<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 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
------------------------
DELTEK SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
VIRGINIA 7371 54-1252625
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CODE CLASSIFICATION NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
8280 GREENSBORO DRIVE
MCLEAN, VIRGINIA 22102
(703) 734-8606
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KENNETH E. DELASKI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DELTEK SYSTEMS, INC.
8280 GREENSBORO DRIVE
MCLEAN, VIRGINIA 22102
(703) 734-8606
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
DENNIS C. SULLIVAN, ESQ. ROBERT E. GREGG, ESQ. THOMAS A. BEVILACQUA, ESQ.
CHRISTOPHER J. HURLEY, ESQ. BENTON BURROUGHS, JR., ESQ. NORA L. GIBSON. ESQ.
GRAY CARY WARE & FREIDENRICH HAZEL & THOMAS, P.C. BROBECK, PHLEGER & HARRISON, LLP
A PROFESSIONAL CORPORATION 3110 FAIRVIEW PARK DRIVE TWO EMBARCADERO PLAZA
400 HAMILTON AVENUE SUITE 1400 2200 GENG ROAD
PALO ALTO, CA 94301 FALLS CHURCH, VA 22042 PALO ALTO, CA 94303
(415) 328-6561 (703) 641-4200 (415) 424-0160
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
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Common Stock (.001 par value)......... 3,335,000 shares $13.00 $43,355,000 $13,138
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</TABLE>
(1) Includes 435,000 shares issuable upon exercise of an option granted by
certain of the Selling Shareholders to the Underwriters to cover
over-allotments, if any.
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 19, 1996
2,900,000 SHARES
DELTEK SYSTEMS, INC.
COMMON STOCK
Of the 2,900,000 shares of Common Stock offered hereby, 1,700,000 are being
sold by Deltek Systems, Inc. ("Deltek" or the "Company") and 1,200,000 are being
sold by the Selling Shareholders. See "Principal and Selling Shareholders." The
Company will not receive any of the proceeds from the sale of shares by the
Selling Shareholders.
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $11.00 and $13.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Company has applied for quotation of the Common Stock on the
Nasdaq National Market under the symbol "DLTK."
SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
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.
<TABLE>
<CAPTION>
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Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Shareholders(2)
<S> <C> <C> <C> <C>
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Per Share...................... $ $ $ $
Total (3)...................... $ $ $ $
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</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $625,000 and
expenses payable by the Selling Shareholders estimated at $25,000.
(3) Certain of the Selling Shareholders have granted to the Underwriters a
30-day option to purchase up to an aggregate of 435,000 additional shares of
Common Stock solely to cover over-allotments, if any. If the Underwriters
exercise this option in full, the Price to Public will total $ ,
the Underwriting Discount will total $ and the Proceeds to the
Selling Shareholders will total $ . See "Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and to their right to reject
any order in whole or in part. It is expected that delivery of the certificates
representing such shares will be made against payment therefor at the office of
Montgomery Securities on or about , 1997.
------------------------
MONTGOMERY SECURITIES WILLIAM BLAIR & COMPANY
, 1997
<PAGE> 3
[ARTWORK TO BE ADDED]
------------------------
Deltek, Costpoint and Allegro are registered trademarks of the Company, and
Electronic Timesheet and Web E.T. are trademarks of the Company. This Prospectus
also contains trade names and trademarks of other companies that are the
property of their respective holders.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK 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> 4
[A schematic diagram, accompanied by the Company's logo and entitled "Software
Solutions for Project-Oriented Businesses," will be provided on the first two
pages of a tri-fold on the inside front cover that contains icons graphically
illustrating eight representative project-oriented business (engineering and
environmental firms, research and development organizations, not-for-profit
organizations, make-to-order manufacturers, systems integrators, professional
service providers, construction companies and technical service providers)
surrounding the names of the Company's products. The following text will
accompany the diagram:
Since 1983, Deltek Systems has been helping project-oriented
organizations manager their unique business requirements through its
family of enterprise-level software products: System 1, Costpoint,
Electronic Timesheet and Allegro. Deltek's products address the core
needs of project-orineted businesses and allow these organizations to
manage financial and project accounting, compute costs and revenue on a
project-by-project basis; submit accurate and detailed bills, comply
with complex industry-specific and regulatory requirements, administer
employee time collection, labor costing and payroll, automate materials
management functions and empower their managers with timely and
pertinent information. Deltek also provides a full range of consulting
and maintenance services to assist its customers with system
implementation and integration and to provide training and ongoing
support for the Company's software products.
On the third page of the tri-fold on the inside front cover, a schematic
diagram, accompanied by the registered trademark for the Company's Costpoint
software product, will be provided that graphically illustrates the product's
five major groups of modules (project accounting; human resources and payroll
administration; reporting tools; materials management; and financial
accounting). The following text will accompany the diagram:
Costpoint, the Company's current flagship product, is a
client/server-based, enterprise-level business software system,
consisting of over 25 integrated module applications which span
financial accounting, project accounting, human resources and payroll
administration, materials management and reporting tools. Costpoint is
designed to meeting the specialized needs of project-oriented
businesses, including project costing, indirect cost allocation, revenue
recognition, project budgeting and project reporting. Costpoint
combines these capabilities with applications in other business system
areas that are designed for the special needs of project-oriented
businesses.]
