in the Policy.
34. LIMITATION OF LIABILITY
A. SUPPLIER'S LIABILITY UNDER ANY CAUSE OF ACTION ARISING UNDER THIS
AGREEMENT OR UNDER ANY INDEMNITY CONTAINED IN THIS AGREEMENT SHALL NOT
EXCEED THE AMOUNTS RECEIVED BY SUPPLIER FROM COMPANY DURING THE IMMEDIATELY
PRECEDING TWELVE MONTH PERIOD.
B. IN NO EVENT SHALL EITHER PARTY HAVE ANY LIABILITY TO THE OTHER PARTY
NOR SHALL SUPPLIER HAVE ANY LIABILITY TO END USERS OR ANY OTHER THIRD
PARTY, FOR ANY LOST PROFITS OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR
SERVICES, OR FOR ANY OTHER INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES
WITH RESPECT TO THE SOFTWARE, USE THEREOF OR FOR ANY OTHER REASON. THESE
LIMITATIONS SHALL APPLY NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL
PURPOSE OF ANY LIMITED REMEDY AND REGARDLESS OF WHETHER THE PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
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C. THE FOREGOING LIMITATIONS OF LIABILITY SHALL NOT APPLY TO LIABILITY FOR
PERSONAL INJURY, INCLUDING DEATH, OR PROPERTY DAMAGE OR LIABILITY ARISING
UNDER SECTION 32 (INFRINGEMENT), SECTION 28 (IDENTIFICATION), SECTION 31
(INDEMNITY), SECTION 44 (SUPPLIER'S INFORMATION), OR SECTION 49 (USE OF
INFORMATION).
35. LICENSES
No licenses, express or implied, under any patents are granted by Company
to Supplier under this Agreement or an Order.
36. NON-EXCLUSIVE MARKET RIGHTS
A. This Agreement neither grants to Supplier an exclusive right or
privilege to sell to Company any or all products or services of the type
described in this Agreement which Company may require, nor, except as set
forth in Attachment B attached hereto, requires the purchase of any
products from Supplier by Company. Company may contract with other
manufacturers and suppliers for the procurement of comparable products and
services. In addition, subject to the provisions of Section 54, MARKETING
EFFORTS, Company shall, at its sole discretion, decide the extent to which
Company will market advertise, promote, support or otherwise assist in
further offering of the products and services contained in this Agreement.
B. Sublicenses by Company under this Agreement shall be initiated by the
placement of an Order by Company which Orders are subject to Supplier's
acceptance and such Order shall not restrict the right of Company to cease
Sublicensing nor require Company to continue any level of Sublicensing.
37. NONWAIVER
No course of dealing or failure of either party to strictly enforce any
term, right or condition of this Agreement or an Order shall be construed
as a waiver of such term, right or condition.
38. NOTICES
A. Any notice, demand or other communication (other than an Order) which
under the terms of this Agreement or otherwise must or may be given or made
by either party shall, unless specifically otherwise provided in this
Agreement, be in writing and shall be given or made by certified mail,
return receipt requested or by an overnight courier service, which provides
the sender with written record of delivery, and shall be addressed to the
respective parties as follows:
To Supplier: CEMAX, INC.
47281 MISSION FALLS COURT
FREMONT, CA 94539
ATTN: TERRY ROSS
To Company: AT&T CORP.
Guilford Center 1
185 and Mount Hope Church Road
Greensboro, NC 27420
Attn: Purchasing -- Data Systems, Products and Services
B. Such notice, demand or other communication (other than an Order) shall
be deemed to have been given or made when received, or if not received by
reason of fault of addressee, when delivered. The above addresses may be
changed at any time by giving thirty (30) days' prior written notice as
above provided.
39. PLANT RULES AND GOVERNMENT CLEARANCE
All persons furnished by a party shall, while on the premises of the other
party, comply with all plant rules and regulations and, where required by
Government regulations, submit satisfactory clearance from the United
States Department of Defense and other federal authorities concerned.
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40. PRICE ADJUSTMENT
If, during the term of this Agreement, Supplier's published suggested list
fees are reduced from their current level as set forth in Attachment A,
then the fees contained in ATTACHMENT A shall be reduced accordingly to
fairly reflect such reduction in suggested list fees.
41. RELEASES VOID
Subject to each parties' respective confidentiality procedures, neither
Supplier nor Company shall require waivers or releases of any personal
rights from representatives or customers of the other in connection with
visits to its premises, and both parties agree that no such releases or
waivers shall be pleaded by them or third persons in any action or
proceeding.
42. SEVERABILITY
If any of the provisions of this Agreement or an Order shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render unenforceable the entire Agreement or Order, but rather the entire
Agreement or Order shall be construed as if not containing the particular
invalid or unenforceable provision or provisions, and the rights and
obligations of the parties shall be construed and enforced accordingly.
43. SOURCE PROGRAMS AND TECHNICAL DOCUMENTATION
SOURCE CODE ESCROW (a) Escrow Agent. Immediately upon execution of this
Agreement, Supplier shall enter into an escrow agreement or use one of its
existing escrow agreement with an escrow agent, and Supplier shall deposit
the Software with an escrow agent selected by Supplier and reasonably
acceptable to Company ("Escrow Agent"), the full source code language of
the Software (including but not limited to flow charts, algorithms,
formulas and all technical documentation), as well as source code for
Updates to the Software (together referred to as the "Source Code"), within
[ * * ] after the same becomes available. An Escrow Agent
shall act as custodian of the Source Code as long as this Agreement shall
be in effect. Escrow Agent shall establish a receptacle in which the Source
Code will be placed and shall place the receptacle under the control of one
officer of Escrow Agent selected by Escrow Agent from time to time, whose
identity shall be available to the parties at all times. Company shall have
the right to audit the contents of the escrow, subject to confidentiality
restrictions acceptable to Supplier and terms and conditions agreed upon by
Escrow Agent.
(b) Insolvency. Upon the occurrence of any one of the following events:
(i) the filing of a petition for bankruptcy by Supplier, or the making of
an assignment for the benefit of creditors or similar proceedings; (ii)
liquidation of Supplier; (iii) Supplier's material breach of its Software
maintenance obligations under this Agreement, and failure to cure within
[ * * ] after receiving written notification of such material
breach; Company may submit a written affidavit under penalty of perjury
specifying the occurrence of one of the foregoing events and making request
to Escrow Agent for release of the Source Code ("Affidavit Notice").
Company's request shall be made by Company's Purchasing Representative and
shall set forth the facts indicating that one of the events described above
had occurred and is continuing to occur and that Company is entitled to a
copy of the Source Code. Company shall provide Supplier with a copy of its
written request. Escrow Agent is hereby authorized to provide Company, upon
Company's Affidavit Notice, a copy of the Source Code.
(c) Escrow Fees. The fees of the Escrow Agent shall be paid by Company.
(d) Use of Source Code. Company shall only have the right to use the
Source Code for the purpose of maintaining the Software and for supporting
End-Users in accordance with the terms and conditions of this Agreement and
for no other purpose. Company will maintain the Software received from
Escrow Agent strictly in confidence using at least the same degree of care
that Company uses to protect its own most confidential Source Code.
(e) Company shall have the right to continue to purchase the Software from
Escrow Agent or receiver per terms and conditions of this Agreement.
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44. SUPPLIER'S INFORMATION
Except for source code released pursuant to Section 43, no specifications,
drawings, sketches, models, tools, computer or other apparatus programs,
technical or business information or data, written, oral or otherwise,
furnished by Supplier to Company under this Agreement or an Order or in
contemplation of this Agreement or an Order shall be considered by Supplier
to be confidential or proprietary. If Supplier must furnish any such
information to Company with restrictions, it shall only be furnished after
negotiation and execution on behalf of Company of a separate written
agreement specifically identifying the documents to be furnished and
setting forth the rights and obligations of Company with respect thereto.
Further, there are no limitations on Company's use of Software except as
otherwise agreed to in the clauses CENTRALIZED MAINTENANCE, LICENSE GRANT
and TITLE, however, full title to and ownership of the Software shall
remain in Supplier or Supplier's licensor, as applicable.
This clause SUPPLIER'S INFORMATION shall not alter the rights and
obligations of the parties with respect to Information properly delivered
to Company pursuant to separate NONDISCLOSURE AGREEMENTS, including the
NONDISCLOSURE AGREEMENT between Company and Supplier of even date herewith.
This clause SUPPLIER'S INFORMATION does not affect Supplier's rights under
any patent, trademark, or copyright.
Notwithstanding the above, Company will protect software received from
Supplier with the same degree of care that Company uses to protect its own
software that it does not wish to become public knowledge.
With respect to source code released pursuant to Section 43, software
source code may be furnished under this Agreement or an Order with
restrictions if it is in human-readable form and clearly marked as
proprietary. Company, for ten (10) years after the delivery of the software
source code, shall hold the software source code in confidence, shall use
the software source code only as provided in Section 43, and shall not
disclose the software source code to any third party without prior written
approval of Supplier. Company shall not be liable for the inadvertent or
accidental disclosure of source code, if the disclosure occurs despite the
exercise of the same degree of care as Company normally takes to preserve
its own proprietary information of a similar nature, but in no event less
than reasonable care.
These restrictions on the use or disclosure of software source code shall
not apply to software source code:
i. independently developed by or for Company, or lawfully received from
another source free of restriction and without breach of this Agreement;
or
ii. which is or becomes generally available to the public without breach
of this Agreement; or
iii. which at the time of disclosure was known to Company free of
restriction and evidenced by a writing in its possession; or
iv. which was not marked as proprietary when furnished to Company.
The software source code shall remain the property of Supplier and shall be
returned upon written request or upon Company's determination that it no
longer has a need for the software source code. Company may, however,
retain one (1) copy of all written materials returned to provide an
archival record of the disclosure.
45. SURVIVAL OF OBLIGATIONS
Either party's obligations under this Agreement or an Order, which by their
nature would continue beyond the termination, cancellation or expiration of
this Agreement or an Order, including, by way of illustration only and not
limitation, those in the clauses COMPLIANCE WITH LAWS, INFRINGEMENT,
INSURANCE, INDEMNITY, LIMITATION OF LIABILITY, RELEASES VOID, USE OF
INFORMATION and WARRANTY, shall survive termination, cancellation or
expiration of this Agreement or an Order.
46. TAXES
Company shall pay any foreign, state and local sales, use, value-added,
withholding, customs duties and other similar taxes which may be imposed
upon the charges specified in an Order, unless an exemption
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<PAGE> 16
certificate is furnished by Company to Supplier. Such taxes shall be billed
to Company as separate items. Supplier shall assume and pay all other
taxes. If there is any question concerning an exemption certificate
furnished by Company, Supplier shall advise Company thereof immediately.
All payments by Company shall be made without reduction for any withholding
taxes and shall be the sole responsibility of Company, and Company will
provide Supplier with official receipts or such other evidence as is
reasonably requested by Supplier to establish that such taxes have been
paid.
47. TRAINING
Supplier shall provide at times and locations to be agreed upon by the
parties the training specified in Attachment A at the rates specified in
Attachment A. Company shall arrange with Supplier, at Company's expense,
for at least one (1) qualified employee of Company to attend Supplier's
training program in the use and operation of the Software. In the event of
termination of the employment of such employee, Company shall notify
Supplier in writing of such termination, and of the name of another
qualified employee, who shall, at Company's expense, attend and complete
Supplier's training program within thirty (30) days of the date of such
termination.
48. TITLE
Title to all Software and any copies of the Software and portions thereof
shall remain in Supplier or Supplier's licensors as applicable. The
Software is copyrighted by Supplier, and Company shall not make any copies
of the Software, except as expressly permitted in Sections 8 and 9.A above.
All Software used or distributed by Company will maintain the Supplier
copyright message and other copyright notices, patent markings and
information contained within the Software. Company shall not modify the
Software or reverse engineer, reverse assemble, decompile, or otherwise
attempt to derive source code from the Software. Except as provided in the
clause titled SOURCE CODE ESCROW, no rights with respect to Software source
code are granted to Company.
Company will not (in the absence of Supplier's express written consent) (i)
copy or permit the copying of any tapes or written materials pertaining to
the Software for distribution to other parties except as expressly
permitted herein, or (ii) use or authorize the use of the Software on
equipment other than the designated computers set forth in Attachment F.
Company agrees to affix Supplier's notices to all copies of the Software
made by Company and shall extend to such copies no less protection than is
required to be extended to the original thereof.
49. USE OF INFORMATION
Any specifications, drawings, sketches, models, samples, tools, computer or
other apparatus programs, software, technical or business information or
data, written, oral or otherwise expressed, owned or controlled by Company
and furnished to or acquired by Supplier under this Agreement or an Order
or in contemplation of the Agreement or an Order, shall remain the
Company's property. All copies of such Information in written, graphic or
other tangible form shall be returned to the Company at its request. Unless
such Information was (i) previously known to Supplier free of any
obligation to keep it confidential, or has been or is subsequently made
public by the Company, or (ii) has been independently developed by
Supplier, or (iii) has been received by Supplier from a third party without
obligation of confidentiality, or (iv) must be disclosed pursuant to
applicable federal, state or local law, or regulatory or judiciary or other
legal process, provided Supplier has notified Company prior to the required
disclosure and, to the extent reasonably possible, has given Company an
opportunity to contest the required disclosure, it shall not be disclosed
to third parties by Supplier, and shall be used only in filling of Orders
or performing under this Agreement or Order or as otherwise agreed in
writing. Notwithstanding the foregoing, Supplier shall have the right to
continue to use End User lists for all purposes after termination of this
Agreement.
50. VARIATION OF QUANTITY
Unless otherwise specified in an Order, Company assumes no liability for
material produced, processed or shipped in excess of the amount specified
in any Order placed with Supplier.
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<PAGE> 17
51. CLAUSE HEADINGS
The headings of the clauses in this Agreement are inserted for convenience
only and are not intended to affect the meaning and interpretation of this
Agreement.
52. ENTIRE AGREEMENT
This Agreement shall incorporate the written provisions on the face of
Company's Orders issued pursuant to this Agreement and agreed to by
Supplier; and this Agreement as supplemented by such provisions shall
constitute the entire agreement between Company and Supplier with respect
to the subject matter of an Order, superseding all prior oral and written
quotations, communications, agreements and understandings of Supplier and
Company in respect of the subject matter of the Order. This Agreement shall
not be modified or rescinded, except by a writing signed by both parties.
Printed provisions of the reverse side of Company's Orders shall be deemed
deleted. Additional or different terms inserted in this Agreement or an
Order by Supplier, or deletions thereto, whether by alterations, addenda,
or otherwise, shall be of no force and effect, unless expressly consented
to by Company in writing. Estimates furnished by Company shall not
constitute commitments. The provisions of this Agreement supersede all
prior oral and written quotations, communications, agreements and
understandings of the parties with respect to the subject matter of this
Agreement.
53. MOST FAVORED CUSTOMER
If Supplier licenses the Software for fees that are lower than those stated
herein to similarly situated distributors pursuant to agreements of the
same scope and containing substantially similar terms and conditions,
Supplier will offer such lower fees to Company. Subject to Supplier's
confidentiality obligations to third parties, if Supplier licenses the
Software for fees that are lower than those stated herein to similarly
situated distributors pursuant to agreements of the same scope and
containing volume commitments more favorable to Supplier than those
contained herein, Supplier will offer to Company such lower fees if Company
agrees in writing to the same volume commitments.
54. MARKETING EFFORTS
Company agrees to creatively market the Software and to use reasonable
efforts to refer to Supplier as one of its preferred vendors for medical
imaging products. Supplier agrees to use reasonable efforts to refer to
Company as one of its preferred vendors for networking and communications
products. The parties further agree to issue a joint press release and will
use best efforts to issue such press release within fifteen (15) days after
the Effective Date.
55. ARBITRATION
Any dispute or claim arising out of or in relation to this Agreement or the
interpretation, making, performance, breach or termination thereof, shall
be finally settled by binding arbitration under the Commercial Rules and
Supplementary Procedures for Large, Complex Disputes of the American
Arbitration Association as presently in force ("Rules") and by three (3)
arbitrators appointed in accordance with said Rules. Judgment on the award
rendered may be entered in any court having jurisdiction thereof. The place
of arbitration shall be Santa Clara County, California, U.S.A. The parties
may apply to any court of competent jurisdiction for temporary or permanent
injunctive relief, without breach of this Section 55 and without any
abridgment of the powers of the arbitrator.
56. EXPORT CONTROL
Company understands and acknowledges that Supplier is subject to regulation
by agencies of the U.S. Government, including, but not limited to, the U.S.
Food and Drug Administration and the U.S. Department of Commerce, which
regulate and/or prohibit export or diversion of certain software, products
and technology to certain countries. Any and all obligations of Supplier to
supply Software as well as any other technical information or assistance
shall be subject in all respects to such United States laws and regulations
as shall from time to time govern the license and delivery of software,
technology and products abroad by persons subject to the jurisdiction of
the United States, including without
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<PAGE> 18
limitation the Export Administration Act of 1979, as amended, any successor
legislation, and the Export Administration Regulations issued by the
Department of Commerce, Bureau of Import Administration. Company agrees to
cooperate with Supplier, including, without limitation, providing required
documentation, in order to obtain export licenses or exemptions therefrom.
Company shall at its own expense, make, obtain, and maintain in force at
all times during the term of this Agreement, all filings, registrations,
reports, licenses, permits and authorizations (collectively
"Authorizations") in order for Company to perform its obligations and
exercise its rights under this Agreement. To the extent permitted by law,
Company shall obtain such authorizations in Supplier's name. Supplier shall
provide Company with such assistance as Company may reasonably request in
making or obtaining any such Authorizations. In the event that the issuance
of any Authorization is conditioned upon an amendment or modification to
this Agreement which is unacceptable to Supplier, Supplier shall have the
right to terminate this Agreement without further obligation whatsoever to
Company.
IN WITNESS WHEREOF, the parties have executed this Agreement at the respective
dates entered below.
<TABLE>
<S> <C>
CEMAX, INC. AT&T CORP.
By: By:
Name: Name:
Title: Title:
Date: Date:
</TABLE>
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<PAGE> 19
ATTACHMENT A
SALES RESOURCES, SOFTWARE LIST FEES AND TRAINING
120
<PAGE> 20
ATTACHMENT A-1
SALES RESOURCES
Supplier shall provide marketing and reasonable and appropriate sales resources
to Company to help pursue opportunities identified by Company. Company agrees to
pay for all sales, training, and travel expenses incurred by Supplier to work
and close Company business. Company shall give prior written approval to
Supplier on the required Supplier resources and expenses on a monthly basis, and
Supplier shall observe Company guidelines given by Company's Technical
Representative.
121
<PAGE> 21
ATTACHMENT A-2
SOFTWARE LIST FEES
[TO BE ATTACHED]
122
<PAGE> 22
[ LOGO ]
LIST
PRICE BOOK
SEPTEMBER 1994
STRICTLY CONFIDENTIAL
NOT TO BE PHOTOCOPIED
ISSUED TO: AT&T
PRICE BOOK NUMBER: 1
#999550 REV C
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<PAGE> 23
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1: IMAGE DISPLAY PRODUCTS
ClinicalViewTM (Single Monitor).................................................. Page 3
ClinicalViewTM (Dual Monitor).................................................... Page 4
DiagnosticViewTM (Single Monitor)................................................ Page 5
DiagnosticViewTM(Dual Monitor)................................................... Page 6
VIPstation20TM................................................................... Page 7
VIPstationTM Software Options.................................................... Page 8
HomeViewTM Software -- PC and Mac................................................ Page 9
SECTION 2: IMAGE/NETWORK MANAGEMENT PRODUCTS
ImageServerTM.................................................................... Page 10
HomeViewTM Server................................................................ Page 11
ArchiveManagerTM 1.0............................................................. Page 12
SECTION 3: IMAGE ACQUISITION PRODUCTS
Laser Digitizer and QA Station................................................... Page 13
ScanLinks........................................................................ Page 14
Digital Connects................................................................. Page 15
VIP Tape Readers................................................................. Page 16
SECTION 4: FILMING PRODUCTS
Network Film ServerTM............................................................ Page 17
Direct Filming Option............................................................ Page 17
Network Filming Option........................................................... Page 17
SECTION 5: DISPLAY OPTIONS
20" Color Monitor................................................................ Page 18
SECTION 6: HARD DISK STORAGE OPTIONS............................................. Page 19
SECTION 7: RAID STORAGE OPTIONS.................................................. Page 20
SECTION 8: HARDWARE OPTIONS
32 MB Ram Memory................................................................. Page 21
FDDI Network Interface........................................................... Page 21
5 GB 8mm Tape Drive.............................................................. Page 21
High Density Magnetic Tape Drive................................................. Page 21
Color Printer.................................................................... Page 21
Trackball UI Device.............................................................. Page 21
Remote Diagnostic Kit............................................................ Page 21
ATM Network Option............................................................... Page 21
ClinicalView(TM) 20/50 (Dual Monitor)............................................ Page 22
DiagnosticView(TM) 20/50 (Dual Monitor).......................................... Page 22
SECTION 9: SYSTEM UPGRADES
ClinicalView(TM) Single to Dual Monitor Upgrade.................................. Page 23
DiagnosticView(TM) Single to Dual Monitor Upgrade................................ Page 23
ClinicalView(TM) Dual to DiagnosticView(TM) Dual Monitor......................... Page 23
VIPstation2(TM) to VIPstation20(TM) Upgrade...................................... Page 24
VIP1.3 to VIP1.4 Software Upgrade................................................ Page 24
SECTION 10: SERVICE AND TRAINING
Service Contracts................................................................ Page 25
Additional Product Training...................................................... Page 26
</TABLE>
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<PAGE> 24
SECTION 1
IMAGE DISPLAY PRODUCTS
CLINICALVIEWTM
(SINGLE MONITOR)
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
CLINICALVIEWTM SINGLE MONITOR STATION:........................................... [ * * ]
(PART #100-2019-0000)
VIEWING SOFTWARE:
- 2D image review
- Interactive WW and WL display
- Image Pan and Zoom
- Screen reforming
- Image orientation, flip and rotate
- Next/previous image, page, & patient functions
- Access to Cemax patient database and folders
- Review of 3D images, produced by host VIPstationTM
- Based on industry-standard X-window/Motif (GUI)
- Supports one 1280 X 1600 resolution grayscale monitor
- DICOM 3.0 storage class user/provider
STANDARD SUN HOST COMPUTER:
- SUN SPARC 5/70
- SUN SPARC RISC processor operating at 57 SPECint 92
- 64 MB main memory, expandable to 256 MB
- SBUS system bus with 32 bit address and data bus width
- Ethernet interface with 10 Mbits/second data rate
- One high resolution (1280 X 1600) 24 inch grayscale monitor with keyboard
and optical mouse
- 1 GB internal hard disk
- SCSI - 2 port, 10 MB/sec
CLINICALVIEWTM SINGLE MONITOR STATION SOFTWARE ONLY:............................. [ * * ]
(PART #700-2012-0000)
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
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<PAGE> 25
CLINICALVIEWTM
(DUAL MONITOR)
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
CLINICALVIEWTM DUAL MONITOR STATION:............................................. [ * * ]
(PART #100-2020-0000)
VIEWING SOFTWARE:
- 2D image review
- Interactive WW and WL display
- Image Pan and Zoom
- Screen reformatting
- Image orientation, flip and rotate
- Next/previous image, page, & patient functions
- Access to Cemax patient database and folders
- Review of 3D images, produced by host VIPstationTM
- Based on industry-standard X-window/Motif (GUI)
- Supports two 1280 X 1600 resolution grayscale monitors
- Seamless integration between monitors
- DICOM 3.0 storage class user/provider
STANDARD SUN HOST COMPUTER:
- SUN SPARC 5/70
- SUN SPARC RISC processor operating at 57 SPECint 92
- 64 MB main memory, expandable to 256 MB
- SBUS system bus with 32 bit address and data bus width
- Ethernet interface with 10 Mbits/second data rate
- Two high resolution (1280 X 1600) 24 inch grayscale monitors with keyboard
and optical mouse
- 1 GB internal hard disk
- SCSI - 2 port, 10 MB/sec
CLINICALVIEWTM DUAL MONITOR STATION SOFTWARE ONLY:............................... [ * * ]
(PART #700-2013-0000)
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
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<PAGE> 26
DIAGNOSTICVIEWTM
(SINGLE MONITOR)
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
DIAGNOSTICVIEWTM SINGLE MONITOR STATION:......................................... [ * * ]
(PART #100-2062-000)
VIEWING SOFTWARE:
- High resolution image viewing
- 2D image review
- Interactive WW and WL display
- Image Pan and Zoom
- Screen reformatting
- Image orientation, flip and rotate
- Next/previous image, page, & patient functions
- Access to Cemax patient database and folders
- Review of 3D images, produced by host VIPstationTM
- Based on industry-standard X-window/Motif (GUI)
- Supports one 2048 scanline grayscale monitor
- DICOM 3.0 storage class user/provider
STANDARD SUN HOST COMPUTER:
- SUN SPARC 5/85
- SUN SPARC RISC processor operating at 64 SPECint 92
- 64 MB main memory, expandable to 256 MB
- SBUS system bus with 32 bit address and data bus width
- Ethernet interface with 10 Mbits/second data rate
- One SBUS compatible ultra high resolution 2048 scanline grayscale graphics
adapters
- One ultra high resolution 2048 scanline grayscale portrait monitor with
keyboard and optical mouse
- 1 GB internal hard disk
- SCSI - 2 port, 10 MB/sec
- Integrated input/output audio capability
DIAGNOSTICVIEWTM SINGLE MONITOR STATION SOFTWARE ONLY:........................... [ * * ]
(PART #700-2041-0000)
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
127
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<PAGE> 27
DIAGNOSTICVIEWTM
(DUAL MONITOR)
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
DIAGNOSTICVIEWTM DUAL MONITOR STATION:........................................... [ * * ]
(PART #100-2063-0000)
VIEWING SOFTWARE:
- High resolution image viewing
- 2D image review
- Interactive WW and WL display
- Image Pan and Zoom
- Screen reformatting
- Image orientation, flip and rotate
- Next/previous image, page, & patient functions
- Access to Cemax patient database and folders
- Review of 3D images, produced by host VIPstationTM
- Based on industry-standard X-window/Motif (GUI)
- Supports two 2048 scanline grayscale monitors
- Seamless integration between monitors
- DICOM 3.0 storage class user/provider
STANDARD SUN HOST COMPUTER:
- SUN SPARC 5/85
- SUN SPARC RISC processor operating at 64 SPECint 92
- 64 MB main memory, expandable to 256 MB
- SBUS system bus with 32 bit address and data bus width
- Ethernet interface with 10 Mbits/second data rate
- Two SBUS compatible ultra high resolution 2048 scanline grayscale graphics
adapters
- Two ultra high resolution 2048 scanline grayscale portrait monitors with
keyboard and optical mouse
- 1 GB internal hard disk
- SCSI - 2 port, 10 MB/sec
- Integrated input/output audio capability
DIAGNOSTICVIEWTM DUAL MONITOR STATION SOFTWARE ONLY:............................. [ * * ]
(PART #700-2042-0000)
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
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<PAGE> 28
VIPSTATION20TM
<TABLE>
<CAPTION>
LIST
--------
<S> <C>
CEMAX "VIPSTATION20TM":......................................................... [ * * ]
(PART #100-2073-0000)
CEMAX VIPsoftwareTM CT/MRI CLINICAL SOFTWARE WITH:
- 2D/3D Clinical Workstation
- Volumetric and Surface Rendering reconstruction software
- Icon user interface
- Image creation and viewing for 2D and 3D
- Automatec protocols
- System status
- System control with Retrieve/Archive
- SpineProbeTM clinical application module
- Voxel projection for MRI angiography
- Interactivity and speed
- Lifesize image creation and filming
- Unattended filming capability
- On-line help menu programmed into application software
- DICOM 3.0 storage class user/provider
STANDARD SUN HOST COMPUTER:
- SUN SPARC 20/50
- SUN SPARC RISC processor operating at 69.2 SPECint 92
- SPARC floating point processor with 1 MB super cache memory
- 64 MB main memory, expandable to 256 MB
- SBUS system bus with 64 bit address and data bus width
- Ethernet interfaces with 10 Mbits/second data rate
- 16.7 million color pallette
- High resolution 17 inch color monitor with keyboard and optical mouse
- Integrated input/output audio capability
- 2.1 GB magnetic hard disk
- 5.0 GB 8mm ExabyteTM cartridge tape subsystem
CEMAX "VIPSTATION20TM" SOFTWARE ONLY:........................................... [ * * ]
8MM TAPE - (PART #700-2000-0000)
1/4" TAPE - (PART #700-2003-0000)
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
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<PAGE> 29
VIPSOFTWARETM OPTIONS
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
TOOTHPIXTM DENTAL IMAGING SOFTWARE MODULE........................................ [ * * ]
(PART #700-2010-0000)
- Pre-surgical planning of endosseous-integrated implants
- User definable curve for panoramic view and cut parameters
- Generation of lifesize images
- Cross sectional obliques
IMAGEXCHANGE SOFTWARE............................................................ [ * * ]
(PART #700-2011-0000)
- Converts images from VIP to Macintosh PICT or PC TIFF
- Mac & SPARC must be equipped with appropriate communications, software and
hardware
</TABLE>
HOMEVIEWTM SOFTWARE -- PC OR MAC
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
HOMEVIEWTM SOFTWARE -- PC OR MAC:................................................ [ * * ]
- 8bit image store and display
- Simple 2D image processing
PC BASED REVIEW STATION (NOT INCLUDED)
(PART #700-2043-0000)
- Microsoft Windows 3.X based applications
- Intel 386+.8 MB Ram and SVGA minimum PC requirements
OR
MAC BASED REVIEW STATION (NOT INCLUDED)
(PART #700-2044-0000)
- Macintosh System 7.X based applications
- Motorola 68030+.8 MB Ram and SBGA minimum Mac requirements
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
130
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<PAGE> 30
SECTION 2
IMAGE/NETWORK MANAGEMENT PRODUCTS
IMAGESERVERTM
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
IMAGESERVERTM:................................................................... [ * * ]
(PART #100-2021-0001)
IMAGESERVERTM SOFTWARE:
- Patient/image folder concept
- Distributed database
- Client/server network architecture
- Archive Manager Reading
- DICOM 3.0 storage class user/provider
- Network management and administration
- Complete system control
STANDARD SUN HOST COMPUTER:
- SUN SPARC 20/50
- SUN SPARC RISC processor operating at 69.2 SPECint 92
- SPARC floating point processor with 1 MB super cache memory
- 64 MB main memory, expandable to 256 MB
- SBUS system bus with 64 bit address and data bus width
- Ethernet interface with 10 Mbits/second data rate
- 16.7 million color pallette
- High resolution 17 inch color monitor with keyboard and optical mouse
- Integrated input/output audio capability
- 1.05 GB internal disk drive
- 1.44 MB internal floppy drive
IMAGESERVERTM SOFTWARE ONLY:..................................................... [ * * ]
(PART #700-2014-0000)
</TABLE>
HOMEVIEWTM SERVER
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
HOMEVIEWTM SERVER:............................................................... [ * * ]
(PART #100-2067-0000)
HOMEVIEWTM SERVER:
- Hospital based 8 bit teleradiology server
- Based on industry standard hardware (486 PC)
- Modem for standard dial-up phone lines at 28 Kbps transmission rate
- Variable resolution/compression
- Auto routing to preselected physician's home
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
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<PAGE> 31
ARCHIVEMANAGERTM 1.0
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
ARCHIVEMANAGERTM 1.0:............................................................ [ * * ]
(PART #100-2068-0000)
ARCHIVE SOFTWARE:
- 5.0 GB 8MM D.A.T. digital archive
- On-line search of directory of archived data
- Creation of archive folders
- Search by Patient Name, I.D., and Modality
- Media cost approximately $3 per GB
STANDARD SUN HOST COMPUTER:
- SUN SPARC 5/70
- SUN SPARC RISC processor operating at 57 SPECint 92
- 32 MB main memory, expandable to 256 MB
- SBUS system bus with 32 bit address and data bus width
- Ethernet interface with 10 Mbits/second data rate
- One 15 inch color monitors (1024 X 768 resolution)
- 2 X 536 MB internal hard disks
- 8.0 GB 8mm ExabyteTM cartridge tape subsystem
ARCHIVEMANAGERTM SOFTWARE ONLY:.................................................. [ * * ]
(PART #700-2045-0000)
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
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<PAGE> 32
SECTION 3
IMAGE ACQUISITION PRODUCTS
LASER FILM DIGITIZER
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
LASER FILM DIGITIZER PREFERRED PACKAGE (INCLUDING QA STATION):................... [ * * ]
(PART #100-2022-0000)
LUMISYS LUMISCAN 150 DIGITIZER:
- Fixed resolution (2048 over 8"-14")
- 12 bits grayscale resolution
- Scan rate up to 75 lines per second
- Density resolution 0.001 optical density
- Density range of 0 to 3.5 optical density
- SCSI interface
QA STATION VIEWING SOFTWARE:
- 2D image review
- Interactive WW and WL display and save
- Orientation correction
- Support for patient demographic input
- Destination selection and transmit
- DICOM 3.0 storage class user/provider
QA STATION STANDARD SUN HOST COMPUTER:
- SUN SPARC 5/70
- SUN SPARC RISC processor operating at 57 SPECint 92
- 32 MB main memory, expandable to 256 MB
- SBUS system bus with 32 bit address and data bus width
- Ethernet interface with 10 Mbits/second data rate
- 15 inch color monitor (1024 X 768 resolution)
- 2 X 535 MB internal hard disks
QA STATION SOFTWARE ONLY:........................................................ [ * * ]
(PART #700-2039-0000)
</TABLE>
SCANLINKS
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
SCANLINK I: (PART #100-2031-0000)................................................ [ * * ]
- Direct link connection to a - scanner,
- Standard scanner must be equipped with appropriate interface and software
for system communication.
- Scanner may need additional upgrade at customer's expense.
- Customer to purchase and route all cables.
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
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<PAGE> 33
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
SCANLINK II: (PART #100-2028-0000)............................................... [ * * ]
- Direct link connection to a - scanner.
- Standard scanner must be equipped with appropriate interface and software
for system communication.
- Scanner may need additional upgrade at customer's expense.
- Customer to purchase and route all cables.
SCANLINK III: (PART #100-2038-0000).............................................. [ * * ]
- Direct link connection to a - scanner.
- Standard scanner must be equipped with appropriate interface and software
for system communication.
- Scanner may need additional upgrade at customer's expense.
- Customer to purchase and route all cables.
SCANLINK IV/QA STATION: (PART #100-2053-0001).................................... [ * * ]
- Direct link connection to a - digitizer/CR.
- Standard digitizer/CR must be equipped with appropriate interface and
software for system communication.
- Digitizer/CR may need additional upgrade at customer's expense.
- Customer to purchase and route all cables.