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, included
elsewhere in this Prospectus. Except as otherwise indicated, all information in
this Prospectus (i) gives effect to a three-for-one stock split of the Company's
Common Stock effected by means of a stock dividend in December 1996 and (ii)
assumes that the Underwriters' over-allotment option is not exercised. The
discussion in this Prospectus contains forward-looking statements which include
risks and uncertainties. The Company's actual results could differ materially
from those discussed in this Prospectus. Factors that could cause or contribute
to such differences include those discussed in the sections entitled "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," as well as those discussed elsewhere in
this Prospectus.
THE COMPANY
Deltek designs, develops, sells and supports a family of integrated
software products that provide project-oriented businesses with tools to more
effectively manage, operate and grow their operations. Deltek's products address
the enterprise-level needs of project-oriented businesses and allow these
organizations to manage financial and project accounting, compute costs and
revenues on a project-by-project basis, submit accurate and detailed bills,
comply with complex industry-specific and regulatory requirements, administer
employee time collection, labor costing and payroll, automate materials
management functions, and empower their managers with timely and pertinent
information. Deltek also provides a full range of consulting and maintenance
services to assist its customers with system implementation and integration and
to provide training and ongoing support for the Company's software products.
The increasingly competitive business environment has created pressure for
business organizations to better utilize information technologies to improve
their efficiency, reduce their costs and provide their employees and management
with more timely and pertinent information. As a result, many organizations are
implementing a new generation of enterprise-level business systems, based on
open, client/server architectures, to automate their operations, including
finance, accounting, manufacturing and human resource management functions. Most
client/server enterprise-level business systems are general purpose and fail to
address many of the specific requirements of businesses engaged primarily in
providing goods and services to customers under project-specific contracts and
engagements. These project-oriented businesses include a wide variety of
professional and technical service providers, including engineering and
environmental firms, research and development firms and contract service
organizations, as well as not-for-profit organizations, make-to-order
manufacturers and construction companies. Many of these project-oriented
businesses provide goods and services under government contracts.
Deltek's family of software products consists of Costpoint, the Company's
advanced client/server, enterprise-level business software system designed for
project-oriented organizations; System 1, a DOS-based accounting and management
system designed primarily for organizations providing goods and services under
contracts with the federal government; Electronic Timesheet, an employee
timekeeping system; and Allegro, a project and resource management tool. These
products include modules spanning financial accounting, project accounting and
management, human resources and payroll administration, time and labor
collection, materials management and reporting tools. Application modules within
each Deltek product are integrated and utilize a common user interface and
database structure, allowing project-oriented organizations to configure and
implement a fully-integrated system solution.
An integral part of Deltek's solution is to provide superior services and
support directly to its customers. The Company believes that its implementation
expertise, together with its focus on the unique requirements of
project-oriented organizations, result in a faster and more cost-effective
system implementation than is typically achieved by companies which choose to
adapt general-purpose business systems to the needs of their project-oriented
organizations. After a customer's implementation is completed, Deltek provides
ongoing support services to assist the customer in maintaining and updating its
system, training its employees and adding functionality as the customer's
business grows and its requirements change.
Deltek sells its products and services through its direct sales force.
Since its inception, the Company has installed more than 1,900 systems for a
wide range of project-oriented organizations of all sizes, predominantly in the
United States. Deltek's customers include Bell Atlantic, Coopers & Lybrand, LLP,
Federal Integrated Systems, Inc., Lockheed Martin Corp., Northrup Grumman Corp.,
Raytheon Service Co., Inc. and Research Triangle Institute, Inc.
Deltek's objective is to strengthen its position as a leading supplier of
enterprise-level software systems for project-oriented organizations. Deltek
intends to continue to differentiate itself from providers of general-purpose
business application software by focusing exclusively on providing
cost-effective solutions that meet the unique and changing demands of
project-oriented businesses. Key elements of Deltek's strategy include targeting
additional project-oriented markets and leveraging its large installed customer
base to generate additional licensing and consulting revenues as these companies
grow and their requirements change.
Deltek was incorporated in Virginia in 1983. Deltek's executive offices are
located at 8280 Greensboro Drive, McLean, Virginia 22102, and its telephone
number at that address is (703) 734-8606.
3
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company............................................ 1,700,000 shares
Selling Shareholders................................... 1,200,000 shares
Common Stock to be outstanding after the offering........ 16,862,750 shares(1)
Use of proceeds.......................................... For working capital and other general corporate
purposes, including potential acquisitions. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol................... DLTK
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................... $13,805 $17,794 $19,417 $21,356 $26,849 $18,518 $24,371
Operating expenses before non-recurring charges.... 8,555 11,735 12,328 13,313 17,176 12,069 17,035
Non-recurring charges.............................. -- -- -- -- -- -- 1,261(2)
Income from operations............................. 5,250 6,059 7,089 8,043 9,673 6,449 6,075
Income before state income taxes................... 5,515 6,299 7,331 8,300 10,066 6,744 6,362
Net income......................................... 5,478 6,240 7,280 8,235 10,021 6,710 6,287
PRO FORMA STATEMENT OF OPERATIONS DATA(3):
Income tax provision............................... $ 2,097 $ 2,395 $ 2,787 $ 3,156 $ 3,827 $ 2,564 $ 2,483
Net income......................................... 3,418 3,904 4,544 5,144 6,239 4,180 3,879
Net income per share(4)............................ $ 0.40 $ 0.25
Weighted average shares outstanding (4)............ 15,552 15,555
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------
PRO FORMA AS
ACTUAL ADJUSTED(5)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities.......................................... $ 4,698 $ 23,045
Working capital........................................................................... 2,785 14,832
Total assets.............................................................................. 18,378 36,725
Short-term notes payable to shareholders.................................................. -- 4,000
Total shareholders' equity................................................................ 7,187 19,234
</TABLE>
- ---------------
(1) Excludes (i) 1,936,500 shares reserved for issuance under the Company's
stock option plans, of which 1,036,500 shares were subject to outstanding
options as of September 30, 1996, at a weighted average exercise price of
$2.65 per share; and (ii) 400,000 shares reserved for issuance under the
Company's 1996 Employee Stock Purchase Plan. See "Management -- Stock Plans"
and Note 8 of Notes to Financial Statements.
(2) Represents non-recurring, non-cash charges of $867,000 for stock option
compensation and $394,000 for purchased in-process research and development.
Exclusive of these charges, income from operations, net income, pro forma
net income and pro forma net income per share would have been $7.3 million,
$7.5 million, $4.6 million and $0.30, respectively. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Notes 2 and 8 of Notes to Financial Statements.
(3) For all periods indicated, the Company elected to be treated as an S
Corporation and was not subject to federal and certain state income taxes.
The pro forma statement of operations data reflects federal and state income
taxes based on applicable tax rates as if the Company had not elected S
Corporation status for the periods indicated. See "Prior S Corporation
Status" and Note 1 of Notes to Financial Statements.
(4) See Note 1 of Notes to Financial Statements for a description of the
computation of weighted average shares outstanding and pro forma net income
per share.
(5) Gives pro forma effect to (i) the declaration of a $6.3 million distribution
to the Company's current shareholders, representing undistributed previously
taxed S Corporation earnings as of September 30, 1996 and (ii) the sale of
the 1,700,000 shares of Common Stock offered by the Company hereby (at an
assumed initial public offering price of $12.00 per share and after
deducting the estimated underwriting discount and offering expenses). The
deferred tax liability that would have been recorded if the Company had
terminated its S Corporation status at September 30, 1996 would not have
been material. Prior to the closing of this offering, the Company will make
a distribution to its current shareholders of the $6.3 million of
undistributed previously taxed earnings as of September 30, 1996 and all
additional taxable S Corporation earnings generated between October 1, 1996
and the termination of the Company's S Corporation status prior to the
closing of this offering, which the Company currently estimates will be
approximately $5.7 million. The Company expects to pay approximately $8.0
million of such distribution out of cash flow and to issue short-term notes
for the balance of approximately $4.0 million. See "Prior S Corporation
Status" and "Capitalization."
4
<PAGE> 7
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered hereby. This Prospectus contains forward-looking
statements, and actual results could differ materially from those projected in
the forward-looking statements as a result of numerous factors, including the
factors set forth below and elsewhere in this Prospectus.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company has experienced, and expects to continue to experience,
significant fluctuations in quarterly operating results. The Company's future
operating results will depend upon a number of factors, including the demand for
its products, the size and timing of specific sales, the delay or deferral of
customer implementations, the level of product and price competition that it
encounters, the length of its sales cycles, the successful expansion of its
direct sales force and customer support organization, the timing of new product
introductions and product enhancements by the Company and its competitors, the
mix of products and services sold, the activities of and acquisitions by its
competitors, the timing of new hires and its ability to develop and market new
products and control costs. The Company's operating results could also be
affected by general economic conditions or those within specific geographic
areas where its customers do business. In addition, the decision to license and
implement an enterprise-level business software system is usually discretionary,
involves a significant commitment of customer resources and is subject to
delays, and to budget cycles and internal authorization procedures of the
Company's customers. The loss or delay of individual orders could have a
significant impact on the Company's operating results, particularly on a
quarterly basis. Furthermore, while the Company's revenue from license fees is
difficult to predict because of the length and variability of the Company's
sales cycles, the Company's operating expenses are based on anticipated revenue
trends. Because a high percentage of these expenses are relatively fixed, a
delay in the recognition of revenue from a limited number of sales could cause
significant variations in operating results from quarter to quarter. To the
extent such expenses precede, or are not subsequently followed by, anticipated
revenues, the Company's operating results could be materially and adversely
affected.