QA STATION VIEWING SOFTWARE:
- 2D image review
- Interactive WW and WL display and save
- Orientation correction
- Support for patient demographic input
- Destination selection and transmit
- DICOM 3.0 storage class user/provider
QA STATION STANDARD SUN HOST COMPUTER:
- SUN SPARC 5/70
- SUN SPARC RISC processor operating at 57 SPECint 92
- 32 MB main memory, expandable to 256 MB
- SBUS system bus with 32 bit address and data bus width
- Ethernet interfacers with 10 Mbits/second data rate
- 15 inch color monitor (1024 X 768 resolution)
- 2 X 535 MB internal hard disks
SCANLINK IV/QA STATION SOFTWARE ONLY:............................................ [ * * ]
(PART #700-2036-0000)
SCANLINK V: (PART #100-2070-0000)................................................ [ * * ]
- Direct Digital Video Interface
- Digital and keyboard entry of demographics
- 486 EISA Bus ethernet network connection
- Filming Keypad
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
134
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 34
DIGITAL CONNECTS
<TABLE>
<CAPTION>
MANUFACTURER PART NUMBER DESCRIPTION
- ------------------------------------------- ---------------- -----------------------
<S> <C> <C>
GE 9800 CT (Non-Advantage) P #100-2028-0000 ScanLinkTMII
GE Signa 1.5 MR (Non-Advantage) P #100-2029-0000 ScanLinkTMII
GE Signa 1.5 MR (Advantage up to 4.6) P #100-2030-0000 ScanLinkTMII
GE 9800 HiLight CT (Advantage) P #100-2031-0000 ScanLinkTMI
GE HiSpeed Ct (Advantage) P #100-2032-0000 ScanLinkTMI
GE Signa 1.5 MR (Advantage 5X) P #100-2033-0000 ScanLinkTMI
Hitachi MRI P #100-2034-0000 ScanLinkTMIII
Imatron Ultrafast CT P #100-2035-0000 ScanLinkTMI
Philips CX CT P #100-2036-0000 ScanLinkTMIII
Philips LX CT P #100-2037-0000 ScanLinkTMIII
Philips SR CT P #100-2038-0000 ScanLinkTMIII
Philips MR P #100-2039-0000 ScanLinkTMIII
Picker IQ/PQ CT P #100-2040-0000 ScanLinkTMI
Picker 1200SX CT/Level II P #100-2041-0000 ScanLinkTMII
Picker Vista/HPQ MR P #100-2042-0000 ScanLinkTMII
Siemens DR3 CT P #100-2043-0000 PACSNet ScanLinkTMIII
Siemens DRH CT P #100-2044-0000 PACSNet ScanLinkTMIII
Siemens Somatom Plus CT P #100-2045-0000 PACSNet ScanLinkTMIII
Siemens Magnetom MR P #100-2046-0000 PACSNet ScanLinkTMIII
Toshiba 600 CT P #100-2047-0000 ScanLinkTMIII
Toshiba 900 CT P #100-2048-0000 ScanLinkTMIII
Toshiba Xpeed/XpressTM P #100-2049-0000 ScanLinkTMI
Toshiba MRT 35 MR P #100-2050-0000 ScanLinkTMI
Toshiba Access MR P #100-2051-0000 ScanLinkTMI
Toshiba MRT 50 MR P #100-2052-0000 ScanLinkTMIII
Toshiba MRT 150 MR P #100-2053-0000 ScanLinkTMIII
DuPont CR P #100-2054-0000 ScanLinkTMI
Kodak CR (via DICOM 3.0) P #100-2055-0000 ScanLinkTMI
ACR-NEMA 2.0 P #100-2056-0000 ScanLinkTMI
ACR-NEMA DICOM 3.0 P #100-2057-0000 ScanLinkTMI
QA Station Interface P #100-2058-0000 ScanLinkTMIV
(Fuji CR & Lumisys digitizer)
</TABLE>
[ * * ] FOR INSTALLATION IF BOUGHT AS STAND-ALONE CONFIGURATION
NOTES: - Standard scanner must be equipped with appropriate interface and
software for system communication.
- Scanner may need additional upgrade at customer's expense.
- Up to 400 feet cable length from the scanner.
- Customer responsible for all network components.
- Customer to purchase and route all cable.
135
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 35
VIP TAPE READERS
<TABLE>
<CAPTION>
MANUFACTURER DESCRIPTION LIST
- --------------------------------------- --------------------------------------- ------
<S> <C> <C>
GE 9800 (CT) Reads image & patient data from a [ * * ]
(Part #700-2016-0000) standard 9 track archive tape
GE Advantage (CT) Reads image & patient data from a [ * * ]
(Part #700-2017-0000) standard 9 track archive tape
GE Pace (CT) Reads image & patient data from a [ * * ]
(Part #700-2018-0000) standard 9 track archive tape
GE Signa (MR) Reads image & patient data from a [ * * ]
(Part #700-2019-0000) standard 9 track archive tape
Imatron/Ultrafast (CT) Reads image & patient data from a [ * * ]
(Part #700-2020-0000) standard 9 track archive tape
Philips LX/SR (CT) Reads image & patient data from a [ * * ]
(Part #700-2021-0000) standard 9 track archive tape
Picker IQ/PQ (CT) Reads image & patient data from an 8mm [ * * ]
(Part #700-2022-0000) ExabyteTM tape drive
Picker 1200SX/Level II (CT) Reads image & patient data from a [ * * ]
(Part #700-2023-0000) standard 9 track archive tape
Picker MR (MR) Reads image & patient data from a [ * * ]
(Part #700-2024-0000) standard 9 track archive tape
Siemens DRH (CT) Reads image & patient data from a [ * * ]
(Part #700-2025-0000) standard 9 track archive tape
Siemens Magnetom MR (MR) Reads image & patient data from a [ * * ]
(Part #700-2026-0000) standard 9 track archive tape
Siemens Somatom Plus (CT) Reads image & patient data from a [ * * ]
(Part #700-2027-0000) standard 9 track archive tape
Toshiba Xpeed/XpressTM (CT) Reads image & patient data from a 1/4 [ * * ]
(Part #700-2028-0000) inch cassette drive
Toshiba MRT 35/Access (MR) Reads image & patient data from a [ * * ]
(Part #700-2029-0000) standard 9 track archive tape
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
136
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 36
SECTION 4
FILMING PRODUCTS
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
NETWORK FILM SERVER:............................................................. [ * * ]
(PART #100-2023-0001)
SERVER SOFTWARE:
- Film spooling software allows background filming capability
- Choice of laser camera for redundant, mirrored & remote filming
- NOTE: 3M/Kodak/DuPont/Fuji/Agfa laser camera must be configured with
multi-modality unit and a digital port for CEMAX LaserLinkTM
STANDARD SUN HOST COMPUTER:
- SUN SPARC 5/70
- SUN SPARC RISC processor operating at 57 SPECint 92
- 32 MB main memory, expandable to 256 MB
- SBUS system bus with 32 bit address and data bus width
- Ethernet interface with 10 Mbits/second data rate
- 2 X 535 MB internal hard disk
- SBUS hardware and software to control sending images digitally to
3M/Kodak/DuPont/Fuji/Agfa laser camera
LASERLINKTM CAMERA INTERFACE INCLUDING:
- SBUS hardware and software to control sending images digitally to
3M/Kodak/DuPont/Fuji/Agfa laser camera
- Film spooling software allows background filming capability
- Software for automatic filming after processing of 2D/3D images
- NOTE: 3M/Kodak/DuPont/Fuji/Agfa laser camera must be configured with
multi-modality unit and a digital port for CEMAX LaserLinkTM
NETWORK FILM SERVER SOFTWARE ONLY:............................................... [ * * ]
(PART #700-2039-0000)
DIRECT FILMING OPTION:........................................................... [ * * ]
(PART #100-2026-0000)
- Direct Filming connection to selected laser camera
- Film spooling software allows background filming capabilities
- Error message support and job resume
- Filming format and copy control
- SBUS hardware and software to control sending image digitally to
3M/Kodak/DuPont/Fuji/Agfa laser camera
NETWORK FILMING OPTION:.......................................................... [ * * ]
(PART #700-2030-0000)
- Enables selected network station to film over the network to a selected
Direct Filming node or Network Film Server
- Film spooling software allows background filming capabilities
- Selection of supported laser camera on the network
- Error message support and job resume
- Filming format and copy control
- User interface icon controlled
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
137
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 37
SECTION 5
DISPLAY OPTIONS
<TABLE>
<CAPTION>
LIST
------
<S> <C>
20 INCH COLOR MONITOR:............................................................ [ * * ]
(PART #500-1001-0000)
VIEWING SOFTWARE:
- 1152 (h) X 900 (v) pixels at 76HZ
- Must be ordered with original product order
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
138
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 38
SECTION 6
STANDARD HARD DISK STORAGE OPTIONS
<TABLE>
<CAPTION>
LIST
--------
<S> <C>
2.1 GB ADDITIONAL HARD DISK DRIVE:.............................................. [ * * ]
(PART #302-2010-0000)
- External disk drive
- 2.1 GB disk storage
- SCSI-2 connection
4 GB ADDITIONAL HARD DISK DRIVE:................................................ [ * * ]
(PART #302-2025-0000)
- External disk drive
- 4 GB disk storage
- SCSI-2 connection
9 GB ADDITIONAL HARD DISK DRIVE:................................................ [ * * ]
(PART #302-2026-0000)
- External disk drive
- 9 GB disk storage
- SCSI-2 connection
18 GB ADDITIONAL HARD DISK DRIVE:............................................... [ * * ]
(PART #302-2027-0000)
- External disk drive
- 18 GB disk storage
- SCSI-2 connection
27 GB ADDITIONAL HARD DISK DRIVE:............................................... [ * * ]
(PART #302-2028-0000)
- External disk drive
- 27 GB disk storage
- SCSI-2 connection
36 GB ADDITIONAL HARD DISK DRIVE:............................................... [ *
(PART #302-2029-0000) * ]
- External disk drive
- 36 GB disk storage
- SCSI-2 connection
45 GB ADDITIONAL HARD DISK DRIVE:............................................... [ *
(PART #302-2030-0000) * ]
- External disk drive
- 45 GB disk storage
- SCSI-2 connection
54 GB ADDITIONAL HARD DISK DRIVE:............................................... [ *
(PART #302-2043-0000) * ]
- External disk drive
- 54 GB disk storage
- SCSI-2 connection
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
139
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 39
SECTION 7
RAID STORAGE OPTIONS
<TABLE>
<CAPTION>
LIST
--------
<S> <C>
4 GB ADDITIONAL RAID STORAGE:................................................... [ * * ]
(PART #302-2037-0000)
- External enclosure
- 4 GB disk storage
- SCSI - 2 connection
8 GB ADDITIONAL RAID STORAGE:................................................... [ * * ]
(PART #302-2038-0000)
- External enclosure
- 8 GB disk storage
- SCSI - 2 connection
12 GB ADDITIONAL RAID STORAGE:.................................................. [ * * ]
(PART #302-2039-0000)
- External enclosure
- 12 GB disk storage
- SCSI - 2 connection
24 GB ADDITIONAL RAID STORAGE:.................................................. [ * * ]
(PART #302-2031-0000)
- External enclosure
- 24 GB disk storage
- SCSI - 2 connection
32 GB ADDITIONAL RAID STORAGE:.................................................. [ * * ]
(PART #302-2032-0000)
- External enclosure
- 32 GB disk storage
- SCSI - 2 connection
48 GB ADDITIONAL RAID STORAGE:.................................................. [ * * ]
(PART #302-2033-0000)
- External enclosure
- 48 GB disk storage
- SCSI - 2 connection
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
140
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 40
SECTION 8
HARDWARE OPTIONS
<TABLE>
<CAPTION>
LIST
--------
<S> <C>
32 MB ADDITIONAL MEMORY......................................................... [ * * ]
(PART #302-2022-0000)
- Improves multi-tasking operation
- Enhances ability of the workstation to deal with very large data sets
HIGH SPEED FDDI NETWORK OPTION.................................................. [ *
(PART #100-2027-0000) * ]
- 100 Mbits per second (per node)
- TCP/IP communication protocol
- Provides connection to installed FDDI network
(more than two nodes requires additional network technology)
(bridges, hubs, routers, cables and connectors not included)
- NOTE: At least two nodes are needed at initial purchase
5 GB 8 MM TAPE DRIVE SYSTEM..................................................... [ * * ]
(PART #302-2035-0000)
- Economical mass storage of data on standard 5.0 GB 8mm cassette
- NOTE: SPARC will only support two tapes drives
HIGH DENSITY MAGNETIC TAPE DRIVE................................................ [ * * ]
(PART #306-2000-0000)
- Self-loading 9 track tape drive
- 800/1600/3200/6250 Bpi tape drive
MITSUBISHI COLOR PRINTER........................................................ [ * * ]
(PART #316-2001-0000)
- High resolution: 1280 X 1218 image
- 16.7 million color palette
- Mirror mode for printing overhead transparencies
- True color quality
- Sublimination dye thermal transfer printing process
- Two picture sizes: Standard 7.87 inch X 5.83 inch and large 9.13 inch X 7.87
inch
TRACKBALL UI DEVICE............................................................. [ * * ]
(PART #500-2048-0000)
- Trackball Device
REMOTE DIAGNOSTIC KIT........................................................... [ * * ]
(PART #100-2065-0000)
- Includes Modem and 5 GB 8mm Tape Drive
- Allows for faster services response times
- Supports remote hardware diagnostics
- Supports remote software diagnostics
- Allows remote software installation upgrade
- Customer must supply direct dedicated phone line
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
141
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 41
<TABLE>
<CAPTION>
LIST
--------
<S> <C>
ATM NETWORK OPTION.............................................................. [ *
(PART #100-2069-0000) * ]
- 155 Mbits per second (per node)
- TCP/IP communication protocol
- Provides connection to installed ATM network
(more than two nodes requires additional network technology)
(bridges, hubs, routers, cables and connectors not included)
- NOTE: At least two nodes are needed at initial purchase
CLINICALVIEWTM 20/50 DUAL MONITOR STATION:...................................... [ * * ]
(PART #100-2064-0000)
VIEWING SOFTWARE:
- 2D image review
- Interactive WW and WL display
- Image Pan and Zoom
- Screen reformatting
- Image orientation, flip and rotate
- Next/previous image, page, & patient functions
- Access to Cemax patient database and folders
- Review of 3D images, produced by host VIPstationTM
- Based on industry-standard X-window/Motif (GUI)
- Supports two 1280 X 1600 resolution grayscale monitors
- Seamless integration between monitors
- DICOM 3.0 storage class user/provider
STANDARD SUN HOST COMPUTER:
- SUN SPARC 20/50
- SUN SPARC RISC processor operating at 69.2 SPECint 92
- SPARC floating point processor with 1 MB super cache memory
- 64 MB main memory, expandable to 256 MB
- SBUS system bus with 64 bit address and data bus width
- Ethernet interfaces with 10 Mbits/second data rate
- Two high resolution (1280 X 1600) 24 inch grayscale monitors with
keyboard and optical mouse
- 1.05 GB internal disk drive
- SCSI - 2 port, 10 MB/sec
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
142
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 42
<TABLE>
<CAPTION>
LIST
--------
<S> <C>
DIAGNOSTICVIEWTM 2050 DUAL MONITOR STATION:..................................... [ * * ]
(PART #100-2074-0000)
VIEWING SOFTWARE:
- High resolution image viewing
- 2D image review
- Interactive WW and WL display
- Image Pan and Zoom
- Screen reformatting
- Image orientation, flip and rotate
- Next/previous image, page, & patient functions
- Access to Cemax patient database and folders
- Review of 3D images, produced by host VIPstationTM
- Based on industry-standard X-window/Motif (GUI)
- Supports two scanline grayscale monitors
- Seamless integration between monitors
- DICOM 3.0 storage class user/provider
STANDARD SUN HOST COMPUTER:
- SUN SPARC 20/50
- SUN SPARC RISC processor operating at 69.2 SPECint 92
- SPARC floating point processor with 1 MB super cache memory
- 64 MB main memory, expandable to 256 MB
- SBUS system bus with 64 bit address and data bus width
- Ethernet interfaces with 10 Mbits/second data rate
- Two SBUS compatibe ultra high resolution 2048 scanline grayscale graphics
adapters
- Two ultra high resolution 2048 scanline grayscale portrait monitors with
keyboard and optical mouse
- Integrated input/output audio capability
- 1.05 GB internal disk drive
- SCSI - 2 port, 10 MB/sec
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
143
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 43
SECTION 9
SYSTEM UPGRADES
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
CLINICALVIEWTM SINGLE TO DUAL MONITOR UPGRADE:................................... [ * * ]
(PART #100-2025-0000)
- Software support for two 1280 X 1600 monitors
- Seamless integration between monitors
- Additional SBUS high resolution 1280 X 1600 graphics card
- Additional 1280 X 1600 grayscale monitor
- Subject to available SBUS slots
SOFTWARE ONLY UPGRADE:........................................................... [ * * ]
(PART #100-2015-0000)
- Software support for two 1280 X 1600 monitors
- Seamless integration between monitors
DIAGNOSTICVIEWTM SINGLE TO DUAL MONITOR UPGRADE:................................. [ * * ]
(PART #100-2071-0000)
- Software support for two 2048 scanline monitors
- Seamless integration between monitors
- Additional SBUS high resolution graphics card
- Additional 2048 scanline grayscale portrait monitor
- Subject to available SBUS slots
SOFTWARE ONLY UPGRADE:........................................................... [ * * ]
(PART #700-2046-0000)
- Software support for two 2048 scanline monitors
- Seamless integration between monitors
CLINICALVIEWTM DUAL TO DIAGNOSTICVIEWTM DUAL MONITOR:............................ [ * * ]
(PART #100-2072-0000)
- Software support for two 2048 scanline monitors
- Seamless integration between monitors
- Additional SBUS high resolution graphics card
- Replace two 1280 X 1600 grayscale monitors with two 2048 scanline
grayscale portrait monitors
- Subject to available SBUS slots
SOFTWARE ONLY UPGRADE:........................................................... [ * * ]
(PART #700-2047-0000)
- Software support for two 2048 scanline monitors
- Seamless integration between monitors
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
144
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 44
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
"VIPSTATION2TM" TO "VIPSTATION20TM" UPGRADE:..................................... [ * * ]
(PART #100-2066-0000)
CEMAX VIPsoftwareTM CT/MRI CLINICAL SOFTWARE WITH:
- - 2D/3D Clinical Workstation
- - Volumetric and Surface Rendering reconstruction software
- - Icon user interface
- - Image creation and viewing for 2D and 3D
- - Automated protocols
- - System status
- - System control with Retrieve/Archive
- - SpineProbeTM clinical application module
- - Voxel projection for MRI angiography
- - Interactivity and speed
- - Lifesize image creation and filming
- - Unattended filming capability
- - On-line help menu programmed into application software
STANDARD SUN HOST COMPUTER:
- - SUN SPARC 20/50
- - SUN SPARC RISC processor operating at 69.2 SPECint 92
- - SPARC floating point processor with 1MB super cache memory
- - 64 MB main memory, expandable to 256 MB
- - SBUS system bus with 64 bit address and data bus width
- - Ethernet interfaces with 10 Mbits/second data rate
- - 16.7 million color pallette
- - High resolution 17 inch color monitor with keyboard and optical mouse
- - Integrated input/output audio capability
- - 2.1 GB magnetic hard disk
NOTE: THIS UPGRADE IS A CHASSIS SWAP. THE CUSTOMER USES EXISTING EXTERNAL DISK AND TAPE
DRIVES.
VIP1.3 SOFTWARE TO VIP1.4 SOFTWARE UPGRADE:...................................... [ * * ]
(PART #700-2038-0000)
VIEWING SOFTWARE:
- - Integration to CEMAX distributed database
- - Patient folder creation
- - DICOM 3.0 storage class user/provider
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
145
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 45
SECTION 10
SERVICE AND TRAINING
SERVICE CONTRACTS
<TABLE>
<CAPTION>
LIST
--------------------
<S> <C>
STANDARD 12 MONTH SERVICE AGREEMENT FOR STANDARD SYSTEM: [ * * ]
- 12 month hardware agreement including all parts, travel and
labor (per year)
- 12 month software agreement including all standard updates and
maintenance
- Service premium is paid quarterly in advance
- Guaranteed 98% uptime
EXTENDED 48 MONTH SERVICE AGREEMENT FOR STANDARD SYSTEM: [ * * ]
- 48 month hardware agreement including all parts, travel and
labor (per year)
- 48 month software agreement including all standard updates and
maintenance
- Service premium is paid quarterly in advance
- Guaranteed 98% uptime
STANDARD 12 MONTH SERVICE PARTNER AGREEMENT FOR STANDARD SYSTEM: [ * * ]
- Service partner provides first level service. Cemax provides
second level support
- 12 month hardware agreement including all parts, travel and
labor (per year)
- 12 month software agreement including all standard updates and
maintenance
- Service premium is paid quarterly in advance
- Guaranteed 98% uptime
EXTENDED 48 MONTH SERVICE PARTNER AGREEMENT FOR STANDARD SYSTEM: [ * * ]
- Service partner provides first level service. Cemax provides
second level support
- 48 month hardware agreement including all parts, travel and
labor (per year)
- 48 month software agreement including all standard updates and
maintenance
- Service premium is paid quarterly in advance
- Guaranteed 98% uptime
</TABLE>
NOTES: - All products include a 6 month service warranty upon purchase.
- Network systems must be individually quoted.
- Customer responsible for all network components.
- Customer to purchase and route all cables.
146
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 46
ADDITIONAL APPLICATIONS PRODUCT TRAINING
<TABLE>
<CAPTION>
LIST
-------
<S> <C>
VIP TRAINING AT CEMAX:........................................................... [ * * ]
- Product training of one additional person at CEMAX
- One week duration (4 days a week/8 hours a day)
- All expenses included
VIP TRAINING AT THE CLIENT'S SITE:............................................... [ * * ]
- Product training of two persons at the client's site
- One week duration (4 days a week/8 hours a day)
- All expenses included
</TABLE>
- - Customer responsible for all network components.
- - Customer to purchase and route all cables.
147
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 47
ATTACHMENT A-3
TRAINING
TRAIN THE TRAINER -- APPLICATIONS:
First Class -- Tuition Waived
Second through "N" number of Classes
-- [ * * ]
END USER TRAINING -- APPLICATIONS:
[ * * ]
SERVICE AND INSTALLATION TRAINING:
First Two (2) Classes are at [ * * ]
Third through "N" number of Classes
-- [ * * ] per person plus expenses
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 48
ATTACHMENT B
LICENSE AND MAINTENANCE FEES
IN CONSIDERATION FOR SUPPLIER GRANTING COMPANY A [ * * ] discount
off Supplier's Suggested List Fee (See Appendix B Pages 1-23 for list prices as
of September 15, 1994), Company will submit six month rolling forecasts to
Supplier stating Company's anticipated monthly Orders on a per Software product
basis. Company also agrees that it will order at least [ * * ]
[ * * ] of Supplier Software (in any mix) and pay to Supplier at least
[ * * ] in License Fees within the first 18 months of
this Agreement, which period shall commence on the Effective Date. If at the end
of the initial 18 months, Company has paid to Supplier less than [ *
* ] in License Fees, Company will pay to Supplier the balance within thirty
days after the expiration of the initial 18 month period.
FURTHERMORE in consideration for Supplier granting to Company a [ *
* ] discount off Supplier's Suggested List Fee (See Appendix B Pages 1-23 for
list prices as of September 15, 1994), Company agrees to place an initial order
for Supplier Software in the amount of [ * * ] immediately and will, unless
Company has paid to Supplier an additional [ * * ] by December 31, 1994 for
Software licenses or Sublicenses, pay to Supplier an additional [ * * ] by
December 31, 1994. Such payments totaling [ * * ] in 1994 shall reduce the
[ * * ] commitment specified in the first paragraph of this Attachment B
to [ * * ].
FURTHERMORE in consideration for Supplier granting to Company a [ *
* ] discount off Supplier's Suggested List Fee (See Appendix B Pages 1-23 for
list prices as of September 15, 1994), Company agrees to provide an initial
business plan to Supplier within two weeks after the Effective Date. Company
also agrees to share, on a continuing basis appropriate business plan
information with Supplier (subject to confidentiality agreements) so that
Supplier can plan and schedule appropriate resources to Company to meet product
and delivery plans.
MAINTENANCE FEES
Supplier shall provide the maintenance specified in Sections 3, 4, and 5 of
Attachment C free of charge during the period commencing on the Effective Date
and expiring [ * * ] thereafter. Following such initial [ *
* ] period and during the term of this Agreement, Supplier shall
provide such maintenance at Supplier's standard rates then in effect.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 49
ATTACHMENT C
STANDARD MAINTENANCE TERMS
1. DEFINITIONS
1.1 "Error" shall mean a software problem or documentation error which
causes a failure of Supplier's unmodified Software to operate in
accordance with its Documentation.
1.2 "Workaround" shall mean a modification or "patch" of the Software or an
alteration to the configuration at the end user customer's site, which
may be of a temporary or interim nature, to help avoid an Error.
1.3 "Business Day" shall mean a business day, which shall exclude weekends
and Supplier holidays.
2. SCOPE OF MAINTENANCE
This Exhibit sets forth the parties' rights and responsibilities with
respect to Supplier's maintenance of the unmodified Software and Updates
thereto.
3. TELEPHONE SUPPORT
Supplier shall provide a reasonable telephone hotline support available
Monday through Friday (9:00 a.m. to 5:00 p.m. Pacific Time), excluding
Supplier holidays, to answer questions by Company concerning Software
Errors within the scope of this Agreement. Supplier also will maintain one
technician on a 24 hour paging service, [ * ] days per week who will
respond to calls within one (1) Business Day. All support requests shall be
coordinated and channeled through Company. Company shall be responsible for
costs of return calls by Supplier to destinations outside of the United
States.
4. CORRECTION OF SOFTWARE ERRORS
4.1 Supplier agrees to use all reasonable efforts to acknowledge Software
Errors reported to Supplier by Company and to use all reasonable efforts
to provide Workarounds and Updates to correct such Errors. Maintenance
will be provided by Supplier during the term of the Distribution
Agreement for the current Update and the most recent prior Update of the
Software. Supplier does not warrant that Workarounds will be provided in
every case, or that Errors will be corrected in Supplier Updates in
every case. In addition, in some cases the Software may not conform to
Documentation because of a Documentation Error, rather than a Software
Error, in which case Supplier shall provide corrections to, or
corrected, Documentation.
4.2 All Updates shall become part of the Software that is updated. Company
acknowledges that implementation of Updates may require modification to
end user customer files, configurations, and/or making other changes
necessitated by the Error correction.
4.3 If Supplier determines that the problem reported by Company is outside
the scope of this Section, Supplier shall notify Company and reserves
the right to charge Company at its then current standard hourly rates.
If Supplier agrees to continue furnishing services related to such a
problem, such services shall be deemed to be Special Services pursuant
to Section 6 below.
4.4 Emergency Service:
A SEVERITY LEVEL 1 ERROR is classified by Company as one which (i)
renders the Software inoperative; or (ii) causes the Software to fail
catastrophically. Supplier shall respond to Company's written
notification of a severity level 1 Error provided in accordance with the
provisions of this Attachment C within [ * * ] after notification
thereof and communicate Supplier's plan for using reasonable efforts to
resolve such severity level 1 Error. After Supplier's initial response
to a severity level 1 Error, Supplier agrees to initiate a verbal report
to Company every [ * * ] that a severity level 1 Error is
outstanding (except weekends and Supplier holidays).
148
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 50
A SEVERITY LEVEL 2 ERROR is any Error that significantly degrades the
performance of the Software or materially restricts use of the Software
by Company's internally designated maintenance organization, designated
pursuant to Section 15 of the Agreement. Supplier shall use its
reasonable efforts to eliminate the Error within fifteen (15) days after
written notification thereof in accordance with the provisions of this
Agreement.
A SEVERITY LEVEL 3 Error is any Error that causes only a minor impact on
the use of the Software. Supplier may include the Fix for the Error in
the next major releases of the Software.
5. "UPDATES" shall have the meaning set forth in Section 16 of the Agreement.
Supplier agrees to provide to Company one copy of each new Software Update
at no charge to Company, other than the applicable maintenance fee, issued
by Supplier during the term of this Agreement.
6. SERVICES FEES
The Software maintenance specified in Sections 3, 4, and 5 of this
Attachment C shall be provided by Supplier at Supplier's maintenance rates
specified in Attachment B. All Software maintenance which Company requests,
and which Supplier in its discretion, agrees to provide, and which is not
specifically provided pursuant to Sections 3, 4, and 5 of this Attachment
C, shall be provided at Supplier's then current billing rates therefor
("Special Services"). Special Services offered by Supplier as of the
Effective Date are set forth in Attachment G. This shall also include all
services provided by Supplier, at Company's request, other than during than
Supplier's normal working hours at Supplier's California headquarters.
Special Services shall be invoiced by Supplier monthly and shall be payable
within thirty (30) days after receipt of invoice for which Special Services
are invoiced.
7. RESPONSIBILITIES OF COMPANY
Company shall be responsible for:
-- ensuring that its End User customers that are provided maintenance
pursuant to Software Maintenance Agreements incorporate and install
Error corrections, Workarounds, and Updates
-- reporting Errors promptly, in English
-- promptly paying all maintenance fees and other amounts payable
hereunder under this Agreement in accordance with the terms of this
Agreement
-- providing all direct contact with Company's customers deemed necessary
by Supplier
-- providing sufficient information for Supplier to duplicate the
circumstances indicating a reported Software defect or Error as
described in the Documentation or as determined by Supplier in
Supplier's reasonable judgment
-- providing all reasonable cooperation to Supplier with respect to
Supplier's furnishing of maintenance hereunder
-- providing all communications to Supplier in the English language
149
<PAGE> 51
ATTACHMENT D
DISABLING DEVICES
The Software has a software licensing mechanism that could disable
operation of the Software. Supplier will furnish to Company configuration tables
necessary to create license files. Each copy of the Software has a unique
identification number called the "hostid". The license file is created for this
specific hostid number.
150
<PAGE> 52
ATTACHMENT E
TRADEMARKS AND TRADENAMES
CEMAX
PerfectVision
DiagnosticView
ClinicalView
VIPStation
QAStation
Network Film Server
ImageServer
ArchiveManager
151
<PAGE> 53
ATTACHMENT F
DESIGNATED COMPUTERS
[TO BE COMPLETED BY AT&T]
152
<PAGE> 54
ATTACHMENT G
SPECIAL SERVICES
The maintenance services set forth in Sections 3, 4 and 5 of Attachment C
may be obtained by Company seven days a week, twenty-four hours per day ("7x24
Support") on an "all or none basis". For purposes of this Attachment G, "all or
none basis" means that if Company elects 7x24 Support, Company must pay 7x24
Support maintenance fees for every copy of the Software licensed or Sublicensed
by Company hereunder. Maintenance fees for 7x24 Support will be Supplier's
standard rates then in effect for 7x24 Support. Supplier's standard rate for
7x24 Support as of the Effective Date is an annual per copy fee equal to [ *
* ] of Supplier's then current Software per copy list fee. Maintenance
fees for such support shall be payable for each copy of the Software licensed or
Sublicensed by Company.
153
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 1
Exhibit 10.10
LIGHT INDUSTRIAL LEASE
BETWEEN
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
("LESSOR")
AND
CEMAX, INC.
("LESSEE")
for the approximately 26,351 square foot premises at
47281 Mission Falls Court, Fremont, California
70
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
------- ----
<C> <S> <C> <C>
1 BASIC LEASE TERMS.............................................................. 1
1.1 Commencement of Lease.................................................. 1
1.2 Lease Term............................................................. 1
1.3 Monthly Rent........................................................... 1
1.4 Lessor's Pro Rata Share................................................ 1
1.5 Security Deposit....................................................... 1
1.6 Use.................................................................... 2
2 PREMISES....................................................................... 2
2.1 Description............................................................ 2
2.2 Work of Improvement.................................................... 2
2.3 Possession............................................................. 2
3 TERM........................................................................... 2
3.1 Term................................................................... 2
3.2 Delay in Commencement.................................................. 2
4 RENT........................................................................... 3
4.1 Monthly Rent........................................................... 3
4.2 Mode of Payment........................................................ 3
4.3 Late Charges........................................................... 3
4.4 Security Deposit....................................................... 3
5 TAXES.......................................................................... 4
5.1 Real Property Taxes.................................................... 4
5.2 Personal Property Taxes................................................ 4
6 INSURANCE...................................................................... 4
6.1 Property Insurance -- Building......................................... 4
6.2 Property Insurance -- Fixtures and Inventory........................... 4
6.3 Lessor's Liability Insurance........................................... 5
6.4 Lessee's Liability Insurance........................................... 5
6.5 Waiver of Subrogation.................................................. 5
6.6 Plate Glass Replacement................................................ 5
6.7 Workers' Compensation Insurance........................................ 5
6.8 Insurance Carriers..................................................... 5
7 MAINTENANCE.................................................................... 6
7.1 Maintenance -- Premises................................................ 6
7.2 Maintenance -- Building and Common Area................................ 7
7.3 Common Area Expenses................................................... 7
7.4 Alterations, Changes and Additions by Lessee........................... 9
7.5 Plumbing............................................................... 10
7.6 Liens.................................................................. 10
7.7 Lessor's Waiver of Lien Rights......................................... 11
8 UTILITIES...................................................................... 11
9 USE OF PREMISES................................................................ 11
9.1 Use.................................................................... 11
9.2 Suitability............................................................ 11
9.3 Use Prohibited......................................................... 11
</TABLE>
71
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE PAGE
------- ----
<C> <S> <C> <C>
10 DEFAULT PROVISIONS............................................................. 12
10.1 Insolvency............................................................. 12
10.2 Non-Payment, Default Or Vacating....................................... 12
10.3 Lessor's Right to Relet................................................ 13
10.4 Right to Terminate..................................................... 13
10.5 Default by Lessor...................................................... 13
10.6 Lessee's Right to Cure Lessor's Default................................ 13
11 EXPIRATION OR TERMINATION...................................................... 14
11.1 Surrender or Possession................................................ 14
11.2 Additional Remedies of Lessor.......................................... 14
11.3 Holding Over........................................................... 14
11.4 Voluntary Surrender.................................................... 15
12 CONDEMNATION OF PREMISES....................................................... 15
12.1 Total Condemnation..................................................... 15
12.2 Partial Condemnation................................................... 15
12.3 Award to Lessee........................................................ 15
13 ENTRY BY LESSOR................................................................ 16
14 INDEMNIFICATION................................................................ 16
15 ASSIGNMENT AND SUBLETTING...................................................... 17
16 DAMAGE OR DESTRUCTION.......................................................... 17
16.1 Right to Terminate on Destruction of Premises.......................... 17
16.2 Damage at End of Term.................................................. 18
16.3 Repairs by Lessor...................................................... 18
16.4 Reduction of Rent During Repairs....................................... 18
16.5 Arbitration............................................................ 19
17 PARKING........................................................................ 19
18 COVENANTS, CONDITIONS AND RESTRICTIONS......................................... 19
19 HAZARDOUS MATERIALS............................................................ 19
19.1 Definition............................................................. 19
19.2 Use.................................................................... 19
19.3 Notice................................................................. 20
19.4 Removal and Disposal................................................... 20
19.5 Indemnity.............................................................. 20
19.6 Right of Entry......................................................... 20
19.7 Inspection............................................................. 21
19.8 Surrender.............................................................. 21
19.9 Survival............................................................... 21
19.10 Lessor's Covenant...................................................... 21
20 OPTION TO EXTEND............................................................... 21
20.1 Option Period.......................................................... 21
20.2 Option Period Base Monthly Rent........................................ 22
20.3 Fair Market Rental Value............................................... 22
20.4 Appraisal.............................................................. 22
</TABLE>
72
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE PAGE
------- ----
<C> <S> <C> <C>
21 MISCELLANEOUS PROVISIONS....................................................... 23
21.1 Waiver................................................................. 23
21.2 Successors and Assigns................................................. 23
21.3 Notices................................................................ 23
21.4 Partial Invalidity..................................................... 23
21.5 Number and Gender...................................................... 23
21.6 Descriptive Headings................................................... 23
21.7 Time is of the Essence................................................. 23
21.8 Entire Agreement....................................................... 24
21.9 Memorandum of Lease.................................................... 24
21.10 Applicable Law......................................................... 24
21.11 Corporate-Authority.................................................... 24
21.12 Litigation Expense..................................................... 24
21.13 Subordination of Leasehold............................................. 24
21.14 Certificate............................................................ 25
21.15 Attornment............................................................. 25
21.16 Quiet Possession....................................................... 25
21.17 Lessor's Authority to Execute.......................................... 25
21.18 Approvals.............................................................. 25
21.19 Reasonable Expenditures................................................ 25
21.20 Exhibits............................................................... 26
</TABLE>
73
<PAGE> 5
LIGHT INDUSTRIAL LEASE
This Light Industrial Lease ("Lease") is made and entered into this 16th
day of July, 1993, between Teachers Insurance and Annuity Association of
America, a New York corporation ("Lessor") and Cemax, Inc., a California
corporation ("Lessee").
ARTICLE 1
BASIC LEASE TERMS
1.1 COMMENCEMENT OF LEASE. The Term of this Lease shall commence on the
earlier of (a) one (1) day after the improvements to be constructed by Lessor
pursuant to EXHIBIT B ("Tenant Improvements") have been substantially completed
(excluding installation of the elevator) and the City of Fremont has made a
final inspection of the Premises and signed off the building inspection, or (b)
the date Lessee actually takes possession of the Premises. Lessor and Lessee
contemplate that the Commencement Date will be September 1, 1993 (the "Target
Commencement Date").
1.2 LEASE TERM. The Term of this Lease shall expire sixty-two (62)
months after the Commencement Date.
1.3 MONTHLY RENT. The base monthly rental shall be as follows, subject
to adjustment as provided in Paragraph 3 of the Work Letter Agreement:
<TABLE>
<CAPTION>
RENTAL MONTH OF TERM BASE MONTHLY RENTAL
--------------------------------------------------- -------------------
<S> <C>
1 through 2 $ 0.00
3 through 14 $12,912.00
15 through 26 $13,966.00
27 through 38 $15,152.00
39 through 50 $16,074.00
51 through 62 $16,865.00
</TABLE>
Notwithstanding anything to the contrary set forth above if Lessor
terminates this Lease because of Lessee's default, base monthly rental shall be
deemed to have been due and payable at the rate of Twelve Thousand Nine Hundred
Twelve and no/100ths Dollars ($12,912.00) per month for the first two months of
the Term (prorated for partial months as provided in Paragraph 4.1).