The Company typically grants its customers the right to return its software
products for a refund of the license fee during a refund period which is
generally 60 to 90 days from the date of the license agreement, although the
Company occasionally has provided, and may in the future provide, longer refund
periods for larger, more complex Costpoint installations. The Company recognizes
license fees from its System 1 and Electronic Timesheet products upon delivery,
whereas Costpoint license fees are recognized upon the expiration of the
applicable refund period and are recorded as deferred revenue until recognized.
Because of its customers' refund rights and the varying length of applicable
refund periods, deferred revenue at the end of a quarter does not necessarily
reflect revenue which the Company will recognize in the succeeding quarter.
Over the last several years, the Company has experienced seasonal
variations in its operating results, partly due to customers' desire to have
their systems operational at the beginning of a calendar year. Accordingly,
these customers typically order their systems in the middle of the preceding
year in order to allow adequate time for implementation, resulting in a
seasonably high level of revenue being recognized in the fourth quarter upon the
expiration of refund periods.
As a result of these and other factors, the Company's operating results for
any quarter are subject to significant variation, and the Company believes that
period-to-period comparisons of its operating results are not necessarily
meaningful and should not be relied upon as indications of future performance.
It is likely that the Company's future quarterly operating results from time to
time will not meet the expectations of market analysts or investors. In such
event, the price of the Company's Common Stock would likely be materially and
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
5
<PAGE> 8
DEPENDENCE ON COSTPOINT PRODUCT LINE; PRODUCT MIGRATION
Prior to 1995, substantially all of the Company's revenues were derived
from licenses of its DOS-based System 1 business software products and from
services related to the implementation, support and maintenance of System 1. In
June 1995, the Company introduced its Costpoint client/server-based,
enterprise-level business software. In 1995, the Company derived 26.6% of its
total revenues from licenses of Costpoint software and services related to the
implementation, support and maintenance of Costpoint systems. For the nine
months ended September 30, 1996, Costpoint-related license fees and service
revenue accounted for 42.6% of total revenues. The Company expects its Costpoint
product line to account for an increasingly significant percentage of the
Company's future revenues. In addition, the Company is dependent upon the
continued satisfaction of its existing customers and the acceptance of Costpoint
by future customers in order to establish and maintain relationships that will
result in ongoing revenue from support and maintenance services and the
licensing of additional products and upgrades. Accordingly, factors adversely
affecting the pricing of or the demand for Costpoint, such as the success of
competitive products or technological change, or the Company's inability to
continue to enhance the Costpoint product line to meet the evolving needs of its
customers, would have a material adverse effect on the Company's business,
operating results and financial condition.
An important element of the Company's strategy is to license Costpoint to
existing System 1 users as those customers reengineer their information systems
and migrate to new client/server business software solutions. As of September
30, 1996, approximately 40 of the Company's former System 1 customers,
representing approximately 3% of the installed base of System 1 users, had
migrated to or were in the process of migrating to Costpoint systems. There can
be no assurance that a significant percentage of current System 1 customers will
migrate to Costpoint. In particular, smaller System 1 customers are less likely
to migrate to Costpoint because the cost of migrating to a client/server
environment is high relative to their size and because in many cases System 1
adequately meets their present needs. If a significant number of the Company's
current System 1 customers elect not to migrate to Costpoint, or purchase
competitive products or encounter problems in implementing Costpoint systems,
the Company's business, operating results and financial condition would be
materially and adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Industry
Background," "-- Strategy" and "-- Products."
COMPETITION
The business application software market, including the market for
client/server-based business software systems, is intensely competitive and
rapidly changing. The Company's products are targeted toward a wide range of
project-oriented organizations, and the competition that the Company encounters
varies depending upon the customer's size, industry and specific system
requirements. For larger Costpoint implementations, the Company's principal
competitors include Oracle Systems Corporation ("Oracle"), PeopleSoft, Inc.
("PeopleSoft") and SAP America, Inc. ("SAP"). For smaller and medium-size
Costpoint and System 1 implementations, the Company's principal competitors
include Great Plains Software, Harper and Shuman, Inc., Maxwell Business
Systems, Inc., Platinum Software Corporation, Solomon Software, State of the
Art, Inc. and Timberline Software Corporation, some of which offer
industry-specific products. Electronic Timesheet competes with electronic
timekeeping systems offered by vendors including TIMESLIPS Corporation and
Kronos, Inc. The Company also faces indirect competition from systems developed
by the internal MIS departments of large organizations.
Many of the Company's competitors have significantly greater financial,
technical, marketing and other resources than the Company. In addition, certain
competitors, particularly Oracle, PeopleSoft and SAP, have well-established
relationships with the Company's current and prospective customers and with
major accounting and consulting firms that may have an incentive to recommend
such competitors over the Company. Further, because the Company's products run
on relational database management systems ("RDBMS"), and Oracle has the largest
share of the RDBMS software market, Oracle may have a competitive advantage in
selling its application products to its installed RDBMS customer base.
Furthermore, as the client/server computing market develops, companies with
significantly greater resources than the Company could attempt to increase their
presence in this market by acquiring or forming strategic alliances
6
<PAGE> 9
with competitors of the Company. In addition, as the Company attempts to
penetrate other strategic vertical markets, it will likely encounter competitors
with substantially more experience in those markets.