Upon execution of this Lease by Lessor and Lessee, Lessee shall immediately
deliver to Lessor the Security Deposit set forth in Paragraph 1.4 and Twelve
Thousand Nine Hundred Twelve and no/100ths Dollars ($12,912.00) as prepayment of
base monthly rental for the third (3rd) month of the Term.
As used in this paragraph, the first "rental month" shall mean the month
beginning on the Commencement Date and ending on the same day of the next
calendar month (the monthly "anniversary" of the Commencement Date), and each
succeeding rental month shall begin on the monthly "anniversary" of the
Commencement Date. If the Commencement Date does not fall on the first day of a
calendar month, then the rent payments payable for each partial calendar month
shall be prorated on a per diem basis, based on a 30 day month.
1.4 LESSEE'S PRO RATA SHARE. Lessee's pro rata share shall be
forty-eight and 88/100ths percent (48.88%), which percentage derived by dividing
the square footage of the Premises by the square footage of the Building.
Lessee's pro rata share shall be adjusted appropriately if the amount of space
leased by Lessee in the Building increases.
1.5 SECURITY DEPOSIT. Sixteen Thousand Eight Hundred Sixty-Five and
no/100ths Dollars ($16,865.00).
LIGHT INDUSTRIAL LEASE
This Light Industrial Lease ("Lease") is made and entered into this 16th
day of July, 1993, between Teachers Insurance and Annuity Association of
America, a New York corporation ("Lessor") and Cemax, Inc., a California
corporation ("Lessee").
74
<PAGE> 6
ARTICLE 1
BASIC LEASE TERMS
1.1 COMMENCEMENT OF LEASE. The Term of this Lease shall commence on the
earlier of (a) one (1) day after the improvements to be constructed by Lessor
pursuant to EXHIBIT B ("Tenant Improvements") have been substantially completed
(excluding installation of the elevator) and the City of Fremont has made a
final inspection of the Premises and signed off the building inspection, or (b)
the date Lessee actually takes possession of the Premises. Lessor and Lessee
contemplate that the Commencement Date will be September 1, 1993 (the "Target
Commencement Date").
1.2 LEASE TERM. The Term of this Lease shall expire sixty-two (62) months
after the Commencement Date.
1.3 MONTHLY RENT. The base monthly rental shall be as follows, subject to
adjustment as provided in Paragraph 3 of the Work Letter Agreement:
<TABLE>
<CAPTION>
RENTAL MONTH OF TERM BASE MONTHLY RENTAL
--------------------------------------------------- -------------------
<S> <C>
1 through 2 $ 0.00
3 through 14 $12,912.00
15 through 26 $13,966.00
27 through 38 $15,152.00
39 through 50 $16,074.00
51 through 62 $16,865.00
</TABLE>
Notwithstanding anything to the contrary set forth above if Lessor
terminates this Lease because of Lessee's default, base monthly rental shall be
deemed to have been due and payable at the rate of Twelve Thousand Nine Hundred
Twelve and no/100ths Dollars ($12,912.00) per month for the first two months of
the Term (prorated for partial months as provided in Paragraph 4.1).
Upon execution of this Lease by Lessor and Lessee, Lessee shall immediately
deliver to Lessor the Security Deposit set forth in Paragraph 1.4 and Twelve
Thousand Nine Hundred Twelve and no/100ths Dollars ($12,912.00) as prepayment of
base monthly rental for the third (3rd) month of the Term.
As used in this paragraph, the first "rental month" shall mean the month
beginning on the Commencement Date and ending on the same day of the next
calendar month (the monthly "anniversary" of the Commencement Date), and each
succeeding rental month shall begin on the monthly "anniversary" of the
Commencement Date. If the Commencement Date does not fall on the first day of a
calendar month, then the rent payments payable for each partial calendar month
shall be prorated on a per diem basis, based on a 30 day month.
1.4 LESSEE'S PRO RATA SHARE. Lessee's pro rata share shall be forty-eight
and 88/100ths percent (48.88%), which percentage is derived by dividing the
square footage of the Premises by the square footage of the Building. Lessee's
pro rata share shall be adjusted appropriately if the amount of space leased by
Lessee in the Building increases.
1.5 SECURITY DEPOSIT. Sixteen Thousand Eight Hundred Sixty-Five and
no/100ths Dollars ($16,865.00).
1.6 USE. Sales, marketing, engineering and light assembly of biotech
equipment and other related uses permitted by law.
ARTICLE 2
PREMISES
2.1 DESCRIPTION. Lessor hereby leases to Lessee the premises consisting
of approximately twenty-six thousand three hundred fifty-one (26,351) square
feet ("Premises") in Building 104, Mission Falls business Park, and commonly
known as 47281 Mission Falls Court, Fremont, Alameda County, California,
together with the right to use the common areas of the parcel on which the
Premises are located. EXHIBIT A further
75
<PAGE> 7
describes the Premises being leased hereby, and the parcel of which the Premises
is a part ("Property"). The Property includes Buildings 103 and 104 consisting,
in the aggregate, of approximately one hundred five thousand two hundred
twenty-four (105,224) square feet. Building 104 contains approximately
fifty-three thousand nine hundred seven (53,907) square feet.
2.2 WORK OF IMPROVEMENT. The improvements to be constructed by Lessor
shall be constructed, and their manner of construction shall be performed, as
more fully set forth in EXHIBIT B. Lessor and Lessee shall expend all funds and
do all acts required of them respectively and Lessor shall have the work
performed promptly and diligently in a workmanlike manner. Lessee shall not
interfere with Lessor's construction of the improvements in a manner which
materially impedes the progress of the work.
2.3 POSSESSION. Lessor shall deliver occupancy of the Premises to
Lessee on the date the Tenant Improvements to be constructed by Lessor are
substantially complete.
2.4 TEMPORARY OCCUPANCY. Lessee shall be permitted to occupy
approximately eight thousand (8,000) square feet in the building located at
47315 Mission Falls Court on a temporary basis (the "Temporary Space") during
construction of the tenant improvements to the Premises. Lessee shall be
permitted to occupy the Temporary Space upon execution of this Lease. Lessor
shall, however, have the right, at its expense, to relocate Lessee to other
temporary premises within Mission Falls Business Park on two (2) weeks' notice
if Lessor leases the Temporary Space (which may include the Temporary Space to
which Lessee has been relocated) to Lessor upon the Commencement Date of this
Lease. Lessee's occupancy of the Temporary Space shall be subject to all the
terms and conditions of this Lease, including payment during such occupancy of
Lessee's pro rata share of Common Area Expenses, based upon the square footage
of the Temporary Space occupied by Lessee, except that Lessee shall not be
required to pay any base monthly rent for the use of the Temporary Space.
ARTICLE 3
TERM
3.1 TERM. The Lease shall commence on the date determined pursuant to
Paragraph 1.1 (the "Commencement Date") and shall continue thereafter for the
term specified in Paragraph 1.2 unless sooner terminated pursuant to this Lease.
"Term" shall hereafter mean the term of this Lease.
3.2 DELAY IN COMMENCEMENT. Lessor shall make the Premises available for
occupancy upon final inspection by the City of Fremont. If for any reason Lessor
cannot deliver possession of the Premises to Lessee on the Commencement Date,
such failure shall not affect the validity of this Lease nor shall it extend the
Term or render Lessor liable to Lessee for any loss or damage resulting
therefrom.
Notwithstanding any other provision of this Lease, if the Term of the Lease
does not commence on the Target Commencement Date because Lessor cannot deliver
possession of the Premises to Lessee, due to the fault of Lessor, the Term of
the Lease shall instead commence on the date on which Lessor tenders possession
of the Premises to Lessee, and the Lease shall terminate sixty-two (62) months
from the date on which the Term of the Lease commences. Delays caused by acts of
God and other causes beyond Lessor's reasonable control shall not be deemed
delays due to the fault of Lessor.
ARTICLE 4
RENT
4.1 MONTHLY RENT. Lessee shall pay to Lessor as base monthly rent for
the Premises in advance on the first day of each calendar month of the Term
without deduction, offset, prior notice or demand, in lawful money of the United
States, the sum specified in Paragraph 1.3. All additional amounts of rent or
other charges required to be paid by Lessee under this Lease shall be deemed
additional rent.
4.2 MODE OF PAYMENT. Lessee shall pay all rent due hereunder to Lessor
c/o The Martin Group, 4637 Chabot Drive, Suite 118, Pleasanton, CA 94588, or any
such other place as Lessor may designate from time to time in writing.
76
<PAGE> 8
4.3 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on the
Lessor by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designated agent when due, and such amount
remains unpaid at the end of five (5) business days after Lessee's receipt of
written notice of delinquency specifying the amount past due, Lessee shall pay
to Lessor a late charge equal to five percent (5%) of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.
4.4 SECURITY DEPOSIT. Concurrent with Lessee's execution of this Lease,
Lessee shall deposit with Lessor a security deposit ("Deposit") in the amount
specified in Paragraph 1.5. The Deposit shall be held for the faithful
performance by Lessee of all the terms, covenants and conditions of this Lease
to be kept and performed by Lessee. If Lessee defaults with respect to any
provisions of the Lease, including but not limited to the provisions relating to
the payment of rent and any of the monetary amounts due hereunder, Lessor may
(but shall not be required to) use, apply or retain any part or all of the
Deposit for the payment of any amount which Lessor may spend or become obligated
to spend by reason of Lessee's default or to compensate Lessor for any loss or
damage which Lessor may suffer by reason of Lessee's default. If any portion of
the Deposit is so used or applied, Lessee shall, within ten (10) days after
written demand therefor, deposit cash with Lessor in an amount sufficient to
restore the Deposit to its original amount. Lessee's failure to do so shall be a
material breach of this lease. Lessor shall not be required to keep the Deposit
separate from its general funds, and Lessee shall not be entitled to any
interest on the Deposit. If Lessee fully and faithfully performs every provision
of this Lease to be performed by it, the Deposit, or balance thereof, shall be
returned to Lessee (or, at Lessor's option, to the last assignee of Lessee's
interest hereunder) at the expiration of the Term and after Lessee has vacated
the Premises. In the event of termination of Lessor's interest, in this Lease,
Lessor shall transfer the Deposit to Lessor's successor in interest, whereupon
Lessee agrees to release Lessor from all liability for the return of such
deposit or the accounting therefor.
ARTICLE 5
TAXES
5.1 REAL PROPERTY TAXES. Lessor shall pay, prior to delinquency, all
Real Property Taxes levied or assessed against the Premises during the Term of
this Lease. Lessee shall reimburse Lessor for all Real Property Taxes levied or
assessed against the Premises during the term as provided in Paragraph 7.3
below. If the Premises are not separately assessed, Lessee agrees to pay to
Lessor its pro rata share of all Real Property Taxes levied against the
Property. As used herein, "Real Property Taxes" shall include any form of
assessment, license, fee, levy, penalty or tax imposed by any authority having
the direct or indirect power to tax (excluding Lessor's income taxes), including
any improvement district, as against any legal or equitable interest of Lessor
in the Property or as against Lessor's business of renting the Property;
provided, however, that any so-called "rent tax" shall only be paid by Lessee if
such rent tax is levied in lieu of, and not in addition to, ad valorem real
property taxes currently levied against the Property. Lessee shall have no
obligation to reimburse Lessor for penalties or interest on any installment of
Real Property Taxes provided that Lessee has paid the Common Area Expenses
within the time period specified in Paragraph 7.3(c) below. Lessee's share of
Real Property Taxes shall be equitably prorated to cover only the period of time
within the fiscal tax year during which this Lease is in effect. With respect to
any assessments which may be levied against or upon the Premises, and which may
be paid in annual installments, only the amount of such annual installments
(with appropriate proration for any partial year) and interest due thereon shall
be included within the compilation of the annual Real Property Taxes.
77
<PAGE> 9
5.2 PERSONAL PROPERTY TAXES. Lessee shall pay before delinquency all
taxes levied or assessed on Lessee's fixtures, improvements, furnishings,
merchandise, equipment and personal property in and on the Premises, whether or
not affixed to the real property.
ARTICLE 6
INSURANCE
6.1 PROPERTY INSURANCE -- BUILDING. During the Term, Lessor shall keep
the Building, including the Tenant Improvements but excluding any other property
which is Lessee's Property, insured against loss or damage by fir and those
risks normally included in the term "all risk" in such amounts as are acceptable
to lessor. Any recovery received from said insurance policy shall be paid to
Lessor.
6.2 PROPERTY INSURANCE -- FIXTURES AND INVENTORY. During the Term,
Lessee shall, at its sole expense, maintain insurance with "all risk" coverage
on any fixtures, leasehold improvements, furnishings, merchandise, equipment or
personal property in or on the Premises, whether in place as of the date hereof
or installed hereafter, for the full replacement value thereof, and Lessee shall
also have sole responsibility and cost for maintaining any other types of
insurance as Lessee elects to carry. Any deductibles shall be paid by Lessee.
Lessee shall have no obligation to insure any property in the Premises, other
than Lessee's Property (defined below), from fire or any other casualty and
Lessee shall be entitled to all insurance proceeds payable with respect to
Lessee's Property.
6.3 LESSOR'S LIABILITY INSURANCE. During the Term, Lessor shall
maintain at its sole cost a policy or policies of commercial general liability
insurance insuring Lessor (and such others as designated by Lessor) against
liability for bodily injury, death and property damage on or about the Property,
with combined single limit coverage of not less than Two Million Dollars
($2,000,000).
6.4 LESSEE'S LIABILITY INSURANCE. During the Term, Lessee shall, at its
sole expense, maintain for the mutual benefit of Lessor and Lessee,
comprehensive general liability and property damage insurance against claims for
bodily injury, death or property damage occurring in or about the Premises or
arising out of the use or occupancy of the Premises, with combined single limit
coverage of not less than One Million Dollars ($1,000,000). The limits of such
insurance shall not limit the liability of Lessee. Lessee shall furnish to
Lessor prior to the Commencement Date, and at least thirty (30) days prior to
the expiration date of any policy, certificates indicating that the liability
insurance required of Lessee above is in full force and effect; that Lessor has
been named as an additional insured; and that all such policies will not be
canceled unless thirty (30) days' prior written notice of the proposed
cancellation has been given to Lessor. The insurance shall be with insurers
reasonably approved by Lessor and with policies in form reasonably satisfactory
to Lessor. Said policies shall provide that Lessor, although an additional
insured, may recover for any loss suffered by Lessor by reason of Lessee's
negligence, and shall include a broad form liability endorsement. Lessee's
insurance shall be primary and non-contributing with any other insurance
available to Lessor.
6.5 WAIVER OF SUBROGATION. Lessor hereby releases Lessee, and Lessee
hereby releases Lessor, and their respective officers, agents, employees and
servants, from any and all claims or demands of damages, loss, expense or injury
to the Premises, or to the furnishings and fixtures and equipment, or inventory
or other property of either Lessor or Lessee in, about or upon the Premises,
which is caused by or results from perils, events or happenings which are the
subject of insurance carried by the respective parties and in force at the time
of any such loss; provided, however, that such waiver shall be effective only to
the extent such insurance is not prejudiced thereby. Each party shall cause each
insurance policy obtained by it to provide that the insurance company waives all
right of recovery by way of subrogation against either party in connection with
any damage covered by any policy.
6.6 PLATE GLASS REPLACEMENT. Lessee shall replace, at its sole expense,
any and all plate glass and other glass in and about the Premises which is
damaged or broken by vandalism. If any plate glass or other glass in and about
the Premises is damaged or broken by causes other than vandalism, then Lessee
shall pay Lessor an amount equal to Lessor's cost of replacement, provided that
such amount shall not exceed the deductible then in effect on Lessor's insurance
policy, if any, covering the damaged glass. Nothing herein shall be construed to
require Lessor to carry plate glass insurance.
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6.7 WORKERS' COMPENSATION INSURANCE. Lessee shall, at its sole expense,
maintain and keep in force during the Term a policy or policies of Workers'
Compensation Insurance and any other employee benefit insurance sufficient to
comply with all applicable laws, statutes, ordinances and governmental rules,
regulations or requirements.
6.8 INSURANCE CARRIERS. The insurance required to be carried by the
parties hereunder shall be written by companies licensed to do business in the
State of California which have a rating of at least A:X as set forth in the most
current issue of BEST'S INSURANCE GUIDE.
ARTICLE 7
MAINTENANCE
7.1 MAINTENANCE -- PREMISES. Throughout the Term, Lessee agrees to keep
and maintain the Premises and all improvements and appurtenances upon the
Premises, including all sewer connections (within the interior of the Premises),
plumbing, heating and cooling appliances, wiring and glass, in good order,
condition and repair, including the replacement of such improvements and
appurtenances when necessary, provided that Lessee shall not be responsible for
insured damage to the foregoing or damages to the foregoing caused by Lessor or
its agents or by other tenants. Lessee hereby expressly waives the provisions of
any law permitting repairs by a tenant at the expense of a landlord, including,
without limitation, all rights of Lessee under Section 1941 and 1942 of the
California Civil Code. Lessee agrees to keep the Premises clean and in sanitary
condition as required by the health, sanitary and police ordinances and
regulation of any political subdivision having jurisdiction, and provide, at its
own expense, trash removal and janitorial services. Lessee further agrees to
keep the interior of the Premises, such as the windows, floors, walls, doors,
showcases and fixtures clean and neat in appearance and to remove all trash and
debris which may be found in or around the Premises. If any repairs and/or
maintenance to be made by Lessee are necessary, Lessor shall have the right to
cause such repairs and/or maintenance to be made if Lessee fails to cause such
repairs, or commence to cause such repairs and diligently prosecute same to
completion, within thirty (30) days after written notice from Lessor to Lessee.
Lessee agrees that upon demand, it shall pay to Lessor the cost of any such
repairs, together with accrued interest from the date of payment at the interest
rate specified in Paragraph 11.2 below, which interest rate is hereinafter
referred to as the "Reference Rate". Notwithstanding anything to the contrary
above, Lessor may elect to enter into one or more maintenance contracts with
third parties for the provision of all or a part of Lessee's maintenance
obligations as set forth in this paragraph, excluding janitorial services. If
Lessor elects to enter into one or more maintenance contracts, such maintenance
contracts shall be let to licensed, reputable contractors, selected through a
competitive bidding process. Upon such election, Lessee shall be relieved from
its obligations to perform only those maintenance obligations covered by such
maintenance contracts, and Lessee shall bear one hundred percent (100%) of the
costs of any such maintenance contracts. All such costs shall be paid in advance
on a monthly basis with Lessee's rent payments.
Notwithstanding the foregoing to the contrary, Lessee shall have no
responsibility to undertake any repair, maintenance or improvement, or pay any
of the costs thereof (i) necessitated by the negligence, willful misconduct or
violation of Laws by Lessor or its agents; (ii) occasioned by fire, acts of God
or other casualty or by the exercise of the power of eminent domain; (iii)
required as a consequence of any defect in the construction of the Premises as
of the Commencement Date; (iv) for which Lessor has a right of reimbursement
from others; or (v) which would be treated as a capital expenditure under
generally accepted accounting principles. Any repairs or replacements otherwise
required of Lessee which would result in expenditures that would constitute a
capital expenditure shall, unless required because of Lessee's particular use of
the Premises or any Alterations to the Premises made by Lessee, be paid for by
Lessor, and the cost of thereof shall be amortized over the useful life of the
equipment or improvement, and Lessee shall pay as additional rent each month
that portion of such amortized cost as properly allocable to such month.
7.2 MAINTENANCE -- BUILDING AND COMMON AREA. Except for damage caused
by any negligent or intentional act or omission of Lessee, Lessee's employees,
suppliers, shippers, customers, or invitees, which is not covered by insurance
required to be carried by Lessor under Paragraph 6.1 above, (in which event
Lessee shall repair the damage) Lessor, at Lessor's expense, shall keep in good
condition and repair the foundations,
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floor slab and upper floor decking, exterior walls, the structural condition of
interior bearing walls, and the roof structure of the Building.
Lessor shall maintain the Common Areas of the Property in reasonably good
working order and condition, except that damage occasioned by the act of Lessee
and not covered by the insurance described in Article 6 shall be repaired by
Lessor at Lessee's expense. Lessee shall notify Lessor in writing of any repairs
or maintenance to the Common Areas which may be required and Lessor shall have a
reasonable time to make such repairs. The Common Areas of the Property shall be
comprised of all non-leasable space including, but not limited to, the roof
membrane of the Building, sidewalks, parking areas, private roadways within the
Property, water amenities, exterior lighting and landscaping. Lessor shall
warrant the good condition and repair of the roof membrane for the first twelve
(12) months of the Term and shall maintain and repair the roof membrane at
Lessor's sole expense during such 12-month period; provided, however that Lessee
shall reimburse Lessor for the cost of any repairs required due to the
negligence or willful misconduct of Lessee, its agents, employees or
contractors.
7.3 COMMON AREA EXPENSES.
a. COMMON AREA EXPENSES DEFINED. The term "Common Area Expenses"
shall mean all expenses, costs and disbursements of every kind and nature
which Lessor shall pay or become obligated to pay because of or in
connection with the ownership, management, maintenance, repair and
operation of the Building and Common Area and such additional Building or
Common Area facilities in subsequent years as may be determined by Lessor
to be necessary, including but not limited to, the following:
(i) wages and salaries of all employees engaged in the operation,
maintenance and security of the Building and Common Area, including
taxes, insurance and benefits relating thereto; provided, however, that
if any such employees are engaged in the management of other properties
in addition to Mission Falls Business Park, only that portion of such
wages, salaries, taxes, insurance and benefits properly allocable to the
management of Mission Falls Business Park shall be billed as a Common
Area Expense; and the rental cost of overhead of any office and storage
space used to provide such services;
(ii) cost of all supplies, materials and labor used in the
operation, repair, replacement and maintenance of the Building and
Common Area;
(iii) cost of all utilities, including surcharges, for the Common
Area, including the cost of water, sewer, gas, power, heating, lighting,
air conditioning and ventilating; and the cost of all license, permit
and inspections fees;
(iv) cost of all insurance which Lessor or Lessor's lender deems
necessary for the Building and Common Area such as the cost of
"All-Risk" property insurance, including, at Lessor's option, earthquake
and flood coverage (provided, however, that if earthquake insurance is
no longer available at commercially reasonable rates and Lessor elects
to continue to maintain earthquake insurance coverage for the Building,
only that portion of the premium which is commercially reasonable shall
be included as a Common Area Expense), insurance against loss of rents
on an "All-Risk" basis for a period not exceeding twelve (12) months, a
lender's loss payable endorsement in favor of Lessor's lender and naming
Lessor and its subsidiaries, directors, agents, officers and employees
as named insured; and casualty and liability insurance applicable to the
Building and Lessor's personal property used in connection therewith,
naming Lessor and its subsidiaries, directors, agents, officers and
employees as additional insureds;
(v) cost of repairs and general maintenance of the Building and
common Area (excluding repairs and general maintenance paid by proceeds
of insurance or by Lessee pursuant to Article 7, or other third parties,
and alterations attributable solely to lessees of the Building);
(vi) a reasonable management fee for the manager of the Building;
(vii)the costs of any additional services not provided to the
Building and Common Area at the Commencement Date, but thereafter
provided by Lessor in its management of the same;
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(viii)the cost of any capital improvements made to the Building
after the Commencement Date that (A) reduce other operating expenses,
(B) to replace existing Common Area facilities, or
(C) are required under any governmental law or regulation that was not
applicable to the Building or the Common Area at the Commencement Date,
all such costs thereof to be amortized over the useful life of the
improvement consistent with generally accepted accounting principles;
and
(ix) Real Property Taxes.
b. EXCLUSIONS FROM COMMON AREA EXPENSES. Common Area Expenses shall
not include: (i) the cost of any additional or extraordinary services
provided to other tenants of the Building; (ii) costs paid for directly by
Lessee; (iii) principal and interest payment on loans secured by deeds of
trust recorded against the Building; (iv) real estate sales or leasing
brokerage commissions; (v) executive salaries of off-site personnel
employed by Lessor excepting the management fee referenced in Paragraph
7.3(a)(vi) above; or (vi) the cost of any repairs to the foundations, floor
slab and upper floor decking, exterior walls, the structural condition of
interior bearing walls, or the roof structure of the Building; (vii) costs
occasioned by the negligence of willful misconduct of, or violation of Laws
by, Lessor, its agents, employees or contractors; (viii) costs occasioned
by fire, acts of God, or other casualties or by the exercise of the power
of eminent domain; (ix) costs resulting directly or indirectly form the
presence of Hazardous Materials on the Property, except to the extent
caused by the use, storage, or disposal of Hazardous Materials by Lessee,
its agents, employees, contractors, invitees or subtenants; (x) costs
relating to repairs, alterations, improvements, equipment and tools which
would properly be capitalized under generally accepted accounting
principles, except as otherwise expressly permitted under Paragraph
7.3(a)(viii) above;(xi) costs for which Lessor has a right of reimbursement
from other; (xii) costs to correct any construction defect in the Building
or the Common Areas not resulting fro the Tenant Improvements undertaken by
Lessee, or to comply with any CC&Rs or underwriters requirement applicable
to the Premises; (xiii) depreciation, amortization or other expense
reserves, except as expressly provided herein; (xiv) costs of insurance for
coverage not customarily paid by tenants of similar properties in the
vicinity of the Property, and co-insurance payments; and (xv) any fee,
profit or compensation retained by Lessor or its affiliates for management
and administration of the Property in excess of the management fee which
would be charged by a professional management company providing management
services for comparable projects in the vicinity of the Property.
Additionally, Common Area Expenses shall not include all utilities and
janitorial services which shall be contracted for and paid for by Lessee,
commencing on the Lease Commencement Date.
c. ADJUSTMENT.
(i) MONTHLY PAYMENTS. Lessee shall pay to Lessor on the first
day of each calendar month of the Term, an amount estimated by Lessor to
the Lessee's pro rata share of the Common Area Expenses (the
"Expenses"). The foregoing Expenses may be adjusted by Lessor at the end
of any calendar quarter on the basis of Lessor's experience and
reasonably anticipated costs. Any such adjustment shall be effective as
of the calendar month next succeeding receipt by Lessee of written
notice of such adjustment.
(ii) ACCOUNTING. Within one hundred twenty (120) days following
the end of each calendar year, Lessor shall furnish to Lessee a
statement of Lessee's pro rate share of the actual Common Area Expenses
(the "Actual Expenses") for the calendar year and the payments made by
lessee with respect to such period. If the Expenses paid by Lessee for
such period are less than the amount of Actual Expenses, Lessee shall
pay Lessor the deficiency within ten (10) days after receipt of such
statement. Any overpayment made by Lessee shall be credited against the
next monthly payment(s) of Expenses due from Lessee.
(iii) PRORATION. Lessee's obligation to pay the Expenses shall
be prorated on the basis of a 365-day year to account for any fractional
portion of a year included at the commencement or expiration of the Term
of this Lease.
(iv) SURVIVAL. Lessee's obligation to pay for any Expenses
pursuant to this paragraph shall survive any termination of this Lease.
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d. RIGHT TO INSPECT LESSOR'S BOOKS AND RECORDS. Lessor shall
maintain complete and accurate books and records of the Common Area
Expenses billed to Lessee. Lessee shall have the right to inspect Lessor's
records for the prior calendar year within ninety (90) days after Lessee's
receipt of Lessor's statement of the Actual Expenses for that calendar
year. Lessee shall conduct such inspection during normal business hours
upon not less than two (2) business days' prior notice to Lessor. If Lessee
questions or disputes any Common Area Expenses billed to Lessee, Lessee
shall so notify Lessor in writing, and Lessor and Lessee shall attempt in
good faith to resolve any dispute regarding such expenses. If Lessor and
Lessee fail to resolve the dispute within thirty (30) days after Lessee has
notified Lessor of the expenses questioned, Lessee shall be permitted to
conduct an audit of Lessor's books and records of the Common Areas
Expenses, using an independent nationally recognized accounting firm. If
the audit discloses that the Common Area Expenses charged to Lessee for the
period under review were overstated by five percent (5%) or more, Lessor
shall promptly pay to Lessee the reasonable cost of such audit; otherwise
the cost of the audit shall be paid by Lessee. Lessor shall promptly refund
to Lessee the full amount of any overpayment together with interest at the
Reference Rate from the date of Lessee's payment of such overcharge.
7.4 ALTERATIONS, CHANGES AND ADDITIONS BY LESSEE. Lessee shall be
permitted to construct alterations, additions, and improvements to the Premises
("Alterations") with the prior written consent of Lessor, which shall not be
unreasonably withheld; provide, however, that any single Alteration which is
nonstructural in nature and limited to the interior of the Building only, that
can be constructed at a cost not exceeding Ten Thousand and no/100ths Dollars
($10,000.00), may be undertaken by Lessee without the consent of Lessor and
without any prior notice to Lessor. If Lessor's consent is required for any
Alterations, and Lessor does not notify Lessee in writing of Lessor's approval
or disapproval of such Alterations within fifteen (15) business days after
Lessee's request for approval (which shall include copies of the plans and
specifications for Lessee's proposed Alterations), then Lessor shall be deemed
to have approved the proposed
Alterations. Lessor shall have the right to withhold its consent to structural
or exterior Alterations at Lessor's sole and absolute discretion. As used
herein, Alterations include utility installations such as ducting, power panels,
fluorescent fixtures, base heaters, conduit and wiring. As a condition to giving
such consent, Lessor may require that Lessee provide Lessor a payment and
completion bond from a California surety company at Lessee's expense if the cost
of such Alterations exceeds Fifty Thousand and no/100ths Dollars ($50,000.00).
All Alterations to be made to the Premises shall be under the supervision of a
competent architect and made in accordance with plans and specifications which
have been furnished to and approved by Lessor prior to commencement of work. If
the written consent of Lessor to any proposed Alterations by Lessee shall have
been obtained, Lessee agrees to advise Lessor in writing of the date upon which
such alterations will commence in order to permit Lessor to post a notice of
nonresponsibility. all such Alterations shall be constructed in a good and
workmanlike manner in accordance with all ordinances and laws relating thereto.
If Lessor's consent to any Alterations is required, Lessor shall include with
its notice of consent a statement confirming either that (i) the Alterations
approved by Lessor may remain in the Premises at Lease termination, or (ii) the
Alterations must, as a condition of Lessor's consent, be removed by Lessee at
Lease termination. Lessee shall be required to remove at Lease termination only
those Alterations which Lessor has expressly required to be removed in its
written notice to Lessee consenting to such Alterations, those Tenant
Improvements which Lessor has expressly required Lessee to remove pursuant to
the Work Letter Agreement attached as EXHIBIT B, and any Alterations installed
in the Premises by Lessee without Lessor's consent where such consent was
expressly required by the terms of this Paragraph 7.4.
With respect to any Alterations which Lessee is entitled to make hereunder,
Lessee shall use only duly qualified, reputable and licensed contractors and
subcontractors for any work commenced after the Commencement Date. Lessee's
selection of contractors and subcontractors shall be subject to Lessor's prior
written approval, which shall not be unreasonably withheld. Lessor shall not
have the right to disapprove any contractor proposed by Lessee solely because
such contractor is nonunion. Lessee shall provide to Lessor copies of all plans,
specifications and drawings of all Alteration prior to the commencement of any
work relating thereto. All Alterations, Tenant Improvements, trade fixtures and
personal property installed in the Premises at Lessee's expense ("Lessee's
Property") shall remain the property of Lessee during the Term and Lessee shall
have the right to depreciate or amortize the cost of the same and claim and
collect investment tax
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credits and all other tax benefits with respect to Lessee's Property. Except for
Alterations which cannot be removed without structural damage to the Premises,
Lessee shall have the right at any time to remove Lessee's Property from the
Premises, provided that Lessee repairs all damage caused by such removal.
7.5 PLUMBING. Lessee shall not use the plumbing facilities for any
purpose other than that for which they were constructed. The expense of any
breakage, stoppage or other damage relating to the plumbing and resulting from
the introduction by Lessee, its agents, employees or invitee of foreign or
harmful substances into the plumbing facilities shall be borne by Lessee.
7.6 LIENS. Lessee shall keep the Premises and the Building free from
any liens arising out of work performed, materials furnished or obligations
incurred by Lessee and shall indemnity, hold harmless and defend Lessor from any
liens and encumbrances arising out of any work performed or materials furnished
by or at the direction of Lessee. In the event that Lessee shall not, within
twenty (20) days following Lessee's receipt of written demand from Lessor, cause
such lien to be released of record by payment or posting of a proper bond,
Lessor shall have, in addition to all other remedies provided herein and by law,
the right, but not the obligation, to cause the same to be released by such
means as it shall deem proper, including payment of the claim giving rise to
such lien. All such sums paid by Lessor and all expenses incurred by it in
connection therewith including reasonable attorneys' fees and costs shall be
payable to Lessor by Lessee on demand with interest at the Reference Rate.
Lessor shall have the right at all times to post and keep posted on the Premises
any notices permitted or required by law, or which are proper, for the
protection of Lessor and the Premises, and any other party having an interest
herein, from mechanics, and materialments liens, and Lessee shall give to Lessor
at least ten (10) business days' prior written notice of the expected date of
commencement of any work relating to changes, alterations or additions to the
Premises.
7.7 LESSOR'S WAIVER OF LIEN RIGHTS. Lessor shall have no lien or other
interest in any item of Lessee's Property located in the Premises or elsewhere,
and Lessor hereby waives all such liens and interests. Within ten (10) business
days after Lessee's request, Lessor shall execute documents in form reasonably
acceptable to Lessor which duly evidence Lessor's waiver of any right, title,
lien or interest in Lessee's Property located in the Premises.
ARTICLE 8
UTILITIES
Lessee shall pay prior to delinquency throughout the Term the cost of
water, gas, heating, cooling, sewer, telephone, electricity, garbage, air
conditioning and ventilating, janitorial services, landscape maintenance (except
Common Area landscape maintenance) and all other materials and utilities
supplied to the Premises. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion of all charges which are
jointly metered, the determination to be made by Lessor in goof faith, and
payment to be made by Lessee within fifteen (15) days of receipt of the
statement for such charges.
ARTICLE 9
USE OF PREMISES
9.1 USE. The Premises shall be used and occupied by Lessee for only the
purposes specified in Paragraph 1.6 and for no other purposes whatsoever without
obtaining the prior written consent of Lessor, which shall not be unreasonably
withheld.
9.2 SUITABILITY. This Lease shall be subject to all applicable zoning
ordinances and to any municipal, county and state laws and regulations governing
and regulating the use of the Premises. Lessee acknowledges that neither Lessor
nor Lessor's agent has made any representation or warranty as to the suitability
of the Premises for the conduct of Lessee's business.
9.3 USES PROHIBITED.
a. RATE OF INSURANCE. Lessee shall not do or permit anything to
be done in or about the Premises which will cause an increase in the
existing rate of insurance upon the Premises (unless Lessee shall pay
an increased premium as a result of such use or acts) or cause the
cancellation of
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any insurance policy covering the Premises or the Building of which the
Premises may be a part, nor shall Lessee sell or permit to be kept,
used or sold in or about such Premises any articles which may be
prohibited by a standard form policy of fire insurance.
b. INTERFERENCE WITH OTHER TENANTS. Lessee shall not do or
permit anything to be done in or about the Premises which will in any
way unreasonably obstruct or interfere with the rights of other tenants
or occupants of the Building or injure or annoy them or use or allow
the Premises to be used for any unlawful purpose, nor shall Lessee
cause, maintain or permit any nuisance in, or about the Premises.
Lessee shall not commit or suffer to be committed any waste in or upon
the Premises.
c. APPLICABLE LAWS. Lessee shall not conduct any auctions on
the Premises or use the Premises or permit anything to be done in or
about the Premises which will in anyway conflict with any law, statute,
zoning restriction, ordinance, governmental rule, regulation or
requirements of daily constituted public authorities whether now in
force or which may hereafter be enacted or promulgated. Lessee shall at
its sole cost and expense promptly comply with all laws, statutes,
ordinances and governmental rules, regulations or requirements now in
force or which may hereafter be in force (including the Americans With
Disabilities Act as it applies to the Premises and to any portion of
the Property affected by Lessee's possession and use of the Premises)
and with the requirements of any board of fire underwriters or other
similar body now or hereafter constituted relating to or affecting the
condition, use or occupancy of the Premises. The judgment of any court
of competent jurisdiction or the admission of Lessee in any action
against Lessee whether Lessor be a party thereto or not, that Lessee
has violated any law, statute, ordinance or government rule, regulation
or requirement, shall be conclusive of that fact as between Lessor and
Lessee.