There can be no assurance that the Company's products will continue to
compete favorably or that the Company will be successful in the face of
increasing competition from new products and enhancements introduced by existing
or new competitors. In addition, increased competition may result in price
reductions, reduced margins and loss of market share, any of which could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business -- Competition."
LENGTHY SALES CYCLES
The licensing and implementation of the Company's business software
products is often a decision with significant enterprise-wide implications
involving a substantial commitment of the customer's management attention and
resources. The period between initial customer contact and the customer's
purchase commitment typically ranges from 3 to 18 months. Accordingly, the
Company's sales process is subject to delays associated with a lengthy
evaluation and approval process that typically accompanies major initiatives or
capital expenditures, including delays over which the Company has little or no
control. The loss of individual orders due to the lengthy sales and evaluation
cycle, or delays in the sale of even a limited number of systems could have a
material adverse effect on the Company's business, operating results and
financial condition and, in particular, could contribute to significant
fluctuations in operating results on a quarterly basis. See "Business -- Sales
and Marketing."
DEPENDENCE ON DIRECT SALES AND SUPPORT ORGANIZATIONS
To date, the Company has sold its products exclusively through its direct
sales force and has supported its customers with its internal staff of system
consultants and technical support and maintenance personnel. The Company intends
to continue to differentiate itself from its competitors by relying,
principally, on its direct sales and support model. The Company's ability to
achieve significant revenue growth in the future will, therefore, depend in
large part on its success in recruiting, training and retaining additional
direct sales, technical and support personnel. Although the Company is currently
investing, and plans to continue to invest, significant resources to expand its
direct sales force and its technical and customer support staff, the Company has
at times experienced difficulties in recruiting qualified personnel. There can
be no assurance that the Company will be successful in expanding its direct
sales and support organizations as needed to achieve future revenue growth, and
its failure to do so would have a material adverse effect on the Company's
business, operating results and financial condition. In the future, the Company
may seek to develop third-party distribution channels and use third-party
consultants to provide consulting and support services. There can be no
assurance that the Company would be successful in establishing such third party
arrangements, that any such expansion of the Company's sales and support
capabilities would result in increased revenues, or that the resulting reduction
in the Company's direct involvement with its customers would not adversely
affect its competitive position. See "Business -- Sales and Marketing" and
"-- Competition."
DEPENDENCE UPON ORGANIZATIONS WITH FEDERAL GOVERNMENT CONTRACTS
Most of the Company's current customers are organizations that provide a
portion of their goods and services under federal government contracts. The
Company believes that, at least in the near term, such organizations will
continue to represent a large percentage of its customers and account for a
large percentage of its revenues. While such organizations are subject to the
same general economic conditions as other businesses, demand for their products
and services also is dependent upon the availability of funds appropriated
therefor. Budget reductions or reallocations could result in such organizations
downsizing, consolidating or liquidating, which, in turn could result in lost
revenue from the Company's existing customers and adversely affect the Company's
ability to add new customers in this market.
7
<PAGE> 10
UNCERTAINTY OF EXPANSION INTO NEW MARKETS
As a part of its strategy, the Company is broadening its product and
marketing focus beyond its traditional base of customers providing goods and
services under government contracts. For example, the Company has targeted
professional and technical service providers, including engineering and
environmental firms, research and development firms and contract service
organizations, as well as not-for-profit organizations and make-to-order
manufacturers, and intends to target additional project-oriented markets such as
architectural and design firms, construction companies, governmental agencies
and organizations managing large internal projects. The Company believes that
its future success is dependent, in part, on its ability to successfully
penetrate new project-oriented markets. The Company's success in generating
sales in these markets will depend upon its ability to educate potential
customers about the benefits of the Company's project-oriented business
solutions. The Company's limited resources may restrict its ability to track
developments in these diverse markets and to effectively pursue marketing
activities in multiple markets simultaneously. There can be no assurance that
the Company's products will be widely accepted in these new markets. The
inability of the Company to successfully expand the markets for its products
could have a material adverse effect on its business, operating results and
financial condition. See "Business -- Strategy" and "-- Sales and Marketing."
LACK OF LONG-TERM SUPPORT AND MAINTENANCE AGREEMENTS
The Company derives a substantial portion of its revenues from ongoing
support and maintenance services, particularly from its System 1 customers.
These services are billed in advance on a quarterly basis. Historically, a high
percentage of the Company's customers have chosen to renew their support and
maintenance program by continuing to pay for such services from quarter to
quarter. However, there can be no assurance that any customer will continue to
pay its quarterly support and maintenance fees, and the failure of a significant
number of customers to do so would have a material adverse affect on the
Company's business, operating results and financial condition. See
"Business -- Customer Service and Support."
DIFFICULTY IN FORECASTING DEMAND FOR CONSULTING SERVICES
The Company also derives a substantial portion of its revenues from
consulting services. Initial consulting services are typically performed in
connection with a customer's implementation of a new Deltek system. Ongoing
consulting services are performed, on a project-by-project basis, as the
Company's customers grow and their requirements change. The nature, extent and
duration of consulting services required in connection with system
implementations and the amount of customers' post-implementation consulting
needs vary widely from customer to customer and are difficult to predict.