To the best of Lessor's knowledge, as of the Commencement Date,
the Premises are in compliance with all requirements of the CC&R's, all
underwriters requirements, and rules, regulations, statutes,
ordinances, laws and building codes applicable thereto ("Laws"). Except
as otherwise provided in Paragraph 7.3, Lessee shall not be required to
pay the cost of complying with the CC&R's, underwriters requirements or
Laws requiring the construction of improvements which are properly
capitalized under general accounting principles, unless such compliance
is required solely because of Lessee's particular use of the Premises
or any Alterations or Tenant Improvements installed in the Premises by
Lessee.
d. SIGNS. Lessee shall have the right to install two (2) signs
on the Building exterior, subject to Lessee's receipt of all applicable
governmental approvals from the City of Fremont, Lessor's consent as to
the exact location, size, style and color of the sign, and the CC&Rs
(defined in Article 18). Lessee shall have the right, if permitted by
the City of Fremont, to install a sign on the exterior of the Building
at the front of the Premises substantially equal in size to the
adjacent tenant's sign now installed on the Building. The design and
materials of Lessee's sign shall be substantially equivalent to such
adjacent tenant's sign. Lessee shall not place any other sign upon the
Premises without Lessor's prior written consent, which consent shall
not be unreasonably withheld.
ARTICLE 10
DEFAULT PROVISIONS
10.1 INSOLVENCY. If, during the Term, Lessee shall be declared insolvent
or bankrupt, or if any assignment of Lessee's property shall be made for the
benefit of creditors or otherwise, or if Lessee's leasehold interest herein
shall be levied upon under execution or seized by virtue of any writ of any
court of low, or a trustee in bankruptcy or a receiver be appointed for the
property of Lessee, any such occurrence shall be a material default of this
Lease, and entitle Lessor at its election to terminate the Lease.
10.2 NON-PAYMENT, DEFAULT OR VACATING. If Lessee shall (a) default in
the payment of rent or any charge owing hereunder and the default is not cured
within five (5) business days after receipt of written
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notice from Lessor or (b) default in performing any non-monetary covenant,
condition, agreement or obligation of Lessee hereunder and the default is not
cured within thirty (30) calendar days after receipt of written notice from
Lessor (unless the nature of Lessee's obligation is such that more than thirty
(30) calendar days is required for performance and Lessee promptly commences
performance within such 30-day period and thereafter diligently prosecutes the
same to completion) then the Lease and all rights, title and interest of Lessee
hereunder shall, at the option of Lessor, terminate and Lessee will then quit
and surrender the Premises and improvements thereon to Lessor, or Lessor may
pursue any other available remedy. Lessee shall not be in default if the
Premises or any part thereof are left vacant so long as Lessee is paying all the
rent and other charges owing by it and performing all other obligations under
the Lease.
10.3 LESSOR'S RIGHT TO RELET. Upon recovery of possession of the
Premises after Lessee's breach of this Lease, Lessor may, at its option, at any
time and from time to time, remove any signs and property of Lessee therefrom
and relet the Premises or any part thereof at such rent and upon such terms and
conditions as Lessor in its discretion shall determine, and the term of such
reletting may be for a terms extending beyond the Term. For the purpose of such
reletting, Lessor is authorized to make repairs or alterations in or to the
Premises at the sole expense of Lessee as may be necessary or desirable for the
purpose of such reletting. The costs and expenses of such reletting, including
repairs and alterations and any reasonable real estate commissions associated
with such reletting shall be paid by Lessee. If the amount realized from such
reletting is less than the monthly rent payable hereunder plus all other monthly
charges to be paid by Lessee hereunder, less any amount of rental loss for the
same period which Lessee proves could be reasonably avoided by Lessor, Lessee
will pay such deficiency each month to Lessor. No re-entry of the Premises by
Lessor shall be construed as an election to terminate this Lease unless written
notice of such intention is given to Lessee or unless termination thereof is
decreed by a court of competent jurisdiction.
10.4 RIGHT TO TERMINATE. Lessor may at any time after the times
prescribed in Paragraph 10.2 elect to terminate the Lease by reason of such
uncured default. If Lessor shall at any time terminate this Lease by reason of
default of Lessee, then Lessor, in addition to any other remedy it may have, may
recover from Lessee any damages incurred by reason of such default including,
without limitation, the cost of recovering the Premises, and the amount by which
the rent then unpaid for the balance of the Term exceeds the amount of such
rental loss for the same period which the Lessee proves could be reasonably
avoided by Lessor.
10.5 DEFAULT BY LESSOR. Lessor will be in default if Lessor fails to
perform any obligation required of Lessor (other than a delay in delivery of
possession as provided for in Paragraph 3.2) within thirty (30) days after
written notice by Lessee, specifying wherein Lessor has failed to perform such
obligation; provided that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance, then Lessor shall not be in
default if Lessor promptly commences performance within such thirty (30) day
period and thereafter diligently prosecutes the same to completion.
10.6 LESSEE'S RIGHT TO CURE LESSOR'S DEFAULT. If Lessor should fail to
perform any of its obligations under this Lease and such failure continues for
thirty (30) days following written notice from Lessee (unless the nature of
Lessor's obligation is such that more than thirty (30) days is required for
performance and Lessor commences such performance within such 30-day period and
thereafter diligently prosecutes the same to completion), Lessee shall have the
right, in addition to any other rights or remedies Lessee may have under this
Lease, or at law or in equity, to cure such default. All sums paid by Lessee in
effecting such cure, together with interest thereon at the Reference Rate, shall
be reimbursed to Lessee by Lessor within thirty (30) days after Lessor's receipt
of an itemized statement therefor.
ARTICLE II
EXPIRATION OR TERMINATION
11.1 SURRENDER OF POSSESSION. Lessee agrees to deliver up and surrender
to Lessor possession of the Premises and all improvements thereon, subject to
the terms of Paragraph 7.4, in as good order and condition as when possession
was taken by Lessee, ordinary wear and tear and elements of age, acts of God,
casualties, condemnations, Hazardous Materials (other than those stored, used,
or disposed of by Lessee, its agents, employees, contractors, invitees or
subtenants in or about the Premises), and Alterations or Tenant
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Improvements which Lessee is permitted to leave at the Premises at Lease
termination excepted. Upon termination of this Lease, Lessor may re-enter the
Premises and remove all persons and property therefrom. If Lessee shall fail to
remove any effects which it is entitled to remove from the Premises upon the
termination of this Lease, for any cause whatsoever, Lessor, at its option, may
remove the same and store or dispose of them, and Lessee agrees to pay to Lessor
on demand any and all expenses incurred in such removal and in making the
Premises free from all dirt, litter, debris and obstruction, including all
storage and insurance charges. If the Premises are not surrendered at the end of
the Term, Lessee shall defend, indemnify and hold Lessor harmless from all loss
or liability resulting from delay by Lessee in so surrendering the Premises,
including, without limitation, any claims made by any succeeding lessee founded
on such delay.
11.2 ADDITIONAL REMEDIES OF LESSOR. In addition to the remedies granted
to Lessor pursuant to this Lease and pursuant to law, Lessor shall have the
rights provided under Section 1951.2 of the California Civil Code. Lessor may
also keep the Lease in effect and enforce by an action at law or in equity all
of its rights and remedies under the Lease, including (a) the right to recover
the rent and other sums as they become due by appropriate legal action, (b) the
remedies of injunctive relief and specific performance to compel Lessee to
perform its obligations under this Lease, and (c) the right to cause a receiver
to be appointed to administer the Premises. Lessor may make any payment or
perform any obligation of Lessee if Lessee has not cured the default in question
within the applicable cure period. All sums paid by Lessor and all necessary
costs of such performance by Lessor with interest thereon at the Reference Rate
shall be reimbursed to Lessor by Lessee within fifteen (15) days after Lessee's
receipt of a statement therefor. Lessor shall have the same rights and remedies
in the event of nonpayment of such amounts by Lessee as in the case of failure
by Lessee in the payment of rent. Interest shall be at an annual rate equal to
the floating commercial prime lending rate reported in The Wall Street Journal
most recently published before the date of expenditure, but not to exceed any
applicable usury limitations (which interest rate is referred to herein as the
"Reference Rate"). No act by or on behalf of Lessor intended to mitigate the
adverse effect of Lessee's default shall constitute a termination of the Lease
or Lessee's right to possession unless Lessor gives Lessee written notice of
termination. Any such termination shall not relieve Lessee from the payment of
any sums then due Lessor or from any claim for damages resulting from Lessee's
default.
11.3 HOLDING OVER. If Lessee remains in possession of the Premises after
expiration of the term and if Lessor and Lessee have not executed an express
written agreement as to such holding over, then such occupancy shall be a
tenancy from month to month at a monthly rental equivalent of 125% of the
monthly rental in effect immediately prior to such expiration, such payments to
be made as herein provided. In the event of such holding over all of the terms
of this Lease including the payment of all charges owing hereunder other than
rent shall remain in force and effect on said month to month basis.
11.4 VOLUNTARY SURRENDER. The voluntary or other surrender of this Lease
by Lessee, or a mutual cancellation thereof, shall not work a merger, but shall,
at the option of Lessor, terminate all or any existing subleases or
subtenancies, or operate as an assignment to Lessor of any or all such subleases
or subtenancies.
ARTICLE 12
CONDEMNATION OF PREMISES
12.1 TOTAL CONDEMNATION. If the entire Premises, whether by exercise of
governmental power or the sale or transfer by Lessor to any condemnor under
threat of condemnation or while proceedings for condemnation are pending, at any
time during the Term, or such portion of the entire Premises, shall be taken by
condemnation such that there does not remain a portion suitable for the conduct
of Lessee's business therein (as determined by Lessee in Lessee's reasonable
judgment), this Lease shall then terminate as of the date transfer of possession
is required. Upon such condemnation, all rent shall be paid up to the date
transfer of possession is required, and Lessee shall have no claim against
Lessor for the value of the unexpired term of this Lease.
12.2 PARTIAL CONDEMNATION. If any portion of the Premises is taken by
condemnation during the Term, whether by exercise of governmental power or the
sale or transfer by Lessor to any condemnor under threat of condemnation or
while proceedings for condemnation are pending, this Lease shall remain in full
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force and effect; except that in the event a partial taking leaved the Premises
unfit for the conduct of Lessee's business therein (as determined by Lessee in
Lessee's reasonable judgement), then Lessee shall have the right to terminate
this lease effective on the date transfer to possession is required. Lessee may
elect to exercise its right to terminate this Lease pursuant to this paragraph
by serving written notice to Lessor within thirty (30) days of Lessee's receipt
of notice of condemnation. All rent shall be paid up to the date of termination;
and Lessee shall have no claim against Lessor for the value of any unexpired
term of this Lease. If this Lease shall not be canceled, the rent after such
partial taking shall be that percentage of the adjusted base rent specified
herein, equal to the percentage which the square footage of the undertaken part
of the Premises immediately after the taking bears to the square footage of the
entire Premises immediately before the taking. If Lessee's continued use of the
Premises requires alterations and repairs by reason of a partial taking, Lessor
shall make and pay for such alterations and repairs, but only to the extent of
proceeds received by Lessor from the condemning authority relating to the
improvements to be altered and repaired, and Lessee shall pay the balance of
such alterations and repairs. If Lessee is not willing to pay the balance of
such alterations and repairs. Lessor shall have the right to terminate this
Lease as of the date of taking.
12.3 AWARD TO LESSEE. In the event of any condemnation, whether total or
partial, Lessee shall have the right to claim and recover from the condemning
authority such compensation as may be separately awarded or recoverable by
Lessee for all losses of Lessee, including loss of business, fixtures or
equipment belonging to Lessee immediately prior to the condemnation. The balance
of any condemnation award shall belong to Lessor, and Lessee shall have no
further right to recover from Lessor or the condemning authority for any
additional claims arising out of such taking.
Notwithstanding the foregoing, any other award made as a result of a total
or partial taking shall belong to and be paid to Lessor, except that Lessee
shall receive from such award the following: (a) the unamortized value,
allocable to the remainder of the Term, of Tenant Improvements or Alterations
made to the Premises at Lessee's expense which Lessee has the right to remove
but elects not to remove and which increase the value of the Premises; and (b)
any part of the award made directly to Lessee for the taking of personal
property or trade fixtures belonging to Lessee, for the interruption of Lessee's
business or for its moving costs, or for loss of Lessee's good will.
ARTICLE 13
ENTRY BY LESSOR
Provided that lessor gives Lessee at least twenty-four (24) hours prior
written notice, Lessee shall permit Lessor and its agents to enter the Premises
at all reasonable times for any of the following purposes: to inspect the
Premises; to maintain the Building; to make such repairs to the Premises as
Lessor is obligated or may elect to make; to make repairs, alterations or
additions to any other portion of the Building; to show the Premises and post
"To Lease" signs for the purposes of reletting during the last ninety (90) days
of the Term; to show the Premises as part of a prospective sale by Lessor or to
post notices of non-responsibility. Lessor shall have such right of entry
without any rebate of rent to Lessee for any loss of occupancy or quiet
enjoyment of the Premises thereby occasioned.
In case of emergency, Lessor may enter the Premises without providing
notice to Lessee. Any entry by Lessor shall be scheduled and conducted in a
manner which is least disruptive to Lessee's business operations as reasonably
practicable. Lessor shall comply with Lessee's reasonable security regulations
and Lessor shall, at Lessee' request, be accompanied by Lessee or its agents.
ARTICLE 14
INDEMNIFICATION
Lessee agrees not to hold Lessor liable for any injury or damage, either
proximate or remote, occurring through or caused by any repairs or alterations
to the Premises unless such injury or damage arises from the willful misconduct
or negligence of Lessor or its agents. Lessee agrees that Lessor shall not be
liable for any injury or damage occasioned by defective electric wiring, or the
breaking, bursting, stoppage or leaking of any part of the plumbing, air
conditioning, heating, fire control sprinkler systems or gas, sewer or steam
pipes,
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unless such injury or damage arises from the willful misconduct or negligence of
Lessor or its agents. Lessee will indemnify, protect, defend and hold harmless
Lessor from all claims, actions, liability, loss, expense, including attorneys'
fees and costs, damage or injury to persons or property arising from or
occurring by reason of Lessee's occupation or use of the Premises unless such
losses or injuries are proximately caused by any willful misconduct or
negligence of Lessor or its agents. Lessor shall not be liable for any damage to
or loss of property of Lessee or other persons located on the Premises, and
Lessee shall defend, indemnify, save and hold Lessor harmless from any claims
and losses arising out of damage to the same, unless such loss or damage is
proximately caused by the willful misconduct or negligence of Lessor or its
agents.
Lessor shall indemnify, protect, defend and hold harmless Lessee from all
claims, actions, liability, loss, expenses, attorneys' fees and costs, damage or
injury to persons or property arising from the negligence or willful misconduct
of Lessor, its employees, agents, contractors or invitees, or the breath of
Lessor's obligations under this Lease, or the violation of any Law by Lessor,
its employees, agents or contractors.
within ten (10) days of receipt of Lessor's written election to terminate.
Notwithstanding the above, either Lessor or Lessee shall have the option to
terminate the Lease if the Premises are materially damaged during the Term and
such option is exercised in writing no later than ten (10) calendar days after
the occurrence of the damage. As used herein, materially damaged shall mean that
the cost of repair is equal to or greater than thirty-three percent (33%) of the
replacement cost of the Premises. If, however, the insurance proceeds available
to Lessor (or which would have been available to Lessor if Lessor had maintained
all-risk insurance for the full replacement cost of the Building), plus the
funds, if any, which Lessee is willing to contribute to replace the Premises,
are sufficient to replace the Premises, Lessee shall have the right to elect to
continue this Lease upon written notice to Lessor, Lessee shall exercise such
right on or before ten (10) calendar days after Lessor notifies Lessee of the
approximate cost of repair and the amount of insurance proceeds available; and
Lessee's failure to timely exercise such right shall be deemed a waiver of such
right. If Lessor elects to maintain all-risk insurance for less than the full
replacement cost of the Building, and lessee elects to continue this Lease
following any material damage, Lessor shall contribute toward the cost of
restoration an amount equal to the insurance proceeds that would have been
available if Lessor had maintained all-risk insurance for the full replacement
cost of the Building.
Lessor shall notify Lessee within thirty (30) days following any damage to
or destruction of the Premises of the time Lessor reasonably estimates to be
necessary for the repair or restoration of the Premises. Lessee shall have the
right to terminate this Lease, within fifteen (15) days after receipt of such
notice from Lessor, if the estimated period for completion of repair or
restoration will extend beyond one hundred eighty (180) days from the date of
the damage or destruction.
16.2 DAMAGE AT END OF TERM. Either Lessor or Lessee shall be permitted
to terminate this Lease by written notice to the other if the Premises are
damaged or destroyed during the last nine (9) months of the Term, and the
Premises cannot be repaired or restored within sixty (60) days from the date of
damage; provided, however, that Lessee shall have fifteen (15) days after the
date of such damage or destruction to exercise its option to extend the term of
this Lease as provided in Article 20, and if Lessee exercises its option this
Lease shall not be terminated. In such event, the restoration of the Premises
shall be governed by the provisions of Paragraph 16.3.
16.3 REPAIRS BY LESSOR. If Lessor or Lessee does not elect to terminate
this Lease pursuant to Paragraph 16.1, Lessor shall, immediately upon receipt of
insurance proceeds paid in connection with such casualty, but in no event later
than ninety (90) days after such damage has occurred, proceed diligently to
repair or rebuild the Premises, on the same plan and design as existed
immediately before such damage or destruction occurred, subject to such delays
as may be reasonably attributable to governmental restrictions or failure to
obtain materials or labor, or other causes beyond the control of Lessor. Lessee
shall be liable for the repair and replacement of all fixtures, leasehold
improvements, furnishings, merchandise, equipment and personal property not
covered by the property insurance described in Paragraphs 6.1 and 6.2.
16.4 REDUCTION OF RENT DURING REPAIRS. If Lessee is able to continue to
conduct its business during the making of repairs, the rent then prevailing will
be equitably reduced in the proportion that the unusable part of the Premises
bears to the whole thereof for the period that repairs are being made. No rent
shall be payable while the Premises are wholly unusable due to casualty damage.
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16.5 ARBITRATION. Any controversy or claim arising out of or relating to
this Article shall be settled by arbitration in accordance with California Code
of Civil Procedure, Sections 1280 ET SEG. The expenses of arbitration shall be
borne by the parties as allocated by the arbitrators. The party desiring
arbitration shall serve notice upon the other party, together with designation
of the first party's arbitrator.
ARTICLE 17
PARKING
Lessee shall have the nonexclusive right to use one hundred four (104)
parking spaces in the parking area, provided that under no circumstances shall
Lessor be required to police or monitor the parking rights of Lessee or any
other tenant.
ARTICLE 18
COVENANTS, CONDITIONS AND RESTRICTIONS
This Lease is subject to the terms and conditions of (a) the Declaration of
Covenants, Conditions and Restrictions of Mission Falls Business Park ("CC&Rs")
imposing certain covenants, conditions and restrictions on the use and
management of the Property, (b) the Bylaws ("Bylaws") of Mission Falls Business
Park Owners Association ("Association"), a California nonprofit mutual benefit
corporation charged with the responsibility of managing Mission Falls Business
Park in accordance with the CC&Rs and the Articles of Incorporation of the
Association ("Articles"), and (c) the rules ("Rules") adopted from time to time
by the Association in accordance with the CC&Rs providing for restrictions on
the use of Mission Falls Business Park. Collectively, the CC&Rs, Articles,
Bylaws and Rules are referred to herein as the "Governing Documents." Lessor has
delivered to Lessee copies of the CC&Rs recorded September 6, 1984 as Instrument
No. 84-181476, and the First Amendment to the CC&Rs recorded April 19, 1985 as
Instrument No. 85-076494, and the Articles and the Bylaws, respectively filed in
connection therewith. Lessee agrees to comply with all provisions of the
Governing Documents applicable to its occupancy, interest, use and utilization
of the Premises subject to this Lease. Any failure to comply with the Governing
Documents shall be a default under the terms of this Lease.
ARTICLE 19
HAZARDOUS MATERIALS
19.1 DEFINITION. "Hazardous Material" shall mean any substance or
material which has been designated hazardous or toxic by any federal, state,
county, municipal or other governmental agency or authority or determined by
such agency or authority to be capable of endangering or posing a risk of injury
to, or adverse effect on, the health or safety of persons, the environment or
property.
19.2 USE. Lessee shall not store, use, generate, release or dispose of
any Hazardous Materials in, on or adjacent to the Premises or the Property, or
ship any Hazardous Materials therefrom, except in compliance with all applicable
federal, state and local laws, ordinances, regulations, rules, and policies
(collectively, "Laws"), including any obligation to notify Lessor of same.
Lessee shall submit to Lessor copies of all permits, licenses, filings, reports
or other documentation submitted to any governmental agency or authority, at the
same time such documents are submitted to the governmental agency or authority.
19.3 NOTICE. When Lessee first obtains knowledge thereof, Lessee shall
immediately notify Lessor of any inquiry, test, investigation, or enforcement
proceeding by or against Lessee or the Premises or the Property concerning a
Hazardous Material in, on, under or within 2,000 feet of the Premises and the
Property. Lessee acknowledges that Lessor, as the owner of the Premises, shall
have the right, at its election, in its own name or as Lessee's agent, to
negotiate, defend, approve, and appeal, at Lessee's expense, any action taken or
order issued by an applicable governmental authority with regard to Lessee's
failure to comply with the provisions of this Article 19, but only to the extent
such actions taken by Lessor are reasonable under the circumstances.
Notwithstanding the foregoing, Lessee shall not be responsible for the cost of
complying with any action taken or order issued by an applicable governmental
authority with regard to any Hazardous Material found in, on or
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under any real property within 2,000 feet of the Premises or the Property if
their presence was not caused by Lessee, its agents, employees, contractors or
invitees. Lessee shall submit to Lessor copies of all such inquiries, tests,
investigations and enforcement proceedings and copies of all reports and
responses thereto prepared by Lessee. Lessee shall submit same to Lessor within
five (5) days after receipt of same by Lessee, whether such receipt is from a
governmental authority or nongovernmental entity.
19.4 REMOVAL AND DISPOSAL. In addition, Lessee shall immediately remove
all Hazardous Materials which Lessee, its agents, employees, contractors or
invitees have caused to be released or disposed of in, on, under or adjacent to,
the Premises or the Property, but only to the extent required by Laws or, if not
required by Laws, to the extent physically possible and economically practicable
under the circumstances. Lessee shall dispose of all Hazardous Material removed
from the Premises or the Property in lawful disposal sites and otherwise in
compliance with all applicable Laws, and in all removals of Hazardous Materials,
Lessee shall list itself as the shipper.
19.5 INDEMNITY. Lessee further agrees to indemnify, defend and hold
Lessor harmless from and against any claims, suits, causes of action, costs,
fees, including attorneys' fees and costs, arising out of or in connection with
any clean-up work, inquiry or enforcement proceeding, and any Hazardous
Materials currently or hereafter stored, used, generated, released or disposed
of by Lessee or its agents, employees, contractors or invitees in, on, under or
adjacent to the Premises or the Property, or any Hazardous Materials shipped by
Lessee therefrom. Lessor agrees that Lessee shall have no responsibility for any
Hazardous Materials that may be present in, on or about the Premises unless such
Hazardous Materials were stored, used, generated, released or disposed of by
Lessee, its agents, employees, contractors, invitees or subtenants.
19.6 RIGHT OF ENTRY. Notwithstanding any other right of entry granted to
Lessor under this Lease, Lessor shall have the right to enter the Premises or to
have consultants enter the Premises throughout the terms of this Lease for the
purpose of determining: (i) whether the Premises are in conformity with federal,
state and local laws, ordinances, regulations, rules and policies including
those pertaining to the environmental condition of the Premises and the
Property, (ii) whether Lessee has complied with this Article 19, and (iii) the
corrective measures, if any, required of Lessee to ensure the safe storage, use,
generation, release, shipment and disposal of Hazardous Materials, or to remove
Hazardous Materials. Such entry shall comply with the provisions of Article 13.
Lessee agrees to provide access and reasonable assistance for such inspections.
Such inspections may include, but are limited to, entering the Premises or the
Property with drill rigs or other machinery for the purpose of obtaining soil,
water or other samples. Lessor shall not be permitted to conduct any such
inspections more frequently than once every twelve (12) months during the term
of this Lease unless such inspection is (i) required by the California
Department of Health Services or other governmental agency; or (ii) necessary
due to the release or suspected release of Hazardous Materials in, on, under or
adjacent to the Premises.
19.7 INSPECTION. Lessor shall pay the cost of any inspections conducted
by Lessor under this Article 19 unless such inspection, together with any other
evidence, shows that Lessee, its agents, employees, contractors or invitees
caused the presence of any Hazardous Materials in violation of Laws, in which
event Lessee shall pay for the reasonable cost of such inspection and all
subsequent inspections until the Hazardous Materials are eliminated. If such
consultants determine that the Premises or the Property, or both, are
contaminated with Hazardous materials caused to be present by Lessee, its
agents, employees, contractors or invitees, Lessee shall, in a timely manner, at
its expense, remove such Hazardous Materials or otherwise comply with the
recommendations of such consultants to the reasonable satisfaction of Lessor and
any applicable governmental agencies and reimburse Lessor for the cost of such
inspections within ten (10) days of receipt of a written statement therefor. The
right granted to Lessor herein to inspect the Premises or the Property shall not
create a duty on Lessor's part to inspect the Premises or the Property, or any
liability of Lessor for Lessee's use, storage, release or disposal of Hazardous
Materials, it being understood that Lessee shall be solely responsible for all
liability in connection therewith.
19.8 SURRENDER. Lessee shall surrender the Premises and the Property to
Lessor upon the expiration or earlier termination of this Lease free of
Hazardous Materials which Lessee, its agents, employees, contractors or invitees
have caused to be released or disposed of in, on, under or adjacent to the
Premises or the Property, but only to the extent required by Laws or, if not
required by Laws, to the extent physically
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possible and economically practicable under the circumstances, and in a
condition which complies with all applicable Laws, reasonable recommendations of
consultants hired by Lessor, and such other reasonable requirements as may be
imposed by Lessor.
19.9 SURVIVAL. Lessee's and Lessor's obligations under this Article 19
shall survive termination of this Lease.
19.10 LESSOR'S COVENANT. Lessor represents and covenants that it has no
knowledge of the existence of any Hazardous Materials located on or beneath the
Premises prior to Lessee's occupancy of the Premises.
ARTICLE 20
OPTION TO EXTEND
20.1 OPTION PERIOD. Lessee shall have the option to extend the initial
sixty-two (62) month Term of this Lease for one (1) additional period of five
(5) years ("Option Period") on the same terms, covenants and conditions provided
herein, except that the base monthly rent due hereunder shall be determined
pursuant to Paragraph 20.2. Lessee shall give Lessor written notice of exercise
at least one hundred eighty (180) days but not more than two hundred seventy
(270) days prior to the expiration of the initial Term of the Lease. If Lessee
gives timely notice of exercise of the option to extend, but on the date of such
exercise or at any time thereafter up to and including the last day on which
such option to extend may be exercised (the "Option Expiration Date"), Lessee is
in default in the performance of any of its obligations under this Lease and has
received written notice of such default from Lessor, the exercise of such option
shall nevertheless be valid and enforceable if Lessee cures such default within
the grace period provided herein for such cure, it being understood that such
grace period may extend beyond the Option Expiration Date. Lessee's failure to
timely exercise this option shall result in the automatic termination of this
option.
20.2 OPTION PERIOD BASE MONTHLY RENT. If, within thirty (30) days after
Lessor receives Lessee's notice of exercise, the parties agree on the base
monthly rent for the Option Period, they shall immediately execute an amendment
to this Lease stating the base monthly rent for the Option Period. If Lessor and
Lessee are unable to agree on the base monthly rent for the Option Period within
thirty (30) days, then the base monthly rent for the Option period shall be the
greater of the then current fair market rental value of the Premises, or the
last bast monthly rent payable under this Lease.
20.3 FAIR MARKET RENTAL VALUE. The "then fair market rental value of the
Premises" shall be defined to mean the fair market rental value of the Premises
as of the commencement of the Option Period, taking into consideration the uses
permitted under this Lease, the quality, size, design and location of the
Premises, but excluding any improvements to the Premises installed at Lessee's
expense, and the rent for comparable buildings located in Fremont, California,
as determined in accordance with Paragraph 20.4.
20.4 APPRAISAL. Within seven (7) days after the expiration of the thirty
(30) day period set forth in Paragraph 20.1, each party, at its cost and by
giving notice to the other party, shall appoint a real estate appraiser with at
least five (5) years' full-time commercial appraisal experience in the area in
which the Premises are located to appraise and set the then fair market rental
value of the Premises for the Option Period. If a party does not appoint an
appraiser within ten (10) days after the other party has given notice of the
name of its appraiser, the single appraiser appointed shall be the sole
appraiser and shall set the then fair market rental value of the Premises. If
the two (2) appraisers are appointed by the parties as stated in this paragraph,
they shall meet promptly and attempt to set the then fair market rental value of
the Premises. If they are unable to agree within thirty (30) days after the
second appraiser has been appointed, they shall attempt to elect a third
appraiser meeting the qualifications stated in this paragraph within the (10)
days after the last day the two (2) appraisers are given to set the then fair
market rental value of the Premises. If they are unable to agree on the third
appraiser, either of the parties to this Lease, by giving ten (10) days' notice
to the other party, may apply to the then president of the Alameda County Real
Estate Board or, if the president is unavailable or unwilling to select a third
appraiser, to the then president judge of the Alameda County Superior Court, for
the selection of a third appraiser who meets the qualifications stated in this
paragraph. Each of the parties shall bear one-half ( 1/2) of the cost of
appointing the third appraiser and of paying the third
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appraiser's fee. The third appraiser, however selected, shall be a person who
has not previously acted in any capacity for either party.
Within thirty (30) days after the selection of the third appraiser, a
majority of the appraisers shall set the then fair market rental value of the
Premises. If a majority of the appraisers are unable to set the then fair market
rental value of the Premises within the stipulated period of time, the three (3)
appraisals shall be added together and their total dividend by three (3); the
resulting quotient shall be the then fair market rental value of the Premises.
If, however, the low appraisal and/or the high appraisal are/is more than
ten percent (10%) lower and/or higher than the middle appraisal, the low
appraisal and/or the high appraisal shall be disregarded. If only one appraisal
is disregarded, the remaining two (2) appraisals shall be added together and
their total dividend by two (2); the resulting quotient shall be the then fair
market rental value of the Premises. If both the low appraisal and the high
appraisal are disregarded as stated in this paragraph, the middle appraisal
shall be the then fair market rental value of the Premises.
After the then fair market rental value of the Premises has been set, the
appraisers shall immediately notify the parties of such amount.
Notwithstanding anything to the contrary in this Lease, Lessor and Lessee
can at any time prior to the time the appraisers determine the fair market
rental value of the Premises agree on the base monthly rent for the Option
Period.
ARTICLE 21
MISCELLANEOUS PROVISIONS
21.1 WAIVER. No waiver of any default of any of the covenants or
conditions of this Lease shall be construed to be a waiver of any other default
or to be a consent to any further or succeeding default of the same or other
covenant or condition. The subsequent acceptance of rent hereunder by Lessor
shall not be deemed to be a waiver of any preceding default by Lessee of any
term, covenant or condition of this Lease, other than the failure of Lessee to
pay the particular rent so accepted, regardless of Lessor's knowledge of such
preceding default at the time of acceptance of such rent.
21.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall be binding upon and shall inure to the benefit of the
heirs, personal representatives, successors and assigns of the parties.
21.3 NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and either
personally delivered or sent by certified mail, return receipt requested,
postage prepaid, properly addressed to Lessor at 730 Third Avenue, New York, NY
10017 Attn.: Mr. James P. Garofalo, with a copy to The Martin Group, 4637 Chabot
Drive, Suite 118, Pleasanton, CA 94588, and to Lessee at the Premises, or at
such other address as may from time to time be designated in like manner by one
party to the other. Any such notice shall be deemed given (i) on the date of
delivery shown on the receipt card, or if no delivery date is shown, the
postmark thereon, if such notice was deposited in the U.S. mail, certified,
postage prepaid; (ii) when delivered if given by personal delivery; (iii) on the
business day following deposit with Federal Express or other courier service
guaranteeing overnight delivery; (iv) instantaneously upon confirmation or
receipt of facsimile; and (v) and in all other cases when actually received. The
term "business day" shall mean Monday through Friday, excluding legal holidays.
21.4 PARTIAL INVALIDITY. If for any reason any provision of this Lease
shall be determined to be invalid or inoperative, the validity and effect of the
other provisions' hereof shall not be affected thereby.
21.5 NUMBER AND GENDER. All terms in this Lease shall be construed to
mean either the singular or the plural, masculine, feminine or neuter, as the
situation may demand.
21.6 DESCRIPTIVE HEADINGS. The headings used herein and in any of the
documents attached hereto as schedules, lists or exhibits are descriptive only
and for the convenience of identifying provisions, and are not determinative of
the meaning or effect of any such provisions.
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21.7 TIME IS OF THE ESSENCE. In all matters time is of the essence in
the performance of all obligations under this Lease.
21.8 ENTIRE AGREEMENT. This Lease and the documents attached hereto as
schedules, lists or exhibits, constitute the entire agreement and understanding
between the parties with respect to the subject matters herein and therein, and
supersede and replace any prior agreements and understandings, whether oral or
written, between and among them with respect to the lease of the Premises,
rental therefor, use thereof and all other such matters. The provisions of this
Lease may be waived, altered, amended or repealed in whole or in part only upon
the written consent of Lessor and Lessee.
21.9 MEMORANDUM OF LEASE. Lessor and Lessee mutually agree that they
will not file or record a copy of this Lease, but that in the event Lessor
requests a recording, Lessor and Lessee shall execute and acknowledge a
memorandum of this Lease in a form approved by the parties setting forth in said
memorandum the description of the Premises, the date of the Lease, the
Commencement Date and the date of termination. Said memorandum of Lease may be
recorded in the Recorder's Office of the County in which the Premises are
located.
21.10 APPLICABLE LAW. This Lease shall be construed and interpreted in
accordance with the laws of the State of California, without giving effect to
any doctrine of renvoi or other doctrine of conflicts of law.
21.11 CORPORATE-AUTHORITY. Each individual executing this Lease on behalf
of a corporation represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of the corporation in accordance with a duly
adopted resolution of the Board of Directors of the corporation, and that this
Lease is binding upon said corporation in accordance with its terms.
21.12 LITIGATION EXPENSE. If any party shall bring an action against any
other party hereto by reason of the breach of any covenant, warranty,
representation or condition hereof, or otherwise arising out of this Lease or
any schedule, list or exhibit hereto, whether for declaratory or other relief,
the prevailing party in such suit shall be entitled to such party's costs of
suit and reasonable attorneys' fees, which shall be payable whether or not such
action is prosecuted to judgment.
21.13 SUBORDINATION OF LEASEHOLD. Lessee agrees that this Lease is and
shall be, at all times, subject and subordinate to the lien of any mortgage or
other encumbrances which Lessor may create against the Premises or the Property,
or both, including all renewals, replacements and extensions thereof; provided,
however, that regardless of any default under any such mortgage or encumbrance
or any sale of the Premises under such mortgage, so long as Lessee performs all
covenants and conditions of this Lease and continues to make all payments
hereunder, this Lease and Lessee's possession and rights hereunder shall not be
disturbed by the mortgagee or anyone claiming under or through such mortgagee.
Lessee agrees to execute any and all instruments in writing which may be
required by Lessor to subordinate Lessee's rights to the lien of such mortgage.
Lessee's subordination is only effective in favor of a future lender so long as
such lender, on behalf of itself and any purchaser at a foreclosure sale, agrees
in writing to recognize all rights of Lessee under the Lease. This Lease shall
not be subject to or subordinate to any ground or underlying lease or to any
mortgage, deed of trust, or security interest now or hereafter affecting the
Premises, nor shall Lessee be required to execute any documents subordinating
this Lease, unless the ground lessor, lender, or other holder of the interest to
which this Lease shall be subordinated contemporaneously executes a recognition
and nondisturbance agreement which (i) provides that this Lease shall be not be
terminated so long as Lessee is not in default under this Lease, and (ii)
recognizes all of Lessee's rights hereunder. Further, Lessee shall have no
obligation to attorn to any successor-in-interest or ground lessor, nor to
execute any documents evidencing attornment, unless the successor-in-interest or
ground lessor in question assumes, in writing, all obligations of Lessor under
this Lease. Lessor represents and warrants to Lessee that as of the date of this
Lease there are no mortgages or deeds of trust which are a lien against the
Premises or the Property.
21.14 CERTIFICATE. Within fifteen (15) days following Lessor or Lessee's
request, the other party shall complete, execute and delivery to the requesting
party a certificate setting forth the information requested therein relating to
this Lease and Lessor's certificate within said fifteen (15) days shall be
deemed to be an acknowledgment that the requesting party is not in default under
or supplemented in any way, except as stated in the certificate furnished by the
requesting party. It is intended that such certificate may be relied upon by
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any prospective purchases, lender, or assignee of any lender of the Premises, or
by any prospective assignee, subtenant, lender or equipment lessor, as
applicable.
21.15 ATTORNMENT. Lessee shall, in the event of any sale of the Premises
or if proceedings are brought for the foreclosure of, or in the event of
exercise of the power of sale under, any mortgage, installment land contract or
deed of trust made by Lessor covering the Premises, attorn to the mortgagee or
the purchaser upon any such foreclosure or sale and recognize such mortgagee or
purchaser as Lessor under this Lease provided that such mortgagee or purchaser
assumes in writing all obligations of Lessor under this Lease.
21.16 QUIET POSSESSION. Lessee shall peacefully have, hold and enjoy the
Premises, subject to the other terms of this Lease, provided that Lessee pays
the rent and performs all of Lessee's covenants and agreements contained in this
Lease.
21.17 LESSOR'S AUTHORITY TO EXECUTE. Lessor warrants and represents to
Lessee that Lessor has the full right, power and authority to enter into this
Lease and has obtained all necessary consents and approvals from its officers,
board of directors, or other members required under the documents governing its
affairs in order to consummate the Lease contemplated hereby. The persons
executing this Lease on behalf of Lessor have the full right, power and
authority to do so and affirm the foregoing warranty on behalf of Lessor.
21.18 APPROVALS. Whenever the Lease requires any approval, consent,
designation, determination or judgment by either Lessor or Lessee, such
approval, consent, designation, determination or judgment (including, without
limiting the generality of the foregoing, those required in connection with
assignment and subletting) shall not be unreasonably withheld or delayed and in
exercising any right or remedy hereunder, each party shall at all times act
reasonably and in food faith.
21.19 REASONABLE EXPENDITURES. Any expenditure by a party permitted or
required under this Lease, for which such party is entitled to demand and does
demand reimbursement from the other party shall be limited to the fair market
value of the goods and services involved (except where necessary to incur
expenses in excess of such fair market value in the event of an emergency),
shall be reasonably incurred, and shall be substantiated by documentary evidence
available for inspection and review by the other party or its representative
during normal business hours.
21.20 EXHIBITS. EXHIBITS A and B, attached hereto, are a part hereof.
<TABLE>
<S> <C>
LESSOR LESSEE
Teachers Insurance and Annuity Association Cemax, Inc., a California corporation
of America, a New York corporation
By: By:
Its: Its:
By:
Its:
</TABLE>
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THE PREMISES
EXHIBIT A (FIRST FLOOR)
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THE PREMISES
EXHIBIT A (SECOND FLOOR)
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WORK LETTER AGREEMENT
In connection with the Tenant Improvements to be installed on the Premises
the parties hereby agree as follows:
1. PLANS AND SPECIFICATIONS. Lessor shall retain a licensed architect
for the completion of final architectural plans and specifications for the
Tenant Improvements to be constructed on the Premises ("Final Plans and
Specifications"). The space plan for the Premises is attached hereto as EXHIBIT
B-1. Lessee has provided to Lessor and to Lessor's architect all the tenant
finishes. The fees charged by the foregoing professionals shall be reasonable
and similar to those charges by other reputable professionals for the same work.
Once the Final Plans and Specifications are completed and are approved by Lessee
as provided below, Lessor shall obtain the bid of San Jose Construction to
construct the Tenant Improvements, which bid shall be itemized to show the
amount to be charged by each subcontractor for its part of the work. Lessee
shall have the right to review and approve the bids submitted by any
subcontractors. Lessee shall notify Lessor of Lessee's approval or disapproval
of the subcontractor bids within three (3) business days after receipt of the
same. As soon as an acceptable bid is obtained, Lessor will execute the
construction contract for the Tenant Improvements. Lessee's exercise of its
reasonable approval rights, and any revisions of the Final Plans and
Specifications, or rebidding of the Tenant Improvement work, resulting from
Lessee's reasonable disapproval, shall not constitute a delay attributable to
Lessee under the provisions of Paragraph 7 of this Work Letter Agreement so long
as Lessee responds to any requests for approval within the time periods provided
herein.
2. DRAWINGS, CONSTRUCTION AND WORK QUALITY. Lessor's architect shall
complete the working drawings and deliver the same to Lessee for approval within
three (3) weeks after Lease execution. Lessee shall have the right to approve
the Final Plans and Specifications, which approval or specific grounds for
disapproval shall be given in writing to Lessor within five (5) business days
after Lessee's receipt of the Final Plans and Specifications. Lessee shall not
unreasonably withhold its approval thereto. Thereafter Lessor shall complete
construction of the Tenant Improvements, in a good and workmanlike manner in
accordance with the approved working drawings, with new materials of good
quality and with adequately trained and supervised labor. Lessor shall use its
reasonable efforts to complete the Tenant Improvements by September 1, 1993.
Lessor shall keep Lessee fully informed of all progress and shall allow
representatives of Lessee to observe, inspect and monitor the construction of
the Tenant Improvements. Lessor shall also arrange for all Tenant Improvements
to be fully warranted (labor and materials) by the Architect, general
contractor, sub-contractor, or appropriate supplier, as the case may be, for a
period of one (1) year after the completion thereof. Lessor shall diligently
enforce such warranty for Lessee's benefit, and if Lessor fails to do so, Lessor
shall assign such warranty to Lessee. The Final Plans and Specifications shall
be approved by Lessor and Lessee by initialing same and shall thereafter be
attached hereto as EXHIBIT B-2.
Lessor agrees that the construction contract with San Jose Construction
shall contain a provision that if San Jose Construction fails to complete
construction of the Tenant Improvements (other than the installation of the
elevator) within five (5) weeks after issuance of a building permit for the
Tenant Improvements for any reason other than delays caused by Lessee, San Jose
Construction will pay Lessor a penalty of $250.00 per day for each day beyond
such date that completion of the Tenant Improvements is so delayed. Lessor shall
pay such penalty to Lessee upon receipt of the same from San Jose Construction.
3. TENANT IMPROVEMENTS ALLOWANCE. Lessor shall provide Lessee with an
allowance of Five Hundred Fifty-Three Thousand Three Hundred Seventy-One and
no/100ths Dollars ($553,371.00) for the planning and construction of the Tenant
Improvements (the "Initial Allowance"). In addition to the Initial Allowance,
Lessor shall provide Lessee with an allowance of up to Fifty-Two Thousand Seven
Hundred Two and no/100ths Dollars ($52,702.00) for the Tenant Improvements (the
"Additional Allowance"). If Lessee elects to use all or any portion of the
Additional Allowance, that portion of the Additional Allowance utilized by
Lessee shall be fully amortized over the initial Term at the rate of ten percent
(10%) per annum and the monthly amortized amount shall be paid to Lessor monthly
as additional rent throughout the initial Term. If the total Tenant Improvements
Cost is less than the Initial Allowance provided by Lessor, one-half (1/2) of
the excess allowance shall be credited against the base monthly rent due under
Paragraphs 1.3 and 4.1 of the Lease. The Initial Allowance and the Additional
Allowance shall be referred to collectively as the "Tenant Improvements
Allowance." Any Tenant Improvements Costs in excess of the Tenant Improvements
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Allowance (excluding the Elevator Cost which shall be paid for by Lessor as
provided below) shall be paid by Lessee in cash upon completion of the Tenant
Improvements.
If the purchase and installation of an elevator is included as part of the
Tenant Improvements, and if the total Tenant Improvement Costs exceeds the
Initial Allowance, then, to the extent such excess is attributable to the cost
of purchase and installation of the Elevator (the "Elevator Cost"), the entire
amount of such Elevator Cost shall be paid for by Lessor and (i) one-half (1/2)
of the Elevator Cost shall be paid for by Lessor and (i) one-half (1/2) of the
Elevator Cost shall be the sole responsibility of Lessor, and (ii) the remaining
one-half (1/2) of the Elevator Cost shall be amortized over the first five (5)
years of the Term at an interest rate of ten percent (10%) per annum and the
monthly amortization amount shall be paid by Lessee as additional rent each
month. The Elevator Cost is currently estimated to be Thirty-Six Thousand One
Hundred and no/100ths Dollars ($36,100.00).
4. TENANT IMPROVEMENTS COST. The Tenant Improvements cost ("Tenant
Improvement Cost") to be paid by Lessor from the Tenant Improvements Allowance
shall be the following:
(i) All costs of preliminary and final architectural and
engineering plans and specifications for the Tenant Improvements, and
engineering costs associated with completion of the State of California
energy utilization calculations under Title 24 legislation;
(ii) All costs of obtaining building permits and other necessary
authorizations from the appropriate governmental entity;
(iii) All costs of interior design and finish schedule plans and
specifications including as-built drawings;
(iv) All direct and indirect costs of procuring, constructing and
installing the Tenant Improvements in the Premises, including, but not
limited to, the construction fee for overhead and profit and the cost
of all on-site supervisory and administrative staff, office, equipment
and temporary services rendered by Lessor's contractor in connection
with construction of the Tenant Improvements and also including,
without limitation, the cost of permanent partitioning, utility
systems, fire sprinkler systems, heating, ventilating and air
conditioning systems and equipment, electrical distribution facilities,
wiring, cables, lighting, ceilings, and any necessary installation of
fixtures and equipment, restrooms and carpeting and improvements
reasonably necessary for occupancy by Lessee;
(v) All fees payable to the Lessor's architect and engineering
firm if they are required by Lessee to redesign any portion of the
Tenant Improvements following Lessee's approval of the Final Plans and
Specifications; and
(vi) All costs of installing an elevator in the Premises.
Except as set forth in this EXHIBIT B, the Tenant Improvements Cost shall
not include any costs of procuring, constructing or installing in the Premises
any of Lessee's personal property. Lessor shall not charge Lessee, nor deduct
from the Tenant Improvements Allowance, any overhead or wages or expenses of,
Lessor's employees in connection with administering the contracts for the design
and construction of the Tenant Improvements.
(b) FINAL ACCOUNTING. When the Tenant Improvements are substantially
completed, Lessor shall submit to Lessee a final and detailed accounting of
the Tenant Improvements Cost, certified as true and correct by Lessor's
financial officer. The Tenant Improvements shall be deemed to be
"substantially completed" when (i) San Jose Construction has issued its
written certification stating that the Tenant Improvements (excluding
installation of the elevator) have been substantially completed in
accordance with the Final Plans and Specifications excepting only minor
"punch list" items that do not materially interfere with Lessee's use and
occupancy of the Premises for the purposes permitted by this Lease, and
(ii) the City of Fremont has completed its final inspection of the Tenant
Improvements and has signed off the building inspection card approving such
work as complete or issued a temporary certificate of occupancy, as may be
required by the City of Fremont to permit Lessee to occupy the Premises.
Lessee shall have the right to audit the books, records and supporting
documents of Lessor to the extent
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necessary to determine the accuracy of such accounting during normal
business hours, after giving Lessor at least two (2) days prior written
notice. Lessee shall bear the cost of any such audit.
5. CHANGE REQUESTS. No revisions to the approved space plan and Final
Plans and Specifications shall be made by either Lessor or Lessee unless
approved in writing by both parties. Lessor agrees to make all changes requested
in writing by Lessee and approved in writing by Lessor which approval shall not
be unreasonably withheld. Any costs in excess of the Tenant Improvements
Allowance related to such changes shall be added to the Tenant Improvements Cost
and shall be paid for by Lessee upon completion of the Tenant Improvements. The
billing for such additional costs to Lessee shall be accompanied by evidence of
the amounts billed as is customarily used in the business. Costs related to
changes shall include, without limitation, any architectural or design fees, and
Lessor's general contractor's price for effecting the change. In no event shall
the Commencement Date be changed as a result of any change requests.
6. PUNCH-LIST. Prior to the commencement of the Term, Lessee shall
conduct a walk-through inspection of the Premises with Lessor and complete a
punch-list of items reasonably needing additional work by Lessor. Other than
latent defects or the items specified or queried in the punch-list, if any, by
taking possession of the Premises, Lessee shall be deemed to have accepted the
Premises in good, clean and completed condition and repair, subject to all
applicable laws, codes and ordinances. Any damage to the Premises caused by
Lessee's move-in shall be repaired or corrected by Lessee, at its expense.
Lessee acknowledges that neither Lessor nor its agents have made any
representations or warranties as to the suitability or fitness of the Premises
for the conduct of Lessee's business, nor has Lessor or its agents agreed to
undertake any alterations or construct any Tenant Improvements to the Premises
except as expressly provided in the Lease. If Lessee fails to submit a
punch-list to Lessor within such period, it shall be deemed that there are no
Tenant Improvement items needing additional work or repair. Lessor's contractor
shall complete all punch-list items within ten (10) days after the walk-through
inspection or as soon as practicable thereafter. Upon completion of such
punch-list items, Lessee shall approve such completed items in writing to
Lessor. If Lessee fails to disapprove such items within ten (10) days after
completion, such items shall be deemed approved by Lessee. Notwithstanding the
foregoing, Lessor shall, upon written notice from Lessee within thirty (30) days
after completion of the Tenant Improvements, repair defects in the Tenant
Improvements which defects are not cosmetic defects and which were not readily
apparent during the time Lessee has to conduct a walk-through inspection of the
Premises and the time provided to complete a punch-list of items reasonably
needing additional work.
7. DELAY. Lessee's failure to timely perform its obligations hereunder
for reasons reasonably within its control or Lessee's requirement of long lead
time items to be used in the Tenant Improvements shall not delay the
Commencement Date, notwithstanding any provision in the Lease to the contrary.
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SPACE PLAN
[TO BE ATTACHED]
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FINAL PLANS AND SPECIFICATIONS
[TO BE ATTACHED]
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<PAGE> 1
Exhibit 10.11
PURCHASE AGREEMENT NO. 900000
This Agreement is made this 15th day of May, 1995 between GE Medical
Systems business including corporate affiliates worldwide ("Buyer") and CEMAX
Inc. ("Seller").
Whereas Buyer wishes to have Seller use its expertise to manufacture
products for Buyer in accordance with the following requirements of Buyer:
- Purchase Specification (2127534PSP, Revision 1, May 8, 1995) attached to
this Agreement as Attachment A.
Now therefore Seller and Buyer agree as follows:
1. INTRODUCTION
(a) SCOPE. This Agreement including all attachments states the terms on
which Seller will sell to Buyer software applications and hardware
interfaces ("Products") which will be manufactured in strict compliance
with Attachment A. Buyer and Seller agree that Buyer will sell single
monitor personal computer based products which may perform some of the
functions of Products supplied by the Seller. The parties agree that
those products are not part of this Agreement.
(b) DOCUMENTS. If a conflict exists between this Agreement and its
attachments, the order of precedence will be:
1. This Agreement
2. Attachment E (Proprietary Information & Confidentiality)
3. Attachment A (Purchase Specification)
4. Attachment C (Patent Indemnity)
5. Attachment D (Product(s) Cost and Lead Time)
6. Attachment F (Buyer's Standard Purchase Order)
(c) CHANGES. The parties may modify this Agreement as it applies to a
specific purchase order release as long as the modification is in
writing and signed by both parties.
2. TERM
(a) INITIAL TERM. The term of this Agreement is from May 15, 1995 through
[ * * ].
(b) EXTENSIONS. If Buyer and Seller mutually agree, this Agreement can be
extended for 1 year periods. Buyer must notify Seller in writing of its
intention to extend the term by January 31st, of any terminating year.
(c) EXCLUSIVITY. If Seller meets the pricing, delivery, and quality
requirements defined in this agreement and its attachments, Buyer agrees
not to purchase Products, as defined in Attachment A, from a source
other than the Seller until at least [* *]. However, at any time
during the term of this agreement, the Buyer retains the right to
internally develop and sell a competing product.
3. SPECIAL CONDITIONS
(a) Buyer and Seller agree to the terms of Attachment C, "Patent
Indemnity".
(b) Buyer and Seller agree to the terms of Attachment E, "Proprietary
Information and Confidentiality" for the term of this agreement and
three years after termination.
(c) Buyer and Seller agree to the terms of Attachment D, "Product(s) Cost
And Lead Time".
(d) Seller acknowledges that Buyer and Seller are in the same business and
that Buyer is capable of developing like Product(s). Seller agrees to
hold Buyer harmless, if Buyer develops like Product(s), according to
Attachment A, in the future.
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CONFIDENTIAL TREATMENT REQUESTED
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4. PRICING
(a) SOFTWARE. The prices include a paid-up worldwide license for Buyer
and its customers to use in the operation, maintenance and repair of the
Products any related software which is furnished to purchasers of the
Products. Buyer and Seller agree that over time features will be added
to Products and even though Seller's part numbers may change the pricing
will be as defined in Attachment D.
Seller agrees to implement a process within 2 weeks of signing this
agreement which provides Buyer the capability of generating software
licenses by remote log-in on a 24 hour basis.
As new revisions of Products are developed by adding features and/or
problem solutions, Seller agrees to provide those upgrades [ *
* ] to Buyer for those Products which Buyer has purchased, in order
for Buyer to implement a "Field Upgrade". Seller agrees to provide those
upgrades using the same License Number which was originally issued.
(b) COST REDUCTIONS. Buyer and Seller will have a goal to achieve
reductions in Product cost by utilizing cost-effective design, lower
cost components that use new technology, productivity improvements, and
automation of the main manufacturing process.
5. PRODUCT ROAD MAP AND FIELD UPGRADES
(a) PRICING. Buyer and Seller agree that as Seller develops and issues
additional revisions of Products pricing defined in Attachment D.
6. PURCHASE ORDER RELEASES
(a) CONTENTS. Purchase order releases for Products, spare parts and
service tools may consist of hard copies of Attachment F, electronic
messages as set forth in Article 15 or other written communications from
Buyer which state specific delivery requirements. Specific delivery
dates will be confirmed in writing by Seller. The releases will be
processed as follows:
(i) Buyer will issue individual purchase order releases which
reference the number of this Agreement and state delivery dates and
quantities to be released for delivery within the lead times
specified in Attachment D. Regardless of form, every purchase order
release will be deemed to include Buyer's Standard Conditions of
Purchase located on Attachment F.
(ii) The shipping documents prepared by Seller will reference the
applicable purchase order release number. The return goods (RG)
number will also be referenced on spare repairs.
(iii) As Buyer's business requirements are further defined, it may
change the quantities and delivery dates on individual purchase
order releases without penalty as long as Buyer notifies Seller of
the changes in accordance with the lead times specified on
Attachments D.
(iv) No individual purchase order release will be binding upon Seller
unless and until accepted in writing by Seller, but such acceptance
will not be unreasonably withheld.
7. DOCUMENTATION
(a) CUSTOMER COPIES. Seller will deliver two hard copies and two soft
copies of User Manual and Service Manual containing necessary
information for initial set-up and operation of the Product(s) with each
product release. Seller agrees that Buyer will have the right to
duplicate, microfiche, or electronically copy and/or modify in whole or
part any documentation provided for the purpose of distribution to
Buyer's customers and service personnel.
(b) BUYER'S COPY. Seller will deliver to the Buyer [ ** ] copies of
Field Diagnostics/Service Manuals to support maintenance which is
limited to Field Replaceable Unit (FRU's).
(c) REVISION CONTROL. Seller will maintain master documentation for all
product manuals; Buyer may purchase additional copies of the User
Manuals or Field Diagnostics/Service Manuals from the
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 3
Seller. If changes to any Manuals are required, Seller will update the
master documentation and provide to the Buyer change pages in support of
those manuals previously delivered, for which the changes apply.
8. TRAINING
For every [ ** ] Software Licenses purchased by Buyer, Seller agrees to
provide one Service, applications, or "application train the trainer" class free
of charge to buyer's personnel or customers. For every major software release,
Seller agrees to provide one application training class to Buyer's personnel or
customers. Training will be held at Seller's facility. Each class to accommodate
a maximum of 6 students. Additional training sessions can be arranged at the
expense of the Buyer. Travel costs for attendees will be at the responsibility
of the Buyer.
9. TESTING AND SERVICE CAPABILITY
(a) TESTING. Testing Plans and procedures will be standardized based on
Sellers manufacturing plan for test of the repaired product and spare
items, consistent with best commercial practice.
(b) DURATION. Seller will provide standard commercial support for [ ** ]
years from the date of shipment of the last Product(s).
10. TRANSPORTATION
Seller will make shipments according to the terms below for shipments from
Seller's loading dock to Buyer's loading dock. Additional terms relating to
transportation, insurance, risk of loss and title are contained in Attachment F.
1) For all Product(s) less than 150 pounds, Seller will ship Federal
Express using Buyers in-bound account number 0532-00109.
2) For all Product(s) greater than 150 pounds, Seller will ship
Burlington Express collect.
3) For Product(s) requiring an "air-cushioned ride", Buyer and Seller
will work together to arrange for such.
11. INVOICES/PAYMENT
(a) CONTENTS. Seller's invoices will contain at least the purchase order
release number, item number on the release, invoice quantity, unit of
measure, unit price and total invoice amount.
(b) PAYMENT. If an invoice is consistent with this Agreement, Buyer will
settle the invoice within 30 calendar days after receiving both the
proof of shipment and the invoice. Seller agrees to invoice once at the
end of each month for the number of licenses Buyer ships during that
month.
12. WARRANTY/REPAIR
(a) TERMS. The terms of Seller's warranty for hardware purchases are
[ ** ] months from installation at customer site or [ ** ] months from
delivery, whichever is earliest.
(b) NO NOTICE. Buyer may return in-warranty and out-of-warranty defective
Products without providing advance notice to Seller.
(c) FREIGHT/RISK OF LOSS. A defective item will be returned to Seller's
facility or authorized service center with transportation charges paid
by Seller. Risk of loss passes to Seller when the item is delivered to
the carrier.
(d) REPAIR. Unless Buyer elects to return a warranty item for credit
only, Seller will test and repair or replace any returned defective item
within 14 calendar days after receiving it or such shorter time
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 4
agreed on by Buyer and Seller. Items under warranty will be repaired at
no cost to Buyer, and items out-of-warranty will be repaired at the
prices listed in Attachment D.
(e) CREDIT. Seller will promptly credit Buyer for any payment Buyer made
for an item which becomes defective during the warranty period and is
not repaired or replaced under warranty. Buyer may elect to take such
credit on any open invoices of Seller.
13. PERFORMANCE MEASUREMENTS
HARDWARE:
(a) PRODUCT QUALITY. (i) The quality goal for all Products is a
rejection rate of [ * * ] parts per million [ * * ]. This rate will be
calculated monthly by Buyer for each Product received as one million
multiplied by a quotient (1) whose numerator is the quantity of Product
rejected due to any nonconformity with mutually agreed upon
specifications and acceptance criteria and (2) whose denominator is the
total quantity of a Product received by Buyer during a rolling 3 or 12
month period.
(ii) If the rejection rate for a Product exceeds [ * * ] parts per
million [ * * ], Seller will at Buyer's request submit a written
corrective action plan which at a minimum contains an analysis of
the first root cause(s) and specific actions taken or planned to
correct the problem.
(b) DELIVERY. (i) The delivery goal for all Products is [ * * ] on-time
delivery. This rate will be calculated periodically by Buyer as the
number of deliveries during a rolling 3 month period which arrive at
their destination point within 7 calendar days prior to the scheduled
delivery date divided by the total number of deliveries during the same
period.
(ii) If on-time delivery falls below [ * * ] and the trend is negative,
Buyer and Seller will hold discussions to develop a corrective
action plan.
SOFTWARE:
(a) PRODUCT QUALITY. The quality goal for all software Product(s) and
intermediate deliverables as identified in the Purchase Specification is
zero defects.
(b) For software that SELLER makes available to BUYER, SELLER commits to
BUYER to support software with new releases, as needed, in order to
respond to problem reports and bugs per Article 13, Paragraph C, of this
Software section.
(c) BUYER shall categorize reports of software problems into five severity
levels as follows:
1) Catastrophic and unrecoverable. No work-around. Causes total system
failure or unrecoverable data loss. Example system crash or lost
data.
2) Seriously impaired function. Possible work-around. System is usable
but use is unsatisfactory for clinical use. Example: can't use
major product function.
3) Non critical impaired function. Satisfactory work-around. Could be
placed in clinical use if documented, but will cause some user
dissatisfaction. Example: user data must be modified to work.
4) Minor. Work-around exists, or if not, functional impairment is
slight. Could be placed in clinical use. Most users would be
unaware of impairment or would be slightly dissatisfied. Example:
error messages aren't very clear.
5) Very minor. Example: bad layout or misuse of grammar in
documentation.
(d) RELEASE FOR EVALUATION: For software Product(s), SELLER shall conduct
a formal test process (hereinafter referred to as the "Quality
Assurance" test) prior to release to BUYER for evaluation.
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The content of the Quality Assurance test plan will be agreed upon by
the Buyer and Seller. The Quality Assurance test shall be conducted
entirely by SELLER's personnel, at SELLER's premises, but may be
witnessed on request, by BUYER's personnel. To aid Seller in the design
of its internal test process, Buyer agrees to provide to Seller the
software test procedures Buyer uses to evaluate software purchased from
Seller. Seller shall record all problems encountered during the Quality
Assurance test and prioritize them for correction using the categories
listed in Article 13.c.
Seller agrees not to release a software Product to the Buyer for
evaluation unless the results of its Quality Assurance test indicate
there are no Severity 1 problems and a corrective action plan exists for
Severity 2 problems.
(e) QUALITY CRITERIA FOR SOFTWARE PRODUCTS RELEASED TO BUYER FOR
EVALUATION. On receipt of Quality Assurance tested software Product,
BUYER can at it's option conduct acceptance testing (hereinafter
referred to as the "Beta" test), at BUYER's or BUYER's customers' sites,
in order to qualify the Product(s) for acceptance. Any deficiencies
noted during the Beta test shall be recorded and prioritized using the
categories listed in Article 13.3. The Product release will be
acceptable if Buyer's Beta test results in five (5) or fewer Severity 1
and 2 problems.
(f) FINAL RELEASE FOR CUSTOMER SHIPMENT. Before release to Buyer for
ongoing shipment to end use customers, SELLER shall conduct its Quality
Assurance test prior to first shipment of the final version of the
Product. Seller shall record all problems encountered during the Quality
Assurance test and prioritize them for correction using the categories
listed in Article 13.c.
Seller agrees not to release a software Product to the Buyer for
shipment to end use customers unless the results of its Quality
Assurance test indicate there are no Severity 1 or 2 problems and a
corrective action plan exists for Severity 3 through 5 problems.
(g) QUALITY CRITERIA FOR SOFTWARE PRODUCTS RELEASED TO BUYER FOR SHIPMENT
TO END USE CUSTOMERS. On receipt of Quality Assurance tested software
Product, BUYER can at it's option conduct acceptance testing, at BUYER's
or BUYER's customers' sites, in order to qualify the Product(s) for
acceptance. Any deficiencies noted during this evaluation test shall be
recorded and prioritized using the categories listed in Article 13.c.
The Product release will be acceptable if Buyer's test results in zero
(0) Severity 1 and 2 problems and a corrective action plan is received
for Severity 3, 4, and 5 problems.
(h) RESPONSE TO FIELD PROBLEMS: After Products have been released to end
use customers for either Beta testing or as a final released product and
problems are reported to the Seller, Seller agrees to the following
corrective action protocol:
SEVERITY 1 AND 2 PROBLEMS: a corrective action plan within [ * * ] of
the problem report, a daily progress report and every reasonable effort
made to resolve the issue and provide to BUYER a validated bug fix
release as soon as possible.
SEVERITY 3, 4 AND 5 PROBLEMS: a corrective action plan in accordance
with BUYER's priorities, and to use its best efforts to eliminate all
defects against Product(s) "Purchase Specification" by the date
specified for each product release in Attachment A of this agreement or
in a reasonable time frame.
(i) PROBLEM REPORTING METHOD: BUYER and SELLER agree to use DDTS as the
mutually agreed upon method for tracking and resolving software
problems.
14. REGULATORY COMPLIANCE
(a) The Product(s) shall comply with applicable FDA and FCC regulations.
(b) Seller agrees to achieve ISO [ * * ] registration by [ * * ] and
maintain that registration on an ongoing basis.
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15. CHANGES IN PURCHASE SPECIFICATIONS
(a) PROCESS. Buyer or Seller may propose changes in Attachment A by
submitting proposed changes to the other party's contract manager. If
Buyer is proposing the changes, it will identify those changes which it
deems mandatory to make the Product(s) suitable for its use and Seller
will respond in writing to Buyer's contract manager within 30 calendar
days with the following information:
(i) Lead time required to implement proposed changes.
(ii) Impact of proposed changes on pricing of Product, parts and tools.
(iii) Impact of proposed changes on scrap material and work in process.
(iv) Non-recurring engineering charges to implement proposed changes.
Within no more than 30 calendar days after Buyer receives Seller's response
to Buyer's proposed changes or receives the changes proposed by Seller, the
parties will begin negotiations to agree on the changes to Attachment A and
any related changes to price and delivery schedules.
(b) BUYER APPROVAL. After Buyer has accepted the first unit of Product,
Seller may not make any engineering change to the Product affecting
form, fit, function, reliability, serviceability, performance,
functional interchange ability or interface capability without obtaining
Buyer's written approval at least 60 calendar days before the change is
implemented.
(c) COST REDUCTION. If Buyer or Seller proposes a change which reduces
Seller's costs of providing an item to Buyer, Buyer and Seller will
negotiate a revised price on items incorporating the change, which will
distribute the cost savings between Buyer and Seller.
16. ELECTRONIC DATA INTERCHANGE
(a) ACCESS. Buyer may, at its sole discretion, permit Seller to have
on-line access to designated computer systems of Buyer in order to
facilitate Seller's ability to perform its obligations under this
Agreement. If such access is granted, Seller will give Buyer the names
of Seller's employees who will have access to Buyer's computer systems,
and Buyer will provide a separate user identification code for each
person. Seller will at its own expense provide and maintain any
hardware, telecommunications services and software not furnished by
Buyer which are needed to communicate reliably with Buyer's computer
systems. Buyer may terminate Seller's access to Buyer's computer network
at any time.
(b) USE RESTRICTIONS. Seller will ensure that (i) computer access is
limited to its employees with a legitimate business need, and (ii) its
employees with access agree to keep any information so obtained strictly
confidential, to use such information only to perform Seller's contract
obligations to Buyer, and to cease accessing Buyer's computer systems
when no longer requirement to perform work under this Agreement. Seller
will promptly notify Buyer if it becomes aware of any unauthorized
access to Buyer's computer systems or unauthorized use of the
information on the systems.
(c) LEGAL EFFECT. Any document properly transmitted by computer access
will be considered a writing in connection with this Agreement.
Electronic documents will be considered signed by a party if they
contain an agreed upon electronic identification symbol or code.
Electronic documents will be deemed received by a party when accessible
by the recipient on the computer system.
17. TERMINATION
(a) MARKET CONDITIONS. Buyer may cancel any open hardware purchase order
release in whole or in part upon [ * * ] written notice to
Seller, if Buyer determines that its market for Products does not
support the quantities it has ordered from Seller. Buyer may cancel any
open software purchase order release in whole or in part [ * * ].
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<PAGE> 7
(b) SELLER'S BREACH. If Seller materially breaches this Agreement in
whole or in part, upon written notice to Seller, and if Seller fails to
correct the breach within 90 calendar days after receiving notice, Buyer
may then terminate this Agreement without liability except for the price
of any items previously delivered and accepted by Buyer. A material
breach includes without limitation failure to comply with Attachment A,
the Quality Requirements specified in Article 13 of this agreement, or
delivery schedules.
18. DISPUTE RESOLUTION
If a dispute arises between the parties which cannot be resolved by
negotiation, Buyer and Seller agree to participate in at least four hours
of mediation before pursuing any other legal remedies such as commencing
litigation. The mediation shall be conducted by the Milwaukee office of
United States Arbitration & Mediation, Inc. or another mutually acceptable
service with the costs of the mediator equally split by the parties.
Mediation involves each side of a dispute sitting down with an impartial
person to attempt to reach a voluntary settlement, with no formal court
procedures or rules of evidence and with the mediator having no power to
render a binding decision or force an agreement on the parties.
19. CONTRACT MANAGER/NOTICES
(a) MANAGERS. Each party will appoint a contract manager as the point of
contact for all matters relating to performance of this Agreement.
(b) ADDRESSES. Any notice required under this Agreement will be sent by
fax or first-class mail to:
<TABLE>
<S> <C>
Buyer GE Medical Systems
P.O. Box 414
Milwaukee, WI 53201
Attention: Greg Sinner, W-732
Fax: 414-544-3293
Seller CEMAX Inc.
47281 Mission Falls Ct.
Fremont, CA 94539
Attention: Bruce Olson
Fax: 510-770-8555
</TABLE>
20. GENERAL MATTERS
(a) The relationship between Buyer and Seller is that of independent
contractors. Neither party will do anything which has the effect of
creating an obligation by the other party to a third party. If one party
breaches this commitment, it indemnifies the other party for all damages
and costs the injured party incurs which arise from the breach.
(b) Seller will not issue any press release, use any of Buyer's products
or its name in promotional activity, or otherwise publicly announce or
comment on this Agreement without Buyer's prior written consent.
(c) This Agreement becomes effective when it is signed by an authorized
representative of each party. It may later be modified only by a writing
signed by the contract managers for both parties.
191
<PAGE> 8
<TABLE>
<S> <C>
CEMAX Inc. GENERAL ELECTRIC COMPANY
By By
Title Title
Date Date
By By
Title Title
Date Date
</TABLE>
192
<PAGE> 9
(LOGO)G
GE MEDICAL SYSTEMS WORKSTATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GE COMPANY PROPRIETARY
2127534PSP
ATTACHMENT A
------------------------------------------------------------------------
WORKSTATION PURCHASE SPECIFICATION
FOR NETWORK PRODUCTS & SERVICES
Author: Sharon Works
Revision: Rev 1
Date: 8-May-95
- --------------------------------------------------------------------------------
- ----------
- --------------------------------------------------------------------------------
- ----------
- --------------------------------------------------------------------------------
<PAGE> 10
DATE: 8-May-95
REVISION NUMBER: Rev 1
SOFTWARE RELEASE NUMBER:n/a
PERSON UPDATING
DOCUMENT: Sharon Works
SOFTWARE SETS AFFECTED:
SECTIONS CHANGED: BRIEF DESCRIPTION OF CHANGES:
Section 1 INTRODUCTION
Referenced Purchase Agreement number
Section 2.2.1 PORTABLE
Should be solaris 2.4 not 4.2
Section 2.3.3.3 CAMERA SUPPORT
Shall support new Kodak and Dupont cameras for 14x17
Laser Film
Section 2.10 PRODUCT ROADMAP
Updated schedule
Section 2.10.2 RELEASE 1.3
Updated 1.3 content
194
<PAGE> 11
DATE: 8-May-95
REVISION NUMBER: Rev 1
SOFTWARE RELEASE NUMBER:n/a
PERSON UPDATING
DOCUMENT: Sharon Works
SOFTWARE SETS AFFECTED:
SECTIONS CHANGED: BRIEF DESCRIPTION OF CHANGES:
Issues addressed in Vendor's Response; Exception List, Rev. 0.3.1, GE's Response
to CEMAX Exception List Rev. 0.3.1 and new developments are addressed in the
sections listed below
Section 2.2.1 PORTABLE
Vendor will support [ * * ] display boards (single SBUS
slots) for 1K and 2K monitors (based on availability).
Section 2.2.3 LICENSE AND LICENSING PROCEDURE
License will be tied to Host ID and will be valid
through release 2.99.
Section 2.2.5 PERFORMANCE
Performance for release 1.0 will be measured against
vendor's qualified configuration. Some performance
specifications for release [ ** ] are defined.
Section 2.3.1.1.1 DISPLAY FUNCTIONALITY
The set criteria for auto delete is first in first out.
Section 2.3.1.1.3 DICOM 3.0 CONFORMANCE
Release 1.0 will support Merge [ ** ] protocol.
Postpone support of Merge [ ** ] box until [ ** ].
Remove request for DICOM 3.0 Q/R SCP.
Section 2.3.2.1 DISPLAY FUNCTIONALITY
The set criteria for auto delete is first in first out.
Section 2.3.2.3 DICOM 3.0 CONFORMANCE
Release 1.0 will support Merge [ ** ] protocol.
Postpone support of Merge [ ** ] box until 1.x. Remove
request for DICOM 3.0 Q/R SCP.
Section 2.3.3.1 FILMING FUNCTIONALITY
Moved list of Camera/Auxiliary Device to section 2.3.3.3
Camera Support.