Furthermore, none of these services are provided under long-term contracts. As a
result, it is difficult for the Company to forecast accurately the demands for
its consulting services in order to have available an appropriate number of
qualified and trained personnel. The Company's failure to hire and train an
adequate number of consulting personnel could result in customer dissatisfaction
and the loss of potential revenues. On the other hand, excess staffing could
result in disproportionately high personnel expenses which could have a material
adverse affect on the Company's business, operating results and financial
condition. See "Business -- Customer Service and Support."
RAPID TECHNOLOGICAL CHANGE; RISKS ASSOCIATED WITH NEW PRODUCT DEVELOPMENT
The business application software market is characterized by rapidly
changing technologies, evolving industry standards, frequent new product
introductions and short product life cycles. The Company's future success will
depend to a substantial degree upon its ability to enhance its existing products
and to develop and introduce, on a timely and cost-effective basis, new products
and features that meet changing customer requirements and emerging and evolving
industry standards. The Company introduced Costpoint in June 1995, and Costpoint
currently represents more than half of the Company's license fee revenues.
Despite the recent growth in license fees and service revenues from the
Costpoint product line, there can be no assurance that the market for
client/server-based software will not be adversely affected by changing
technologies. The Company allocates resources for research and development
projects based on planned product introductions and enhancements; however,
actual expenditures may significantly differ from amounts
8
<PAGE> 11
allocated. Inherent in the product development process are a number of risks.
The development of new, technologically advanced software products is a complex
and uncertain process requiring high levels of innovation, as well as the
accurate anticipation of technological and market trends. The introduction of
new or enhanced products also requires the Company to manage the transition from
older products in order to minimize disruption in customer ordering patterns and
to ensure that new products can be delivered to meet customer demand. There can
be no assurance that the Company will successfully develop, introduce or manage
the transition to new products. The Company has experienced, and may in the
future experience, delays in the introduction of its products, due to factors
internal and external to the Company. Any future delays in the introduction or
shipment of new or enhanced products, the inability of such products to gain
market acceptance or problems associated with new product transitions could
adversely affect the Company's business, operating results and financial
condition. See "Business -- Product Development."
PRODUCT AND SERVICE ERRORS; POTENTIAL LIABILITY
Software products as complex as those offered by the Company typically
contain undetected errors or failures when first introduced or as new versions
are released. Testing of the Company's products is particularly challenging
because it is difficult to simulate the wide variety of computing environments
in which the Company's customers may deploy these products. Accordingly, there
can be no assurance that, despite testing by the Company and by current and
potential customers, errors will not be found after commencement of commercial
shipments, resulting in loss of or delay in market acceptance, which, in turn,
could have a material adverse effect upon the Company's business, operating
results and financial condition. Although the Company has not experienced any
material product liability claims to date, the sale and support of software
products by the Company entails the risk of such claims. In addition, the
failure to perform services to a client's expectations may result in the Company
not being paid for services rendered, may damage the Company's reputation and
may result in a claim being brought against the Company. The Company maintains
errors and omissions insurance; however, a successful claim for product or
service liability brought against the Company could have a material adverse
effect upon the Company's business, operating results and financial condition.
DEPENDENCE ON KEY EMPLOYEES
The Company's success will depend in part on the continued services of its
key employees. The Company does not have employment agreements with any of its
key employees and does not maintain any key person life insurance. The loss of
services of one or more of the Company's key employees could have a material
adverse effect on the Company's business, operating results and financial
condition. In addition, if one or more key employees were to join a competitor
or form a competing company, the loss of such employee(s) and any resulting loss
of existing or potential business to any such competitor could have a material
adverse effect on the Company's business, operating results and financial
condition. In the event of the loss of any such employee(s), there can be no
assurance that the Company would be able to prevent the unauthorized disclosure
or use of the Company's or its customers' technical knowledge, practices or
procedures by such employee(s), or that such disclosure or use would not have a
material adverse effect on the Company's business, operating results and
financial condition. See "Management."
MANAGEMENT OF GROWTH
The Company is currently experiencing growth and expansion, which has
placed, and will continue to place, a strain on its administrative, operational
and financial resources and increased demands on its systems and controls. This
growth has resulted in a continuing increase in the level of responsibility for
the Company's management personnel. The Company anticipates that its continued
growth will require it to recruit, hire, train and retain a substantial number
of new engineering, managerial, sales and marketing personnel. The Company's
ability to manage its growth successfully will also require the Company to
continue to expand and improve its operational, management and financial systems
and controls on a timely basis. If the Company's management is unable to manage
growth effectively, the Company's business, operating results and financial
condition will be materially and adversely affected. See "Management."