Section 2.3.3.2 CAMERA SUPPORT (NEW SECTION)
Updated list to include DuPont cameras and new 3M camera
Removed Agfa and Konica cameras from list. Added request
for camera validation and configuration information.
Added procedure to validate unvalidated cameras in
"clinical" environment.
Section 2.4.1 SERVICE TOOLS
Added note that this will be revisited and addressed in
release [ ** ].
Section 2.4.2 SERVICE SUPPORT
Added detail to the level of Service Support expected.
Section 2.5.1 REGULATORY APPROVALS AND PROCESS REQUIREMENTS
Vendor shall receive ISO [ * * ] certification by [ *
* ] GE will upon request make information
pertaining to how certain standards apply to vendor.
Section 2.5.2 HARDWARE DESIGN REQUIREMENTS
Per conversation between Safety and Regulatory and
vendor, nothing needed to be changed.
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Section 2.5.3.1 OPERATOR INTERFACE
Localization will be supported in release [*]. Details
discussed in section [ ** ] Release [*].
Section 2.5.3.2 CLINICAL MEASUREMENTS AND CALCULATIONS
Analytic tools; only 2D measurement and 2D angle will be
supported in version [*].
Section 2.5.3.3 PATIENT FILE MANAGEMENT
Unsuccessful transfers are indicated no successful
transfers.
Section 2.5.4 REFERENCED DOCUMENTATION AND STANDARDS
Documents shall be available upon request.
Section 2.7.1 FDA, GMP, ISO 9000 DOCUMENTATION
ISO 9000 documentation shall be provided to GE by
[ * * ].
Section 2.7.2 SERVICE DOCUMENTATION
Added statement that documentation shall be based on
vendor's standard configuration.
Section 2.7.2.1 REQUIRED DOCUMENTATION CONTENT
Added statement "if applicable".
Section 2.7.2.3 OTHER REQUIREMENTS
Documentation shall be in FrameMaker 4.0 or greater.
Section 2.7.3 OPERATOR'S MANUAL
Added statement that documentation shall be based on
vendor's standard configuration.
Section 2.7.3.1 REQUIRED DOCUMENTATION CONTENT
Added statement "if applicable".
Section 2.10 PRODUCT ROADMAP
Schedule includes a quick follow on release (release
1.x) to release 1.0 and dates for alpha, beta, and fcs
releases of [*].
Section 2.10.2 RELEASE 1.X (NEW SECTION)
Added features for release 1.x [ * * ].
Section 2.10.2 RELEASE 2.0 (CHANGED TO SECTION 2.10.3)
Section 2.10.2 is now Release [*].
Section 2.10.3 RELEASE 2.0 (FORMER SECTION 2.10.2)
Items have been added and subtracted from release [*].
Section 2.10.4 RELEASE X.X (FORMER SECTION 2.10.3)
Section 4.4 WARRANTY
References the Purchase agreement document.
OPEN ISSUES:
<TABLE>
<CAPTION>
SECTION: PERSON RESP: RESOLUTION DATE: BRIEF DESCRIPTION OF ISSUE:
- -------- ------------ ---------------- -----------------------------------------
<S> <C> <C> <C>
2.10 Sharon Works 4/7/95 Agree on Schedule and release of contents
</TABLE>
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<PAGE> 1
Exhibit 10.12
OEM AGREEMENT
This OEM Agreement ("Agreement") is entered into as of November 22, 1994,
("Effective Date"), between CEMAX, Inc., a California corporation with principal
offices at 47281 Mission Falls Court, Fremont, California 84539 ("CEMAX"), and
Minnesota Mining and Manufacturing Company, a Delaware corporation with
principal offices at 3M Center, St. Paul, Minnesota 55144 ("3M").
In consideration of the mutual promises contained herein, the parties agree as
follows:
1. DEFINITIONS
(a) "Software" means the CEMAX software products listed in Exhibit A of
this Agreement in machine executable object code format only, together with
error corrections or other modifications provided to 3M by CEMAX pursuant to
this Agreement. Software may be changed or added by CEMAX, at its sole
discretion, provided that CEMAX gives ninety (90) days prior written notice to
3M. All Software will bear the 3M brand name and meet the 3M brand labeling
requirements stated in Exhibit B.
(b) "Reproduced Software" means the CEMAX software products listed in
Exhibit A of this Agreement, together with error corrections or other
modifications provided to 3M by CEMAX pursuant to this Agreement, and reproduced
by 3M under the terms of this Agreement. All Reproduced Software will bear the
3M brand name and meet the 3M brand labeling requirements stated in Exhibit B.
(c) "Hardware" means the CEMAX hardware listed in Exhibit C of this
Agreement sold to 3M under the terms of this Agreement.
(d) "Subsystems" means the Software, Hardware, and hardware purchased
either by 3M or CEMAX, which CEMAX will integrate and will meet the then current
specifications stated in Exhibit D. All Subsystems will bear the 3M brand name
and meet the 3M brand labeling requirements stated in Exhibit B.
(e) "Products" means Software, Reproduced Software, Hardware and
Subsystems.
(f) "System" means an Image Management System marketed by 3M consisting of
Products and 3M products in various combinations.
(g) "Update" means a change or changes to a Product which corrects errors,
improves performance or seviceability, and/or makes other changes that are
typically of no additional charge to the end-user.
2. LIMITATIONS ON 3M'S RIGHTS TO THE PRODUCTS, SOFTWARE LICENSES
(a) 3M CERTIFICATION. 3M certifies that each Product purchased under this
Agreement will be either:
(i) incorporated by 3M into a System that 3M assembles, for sale,
lease or other use, in the regular course of 3M's business;
(ii) sold by 3M directly to the end user thereof;
(iii) sold to the end user thereof through 3M's customary distribution
channels, without integration of the Product into any System, or any other
value added, by any third party in the distribution channel; or
(iv) used by 3M for internal System development and testing.
3M further certifies that Systems into which each Product is incorporated by 3M
will include the addition of hardware and/or software supplied by 3M which
represents a significant enhancement and transformation of the Product (with
regard to both value and function). 3M agrees that Products intended for other
purposes shall not be purchased under this Agreement.
(b) LICENSE TO 3M FOR SOFTWARE. CEMAX hereby grants to 3M a nonexclusive,
nontransferable, royalty-free (except for the Fees payable to CEMAX) license to
demonstrate and sublicense the Software in machine executable object code format
worldwide in exercising 3M's rights and carrying out 3M's obligations under this
Agreement. The foregoing license shall terminate on the termination of this
Agreement for any reason.
(c) LICENSE TO 3M FOR REPRODUCED SOFTWARE. CEMAX hereby grants to 3M a
nonexclusive, nontransferable, royalty-free (except for the Fees payable to
CEMAX) license to reproduce, demonstrate and
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 2
sublicense the Reproduced Software in machine executable object code format
worldwide in exercising 3M's rights and carrying out 3M's obligations under this
Agreement. The foregoing license shall terminate on the termination of this
Agreement for any reason. CEMAX will provide to 3M a master tape of each
Reproduced Software on execution of this Agreement. In addition, 3M will draft a
detailed integration procedure for the Reproduced Software, for CEMAX's review
and approval.
(d) SUBLICENSING. 3M and its Subdistributors shall provide the Products to
end users pursuant to a software license in accordance with 3M's standard
software licensing practice for products of this type.
(e) SOFTWARE LICENSE AND OTHER RESTRICTIONS. Software and Reproduced
Software are subject to license and not sale. Each reference in this Agreement
to a "purchase" or "sale" of a Software or Reproduced Software, or like terms,
shall mean a "license" of that Software or Reproduced Software. CEMAX shall
retain full title to the Software and Reproduced Software and all copies
thereof, and 3M and its customers may use the Software and Reproduced Software
only in accordance with the provisions of their software licenses, as stated in
this Agreement. Neither 3M nor its customers shall have any access to or rights
in the Software or Reproduced Software source codes, except for 3M's rights
pursuant to Section 6. Neither 3M nor its customers shall have the right to
copy, modify or remanufacture any Software or Reproduced Software or part
thereof, except as specifically stated in this Agreement.
(f) APPOINTMENT. Subject to the terms and conditions set forth in this
Agreement, CEMAX grants 3M the nonexclusive, nontransferable, worldwide right to
distribute the Products in accordance with the restrictions set forth in
Subsection 2(a), solely to end user customers and 3M's subdistributors and
resellers within its normal chain of distribution ("Subdistributors"), but in no
event to any other original equipment manufacturer, systems integrator,
value-added reseller, or any other entity that might integrate or incorporate
the Products with other systems, software, hardware, or other components. CEMAX
agrees, however, that 3M may make occasional sales to original equipment
manufacturers where purchase through an original equipment manufacturer other
than 3M is required by the customer.
3. TERMS OF PURCHASE OF PRODUCTS BY 3M
(a) TERMS AND CONDITIONS. All purchases of Products by 3M from CEMAX
during the term of this Agreement shall be subject to the terms and conditions
of this Agreement.
(b) FEES. All prices are F.O.B. (as defined in Section 2319 of the
California Uniform Commercial Code) CEMAX's plant currently located at the
address listed for CEMAX at the beginning of this Agreement.
(i) The Fees to 3M for Software and Hardware shall be [ *
* ] for that Software or Hardware, as stated
in Exhibit A attached hereto. CEMAX has the right at any time to revise its
list prices stated in Exhibit A with ninety (90) days advance written
notice to 3M. Such revisions shall apply to all orders received after the
effective date of revision. Fee increases shall not affect unfulfilled
purchase orders accepted by CEMAX prior to the effective date of the price
increase. Fee decreases shall apply to pending purchase orders accepted by
CEMAX prior to the effective date of decrease but not yet shipped. CEMAX
understands that 3M has a corporate commitment to [ * * ] per
year cost reduction. CEMAX agrees to make reasonable commercial efforts to
reduce the prices stated in Exhibit A by [ * * ] each
year during the term of this Agreement. CEMAX also agrees to offer to 3M
cost reductions it makes available to its other customers purchasing at
similar volumes.
(iii) The Fees for Reproduced Software and Subsystems are as stated in
Exhibits A and D. The percentage discount from list price may be changed
only on the mutual written agreement of 3M and CEMAX. In years two (2) and
three (3) of this Agreement, if the previous years sales do not exceed [ *
* ], then 3M and CEMAX will renegotiate the
pricing stated in Exhibits A and D.
(c) TAXES. 3M's Fees do not include any federal, state or local taxes that
may be applicable to the Products. When CEMAX has the legal obligation to
collect such taxes, the appropriate amount shall be added
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 3
to 3M's invoice and paid by 3M unless 3M provides CEMAX with a valid tax
exemption certificate authorized by the appropriate taxing authority.
(d) PURCHASES OF SOFTWARE, HARDWARE AND SUBSYSTEMS.
(i) All orders for Software, Hardware, and Subsystems submitted by 3M
shall be initiated by written purchase orders sent to CEMAX and requesting
a delivery date during the term of this Agreement; provided, however, that
an order may initially be placed orally or by telecopy if a conformational
written purchase order is received by CEMAX within five (5) days after said
oral or telecopy order. To facilitate CEMAX's production scheduling, 3M
shall submit purchase orders to CEMAX at least sixty (60) days prior to the
day of the requested delivery. CEMAX shall use best efforts to notify 3M of
the acceptance or rejection of an order and of the assigned delivery date
for accepted orders within five (5) days after receipt of the purchase
order. No partial shipment of an order shall constitute the acceptance of
the entire order, absent the written acceptance of such entire order. Prior
to rejecting an order, CEMAX and 3M will discuss changing the requested
delivery date to accommodate CEMAX's manufacturing capacity. CEMAX may
reject a 3M order in compliance with the Agreement only if CEMAX's
manufacturing capacity is exhausted or if the configuration of Software,
Hardware, and Subsystems ordered by 3M is not functional.
(ii) 3M's purchase orders submitted to CEMAX from time to time with
respect to Software, Hardware and Subsystems to be purchased hereunder
shall be governed by the terms of this Agreement, and nothing contained in
any such purchase order shall in any way modify such terms of purchase or
add any additional terms or conditions.
(iii) 3M may utilize written change orders without penalty up to
[ * * ] prior to 3M's requested ship date for the order.
Otherwise, 3M may not cancel or reschedule orders that have been accepted
by CEMAX without CEMAX's prior written consent.
(iv) CEMAX will invoice 3M for Products on shipment. Full payment of
3M's Fees for the Products (including any freight, taxes or other
applicable costs initially paid by CEMAX but to be borne by 3M) shall be
made by 3M to CEMAX within thirty (30) days after the receipt of CEMAX's
invoice. Any invoiced amount not paid when due shall be subject to a
service charge of [ * * ] per month.
(v) All Software, Hardware and Subsystems delivered pursuant to the
terms of this Agreement shall be suitably packed for air freight shipment
in CEMAX's standard shipping cartons, marked for shipment to 3M's address
set forth above or to another address designated by 3M in the order, and
delivered to 3M or its carrier agent F.O.B. CEMAX's manufacturing plant, at
which time risk of loss shall pass to 3M. Unless otherwise instructed in
writing by 3M, CEMAX shall select the carrier. All freight, insurance, and
other shipping expenses, as well as any special packing expense, shall be
paid by 3M. 3M shall also bear all applicable taxes, duties, and similar
charges that may be assessed against the Products after delivery to the
carrier at CEMAX's plant.
(vi) All Software, Hardware and Subsystems will be deemed accepted
when received by 3M.
(e) PAYMENT FOR REPRODUCED SOFTWARE. Each month during the term of this
Agreement if 3M is reproducing the Software, 3M will pay CEMAX the Fee for the
Reproduced Software shipped during the previous month. 3M will make the payment
within thirty (30) days after the start of the month. With the payment 3M will
send a report itemizing the Reproduced Software and appropriate Fee shown in
Exhibit A.
4. WARRANTY TO 3M
(a) LIMITED WARRANTY. CEMAX warrants, to 3M only, that each Software,
Hardware and Subsystems will perform in accordance with its specifications, and
that the media containing each Software will be free from defects in material
and workmanship, for the shorter of (x) [ * * ] after delivery of the
Software, Hardware or Subsystems by 3M to a customer of 3M, or (y) [ *
* ] after delivery of the Product to 3M by CEMAX. CEMAX does not warrant that
use or operation of the Software, Hardware or Subsystems will be uninterrupted
or error free.
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<PAGE> 4
(i) This warranty does not cover Software, Hardware or Subsystems that
were modified by third parties or that were subjected by the customer to
unusual physical or electrical stress. This exclusion does not include 3M
value-added activities regarding the Software, Hardware or Subsystems. In
addition, this warranty does not apply to the extent that a component
supplied by a third party is covered by a third party warranty.
(ii) In the event that Software, Hardware or a Subsystem does not
conform to the foregoing express limited warranty, during the applicable
warranty period stated above in this Subsection 4(a), 3M promptly shall
notify CEMAX of such defect in writing or electronically. 3M shall be
responsible for and shall coordinate all communication with its customers
concerning warranty claims and maintenance and support requests.
(iii) Except as stated in Subsection 4(c), CEMAX's sole liability and
3M's exclusive remedy for CEMAX's breach of the foregoing warranty shall be
that (1) with respect to media defects, CEMAX will replace the defective
media, and (2) with respect to reproducible performance defects, CEMAX will
use best commercial efforts to correct the nonconformity, and, within five
[ * * ] 3M's notice, will provide to 3M an estimated date for
correction of the defect; or, on mutual agreement by CEMAX and 3M, CEMAX
will provide to 3M a refund for the software, Hardware or Subsystems.
(b) REPRODUCED SOFTWARE WARRANTY. CEMAX warrants, to 3M only, that the
master tapes for the Reproduced Software will be free from defects in material
and workmanship, and that, for a period of [ * * ] after delivery of
the Reproduced Software to 3M's customer, the Reproduced Software will perform
in accordance with its specifications. CEMAX does not warrant that use or
operation of the Reproduced Software will be uninterrupted or error free. Except
as stated in Subsection 4(c), CEMAX's sole liability and 3M's exclusive remedy
for CEMAX's breach of the foregoing warranty shall be that (1) with respect to
media defects, CEMAX will replace the defective media, and (2) with respect to
reproducible performance defects, CEMAX will use best commercial efforts to
correct the nonconformity, and, within [ * * ] of 3M's notice, will
provide to 3M an estimated date for correction of the defect; or, on mutual
agreement by CEMAX and 3M, CEMAX will provide to 3M a refund for the Reproduced
Software.
(c) EPIDEMIC FAILURE. For the purposes of this Agreement, the term
"epidemic failure" means a field failure of any Product due to a specific
reproducible performance, workmanship or material defect which occurs in more
than [ * * ] of that Product installed within a [ * * ] period.
If an epidemic failure in a Product occurs, CEMAX will, in addition to the
warranty obligations stated in Subsection 4(a) and 4(b), prepare and present to
3M within [ * * ] days of 3M's notice, for 3M's approval, a plan to correct the
defect Product already in the field as well as in future Product. Costs incurred
by either party in preparing the plan, or in carrying out the plan including all
material, labor, and transportation expenses will be borne by CEMAX to the
extent of CEMAX's responsibility.
(d) CEMAX CODE. 3M acknowledges that the Products will not operate without
installing the proper CEMAX codes within the license file structures. For
Software, CEMAX will provide to 3M the coding software and documentation
necessary to generate, install, and maintain the license files on all Subsystems
for existing customers. For Reproduced Software, CEMAX will provide to 3M the
coding software and documentation necessary to generate, install, and maintain
the license files on all Subsystems.
(e) NO OTHER WARRANTY. EXCEPT FOR THE EXPRESS WARRANTY SET FORTH ABOVE,
CEMAX GRANTS NO OTHER WARRANTIES, EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE,
REGARDING THE PRODUCTS, THEIR FITNESS FOR ANY PURPOSE, THEIR QUALITY, THEIR
MERCHANTABILITY, OR OTHERWISE AND CEMAX SPECIFICALLY DISCLAIMS THE IMPLIED
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND MERCHANTABILITY. CEMAX GRANTS
NO WARRANTIES TO 3M'S CUSTOMERS.
(f) LIMITATION OF LIABILITY. EXCEPT FOR THE EXCLUSIVE REMEDIES STATED
ABOVE, CEMAX WILL NOT BE LIABLE FOR DIRECT DAMAGES FOR BREACH OF WARRANTY. IN NO
EVENT SHALL CEMAX BE LIABLE FOR ANY SPECIAL, INDIRECT, EXEMPLARY, CONSEQUENTIAL
OR INCIDENTAL DAMAGES FOR BREACH OF WARRANTY.
44
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 5
5. SOFTWARE UPDATES, ENHANCEMENTS AND TECHNICAL SUPPORT
(a) UPDATES. CEMAX will provide to 3M all Updates which CEMAX releases for
the Products. For Updates for Software and Reproduced Software, CEMAX will also
provide to 3M notice of the changes made and a listing of known outstanding bugs
and available "workarounds" for those bugs. At 3M's option, CEMAX will either
provide to 3M, without charge, sufficient copies of any error corrections for
all copies of the Products which 3M has purchased or grant 3M the rights to
reproduce the error corrections. In addition, CEMAX will provide to 3M an
updated master tape for Reproduced Software within [ * * ] of each
Update.
(b) TECHNICAL SUPPORT. As a back up to 3M's service support for the
Products and [ * * ], CEMAX will provide to 3M technical service
support during CEMAX's regular service support hours. If technical service
issues cannot be resolved by phone response by CEMAX, other than those described
in Subsection 4(c), then 3M and CEMAX will jointly develop and implement a plan
for providing on-site support to resolve the issue. All costs incurred by either
party in developing and implementing the plan will be borne by the respective
party. In addition, CEMAX will provide to 3M assistance in supporting Products
and integration during regular business hours and to the extent mutually agreed.
(c) DOCUMENTATION. CEMAX will supply to 3M the following related
documentation for the Products: service troubleshooting diagnostics;
instructions necessary for installation, operation, service and maintenance of
the Products; software and related documentation, including requirements
specifications, design specifications, object code, test plans, and test
procedures and results; manufacturing test plans, procedures and results; user
manuals; and service manuals. In addition, CEMAX will supply to 3M the following
related documentation if available: all applicable drawings and schematics;
theory of operation; and block diagrams. CEMAX grants to 3M the right to copy
and modify CEMAX service manuals and user manuals and to distribute the manuals
under 3M's brand name.
6. SOURCE CODE ESCROW
(a) ESCROW. Within forty-five (45) days after execution of this Agreement,
CEMAX shall deposit with an escrow agent selected by CEMAX and reasonably
acceptable to 3M ("Escrow Agent"), the following: 1) the full source code
language of the Software and Reproduced Software (including copies of all CEMAX
developed software development tools necessary for building the Software and
Reproduced Software), 2) copies of all development tools which do not require
any additional purchases from a third party, 3) a detailed list of all other
development tools required to build the Software and Reproduced Software, and,
4) quarterly thereafter, source code Updates (together referred to as the
"Source Code"). Escrow Agent shall act as custodian of the Source Code as long
as this Agreement shall be in effect. Escrow Agent shall establish a receptacle
in which the Source Code will be placed and shall place the receptacle under the
control of one officer of Escrow Agent selected by Escrow Agent from time to
time, whose identity shall be available to the parties at all times. The parties
shall execute a customary escrow agreement as may be reasonably requested by
Escrow Agent which shall incorporate the provisions of this section.
(b) RELEASE CONDITIONS. Upon the occurrence of any one of the following
events:
(i) the filing of a petition for bankruptcy by CEMAX, or CEMAX's
making of a general assignment for the benefit of creditors, or the
commencement by CEMAX of similar proceedings for the general settlement of
its debts;
(ii) liquidation of CEMAX;
(iii) discontinuation of business by CEMAX; or
(iv) CEMAX's inability or failure to correct a reproducible failure of
a Software or Reproduced Software product to perform in accordance with
it's published specifications that materially effects the operation of the
Software or Reproduced Software, within [ * * ] after receiving
written or electronic notification of such error from 3M.
Escrow Agent will be authorized to provide to 3M, upon 3M's written request in
accordance with the following procedure, a copy of the Source Code. 3M's request
shall be made by an officer of 3M and shall set forth the facts indicating that
one of the events described above has occurred and is continuing to occur and
that 3M is
45
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 6
entitled to a copy of the Source Code within five (5) days. 3M shall provide
CEMAX with a copy of its written request. CEMAX shall have the right to dispute
the facts set forth in 3M's request within five (5) days. In the event of such
dispute, Escrow Agent shall retain the Source Code and the parties shall
promptly proceed with resolution of the dispute as stated in Section 12 of this
Agreement.
(c) ESCROW FEES. The fees of the Escrow Agent shall be paid by 3M.
(d) USE OF SOURCE CODE. Upon release of the Source Code to 3M pursuant to
this section, 3M shall only have the right to use the Source Code for the
purpose of correcting errors in the Software in order to support its end users
and for no other purpose. The Source Code shall be deemed to be CEMAX
Confidential Information as provided in Section 9 hereof. In addition, access to
the source code shall be limited to those 3M employees with a need for such
access pursuant to this section and shall be limited to a single 3M technical
location, and 3M shall be entitled to make only one (1) backup copy of the
machine readable source code for use as set forth herein. Under no circumstances
shall 3M be entitled to disclose the Source Code to any third party. Without
limited the foregoing, 3M will treat the Source Code with at least the same
degree of care as it uses for its own source code.
7. TERM AND TERMINATION
(a) TERM. This Agreement shall continue in force for a fixed term of three
(3) years from the date hereof unless terminated earlier under the provisions of
this Section 7. At the end of the fixed term, this Agreement shall terminate
automatically without notice unless prior to that time the term of the Agreement
is extended by mutual written consent of the parties.
(b) TERMINATION FOR CAUSE. Except as set forth in Subsection 7(c) below,
if either party defaults in the performance of any provision of this Agreement,
then the nondefaulting party may give written notice to the defaulting party
that if the default is not cured within [ * * ] the Agreement will be
terminated. If the non-defaulting party gives such notice and the default is not
cured during the [ * * ] then this Agreement shall automatically
terminate at the end of that period.
(c) TERMINATION FOR INSOLVENCY. This Agreement shall terminate, without
notice, (i) upon the institution by or against 3M of insolvency, receivership or
bankruptcy proceedings or any other proceedings for the settlement of 3M's
debts, (ii) upon 3M's making an assignment for the benefit of creditors, or
(iii) upon 3M's dissolution or ceasing to do business.
(d) TERMINATION FOR CHANGE OF CEMAX OWNERSHIP. If during the term of this
Agreement a medical imaging film competitor of 3M acquires an interest in, or
ownership of, more than [ * * ] of the common stock of CEMAX or
assets, CEMAX will immediately notify 3M in writing. Effective immediately, 3M
will automatically have the right and option to continue this Agreement or the
nonexclusive right and license to make, have made, use, and sell the Products.
CEMAX will deliver to 3M all documentation and information reasonably necessary
for 3M to exercise these rights. 3M and CEMAX will negotiate a reasonable
royalty rate which 3M will pay CEMAX for all Products 3M makes or has made and
sell. The royalty rate, however, will not exceed the then current price under
this Agreement for the Products, and the right and royalty rate will apply to
sales of the Products by 3M for a period of [ * * ] or the end of the
fixed term of this Agreement, whichever is shorter.
(e) FULFILLMENT OF ORDERS UPON TERMINATION. Upon termination of this
Agreement for other than 3M's breach, CEMAX shall continue to fulfill, subject
to the terms of Section 3 above, all orders accepted by CEMAX prior to the date
of termination.
(f) LIMITATION. In the event of termination by either party in accordance
with any of the provisions of this Agreement, neither party shall be liable to
the other, because of such termination, for compensation, reimbursement or
damages on account of the loss of prospective profits or anticipated sales or on
account of expenditures, inventory, investments, leases or commitments in
connection with the business or goodwill of CEMAX or 3M. Termination shall not,
however, relieve either party or obligations incurred prior to the termination.
(g) SURVIVAL OF CERTAIN TERMS. The provisions of Sections 2(d), 3(d), 4,
7, 8, 9, 10, 11, 12 and 13 survive the termination of this Agreement for any
reason. All end user sublicenses provided under the
46
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 7
provisions of Subsection 2(b) above prior to termination of this Agreement for
any reason, in accordance with their terms. All other rights and obligations of
the parties shall cease upon termination of this Agreement.
8. LIMITED LIABILITY
(a) NEITHER PARTY WILL UNDER ANY CIRCUMSTANCES BE LIABLE TO THE OTHER FOR
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT
LIMITED TO, LOSS OF PROFITS, REVENUE OR BUSINESS) RESULTING FROM OR IN ANY WAY
RELATED TO THE PRODUCTS, ANY OF 3M'S PURCHASE ORDERS, THIS AGREEMENT, OR THE
TERMINATION OR NON-RENEWAL OF THIS AGREEMENT. This limitation applies regardless
of whether the damages are sought based on breach of warranty, breach of
contract, negligence, strict liability in tort, or any other legal theory. This
limitation of liability will not apply to claims by either party for
infringement of its intellectual property rights.
(b) Any action for breach of warranty or any other obligation under this
Agreement must be commenced within one (1) year after the cause of action
accrues.
9. CONFIDENTIALITY
(a) The term "Confidential Information" shall mean any information
disclosed by one party to the other (i) prior to the date of this Agreement but
with respect to the subject matter hereof, or (ii) pursuant to the Agreement,
which is in written, graphic, machine readable or other tangible from and is
marked "Confidential," "Proprietary" or in some other manner to indicated its
confidential nature. Confidential Information may also include oral information
disclosed by one party to the other pursuant to this Agreement, provided that
such information is designated as confidential at the time of disclosure and
reduced to a written summary by the disclosing party, within thirty (30) days
after its oral disclosure, which is marked in a manner to indicate its
confidential nature and delivered to the receiving party. Notwithstanding any
failure to so identify it, however, all CEMAX Source Code will be deemed CEMAX
"Confidential Information" hereunder.
(b) Each party shall treat as confidential all Confidential Information of
the other party, shall not use such Confidential Information except as expressly
set forth herein or otherwise authorized in writing, shall implement reasonable
procedures to prohibit the disclosure, unauthorized duplication, misuse or
removal of the other party's Confidential Information and shall not disclose
such Confidential Information to any third party except as may be necessary and
required in connection with the rights and obligations of such party under this
Agreement, and subject to confidentiality obligations at least as protective as
those set forth herein. Without limiting the foregoing, each of the parties
shall use at least the same procedures and degree of care that it uses to
prevent the disclosure of its own confidential information of like importance to
prevent the disclosure of Confidential Information disclosed to it by the other
party under this Agreement, but in no event less than reasonable care.
(c) Notwithstanding the above, neither party shall have liability to the
other with regard to any Confidential Information of the other which:
(i) was generally known and available at the time it was disclosed or
becomes generally known and available through no fault of the receiver;
(ii) was known to the receiver, without restriction, at the time of
disclosure as shown by the files of the receiver in existence at the time
of disclosure;
(iii) is disclosed with the prior written approval of the discloser;
(iv) was independently developed by the receiver without any use of
the Confidential Information provided that the receiver can demonstrate
such independent development by documented evidence prepared
contemporaneously with such independent development;
(v) becomes known to the receiver, without restriction, from a source
other than the discloser without breach of this Agreement by the receiver
and otherwise not in violation of the discloser's rights; or
47
<PAGE> 8
(vi) is disclosed pursuant to the order or requirement of a court,
administrative agency, or other governmental body, provided, that the
receiver shall provide prompt, advanced notice thereof to enable the
discloser to seek a protective order or otherwise prevent such disclosure.
10. TRADEMARKS AND TRADE NAMES
No trademark, service mark, or other company, product, or service
identifier license is granted by CEMAX to 3M hereunder. During the term of this
Agreement, however, 3M may use the following statement in connection with the
marketing, promotion and distribution of Products: "This product was developed
by CEMAX, Inc., located in Fremont, California U.S.A." Upon any expiration or
termination of 3M's rights to sell Products under this Agreement, the foregoing
rights shall terminate. 3M will market and sell the Products under its own names
and marks, as stated in Exhibit B. 3M, however, will not remove or alter any
proprietary notices on or in the Products.
11. INFRINGEMENT INDEMNITY
(a) INDEMNIFICATION. 3M agrees that CEMAX has the right to defend, or at
its option to settle, and CEMAX agrees, at its own expense, to defend or at its
option to settle, any claim, suit or proceeding brought against 3M or its
customer on the issue of infringement of any patent or copyright by the Software
and Reproduced Software sold hereunder or the use thereof, subject to the
limitations hereinafter set forth. CEMAX shall have sole control of any such
action or settlement negotiations, and CEMAX agrees to pay, subject to the
limitations hereinafter set forth, any final judgment entered against 3M or its
customer on such issue in any such suit or proceeding defended by CEMAX. 3M
agrees that CEMAX at its sole option shall be relieved of the foregoing
obligations unless 3M notifies CEMAX promptly in writing of such claim, suit or
proceeding and gives CEMAX authority to proceed as contemplated herein, and, at
CEMAX's expense (except for the value of time of 3M employees), gives CEMAX
proper and full information and assistance to settle and/or defend any such
claim, suit or proceeding. If the Software and Reproduced Software, or any part
thereof, are, or in the opinion of CEMAX may become, the subject of any claim,
suit or proceeding for infringement of any patent or copyright or if it is
adjudicatively determined that the Software and Reproduced Software, or any part
thereof, infringe any patent or copyright or if the sale or use of the Software
and Reproduced Software, or any part thereof, is, as a result, enjoined, then
CEMAX may, at its option and expense either: (i) procure for 3M and its
customers the right under such patent or copyright to sell or use, as
appropriate, the Software and Reproduced Software or such part thereof, or (ii)
replace the Software and Reproduced Software, or part thereof, with other
suitable Software and Reproduced Software or parts; or (iii) suitably modify the
Software and Reproduced Software, or part thereof; or (iv) if the use of the
Software and Reproduced Software, or part thereof, is prevented by injunction,
remove the affected Software and Reproduced Software, or part thereof, and
refund the aggregate payments paid therefor by 3M, less a reasonable sum for use
and damage. CEMAX shall not be liable for any costs or expenses incurred without
its prior written authorization.
(b) LIMITATION. Notwithstanding the provisions of Subsection 11(a) above.
CEMAX assumes no liability for (i) infringements covering completed equipment or
any assembly, circuit, combination, method or process in which any of the
Products may be used but not covering the Products when used alone; or (ii)
infringements involving the modification or servicing of the Products, or any
part thereof, unless such modification or servicing was done by CEMAX.
(c) ENTIRE LIABILITY. THE PROVISIONS OF SUBSECTIONS 11(a) and 11(b) STATE
THE ENTIRE LIABILITY AND OBLIGATIONS OF CEMAX AND THE EXCLUSIVE REMEDY OF 3M AND
ITS CUSTOMERS, WITH RESPECT TO ANY ACTUAL OR ALLEGED INFRINGEMENT OF PATENTS,
COPYRIGHTS, OR OTHER INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCTS OR ANY PART
THEREOF.
(d) REPRESENTATION. CEMAX represents and warrants to 3M that, to the best
of its knowledge as of the date of this Agreement, the Products sold under this
Agreement do not infringe the patents, copyrights, trade secrets or other
proprietary rights or any third party.
48
<PAGE> 9
12. DISPUTE RESOLUTION
(a) RESOLUTION PROCEDURE. The parties agree to attempt in good faith to
resolve any dispute arising out of or relating to this Agreement promptly by
negotiations.
(i) Either party may give the other party written notice of any
dispute not resolved in the normal course of business. Executives of both
parties at levels one step above the project personnel who have previously
been involved in the dispute will meet at a mutually acceptable time and
place within ten (10) days after delivery of the notice, and thereafter as
often as they reasonably deem necessary. The purpose of this meeting is for
the executives to exchange relevant information and to attempt to resolve
the dispute.
(ii) If the matter has not been resolved by the executives within
thirty (30) days of the notice, or if the parties fall to meet within the
ten (10) day period, the dispute will be referred to senior executives of
both parties who have authority to settle the dispute to attempt to resolve
the dispute. If the matter has not been resolved within thirty (30) days
from the referral of the dispute to the senior executives, or if no meeting
has taken place within fifteen (15) days after referral to the senior
executives, either party may initiate mediation or other mutually agreed to
alternate dispute resolution mechanism.
(iii) If the dispute has not been resolved by negotiation as stated
above, the parties agree to attempt to settle the dispute by mediation
using a third party neutral.
(b) EXCLUSIVE PROCEDURES. The procedures stated in Subsection 12(a) must
be exhausted prior to the initiation of any litigation unless the procedures
continue for longer than nine (9) months. A party, however, may seek a
preliminary injunction or other provisional judicial relief if in its judgment
such action is necessary to avoid irreparable damage or to preserve the status
quo. Despite such action the parties will continue to participate in good faith
in the procedures specified in this Section 12.
(c) GOVERNING LAW AND JURISDICTION. This Agreement shall be governed by
and construed under the laws of the State of California, without reference to
conflict of laws principles. The federal and state courts within the State of
California shall have exclusive jurisdiction and venue to adjudicate any dispute
arising out of this Agreement.
13. GENERAL PROVISIONS
(a) INDEPENDENT CONTRACTORS. The relationship of CEMAX and 3M established
by this Agreement is that of independent contractors, and nothing contained in
this Agreement shall be construed to (i) give either party the power to direct
and control the day-to-day activities of the other, (ii) constitute the parties
as partners, joint venturers, co-owners or otherwise as participants in a joint
or common undertaking, or (iii) allow 3M to create or assume any obligation on
behalf of CEMAX for any purpose whatsoever. All financial obligations associated
with 3M's business are the sole responsibility of 3M. All sales and other
agreements between 3M and its customers are 3M's exclusive responsibility and
shall have no effect on 3M's obligations under this Agreement.
(b) NOTICES. Except as specifically stated elsewhere in this Agreement,
any notice required or permitted by this Agreement shall be in writing and shall
be sent by prepaid registered or certified mail, return receipt requested,
addressed to the other party at the address shown at the beginning of this
Agreement or at such other address for which such party gives notice hereunder.
Such notice shall be deemed to have been given three (3) days after deposit in
the mail
CEMAX will send all notices under this Agreement to:
3M Medical Imaging Systems Division
3M Center, Building 223-2SW-03
St. Paul, Minnesota 55144-1000
ATTN: PACS Business Manager
3M will send all notices under this Agreement to:
CEMAX, Inc.
47281 Mission Falls Court
49
<PAGE> 10
Fremont, California 94539
ATTN: President and CEO
A party may designate in writing other individuals to receive notice.
(c) EXPORT REGULATIONS. 3M warrants that it will comply with the Export
Administration Regulations and other United States laws and regulations
governing exports that are in effect from time to time with respect to the
Products.
(d) FORCE MAJEURE. Except for payment obligations, nonperformance of
either party shall be excused to the extent that performance is rendered
impossible by strike, fire, flood, governmental acts or orders or restrictions,
failure of suppliers, or any other reason where failure to perform is beyond the
reasonable control of and is not caused by the negligence of the nonperforming
party.
(e) NONASSIGNABILITY AND BINDING EFFECT. Neither party may assign any of
its rights or delegate or subcontract any of its duties under this Agreement
without first getting the other party's permissions in writing, other than an
assignment or delegation to a successor to the party's business. Subject to the
foregoing sentence, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and assigns.
(f) NO IMPLIED LICENSES. No rights or licenses are granted to 3M, by
implication, estoppel, or otherwise, other than the rights and licenses
expressly granted herein.
(g) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(h) JOINT SALES AGREEMENT. This Agreement supersedes and replaces the
parties' "Joint Sales Agreement", executed [ * * ], which is hereby
terminated. CEMAX will continue to honor its warranty and service obligations
arising out of the Joint Sales Agreement for their stated terms. Any quotes made
under the Joint Sales Agreement outstanding on execution of this Agreement will
be honored for the period stated in the quote. Thereafter, 3M may re-quote under
the terms of this Agreement.
(i) ENTIRE AGREEMENT. This Agreement and the Exhibits attached hereto set
forth the entire agreement and understanding of the parties relating to the
subject matter of this Agreement and merges all prior discussions between them.
No modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the party
to be charged. The terms of any purchase order are expressly excluded.
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to enter into this Agreement, effective as of the Effective
Date.
<TABLE>
<S> <C>
CEMAX, INC. MINNESOTA MINING AND MANUFACTURING COMPANY
By: By:
Terry Ross Clifford T. Pinder
President and CEO Vice President
Medical Imaging Systems Division
</TABLE>
Exhibit A -- List of Software, Reproduced Software and Fees
Exhibit B -- 3M Branding Requirements
Exhibit C -- List of Hardware, Hardware Specifications and Prices
Exhibit D -- List of Subsystems and Subsystem Prices
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 11
EXHIBIT "A"
<TABLE>
<CAPTION>
LIST
PRODUCT NAME PRICE
- -------------------------------------------------------------------------------- --------
<S> <C>
VIPstation20TM.................................................................. $[ *
VIPstation20TM Software......................................................... $
ClinicalViewTM Single Monitor Station........................................... $
ClinicalViewTM Single Monitor Software.......................................... $
ClinicalViewTM Dual Monitor Station............................................. $
ClinicalViewTM Dual Monitor Software............................................ $
DiagnosticViewTM Single Monitor Station......................................... $
DiagnosticViewTM Single Monitor Software........................................ $
DiagnosticViewTM Dual Monitor Station........................................... $
DiagnosticViewTM Dual Monitor Software.......................................... $
HomeViewTM Software -- PC or Mac................................................ $
HomeViewTM Software -- PC....................................................... $
HomeViewTM Software -- Mac...................................................... $
ToothPixTM...................................................................... $
ImageXchange.................................................................... $
ImageServerTM................................................................... $
ImageServerTM Software.......................................................... $
HomeViewTM Server............................................................... $
ArchiveManagerTM 1.0 -- Software Only........................................... $
ArchiveManagerTM 1.0............................................................ $
Lumisys Lumiscan 150 DigitizerTM (Preferred Package)............................ $
QA Station Software Only........................................................ $
VIP Tape Reader................................................................. $
Network Film ServerTM........................................................... $
Network Film ServerTM Software.................................................. $
Direct Filming Option........................................................... $
Network Filming Option.......................................................... $
20 inch Color Monitor........................................................... $
2.1 GB Hard Disk................................................................ $
4 GB Hard Disk.................................................................. $
9 GB Hard Disk.................................................................. $
18 GB Hard Disk................................................................. $
27 GB Hard Disk................................................................. $
36 GB Hard Disk................................................................. $
45 GB Hard Disk................................................................. $
54 GB Hard Disk................................................................. $
4 GB Raid Storage............................................................... $
8 GB Raid Storage............................................................... $
12 GB Raid Storage.............................................................. $
48 GB Raid Storage.............................................................. $
24 GB Raid Storage.............................................................. $
32 GB Raid Storage.............................................................. $
32 MB Additional Memory......................................................... $
FDDI High Speed Network Option.................................................. $
5 GB 8mm Tape Drive System...................................................... $
High Density Magnetic Tape Drive................................................ $
Color Printer................................................................... $
Trackball UI Device............................................................. $
Remote Diagnostic kit........................................................... $
ATM Network Option.............................................................. $ * ]
</TABLE>
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 12
<TABLE>
<CAPTION>
LIST
PRODUCT NAME PRICE
- -------------------------------------------------------------------------------- --------
<S> <C>
ClinicalView(TM) 20/50 Dual Monitor Station..................................... $ [ *
DiagnosticView(TM) 20/50 Dual Monitor Station................................... $
ClinicalView(TM) Single to Dual Monitor Upgrade................................. $
ClinicalView(TM) Single to Dual Monitor Software................................ $
DiagnosticView(TM) Single to Dual Monitor Upgrade............................... $
DiagnosticView(TM) Single to Dual Monitor Software.............................. $
ClinicalView(TM) Dual to DiagnosticView(TM) Dual Monitor........................ $
ClinicalView(TM) Dual to DiagnosticView(TM) Dual S/W............................ $
VIPstation2(TM) to VIPstation20(TM) Upgrade..................................... $
VIP1.3 Software to VIP1.4 Software Upgrade...................................... $
VIP Training at CEMAX........................................................... $
VIP Training at the client's site............................................... $
ScanLink(TM) I -- GE 9800 HiLight CT Advantage 5.3.............................. $
ScanLink(TM) I -- GE HiSpeed Ct Advantage 5.3................................... $
ScanLink(TM) I -- GE Signa 1.5 Advantage 5.3 (Vortech).......................... $
ScanLink(TM) I -- Imatron Ultrafast CT.......................................... $
ScanLink(TM) I -- DICOM 3.0..................................................... $
ScanLink(TM) I -- GE Advantage CT XD............................................ $
ScanLink(TM) I -- GE Signa 1.5 MR Advantage 5.4................................. $
ScanLink(TM) I -- GE HiSpeed CT (Advantage 5.4)................................. $
ScanLink(TM) I -- GE 9800 HiLight CT (Advantage 5.4)............................ $
ScanLink(TM) I -- GE Independent Console (Ver 5.3).............................. $
ScanLink(TM) I -- GE Independent Console (Ver 5.4).............................. $
ScanLink(TM) I -- Picker Edge MR................................................ $
ScanLink(TM) I -- Picker PQ/IQ CT............................................... $
ScanLink(TM) I -- Toshiba Xspeed/Xpress(TM)..................................... $
ScanLink(TM) I -- Toshiba MRT 35 MR............................................. $
ScanLink(TM) I -- Toshiba Access MRI............................................ $
ScanLink(TM) I -- Dupont CRS.................................................... $
ScanLink(TM) I -- Kodak Cr (via DICOM 3.0)...................................... $
ScanLink(TM) I -- ACR-NEMA 2.0.................................................. $
ScanLink(TM) I -- ACR-NEMA DICOM 3.0............................................ $
ScanLink(TM) II -- GE 9800 CT (Non-Advantage)................................... $
ScanLink(TM) II -- Signa 1.5 MR (Non-Advantage)................................. $
ScanLink(TM) II -- Signa 1.5 MR (Advantage up to 4.6)........................... $
ScanLink(TM) II -- Picker 1200 SX CT/Level II................................... $
ScanLink(TM) II -- Picker Vista/HPQ MR.......................................... $
ScanLink(TM) II -- Siemens DRH CT............................................... $
ScanLink(TM) III -- Hitachi MRP 7000 MR......................................... $
ScanLink(TM) III -- Philips LX CT............................................... $
ScanLink(TM) III -- Philips CX CT............................................... $
ScanLink(TM) III -- Philips SR CT............................................... $
ScanLink(TM) III -- Philips MR.................................................. $
ScanLink(TM) III -- Siemens DR3 CT.............................................. $
ScanLinkTM III -- Siemens MR Magnetom........................................... $
ScanLinkTM III -- Siemens MR Impact............................................. $
ScanLinkTM III -- Siemens Somatom +............................................. $
ScanLinkTM III -- Toshiba 600 CT................................................ $
ScanLinkTM III -- Toshiba 900S CT............................................... $
ScanLinkTM III -- Toshiba DFP 50/60............................................. $
ScanLinkTM III -- Toshiba MRT 50................................................ $ * ]
</TABLE>
52
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 13
<TABLE>
<CAPTION>
LIST
PRODUCT NAME PRICE
- -------------------------------------------------------------------------------- --------
<S> <C>
ScanLinkTM III -- Toshiba MRT 150............................................... $ [ *
ScanLinkTM IV / QA Station -- Fuji CR........................................... $
ScanLinkTM IV / QA Station -- Lumisys Digitizer................................. $
ScanLinkTM IV / Software Only................................................... $
ScanLinkTM IV / Software Only -- Fuji CR........................................ $
ScanLinkTM IV / Software Only -- Lumisys Digitzer............................... $
ScanLinkTM V.................................................................... $ * ]
</TABLE>
53
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 14
EXHIBIT "B"
November 9, 1994
Oran Muduroglu Fax: 510-770-8555
Cemax
47281 Mission Falls Ct.
Fremont, CA 94539
Dear Oran:
Listed are some specific requirements for the 3M branded Image Management
System. These requirements are expressed in short (interim) and medium
(ultimate) range goals. We would like to reach our ultimate goals as soon as
possible and the interim objectives are primarily for [ *].
There are four areas that require changes. In some cases 3M can make
necessary modifications within the configuration and in others, the changes will
have to be implemented by Cemax. Ultimately, we would like to see all changes
integrated into the manufacturing process and not performed during installation.
1. [ * * ] screen -- Many of the attributes on this screen can be updated
by 3M. As a result we have made modifications as indicated below, with one
exception. At the top of the screen it says [ * * ]. We
are unable to modify this label and would prefer the header to read as
indicated.
[ *
* ]
Model: XXXX Serial No. XXXXXXXX
For Service Call 1-800-328-7754
3M Health Care
St. Paul, Mn. 55133-3223
Release 1.0 July 23, 1994
Copyright 1991-1994
Cemax Inc.
Portions copyright
Sun Microsystems
The reference to [ * * ] should be changed appropriately
for each station. The modification accomplished by 3M will suffice for
[ *]. The ultimate goal is to have systems shipped from CEMAX with this
verbiage.
2. CEMAX Wallpaper -- On initialization a screen appears that paints CEMAX
consecutively across the screen, line by line. This should be replaced with
an informational message advising the customer what the system is doing.
The interim goal for [ *] is to eliminate the Cemax from this screen.
Adding a descriptive message before [ *] would be desirable, but not
required. The ultimate goal, will be to add the informational message to
the screen.
54
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 15
3. 3M Logos -- There are three areas currently using 3M logos, 3M [ *
* ] Station, 3M [ * * ] Station and 3M [ *
* ] Station. These logos should be consistently sized in all three
areas.
The size used for the [*] Station should be the standard, however, more
room is needed along the borders. The corporate requirement is to provide
at least one half the "M" height as margin around the logo. We will need to
shift the menu down or move the logo to the bottom right corner.
We need to consistently size the logos on the [ *
* ] Stations. It appears that the [ * * ] creates a compressed logo.
For [ *] we will need the 3M logo sized consistently with all three
stations, using the [*] Station logo for size. As an ultimate goal we need
to position the 3M logo in the lower right hand corner. Again, it will be
important to ultimately have this occur as part of the standard
manufacturing process.
4. Product Labeling -- In various places within the software, the product is
referred to as [ * * ]. We would prefer to have these references read
3M Image Management System. These references exist on the initialization
screen, log out screen, status messages and within some of the help
screens.
We are covered for [ *] and need to change the labels and implement these
changes as part of the manufacturing process.
Of utmost importance are the [ *] requirements. I'm sure you will have some
questions, so feel free to call me at 612-733-6879.
Sincerely,
Mark D. Hunter
Marketing Manager
55
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 16
EXHIBIT "C"
<TABLE>
<CAPTION>
PRODUCT NAME LIST PRICE DISCOUNT % 3M OEM PRICE
- ----------------------------------------------------- ---------- ----------- ------------
<S> <C> <C> <C>
VIPstation20(TM) Software............................ $ [ * A $ [ *
ClinicalView(TM) Single Monitor Software............. $ B,C $
ClinicalView(TM) Dual Monitor Software............... $ B,C $
DiagnosticView(TM) Single Monitor Software........... $ B,C $
DiagnosticView(TM) Dual Monitor Software............. $ B,C $
HomeView(TM) Software -- PC or Mac................... $ A $
ToothPix(TM)......................................... $ A $
ImageXchange(TM)..................................... $ A $
ImageServer(TM) Software............................. $ B,C $
ArchiveManager(TM) 1.0 -- Software Only.............. $ B,C $
QA Station Software Only............................. $ B2 $
VIP Tape Reader...................................... $ A $
Network Film Server(TM) Software..................... $ B $
Direct Filming Option................................ $ B2 $
Network Filming Option............................... $ B2 $
ClinicalView(TM) Single to Dual Monitor Software..... $ B $
DiagnosticView(TM) Single to Dual Monitor Software... $ B $
ClinicalView(TM) Dual to DiagnosticView(TM) Dual
S/W................................................ $ B $
VIP1.3 Software to VIP1.4 Software Upgrade........... $ B,C $
VIP Training at CEMAX................................ $ NO DISCOUNT $
VIP Training at the client's site.................... $ NO DISCOUNT $
ScanLink(TM) I -- GE 9800 HiLight CT Advantage 5.3... $ B $
ScanLink(TM) I -- GE HiSpeed CT Advantage 5.3........ $ B $
ScanLink(TM) I -- GE Signa 1.5 Advantage 5.3
(Vortech).......................................... $ B $
ScanLink(TM) I -- Imatron Ultrafast CT............... $ B $
ScanLink(TM) I -- DICOM 3.0.......................... $ B $
ScanLink(TM) I -- GE Advantage CT XD................. $ B $
ScanLink(TM) I -- GE Signa 1.5 MR Advantage 5.4...... $ B $
ScanLink(TM) I -- GE HiSpeed CT (Advantage 5.4)...... $ B $
ScanLink(TM) I -- GE 9800 HiLight CT (Advantage
5.4)............................................... $ B $
ScanLink(TM) I -- GE Independent Console (Ver.
5.3)............................................... $ B $
ScanLink(TM) I -- GE Independent Console (Ver.
5.4)............................................... $ B $
ScanLink(TM) I -- Picker Edge MR..................... $ B $
ScanLink(TM) I -- Picker PQ/IQ CT.................... $ B $
ScanLink(TM) I -- Toshiba Xspeed/Xpress(TM).......... $ B $
ScanLink(TM) I -- Toshiba MRT 35 MR.................. $ B $
ScanLink(TM) I -- Toshiba Access MRI................. $ B $
ScanLink(TM) I -- DuPont CRS......................... $ B $
ScanLink(TM) I -- Kodak CR (via DICOM 3.0)........... $ B $
ScanLink(TM) I -- ACR-NEMA 2.0....................... $ B $
ScanLink(TM) I -- ACR-NEMA DICOM 3.0................. $ B $
ScanLink(TM) II -- GE 9800 CT (Non-Advantage)........ $ FIXED PRICE $
ScanLink(TM) II -- Signa 1.5 MR (Non-Advantage)...... $ FIXED PRICE $
ScanLink(TM) II -- Signa 1.5 MR (Advantage up to
4.6)............................................... $ FIXED PRICE $
ScanLink(TM) II -- Picker 1200 SX CT/Level II........ $ FIXED PRICE $
ScanLink(TM) II -- Picker Vista/HPQ MR............... $ FIXED PRICE $
ScanLink(TM) II -- Siemens DRH CT.................... $ FIXED PRICE $
ScanLink(TM) III -- Hitachi MRP 7000 MR CT........... $ FIXED PRICE $
ScanLink(TM) III -- Philips LX CT.................... $ FIXED PRICE $
ScanLink(TM) III -- Philips CX CT.................... $ * ] FIXED PRICE $ * ]
</TABLE>
56
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 17
<TABLE>
<CAPTION>
PRODUCT NAME LIST PRICE DISCOUNT % 3M OEM PRICE
- ----------------------------------------------------- ---------- ----------- ------------
<S> <C> <C> <C>
ScanLink(TM) III -- Philips SR CT.................... $ [ * FIXED PRICE $ [ *
ScanLink(TM) III -- Philips MR....................... $ FIXED PRICE $
ScanLink(TM) III -- Siemens DR3 CT................... $ FIXED PRICE $
ScanLink(TM) III -- Siemens MR Magnetom.............. $ FIXED PRICE $
ScanLink(TM) III -- Siemens MR Impact................ $ FIXED PRICE $
ScanLink(TM) III -- Siemens Somatom +................ $ FIXED PRICE $
ScanLink(TM) III -- Toshiba 600 CT................... $ FIXED PRICE $
ScanLink(TM) III -- Toshiba 900S CT.................. $ FIXED PRICE $
ScanLink(TM) III -- Toshiba DFP 50/60................ $ FIXED PRICE $
ScanLink(TM) III -- Toshiba MRT 50................... $ FIXED PRICE $
ScanLink(TM) III -- Toshiba MRT 150.................. $ FIXED PRICE $
ScanLink(TM) IV -- Software Only..................... $ B2 $
ScanLink(TM) IV -- Software Only -- Fuji CR.......... $ B2 $
ScanLink(TM) IV -- Software Only -- Lumisys
Digitizer.......................................... $ B2 $
ScanLink(TM) II -- Software Only..................... FIXED PRICE $
ScanLink(TM) III -- Software Only.................... FIXED PRICE $
HomeView Filming Software(TM) Option................. * ] FIXED PRICE $ * ]
</TABLE>
57
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 18
EXHIBIT
CLINICALVIEWTM
(SINGLE MONITOR)
CLINICALVIEWTM SINGLE MONITOR:
(PART #700-2012-0000)
VIEWING SOFTWARE:
-- 2D image review
-- Interactive WW and WL display
-- Image Pan and Zoom
-- Screen reformatting
-- Image orientation, flip and rotate
-- Next/previous image, page, & patient functions
-- Access to Cemax patient database and folders
-- Review of 3D images, produced by host VIPstationTM
-- Based on industry-standard X-window/Motif (GUI)
-- Supports one 1280 X 1600 resolution grayscale monitor
-- DICOM 3.0 storage class user/provider
CLINICALVIEWTM
(DUAL MONITOR)
CLINICALVIEWTM DUAL MONITOR:
(PART #700-2013-0000)
VIEWING SOFTWARE:
-- 2D image review
-- Interactive WW and WL display
-- Image Pan and Zoom
-- Screen reformatting
-- Image orientation, flip and rotate
-- Next/previous image, page, & patient functions
-- Access to Cemax patient database and folders
-- Review of 3D images, produced by host VIPstationTM
-- Based on industry-standard X-window/Motif (GUI)
-- Supports two 1280 X 1600 resolution grayscale monitors
-- Seamless integration between monitors
-- DICOM 3.0 storage class user/provider
58
<PAGE> 19
DIAGNOSTICVIEWTM
(SINGLE MONITOR)
DIAGNOSTICVIEWTM SINGLE MONITOR:
(PART #700-2041-000)
VIEWING SOFTWARE:
-- High resolution image viewing
-- 2D image review
-- Interactive WW and WL display
-- Image Pan and Zoom
-- Screen reformatting
-- Image orientation, flip and rotate
-- Next/previous image, page, & patient functions
-- Access to Cemax patient database and folders
-- Review of 3D images, produced by host VIPstationTM
-- Based on industry-standard X-window/Motif (GUI)
-- Supports one 2048 scanline grayscale monitor
-- DICOM 3.0 storage class user/provider
DIAGNOSTICVIEWTM
(DUAL MONITOR)
DIAGNOSTICVIEWTM DUAL MONITOR:
(PART #700-2042-0000)
VIEWING SOFTWARE:
-- High resolution image viewing
-- 2D image review
-- Interactive WW and WL display
-- Image Pan and Zoom
-- Screen reformatting
-- Image orientation, flip and rotate
-- Next/previous image, page, & patient functions
-- Access to Cemax patient database and folders
-- Review of 3D images, produced by host VIPstationTM
-- Based on industry-standard X-window/Motif (GUI)
-- Supports two 2048 scanline grayscale monitors
-- Seamless integration between monitors
-- DICOM 3.0 storage class user/provider
VIPSTATION20TM
CEMAX "VIPSTATION20TM":
8MM TAPE -- (PART #700-2000-0000)
1/4" TAPE -- (PART #700-2003-0000)
59
<PAGE> 20
CEMAX VIPsoftwareTM CT/MRI CLINICAL SOFTWARE WITH:
-- 2D/3D Clinical Workstation Software
-- Volumetric and Surface Rendering reconstruction software
-- Icon user interface
-- Image creation and viewing for 2D and 3D
-- Automated protocols
-- System status
-- System control with Retrieve/Archive
-- SpineProbeTM clinical application module
-- Voxel projection for MRI angiography
-- Interactivity and speed
-- Lifesize image creation and filming
-- Unattended filming capability
-- On-Line help menu programmed into application software
VIPSOFTWARETM OPTIONS
TOOTHPIXTM DENTAL IMAGING SOFTWARE MODULE:
(PART #700-2010-0000)
-- Pre-surgical planning of endosseous-integrated implants
-- User definable curve for panoramic view and cut parameters
-- Generation of lifesize images
-- Cross sectional obliques
IMAGEXCHANGE SOFTWARE:
(PART #700-2011-0000)
-- Converts images from VIP to Macintosh PICT or PC TIFF
-- Mac & SPARC must be equipped with appropriate communications,
software and hardware
HOMEVIEWTM SOFTWARE -- PC OR MAC
HOMEVIEWTM SOFTWARE -- PC OR MAC:
-- 8bit image store and display
-- Simple 2D image processing
PC BASED REVIEW STATION (NOT INCLUDED)
(PART #700-2043-0000)
-- Microsoft Windows 3.X based applications
-- Intel 386+, 8 MB Ram and SVGA minimum PC requirements
or
MAC BASED REVIEW STATION (NOT INCLUDED)
(PART #700-2044-0000)
-- Macintosh System 7.X based applications
-- Motorola 68030+, 8 MB Ram and SVGA minimum Mac requirements
60
<PAGE> 21
IMAGESERVER(TM)
IMAGESERVER(TM):
(PART #700-2014-0000)
IMAGESERVER(TM) SOFTWARE:
Patient/image folder concept
Distributed database
Client/server network architecture
ArchiveManager Reading
DECOM 3.0 storage class user/provider
Network management and administration
Complete system control
ARCHIVEMANAGER(TM) 1.0
ARCHIVEMANAGER(TM) 1.0:
(PART #700-2045-0000)
ARCHIVE SOFTWARE:
On-line search of directory of archived date
Creation of archive folders
Search by Patient Name, I.D., and Modality
SCANLINKS
SCANLINK I: (PART #100-2031-0000)
-- Direct link connection to a scanner.
-- Standard scanner must be equipped with appropriate interface and
software for system communication.
-- Scanner may need additional upgrade at customer's expense.
-- Customer to purchase and route all cables.
SCANLINK II: (PART #100-2028-0000)
-- Direct link connection to a scanner.
-- Standard scanner must be equipped with appropriate interface and
software for system communication.
-- Scanner may need additional upgrade at customer's expense.
-- Customer to purchase and route all cables.
SCANLINK III: (PART #100-2036-0000)
-- Direct link connection to a scanner.
-- Standard scanner must be equipped with appropriate interface and
software for system communication.
-- Scanner may need additional upgrade at customer's expense.
-- Customer to purchase and route all cables.
61
<PAGE> 22
SCANLINK IV/QA STATION: (PART #100-2058-0001)
-- Direct link connection to a digitizer/CR.
-- Standard digitizer/CR must be equipped with appropriate interface and
software for system communication.
-- Digitizer/CR may need additional upgrade at customer's expense.
-- Customer to purchase and route all cables.
QA STATION VIEWING SOFTWARE:
-- 2D image review
-- Interactive WW and WL display and save
-- Orientation correction
-- Support for patient demographic input
-- Destination selection and transmit
-- DICOM 3.0 storage class user/provider
SCANLINK V: (PART #100-2070-0000)
-- Direct Digital Video Interface
-- Interface to Cemax image database and filming network
-- Digital and keyboard entry of demographics
-- 486 EISA Bus ethernet network connection
-- Filming Keypad
62
<PAGE> 23
DIGITAL CONNECTS
<TABLE>
<CAPTION>
MANUFACTURER PART NUMBER DESCRIPTION
- ------------------------------------------- ---------------- -----------------------
<S> <C> <C>
GE 9800 CT (Non-Advantage) P #100-2028-0000 ScanLinkTMII
GE Signa 1.5 MR (Non-Advantage) P #100-2029-0000 ScanLinkTMII
GE Signa 1.5 MR (Advantage up to 4.6) P #100-2030-0000 ScanLinkTMII
GE 9800 HiLight CT (Advantage) P #100-2031-0000 ScanLinkTMI
GE HiSpeed Ct (Advantage) P #100-2032-0000 ScanLinkTMI
GE Signa 1.5 MR (Advantage 5X) P #100-2033-0000 ScanLinkTMI
Hitachi MRI P #100-2034-0000 ScanLinkTMIII
Imatron Ultrafast CT P #100-2035-0000 ScanLinkTMI
Philips CX CT P #100-2036-0000 ScanLinkTMIII
Philips LX CT P #100-2037-0000 ScanLinkTMIII
Philips SR CT P #100-2038-0000 ScanLinkTMIII
Philips MR P #100-2039-0000 ScanLinkTMIII
Picker IQ/PQ CT P #100-2040-0000 ScanLinkTMI
Picker 1200SX CT/Level II P #100-2041-0000 ScanLinkTMII
Picker Vista/HPQ MR P #100-2042-0000 ScanLinkTMII
Siemens DR3 CT P #100-2043-0000 PACSNet ScanLinkTMIII
Siemens DRH CT P #100-2044-0000 PACSNet ScanLinkTMIII
Siemens Somatom Plus CT P #100-2045-0000 PACSNet ScanLinkTMIII
Siemens Magnetom MR P #100-2046-0000 PACSNet ScanLinkTMIII
Toshiba 600 CT P #100-2047-0000 ScanLinkTMIII
Toshiba 900 CT P #100-2048-0000 ScanLinkTMIII
Toshiba Xpeed/XpressTM P #100-2049-0000 ScanLinkTMI
Toshiba MRT 35 MR P #100-2050-0000 ScanLinkTMI
Toshiba Access MR P #100-2051-0000 ScanLinkTMI
Toshiba MRT 50 MR P #100-2052-0000 ScanLinkTMIII
Toshiba MRT 150 MR P #100-2053-0000 ScanLinkTMIII
DuPont CR P #100-2054-0000 ScanLinkTMI
Kodak CR (via DICOM 3.0) P #100-2055-0000 ScanLinkTMI
ACR-NEMA 2.0 P #100-2056-0000 ScanLinkTMI
ACR-NEMA DICOM 3.0 P #100-2057-0000 ScanLinkTMI
QA Station Interface P #100-2058-0000 ScanLinkTMIV
(Fuji CR & Lumisys digitizer)
</TABLE>
[ ** ] FOR INSTALLATION IF BOUGHT AS STAND-ALONE CONFIGURATION
NOTE: *Standard scanner must be equipped with appropriate interface and software
for system communication.
*Scanner may need additional upgrade at customer's expense.
*Up to 400 feet cable length from the scanner.
*Customer to purchase and route all cable.
63
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 24
VIP TAPE READERS
<TABLE>
<CAPTION>
MANUFACTURER DESCRIPTION
- -------------------------------------------- --------------------------------------------
<S> <C>
GE 9800 (CT) Reads image & patient data from a standard 9
(Part #700-2016-0000) track archive tape
GE Advantage (CT) Reads image & patient data from a standard 9
(Part #700-2017-0000) track archive tape
GE Pace (CT) Reads image & patient data from a standard 9
(Part #700-2018-0000) track archive tape
GE Signa (MR) Reads image & patient data from a standard 9
(Part #700-2019-0000) track archive tape
Imatron/Ultrafast (CT) Reads image & patient data from a standard 9
(Part #700-2020-0000) track archive tape
Philips LX/SR (CT) Reads image & patient data from a standard 9
(Part #700-2021-0000) track archive tape
Picker IQ/PQ (CT) Reads image & patient data from a standard 9
(Part #700-2022-0000) track archive tape
Picker 1200SX/Level II (CT) Reads image & patient data from a standard 9
(Part #700-2023-0000) track archive tape
Picker MR (MR) Reads image & patient data from a standard 9
(Part #700-2024-0000) track archive tape
Siemens DRH (CT) Reads image & patient data from a standard 9
(Part #700-2025-0000) track archive tape
Siemens Magnetom MR (MR) Reads image & patient data from a standard 9
(Part #700-2026-0000) track archive tape
Siemens Somatom Plus (CT) Reads image & patient data from a standard 9
(Part #700-2027-0000) track archive tape
Toshiba Xpeed/XpressTM (CT) Reads image & patient data from a standard 9
(Part #700-2028-0000) track archive tape
Toshiba MRT 35/Access (MR) Reads image & patient data from a standard 9
(Part #700-2029-0000) track archive tape
</TABLE>
64
<PAGE> 25
FILMING
NETWORK FILM SERVER:
(PART #700-2039-0001)
SERVER SOFTWARE:
-- Film spooling software allows background filming capability
-- Choice of laser camera for redundant, mirrored & remote filming
-- NOTE: 3M/Kodak/DuPont/Fuji/Agfa laser camera must be configured with
multi-modality unit and a digital port for CEMAX LaserLink(TM)
LASERLINK(TM) CAMERA INTERFACE INCLUDING:
-- SBUS hardware and software to control sending images digitally to
3M/Kodak/DuPont/Fuji/Agfa laser camera
-- Film spooling software allows background filming capability
-- Software for automatic filming after processing of 2D/3D Images
-- NOTE: 3M/Kodak/DuPont/Fuji/Agfa laser camera must be configured with
multi-modality unit and a digital port for CEMAX LaserLink(TM)
DIRECT FILMING OPTION:
(PART #100-2026-0000)
-- Direct Filming connection to selected laser camera
-- Film spooling software allows background filming capabilities
-- Error message support and job resume
-- Filming format and copy control
-- SBUS hardware and software to control sending image digitally to
3M/Kodak/DuPont/Fuji/Agfa laser camera
NETWORK FILMING OPTION:
(PART #700-2023-0000)
-- Enables selected network station to film over the network to a selected
Direct Filming node or Network Film Server
-- Film spooling software allows background filming capabilities
-- Selection of supported laser camera on the network
-- Error message support and job resume
-- Filming format and copy control
-- User interface icon controlled
UPGRADES
CLINICALVIEWTM SINGLE TO DUAL MONITOR SOFTWARE UPGRADE:
(PART #700-2015-0000)
-- Software support for two 1280 X 1600 monitors
-- Seamless integration between monitors
DIAGNOSTICVIEWTM SINGLE TO DUAL MONITOR SOFTWARE UPGRADE:
(PART #700-2046-0000)
-- Software support for two 2048 scanline monitors
65
<PAGE> 26
-- Seamless integration between monitors
CLINICALVIEWTM DUAL TO DIAGNOSTICVIEWTM DUAL MONITOR SOFTWARE UPGRADE:
(PART #700-2047-0000)
-- Software support for two 2048 scanline monitors
-- Seamless integration between monitors
VIP1.3 SOFTWARE TO VIP1.4 SOFTWARE UPGRADE:
(PART #700-2038-0000)
VIEWING SOFTWARE:
-- Integration to CEMAX distributed database
-- Patient folder creation
-- DICOM 3.0 storage class user/provider
SERVICE CONTRACTS
STANDARD 12 MONTH SERVICE AGREEMENT FOR STANDARD SYSTEM:
-- 12 month hardware agreement including all parts, travel and labor (per
year)
-- 12 month software agreement including all standard updates and
maintenance
-- Service premium is paid quarterly in advance
-- Guaranteed 98% uptime
EXTENDED 48 MONTH SERVICE AGREEMENT FOR STANDARD SYSTEM:
-- 48 month hardware agreement including all parts, travel and labor (per
year)
-- 48 month software agreement including all standard updates and
maintenance
-- Service premium is paid quarterly in advance
-- Guaranteed 98% uptime
STANDARD 12 MONTH SERVICE-PARTNER AGREEMENT FOR STANDARD SYSTEM
-- Service partner provides first level service, Cemax provides second
level service support
-- 12 month hardware agreement including all parts, travel and labor (per
year)
-- 12 month software agreement including all standard updates and
maintenance
-- Service premium is paid quarterly in advance
-- Guaranteed 98% uptime
EXTENDED 48 MONTH SERVICE-PARTNER AGREEMENT FOR STANDARD SYSTEM:
-- Service partner provides first level service, Cemax provides second
level service support
-- 48 month hardware agreement including all parts, travel and labor (per
year)
-- 48 month software agreement including all standard updates and
maintenance
-- Service premium is paid quarterly in advance
-- Guaranteed 98% uptime
NOTE: -- All products include a 6 month service warranty upon purchase.
-- Network systems must be individually quoted.
66
<PAGE> 27
ADDITIONAL APPLICATIONS PRODUCT TRAINING
VIP TRAINING AT CEMAX:
-- Product training of one additional person at CEMAX
-- One week duration (4 days a week/8 hours a day)
-- All expenses included
VIP TRAINING AT THE CLIENT'S SITE:
-- Product training of two persons at the client's site
-- One week duration (4 days a week/8 hours a day)
-- All expenses included
67
<PAGE> 28
EXHIBIT "D"
September 20, 1994
Jim Wales
Business Development Manager
3M Medical Imaging Systems Div.
3M Center, Bldg. 235-2N-16
St. Paul, MN 55144-1000
Dear Jim,
Cemax proposes to provide integration services to 3M for the products
listed on pages 2 and 3.
Integration includes:
1) Receiving and tracking all hardware shipped to Cemax from 3M and/or 3M
vendors.
2) Incoming inspection (FDA GMP Requirement).
3) Integrate and configure all hardware and software as specified by a 3M
work order.
4) Finished device inspection (Final Test, FDA GMP Requirement).
5) Create a device history file for each system (FDA GMP Requirement).
6) Pack and ship system with 3M provided labels and documentation.
If desired, Cemax will integrate the following products for a fee to be
determined after thorough investigation. The final test procedure for these
products will be mutually agreed upon by Cemax and 3M.
- DICOM Manager
- DICOM Print Manager
- HIS/RIS Manager
- TL -- II Interface
This proposal assumes 3M will pay for all freight shipped to and from
Cemax. All hardware to be purchased by 3M and drop shipped to Cemax. Cemax would
need a [ * * ] commitment payable in quarterly installments (in
advance) in the amount of [ * * ] which will be credited to integration
services.
Doug Merk
Director, Operations
<TABLE>
<S> <C>
cc: Oran Muduroglu Tom Kramer
Terry Ross Greg Patti
</TABLE>
68
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 29
<TABLE>
<CAPTION>
PRODUCT NAME INTEGRATION COST
- -------------------------------------- ----------------
<S> <C>
VIPstation 20(TM)..................... $[ *
ClinicalView(TM) (Single)............. $
ClinicalView(TM) (Dual)............... $
DiagnosticView(TM) (Single)........... $
DiagnosticView(TM) (Dual)............. $
ImageServer(TM) 1.0................... $
ArchiveManager 1.0.................... $
QA Station............................ $
Network Film Server................... $
ClinicalView(TM) (Single to Dual)..... $
DiagnosticView(TM) (Single to Dual)... $
ScanLink(TM) II....................... $
ScanLink(TM) III...................... $
OPTIONS
32 MB Memory Expansion................ $
5.0 GB 8MM Tape Drive................. $
HomeView Server....................... $
Direct Film Option.................... $
FDDI Option (each).................... $
Remote Diagnostic Kit................. $
Trackball Option...................... $
ATM Option (each)..................... $
9 Track Tape Drive.................... $
Mitsubishi Color Ptr.................. $
2.1 GB Disk........................... $
4.0 GB Disk........................... $
9 GB Disk............................. $
18 GB Disk............................ $
27 GB Disk Array...................... $
36 GB Disk Array...................... $
45 GB Disk Array...................... $
54 GB Disk Array...................... $
4.0 GB Raid Storage................... $
8.0 GB Raid Storage................... $
12 GB Raid Storage.................... $
24 GB Raid Storage.................... $
32 GB Raid Storage.................... $
48 GB Raid Storage.................... $ * ]
</TABLE>
69
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 1
Exhibit 10.13
LOAN AND SECURITY AGREEMENT
REFERENCE NO. 420-501
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of the date set
forth below BETWEEN:
SECURED PARTY: DVI CAPITAL COMPANY; and
DEBTOR: CEMAX-ICON, INC.