9
<PAGE> 12
RELIANCE ON THIRD-PARTY SOFTWARE
The Company licenses from third parties certain software development tools
that the Company utilizes in the development of its products and certain
application software that the Company incorporates into its products. Third
parties also license to the Company or its customers certain relational database
software used in conjunction with the Company's products. Accordingly, the
Company is dependent upon such third parties' abilities to deliver quality
products, to correct errors, to support their current products, to develop new
and enhanced products on a timely and cost-effective basis and to respond to
emerging industry standards and other technological changes. Should these
third-party development tools or software products become unavailable, or should
their developers fail to adequately support or enhance them, the Company would
be required to rewrite its products using different development tools or replace
the functionality provided by the third-party software currently used in and
licensed with its products. Although the Company believes that other development
tools and application and database software with comparable functionality are
currently available from other third parties, there can be no assurance that
replacement products could be obtained when needed. In addition, there can be no
assurance that the Company could successfully rewrite its products using
different development tools or that it would not encounter substantial delays in
doing so. The inability to rewrite its products using different development
tools on a timely and cost-effective basis or the loss of, or any significant
delay in the replacement of, the functionality provided by the third-party
software could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- Products,"
"-- Proprietary Rights and Licenses" and "-- Product Development."
PROPRIETARY RIGHTS, RISKS OF INFRINGEMENT
The Company's success and ability to compete is dependent in part upon its
proprietary software. The Company relies on a combination of copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to establish and protect its rights in its software. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy, design around or reverse engineer aspects of the Company's
products or to obtain and use information that the Company regards as
proprietary. Furthermore, the Company has no patents, and existing copyright law
affords only limited protection. In addition, the laws of some countries do not
protect the Company's proprietary rights to the same extent as do the laws of
the United States. Accordingly, there can be no assurance that the Company will
be able to protect its proprietary software against unauthorized third party
copying or use, which could adversely affect the Company's competitive position.
There are currently no claims pending against the Company relating to the
infringement of any proprietary rights of third parties. There can be no
assurance, however, that third parties will not claim infringement by the
Company of their intellectual property rights. The Company expects that software
product developers will increasingly be subject to infringement claims as the
number of products and competitors in the Company's industry segment grows and
the functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming to defend, result in
costly litigation, divert management's attention and resources or cause delays
in the delivery or implementation of the Company's products. In addition, such
claims could require the Company to discontinue the use of certain software
codes or processes, cease the manufacture, use and sale of infringing products,
and develop non-infringing technology or to obtain licenses to the alleged
infringing technology. There can be no assurance that the Company would be able
to develop alternative technologies or to obtain such licenses or, if a license
were obtainable, that the terms would be commercially acceptable to the Company.
In the event of a successful claim of product infringement against the Company
and failure or inability of the Company to license the infringed or similar
technology, the Company's business, operating results and financial condition
could be materially and adversely affected. See "Business -- Proprietary Rights
and Licenses."
CONTROL BY PRINCIPAL SHAREHOLDERS, OFFICERS AND DIRECTORS
Upon completion of this offering, the Company's principal shareholders,
Kenneth E. deLaski, its President and Chief Executive Officer, and Donald
deLaski, its Chairman, will, in the aggregate, beneficially own approximately
59.2% of the Company's outstanding shares of Common Stock (55.2% if the
Underwriters'
10
<PAGE> 13
overallotment option is exercised in full). As a result, these shareholders,
acting together, would be able to control substantially all matters requiring
approval by the shareholders of the Company including the election of the Board
of Directors and significant corporate transactions. The control by such
shareholders could delay or prevent a change in control of the Company, impede a
merger, consolidation, takeover or other business combination involving the
Company, or discourage a potential acquiror from making a tender offer or
otherwise attempting to obtain control of the Company. See "Principal and
Selling Shareholders."
BROAD MANAGEMENT DISCRETION IN ALLOCATION OF NET PROCEEDS
The primary purposes of this offering are to obtain additional working
capital, to establish a public market for the Company's Common Stock and to
facilitate the Company's future access to public equity markets. The Company
intends to use the net proceeds of this offering for general corporate purposes,
including product development and working capital. The Company may use a portion
of the net proceeds of the offering to acquire or invest in businesses,
technologies or products complementary to the Company's business. As of the date
of this Prospectus, the Company has no other specific plans to use the net
proceeds of this offering. Accordingly, the Company will retain broad discretion
to allocate the net proceeds of this offering. Pending any such uses, the
Company plans to invest the net proceeds in investment-grade, interest-bearing
securities. See "Use of Proceeds."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained after this offering. The initial public offering price
will be determined through negotiations among the Company, the Selling
Shareholders and the Representatives of the Underwriters and may not be
indicative of the market price of the Common Stock after this offering. The
trading price of the Common Stock is likely to be highly volatile and may be
significantly affected by factors such as actual or anticipated fluctuations in
the Company's operating results, announcements of technological innovations, new
products or new contracts by the Company or its competitors, developments with
respect to patents, copyrights or proprietary rights, conditions and trends in
the software industry, changes in financial estimates by securities analysts,
general market conditions and other factors. In addition, the public equity
markets have from time to time experienced significant price and volume
fluctuations that have particularly affected the market prices for the stocks of
technology companies. These broad market fluctuations, as well as shortfalls in
sales or earnings as compared with public market analysts' expectations, changes
in such analysts' recommendations or projections and general economic and market
conditions, may materially and adversely affect the market price of the
Company's Common Stock. See "Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS
Purchasers of the Common Stock offered hereby will incur immediate,
substantial dilution in net tangible book value of $10.87 per share. To the
extent outstanding options to purchase the Company's Common Stock are exercised,
there will be further dilution to the new public investors. See "Dilution."