1. CERTAIN DEFINITIONS. The following terms shall have the following
respective meanings:
a. ADVANCE. Advances of funds xxxx xxxxxx xxxxxxx x Section 2.1
hereof and Schedules which may be executed between Secured Party and Debtor
from time to time.
b. COLLATERAL. "Collateral" shall have the meaning set forth in
Section 2.2 hereof.
c. EVENT OF DEFAULT. Those events set forth in Section 9 hereof.
d. MONTHLY LOAN REPAYMENT. The amount set forth in any Schedule
executed in connection with any Advance under this Agreement.
e. SCHEDULE(S). Any and all or each (as the context shall require)
of the Loan and Collateral Schedules of the Debtor, to be executed by the
parties under this Agreement.
f. SECURED OBLIGATIONS. The payment of the principal and interest
as set forth in each and all of the Schedules, and the payment of all
additional amounts and other sums at any time due and owing under the
Schedules for this Agreement, and the performance and observance of all
covenants and conditions contained herein and therein.
g. SUPPLIER. The entity from whom the Debtor purchased the
Collateral including manufacturers, dealers, sellers and vendors.
2. PURPOSE OF FINANCING AND DESCRIPTION OF LOANS; GRANT OF SECURITY
INTEREST; COLLATERAL.
Secured Party agrees, subject to the terms and conditions of this
Agreement, to make Advances to the Debtor in an aggregate amount to be
determined by Secured Party in its sole and absolute discretion.
a. Debtor agrees that the proceeds of any Advance will be used
solely to acquire the Collateral as described in the Schedule executed in
connection with said advance.
b. The amount of any Advances to Debtor shall be set forth on the
Schedule executed in connection with said Advance.
c. The term of repayment of any Advance made under this Agreement
(the "Term") shall commence on the date set forth in the Schedule executed
in connection with said Advance and shall continue for the period set forth
in said Schedule, and for all extensions and renewals of such period.
d. Debtor shall pay to Secured Party the Monthly Loan Repayment for
each Advance in amounts and on the dates set forth in the Schedule executed
in connection with said Advance, whether or not Secured Party has rendered
an invoice to Debtor. Debtor agrees to pay the Monthly Loan Repayment to
Secured Party at the office of the Secured Party set forth below, or to
such entity and/or at such other place as Secured Party may from time to
time designate by notice to Debtor. Any other amounts required to be paid
to Secured Party under this Agreement are due upon Debtor's receipt of
Secured Party's invoice and will be payable as directed in the invoice.
Payments under this Agreement may be applied to the Debtor's then accrued
Secured Obligations in such order as Secured Party may choose.
e. The Advances shall not be subject to prepayment or redemption in
whole or in part prior to the expiration of the Term set forth in the
Schedule executed in connection with said Advance.
.1 GRANT OF SECURITY INTEREST. In consideration of the Advances to be
made by Secured Party to Debtor under this Agreement, and to secure the payment
and performance of the Secured Obligations, Debtor
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 2
hereby grants and assigns to Secured Party, its successors and assigns, a
security interest in the Collateral described in Section 2.2 below.
.2 COLLATERAL. All personal property consisting of "goods",
"equipment", and "proceeds" as defined in the California Commercial Code and all
furniture, fixtures and machinery or other property as described in any and all
Schedule(s) executed pursuant to this Agreement, whether now owned or hereafter
acquired, and all substitutions, renewals or replacements of and alterations,
additions or improvements, if any, to such Collateral, together with, in each
and every case, all proceeds thereof. Each item of Collateral shall secure not
only the specific Advances made by Secured Party to Debtor as set forth in any
Schedule, but also all other present and future indebtedness or obligations of
Debtor to Secured Party of every kind and nature whatsoever. Debtor warrants and
agrees that the Collateral will be used primarily for business or commercial
purposes and that regardless of the manner of affixation, the Collateral shall
remain personal property and shall not become part of the real estate. Debtor
agrees to keep the Collateral at the locations set forth in the Schedule(s)
covering said Collateral and will not make any change in the location of the
Collateral within such state, and will not remove the Collateral from such state
without the prior written consent of Secured Party.
3. TIME IS OF THE ESSENCE; LATE CHARGES. Time is of the essence in this
Agreement and if any Monthly Loan Repayment is not paid within the ten (10) days
after the due date thereof, Secured Party shall have the right to add and
collect, and Debtor agrees to pay:
a. A late charge on and in addition to, such Monthly Loan Repayment
equal to five percent (5%) of such Monthly Loan Repayment or a lesser
amount if established by any State or Federal statute applicable thereto,
and
b. Interest on such Monthly Loan Repayment from thirty (30) days
after the due date until paid at the rate of eighteen (18%) per annum.
4. NO WARRANTIES. This Agreement is solely a financing agreement. Debtor
acknowledges that: The Collateral has or will have been selected and acquired
solely by Debtor for Debtor's purposes; Secured Party is not the manufacturer,
dealer, vendor or supplier of the Collateral; the Collateral is of a size,
design, capacity, description and manufacture selected by Debtor, Debtor is
satisfied that the Collateral is suitable and fit for its purposes; and SECURED
PARTY HAS NOT MADE AND DOES NOT MAKE ANY WARRANTY OR REPRESENTATION WHATSOEVER,
EITHER EXPRESS OR IMPLIED, AS TO THE FITNESS, CONDITION, MERCHANTABILITY, DESIGN
OR OPERATION OF THE COLLATERAL, ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE
VALUE OF THE COLLATERAL, THE QUALITY OR CAPACITY OF THE MATERIALS IN THE
COLLATERAL OR WORKMANSHIP IN THE COLLATERAL, NOR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER.
5. NO AGENCY. Debtor acknowledges and agrees that none of the
manufacturer, vendor, dealer or supplier, nor any salesman, representative, or
other agent of the manufacturer, dealer, vendor or supplier, is an agent of
Secured Party. No salesman, representative or agent of the manufacturer, dealer
vendor or supplier is authorized to waive or alter any term or condition of this
Agreement, and no representation as to the Collateral or any other matter by any
manufacturer, dealer, vendor or supplier shall in any way affect Debtor's duty
to pay the Monthly Loan Repayment and perform his other obligations as set forth
in this Agreement.
6. INSURANCE AND RISK OF LOSS. All risk of loss of, damage to, or
destruction of the Collateral shall at all times be borne by Debtor. Debtor will
procure forthwith and maintain property and general liability insurance with
extended or combined additional coverage on the Collateral for the full
insurable value thereof for the life of this Agreement and any Schedule(s) plus
such other insurance as Secured Party may specify, and promptly deliver each
policy to Secured Party with a standard long form endorsement attached showing
Secured Party or assigns as additional insureds and loss payees. Each insurer
shall agree by endorsement upon such policy issued by it or by independent
instrument furnished to Secured Party and Debtor that it will give Secured Party
and Debtor thirty (30) days written notice before the policy in question shall
be materially altered or cancelled. Secured Party's acceptance of policies in
lesser amounts or risks shall not be a waiver of Debtor's foregoing obligation.
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<PAGE> 3
7. DEBTOR'S REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants to Secured Party as follows:
a. Debtor is duly organized and existing under the laws of the State
of its formation without limit as to the duration of its existence, and is
authorized and in good standing to do business in said State; Debtor has
corporate powers and adequate authority, rights and franchises to own its
own property and to carry on its business as now conducted, and is duly
qualified and in good standing in each state in which the character of the
properties owned by it therein or the conduct of its business makes such
qualifications necessary; and Debtor has the corporate power and adequate
authority to make and carry out this Agreement.
b. The execution, delivery and performance of this Agreement are
duly authorized and do not, to the best of the Debtor's knowledge, require
the consent or approval of any governmental body or other regulatory
authority; are not in contravention of or in conflict with any law,
regulation or any term or provision of its articles of formation or bylaws,
and this Agreement is a valid and binding obligation of Debtor legally
enforceable in accordance with its terms.
c. The execution, delivery and performance of this Agreement will
not contravene or conflict with any agreement, indenture or undertaking to
which Debtor is a party or by which it or any of its property may be bound
by or affected, and will not cause any lien, charge or other encumbrance to
be created or imposed upon any such property by reason thereof.
d. There is no material litigation or other proceeding pending or
threatened against or affecting Debtor, and it is not in default with
respect to any order, writ, injunction, decree or demand of any court or
other governmental or regulatory authority. The balance sheets of Debtor
and the related profit and loss statements and other financial data as
submitted in writing by Debtor to Secured Party in connection with this
Agreement, are true and correct, and said balance sheets and profit and
loss statements truly represent the financial condition of Debtor as of the
dates thereof.
e. Debtor has good and valid title to the Collateral which is free
from and will be kept free from all liens, claims, security interests and
encumbrances, except for the security interest granted hereby.
f. No financing statement covering the Collateral or any proceeds
thereof is on file in favor of anyone other than Secured Party, but if such
other financing statement is on file, it will be terminated or
subordinated.
g. All necessary action, including the filing of UCC-1 Financing
Statements, has or will be made to give Secured Party a first priority
security interest in the Collateral. Debtor agrees to permit Secured Party
to pre-file any UCC-1 Financing Statement pursuant to California Commercial
Code sec.9402.
8. DEBTOR'S AGREEMENTS. Debtor agrees:
a. To defend at Debtor's own expense any action, proceeding or claim
affecting the Collateral.
b. To pay reasonable attorneys' fees and other expenses incurred by
Secured Party in enforcing its rights in the event of Debtor's default
under this Agreement.
c. To pay promptly all taxes, assessments, license fees and other
public or private charges when levied or assessed against the Collateral or
this Agreement and this obligation shall survive the termination of this
Agreement.
d. That if a certificate of title is required or permitted by law,
Debtor shall obtain such certificate with respect to the Collateral,
showing the security interests of Secured Party thereon and in any event do
everything necessary or expedient to preserve or perfect the security
interest of Secured Party.
e. That Debtor will not misuse, fail to keep in good repair,
secrete, or without the prior written consent of Secured Party, and
notwithstanding Secured Party's claim to proceeds, sell, rent, lend,
encumber or transfer any of the Collateral. The Collateral shall be
maintained in accordance with the
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<PAGE> 4
manufacturer's specifications and shall at all times be eligible for the
manufacturer's maintenance program.
f. That Secured Party may enter upon Debtor's premises or wherever
the Collateral may be located at any reasonable time to inspect the
Collateral and Debtor's books and records pertaining to the Collateral, and
Debtor shall assist Secured Party in making such inspection.
g. That the security interest granted by Debtor to Secured Party
shall continue effective irrespective of the payment of the Secured
Obligations, so long as there are any obligations of any kind, including
obligations under guarantees or assignments, owed by Debtor to Secured
Party.
h. To mark and identify the Collateral with all information and in
such manner as Secured Party may request from time to time and replace
promptly any such markings or identifications which are removed, defaced or
destroyed.
i. To indemnify and hold Secured Party harmless from and against all
claims, losses, liabilities (including negligence, tort and strict
liability), damages, judgments, suits and all legal proceedings, and any
and all costs and expenses in connection therewith (including attorney's
fees) arising out of or in any manner connected with the manufacture,
purchase, financing, ownership, delivery, rejection, nondelivery,
possession, use, transportation, storage, operation, maintenance, repair,
return or other disposition of the Collateral or with this Agreement,
including, without limitation, claims for injury to, or death of, persons
and for damage to property, and give Secured Party prompt notice of such
claims or liability.
j. That Debtor will not part with possession of or control of or
suffer or allow to pass out of its possession or control items of
Collateral or change the location of the Collateral or any part thereof
from the address shown in the appropriate Schedule without the prior
written consent of Secured Party.
k. That Debtor shall not ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY
PART OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR SELL, SCHEDULE,
TRANSFER, PLEDGE OR HYPOTHECATE ANY PART OF THE COLLATERAL. DEBTOR'S
INTEREST IN THIS AGREEMENT AND THE COLLATERAL IS NOT ASSIGNABLE AND WILL
NOT BE ASSIGNED OR TRANSFERRED BY OPERATION OF LAW, CONSENT TO ANY OF THE
FOREGOING PROHIBITED ACTS APPLIES ONLY IN THE GIVEN INSTANCE AND IS NOT
CONSENT TO SUBSEQUENT LIKE ACT BY DEBTOR OR ANOTHER ENTITY.
9. EVENTS OF DEFAULT. Any of the following events or conditions shall
constitute an Event of Default hereunder:
a. Debtor's failure to pay any Monthly Loan Repayment or any
installment of the principal or interest due under any Schedule when and
after the same shall become due and payable, whether at the due date
thereof, or at the date fixed for prepayment or by acceleration or
otherwise;
b. Debtor failure to observe or perform any covenant or agreement to
be observed or performed by Debtor under this Agreement, any Schedule or
any other instrument or agreement delivered by Debtor to Secured Party in
connection with this or any other transaction;
c. Any representation or warranty made by Debtor herein or in any
report, certificate, financial or other statement furnished in connection
with this Agreement shall prove to be false or misleading in any material
respect; or
d. Debtor is adjudicated insolvent or a bankrupt, or ceases been
xxxxxx or admits in writing its inability to pay its debts as they mature,
or xxxxxx of, or enters into any composition or arrangement with,
creditors, applies for or consents to the appointment of a receiver,
trustee or liquidator of it or of a substantial part of its property, or
authorizes such application or consent, or proceedings seeking such
appointment shall be instituted against it without such authorization,
consent or application and continues undismissed for a period of 60
calendar days; authorizes or files a voluntary petition in bankruptcy or
applies for or consents to the application of any bankruptcy,
reorganization in bankruptcy, arrangement, readjustments or debts,
insolvency, dissolution, moratorium or other similar laws of any
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<PAGE> 5
jurisdiction, or authorizes such application or consent, or proceedings to
such end shall be instituted against it without such authorization,
application or consent and such proceedings instituted against it shall
continue undismissed for a period of 60 calendar days; or
e. Secured Party, in good faith, believes the prospect of payment or
performance is impaired or in good faith believes the Collateral is
insecure;
f. Any agreement made by a guarantor, surety or endorser for
Debtor's default in any obligation or liability to Secured Party or any
guaranty obtained in connection with this transaction is terminated or
breached.
10. SECURED PARTY'S REMEDIES. Debtor agrees that when an Event of Default
has occurred and is continuing, Secured Party shall have the rights, options,
duties and remedies of a Secured Party and Debtor shall have the rights and
duties of a Debtor under the Uniform Commercial Code in effect in each
jurisdiction where the Collateral or any part thereof is located and, without
limiting the foregoing, Secured Party may exercise one or more or all, and in
any order, of the remedies hereinafter set forth:
a. By notice in writing to Debtor, declare the entire unpaid
principal balance due under ANY, EACH AND ALL Schedule(s) to be immediately
due and payable; and thereupon all such unpaid balance(s), together with
all accrued and unpaid interest thereon, shall be immediately due and
payable;
b. Personally, or by agents or attorneys, take immediate possession
of the Collateral or any portion thereof and for that purpose pursue the
same wherever it may be found and enter any of the premises of Debtor with
or without notice, demand, process of law or legal procedure, and search
for, take possession of, remove, keep and store the same, or use, operate,
or lease the same until sold and otherwise exercise any and all of the
rights and powers or Debtor in respect thereof;
c. Either with or without taking possession and without instituting
any legal proceedings whatsoever (having first given notice of such sale by
mail to Debtor once at least 10 calendar days prior to the date of such
sale, and any other notice of such sale which may be required by law, if
said notice is sufficient), sell and dispose of the Collateral or any part
thereof at public auction(s) to the highest bidder, or at a private sale(s)
in one lot as an entirety or in several lots, and either for cash or for
credit and on such terms as Secured Party may determine, and at any place
(whether or not it is the location of the Collateral or any part thereof,
designated in the notice above referred to. Any such sale or sales may be
adjourned from time to time by announcement of the time and place appointed
for such sale or sales, or for such adjourned sales or sales without
further notice, and Secured Party may bid and become the purchaser at any
such sale;
d. Secured Party may proceed to protect and enforce this Agreement
and any Schedule(s) by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained, or execution or aid of any power herein
granted, or for foreclosure hereunder, or for the appointment of a receiver
or receivers for the Collateral, or any party thereof, or for the
enforcement of any proper, legal or equitable remedy available under
applicable law.
e. Secured Party may require Debtor to assemble the Collateral and
return it to Secured Party at a place to be designated by Secured Party
which is reasonably convenient to both parties.
f. Debtor agrees to pay the Secured Party all expenses or retaking,
holding, preparing for sale, or selling the Collateral in addition to
attorneys' fees as set forth above.
11. ACCELERATION CLAUSE. In case of any sale of the Collateral, or any
part thereof, pursuant to any judgment or decree of any court or otherwise in
connection with the enforcement of any of the terms of this Agreement, the
outstanding principal due under any Schedule, if not previously due, the
interest accrued thereon and all other sums required to be paid by Debtor
pursuant to this Agreement shall at once become and be immediately due and
payable.
12. EXERCISE OF RIGHTS. No delay or omission of Secured Party in the
exercise of any right or power arising from any default shall act as a waiver of
or impair any such right or power or prevent its exercise during
168
<PAGE> 6
the continuance of such default. No waiver by Secured Party of any such default,
whether such waiver be full or partial, shall extend to or be taken to affect
any subsequent default, nor shall it impair the rights resulting therefrom
except as may be otherwise provided therein. The giving, taking or enforcement
of any other or additional security, collateral, or guarantee for the payment of
the Secured Obligations shall not operate to prejudice, waive, or affect the
security of this Agreement or any rights, powers, or remedies hereunder, and
Secured Party shall not be required to look first to enforce or exhaust such
other additional security, collateral, or guarantees. All rights, remedies, and
options of Secured Party hereunder, or by law shall be cumulative.
13. ASSIGNMENT BY SECURED PARTY. SECURED PARTY MAY ASSIGN OR TRANSFER THIS
AGREEMENT OR SECURED PARTY'S INTEREST IN THE COLLATERAL WITHOUT NOTICE TO
DEBTOR. Any assignee of Secured Party shall have all of the rights but none of
the obligations, of Secured Party under this Agreement, and Debtor agrees that
it will not assert against any assignee of Secured Party and defense,
counterclaim or offset that Debtor may have against Secured Party.
14. NON-TERMINABLE AGREEMENT; OBLIGATIONS UNCONDITIONAL. This Agreement
cannot be canceled or terminated except as expressly provided herein. Debtor
hereby agrees that Debtor's obligation to pay all Secured Obligations shall be
absolute and unconditional and Debtor will not be entitled to any abatement of
Monthly Loan Repayments or other payments due under this Agreement or any
reduction thereof under circumstances or for any reason whatsoever. Debtor
hereby waives any and all existing and future claims, as offsets, against any
Monthly Loan repayments and other payments due under this Agreement as and when
due regardless of any offset or claim which may be asserted by Debtor or on its
behalf. The obligations and liabilities or Debtor hereunder will survive the
termination of this Agreement.
15. ADDITIONAL DOCUMENTS. In connection with and in order to provide
effective evidence of the security interest in the Collateral granted Secured
Party under this Agreement, Debtor will execute and deliver to Secured Party
such financing statements and similar documents as Secured Party requests.
Debtor authorizes Secured Party where permitted by law to make filings of such
financing statements without Debtor's signature. Debtor further agrees to
furnish Secured Party;
a. On a timely basis. Debtor's future financial statements,
including Debtor's most recent annual report, balance sheet and income
statement, prepared in accordance with generally accepted accounting
principles, which reports, Debtor warrants, shall fully and fairly
represent the true financial condition of Debtor.
b. Any other financial information normally provided by Debtor to
the public; and
c. Such other financial data or information relative to this
Agreement and the Collateral, including, without limitation, copies of
Suppliers' proposals and purchase orders and agreements, listings of serial
numbers or other identification data and confirmations of such information,
as Secured Party may from time to time reasonably request. Debtor will
procure and/or execute, have executed, have acknowledged, and/or deliver to
Secured Party, record and file such other documents and notices as Secured
Party deems necessary or desirable to protect its interest in and rights
under this Agreement and Collateral. Debtor will pay for all filings,
searches, title reports, legal and other fees incurred by Secured Party in
connection with any documents to be provided by Debtor pursuant to this
Agreement and any other similar documents Secured Party may procure.
16. MISCELLANEOUS.
a. SUCCESSORS AND ASSIGNS. Whenever any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such parties, and all the covenants, promises, and agreements in
this Agreement contained by or on behalf of Debtor or Secured Party shall
bind and inure to the benefit of the respective successors and assigns of
each party whether so expressed or not.
b. PARTIAL INVALIDITY. The enforceability or invalidity of any
provision(s) of this Agreement shall not render any other provision(s)
herein contained unenforceable or invalid.
c. COMMUNICATIONS. All communications provided for herein shall be
in writing and shall be deemed to have been given (unless otherwise
required by the specific provisions in respect of any matter)
169
<PAGE> 7
(i) when addressed and delivered personally or (ii) three (3) calendar days
following deposit in the United States mail, registered or certified,
postage prepaid, and addressed to the address set forth beneath the
respective parties' signature lines below, or as to Debtor or Secured Party
at such other address as they may designate by notice duly given in
accordance with this Section to the other party.
d. COUNTERPART; GOVERNING LAW. This Agreement may be executed,
acknowledged, and delivered in any number of counterparts, each of such
counterparts constituting an original but all together only one Agreement.
This Agreement and any Schedule shall be construed and enforced in
accordance with and governed by the laws of the State of Ohio. Debtor
agrees to submit to the jurisdiction of the State and/or Federal Courts in
Ohio.
e. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding or agreement between Secured Party and Debtor and there is no
understanding or agreement, oral or written, which is not set forth herein.
This Agreement may not be amended except by a writing signed by Secured
Party and Debtor and shall be binding upon and inure to the benefit of the
parties hereto, their permitted successors and assigns.
This Agreement is dated December 28, 1995.
DEBTOR: CEMAX-ICON, INC.
ADDRESS: 47281 MISSION FALLS CT.
FREMONT, CA 94359
By:
Title: Vice President, Finance
SECURED PARTY: DVI CAPITAL COMPANY
6611 ROCKSIDE ROAD #110
INDEPENDENCE, OH 44131
By:
Title:
170
<PAGE> 8
LOAN AND COLLATERAL SCHEDULE NO. 1
REFERENCE NO. 420-501
THIS LOAN AND COLLATERAL SCHEDULE is executed pursuant to that certain Loan
and Security Agreement (the "Agreement") dated as of 12/28, 1995, between DVI
CAPITAL COMPANY ("Secured Party") and CEMAX-ICON, INC. ("Debtor").
1. INCORPORATION BY REFERENCE. The Agreement is fully incorporated
herein by reference.
2. DESCRIPTION OF COLLATERAL. In consideration of the terms and
conditions of the Agreement, and of this Schedule. Secured Party has
concurrently herewith made a cash Advance to Debtor on the security of the
Collateral described as follows:
SEE ATTACHED EXHIBIT A
TOGETHER WITH ALL PARTS, ACCESSORIES, ATTACHMENTS, ACCESSIONS, ADDITIONS,
REPLACEMENTS, AND SUBSTITUTIONS THERETO AND THEREFOR.
3. AMOUNT OF ADVANCE. The total amount of the Advance pursuant to this
Schedule is [ * * ].
4. TERM. The Term for the Monthly Loan Repayments of the Advance made
pursuant to this Schedule shall commence on the date set forth below in Section
5, and unless earlier terminated provided in the Loan and Security Agreement
shall continue for a period of [ * * ].
5. MONTHLY LOAN REPAYMENTS. As Monthly Loan Repayments of the Advance
made under this Schedule, Debtor agrees to pay Secured Party, in successive
monthly installments, [ *
* ], beginning in January 1, 1996 and on the same
day of each month thereafter until paid in full. Monthly Loan Repayments will be
made to Secured Party as follows:
DVI CAPITAL COMPANY
P.O. BOX 1213; DEPT. 804
NEWARK, NJ 07101-1213
6. DUTY TO PAY ABSOLUTE. Until the Debtor's obligation to make Monthly
Loan Repayments has been terminated as provided herein, it shall be absolute,
unconditional, and without deduction, offset, or abatement for any reason, and
shall continue in full force and effect regardless of Debtor's ability to use
any item of Collateral or any reason.
7. COLLATERAL LOCATION. The Collateral shall be located at 47281
Mission Falls Ct., Fremont, CA 94539.
This Agreement is dated 12/28/95.
DEBTOR: CEMAX-ICON, INC.
ADDRESS: 47281 MISSION FALLS CT.
FREMONT, CA 94359
By:
Vice
President,
Finance
Title:
171
CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 9
SECURED PARTY: DVI CAPITAL COMPANY
6611 ROCKSIDE ROAD #110
INDEPENDENCE, OH 44131
By: ___________________________________________
Title: ________________________________________
172
<PAGE> 10
ACCEPTANCE CERTIFICATE
TO
LOAN AND SECURITY AGREEMENT NO. 420-501
LOAN AND COLLATERAL SCHEDULE NO. 1
THIS ACCEPTANCE CERTIFICATE ("Certificate") is being executed and delivered
pursuant to the Loan and Security Agreement and Loan and Collateral Schedule
referenced above, (collectively, the "Schedule") each dated as of 12/28/95
between DVI CAPITAL COMPANY as Secured Party ("Secured Party") and CEMAX-ICON,
INC., as Debtor ("DEBTOR") for the following equipment ("EQUIPMENT"):
SEE ATTACHED EXHIBIT A
WE HEREBY CERTIFY AND ACKNOWLEDGE that all the Equipment subject to the above
referenced Schedule and specified herein or in any above referenced Schedule has
been delivered to us; that any necessary installation of the Equipment has been
fully and satisfactorily performed; that the Equipment has been examined and/or
tested and is in good operating order and condition and in all respects
satisfactory to Debtor; and that, after full inspection thereof, we have
accepted the Equipment for all purposes as of the date hereof, including,
without limitation, for purposes of the above referenced Schedule. We hereby
represent and warrant that any right we may have now or in the future to reject
the Equipment or to revoke our acceptance thereof has terminated as of the date
of this Certificate, and we hereby waive any such right by the execution hereof.
WE HEREBY FURTHER CERTIFY AND ACKNOWLEDGE that the Secured Party has fully and
satisfactorily satisfied all its obligations under the Schedule, and that any
and all conditions to the effectiveness of the Schedule or to our obligations
under the Schedule have been satisfied, and that we have no defenses, set-offs
or counterclaims to any such obligations, and that the Schedule is in full force
and effect, and that no event of default has occurred thereunder.
WE HEREBY FURTHER CERTIFY AND ACKNOWLEDGE THAT THE SECURITY PARTY MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE CAPACITY, CONDITION,
DESIGN, DURABILITY, MATERIAL, MERCHANTABILITY, PERFORMANCE, QUALITY,
SUITABILITY, WORKMANSHIP OR VALUE OF THE EQUIPMENT OR ITS FITNESS FOR ANY
PARTICULAR PURPOSE OR THAT THE EQUIPMENT WILL SATISFY THE REQUIREMENTS OF ANY
LAW, RULE, REGULATION, SPECIFICATION OR CONTRACT, OR ANY OTHER REPRESENTATION OR
WARRANTY OF ANY KIND OR NATURE WHATSOEVER WITH RESPECT TO THE EQUIPMENT OR ANY
ASSOCIATED ITEM OR ANY ASPECT THEREOF.
WE HEREBY FURTHER CERTIFY AND ACKNOWLEDGE that in the event the Equipment
subject to the Schedule fails to perform as expected or represented by the
manufacturer/supplier, Debtor shall continue to make monthly payments to Secured
Party as required under the terms of the Schedule and Debtor shall look solely
to the manufacturer or supplier for the performance of all covenants and
warranties with respect to the Equipment and hereby agrees to indemnify Secured
Party and hold it harmless from such non-performance or breach of warranty with
respect to the Equipment.
WE HEREBY FURTHER CERTIFY AND ACKNOWLEDGE that Secured Party is not the
manufacturer, supplier, distributor or seller of the Equipment and has no
control, knowledge of familiarity with the conditioning, capacity, functioning
or other characteristics of the Equipment.
WE HEREBY FURTHER ACKNOWLEDGE that Secured Party is relying upon this
Certificate as a condition to making payment to the manufacturer and/or supplier
of the Equipment.
Date Equipment Accepted: 12/28/95
CEMAX-ICON, INC.
(DEBTOR)
By:
Title: Vice President, Finance
173
<PAGE> 11
EXHIBIT A
5 GIGABYTE 4 MM TAPE DRIVE
1 GB DRIVE
512 KB OPTICAL MEDIA
ZEOS PENTIUM 75.850C
FDDI 3.0 INTERFACE
4-POWERBOOK 520 C 4/240
4 MB SIMMS FOR SPARC II
32 MB MEM MODULES FOR SPARC 20
6-ZEOS PENTIUM 75.850C
PCI TP NUBUS ADAPTOR
T4 BAR CODE READER
PENTIUM PC 1GB/16
PMT TEST BRD KIT
APC MATRIX UPS 3000
SEAGATE 4.2 DRIVE
3-POWERMAC 7100/80 8/500 MB
EPSON ACTION TOWER PC
ISDN 2000A CENTRAL OFFICE EMUL.
ISDN 2000A CENTRAL OFFICE EMUL.
POWER COMPUTING PC 850/8
POWERBOOK 540C
EXABYTE 210 STACKER W/DRIVES
2-POWERBOOK 520C 4/160
DIMENSION PENTIUM 100C/XPS
PENTIUM PC
DIMENSION PC 120C/XPS
POWERBOOK 520C 4/240
POWER MAC 8500/120 16/2GB
2-32 MB SIMMS
PENTIUM PC
DIMENSION PENTIUM 5133
POWER MAC 9500
2-16 MB SIMMES
DIMENSION PENTIUM 100 C/XPS
LANROVER E/35 PORT
SPARC 5/110
PANTERA COMPUTER
SPARC 20/50 WORKSTATION
2-32 MB SIMMS FOR SPARC 20
DIMENSION PENTIUM 100C/XPS
POWERMAC 9500/POWERMAC 7200
POWERMAC 7500
POWERMAC 8500
2-HAND HELD BATTERY TEKSCOPE
HAND HELD BATTERY TEKSCOPE
MERIDIAN PHONE SYSTEM
MERIDIAN PHONE SYSTEM
MERIDIAN PHONE SYSTEM
DESK W/RETURN
TASK CHAIRS
10-COLORPORPAGE T16
174
<PAGE> 12
APPLE REMOTE ACCESS PORT
TEKSCOPE
2-2K MONITORS
2 LINE SIMULATOR
MEMORY UPGRADE
5-POWERPORT MERCURY MODEMS
5-POWERBOOK 520 4/160 COMPUTER
1 GB HARD DRIVE
2-1 GB DRIVES
WINDOWS NT SERVER
2-32 MB SIMMS
CD RECORDER
POWERMAC 9500 16/1GB
FDDI MANAGEMENT MODULE
2-32 MB SIMMS
POWERBOOK 520 4/160
2-32 MB SIMMS FOR SPARC 5
32 MB SPARC MEMORY
2-16 MB SIMMS
4GB SUBSYSTEM
POWERMAC 8100/100
4-16 MB SIMMS
2-32 MB SIMMS
6-32 MB SIMMS
POWERBOOK 5300 CS/100
2-16 PLATTER JUKEBOX/9 GB SUBSY
12 BIT SCANNER
POWERMAC 7500/100 16/1000/CD
2-POWERMAC 7500/100 16/1000/CD
POWERBOOK 5300 25/500
POWERMAC 5300 CS/100 8/500
POWERMAC 7500/100 16/1GB/CD
2-PLANET ISDN BOARD
LINKBUILDER FDDI OPTIC
POWERBOOK 520C 4/240
3-POWERMAC 7100/66
4-GB BARACUDA DRIVE
3-POWERMAC 8100/110/16/2GB
POWERMAC 7500/100/16/500/CD
POWERMAC 7500/100/16/500/CD
FDDI ENET BRIDGE
12 PORT TOKEN RING
M2616 TELEPHONE
POWERMAC 7100/50 8/500
2-DATARAY MONITORS
2-DATARAY MONITORS
POWERMAC 7100/50 8/500
APPLE 14" COLOR DISPLAY & KEYBOARD
EXABYTE 8505 7GB SUBSYSTEM
2GB SUBSYSTEM
COMPAQ PENTIUM PC 120 MHZ
8 SLOT TO NUBUS EXPAN CHASIS
2-32 MB SIMMS/1GB DRIVE
175
<PAGE> 13
SUN MICRO SPARC 20/51
POWERBOOK 5300CS/100 8/500
POWERBOOK 5300CS/100 8/500
POWERMAC 7200/90 8/500
POWERMAC 7500/100 16/1GB/CD
SOLARIS 2.X/HP 9.X SPAR COMPILER
CODE CHECK SOFTWARE
EXODUS & SOURCESAFE SOFTWARE
CLEARCASE SOFTWARE
GALAXY APPL ENVIRON FOR C++
PURE DDTS SOFTWARE PACKAGE
SNIFF 2.0 SOFTWARE
MAIL LINK SMTP FOR QUICKMAIL
ACCPAC ACCTING UPGRADE SOFTWARE
GALAXY APPL ENVIRON FOR C++
NEXTSTEP SOFTWARE
SNM 2.2.2 SOLARIS SOFTWARE
USHARE UNLIMITED SOFTWARE
SOFTWARE TOOLKITS
DEBTOR: CEMAX-ICON, INC.
By:
Title: Vice President, Finance
176
<PAGE> 1
EXHIBIT 11.1
CEMAX-ICON, INC.
COMPUTATION OF NET LOSS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Historical primary and fully diluted:
Weighted average common stock
outstanding........................ 2,030 2,347 3,859 2,391 4,897
Shares related to SAB Nos. 55, 64 and
83:
Stock options......................... 295 295 295 295 295
------- ------- ------- ------- -------
2,325 2,642 4,154 2,686 5,192
======= ======= ======= ======= =======
Net loss................................ $(1,198) $(2,578) $(6,815) $ (755) $ (518)
======= ======= ======= ======= =======
Net loss per share...................... $(0.52) $(0.98) $(1.64) $(0.28) $(0.10)
======= ======= ======= ======= =======
Proforma:
Weighted average common stock
outstanding........................ 3,859 2,391 4,898
Preferred Stock if converted.......... 1,455 2,306 845
Shares related to SAB Nos. 55, 64 and
83:
Stock options......................... 295 295 295
------- ------- -------
5,609 4,992 6,038
======= ======= =======
Net loss................................ $(6,815) $ (755) $ (518)
======= ======= =======
Net loss per share...................... $(1.22) $(0.15) $(0.09)
======= ======= =======
</TABLE>
(1) Assumed exercise of stock options granted during the twelve months ended
June 1996, and purchase of treasury stock at the assumed initial public
offering price applied retroactively for all periods presented.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to use of our report dated March 8, 1996,
except for Note 8, as to which the date is June 13, 1996 in the Registration
Statement (Form S-1) and related Prospectus of CEMAX-ICON, Inc. for the
registration of 3,220,000 shares of its Common Stock.
Our audits also included the financial statement schedule of CEMAX-ICON,
Inc. listed in Item 16(b). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
Palo Alto, California
June 19, 1996
- --------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon completion of
the 1-for 2.35 reverse stock split and reincorporation in Delaware described in
Note 8 to the financial statements.
Palo Alto, California
June 19, 1996
Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE YEAR
ENDED DECEMBER 31, 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM S-1
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<EXCHANGE-RATE> 1 1
<CASH> 1,654 1,775
<SECURITIES> 0 0
<RECEIVABLES> 4,340 4,583
<ALLOWANCES> 803 773
<INVENTORY> 2,297 2,005
<CURRENT-ASSETS> 7,613 7,732
<PP&E> 4,622 4,400
<DEPRECIATION> 1,510 2,928
<TOTAL-ASSETS> 9,157 9,279
<CURRENT-LIABILITIES> 8,758 8,305
<BONDS> 0 0
0 0
5 5
<COMMON> 2 2
<OTHER-SE> 31,939 31,944
<TOTAL-LIABILITY-AND-EQUITY> 9,157 9,279
<SALES> 16,457 17,030
<TOTAL-REVENUES> 16,457 17,030
<CGS> 8,803 10,512
<TOTAL-COSTS> 10,144 13,360
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 30 299
<INTEREST-EXPENSE> 23 115
<INCOME-PRETAX> (515) (6,842)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (515) (6,842)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (518) (6,815)
<EPS-PRIMARY> $(0.09) $(1.22)
<EPS-DILUTED> $(0.09) $(1.22)
</TABLE>