POTENTIAL ISSUANCE OF PREFERRED STOCK; ANTI-TAKEOVER PROVISIONS
The Board of Directors has the authority, without further action by the
shareholders, to issue up to 2,000,000 shares of Preferred Stock and to fix the
rights, preferences, privileges and restrictions, including voting rights, of
such shares. The rights of the holders of the 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 issuance of the Preferred Stock
could have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company, thereby delaying,
deferring or preventing a change in control of the Company. Furthermore, such
Preferred Stock may have other rights, including economic rights, senior to the
Common Stock, and as a result, the issuance of such stock could have a material
adverse effect on the market value of the Common Stock. The Company has no
present plans to issue shares of Preferred Stock. The Company may in the future
adopt other measures that may have the effect of delaying, deferring or
11
<PAGE> 14
preventing a change in control of the Company. Certain of such measures may be
adopted without any further vote or action by the shareholders, although the
Company has no present plans to adopt any such measures. The Company is also
afforded the protections of certain provisions of the Virginia Stock Corporation
Act, which could delay or prevent a change in control of the Company, impede a
merger, consolidation or other business combination involving the Company or
discourage a potential acquiror from making a tender offer or otherwise
attempting to obtain control of the Company. See "Description of Capital
Stock -- Preferred Stock" and "Description of Capital Stock -- Anti-Takeover
Effects of Virginia Law and Articles of Incorporation."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the Company's Common Stock in the public
market after this offering could adversely affect prevailing market prices for
the Common Stock. Upon completion of this offering, the Company will have
outstanding 16,862,750 shares of Common Stock. Of these shares, the 2,900,000
shares offered hereby will be freely tradeable without restriction in the public
market. Taking into account restrictions imposed by the Securities Act of 1933,
as amended (the "Securities Act"), rules promulgated by the Securities and
Exchange Commission thereunder and "lock-up" agreements between certain
shareholders and the Underwriters, (i) approximately 170,250 additional shares
will be eligible for immediate sale as of the date of this Prospectus, (ii)
approximately 93,000 additional shares will be eligible for sale beginning 90
days after the date of this Prospectus, and (iii) approximately 13,275,000
additional shares will be eligible for sale beginning 180 days after the date of
this Prospectus. Montgomery Securities may, in its sole discretion and at any
time without notice, release all or any portion of the shares subject to such
lock-up agreements. In addition, the Company intends to file registration
statements on Form S-8 under the Securities Act approximately 90 days after the
date of this Prospectus to register an aggregate of 1,300,000 shares of Common
Stock issued or reserved for issuance under its 1996 Stock Option Plan and its
1996 Employee Stock Purchase Plan. See "Shares Eligible for Future Sale."
12
<PAGE> 15
PRIOR S CORPORATION STATUS
Since 1987, the Company has elected to be treated for federal and certain
state income tax purposes as an S Corporation under Subchapter S of the Internal
Revenue Code of 1986 (the "Code"). As a result, the Company's earnings for prior
tax years and through the day preceding the date of termination of the Company's
S Corporation status (the "Termination Date") have been or will be, as the case
may be, taxed, with certain exceptions, for federal and certain state income tax
purposes directly to the Company's shareholders, rather than to the Company. The
Termination Date will occur prior to the date of the closing of this offering.
The Company and the current shareholders have entered into an agreement which
provides for income taxes attributable to periods prior to the Termination Date
to be borne by the current shareholders and for income taxes attributable to
periods beginning on and after the Termination Date to be borne by the Company.
See "Certain Transactions."
Shareholder Distributions. Since its election to be treated as an S
Corporation, the Company has made quarterly cash distributions to its
shareholders. During 1994, 1995 and the nine months ended September 30, 1996,
the Company declared cash dividends totalling $7.2 million, $8.0 million and
$9.3 million, respectively. Prior to the consummation of this offering, the
Company will declare a dividend payable to its current shareholders in the
amount of all undistributed taxable S Corporation earnings accruing through the
Termination Date (the "S Corporation Distribution"). At September 30, 1996,
undistributed previously taxed S Corporation earnings were approximately $6.3
million, and the Company currently estimates that additional taxable S
Corporation earnings accruing between October 1, 1996 and the Termination Date
will total approximately $5.7 million, resulting in a total S Corporation
Distribution of approximately $12.0 million. Prior to the consummation of this
offering, the Company expects to pay approximately $8.0 million of the S
Corporation Distribution out of cash flow from operations and to issue
short-term notes (the "S Corporation Notes") for the balance of approximately
$4.0 million to those shareholders entitled to the S Corporation Distribution.
The S Corporation Notes will bear interest at the rate of 7% per annum and will
be payable on or before December 31, 1997 only out of cash flow from operations
generated after the Termination Date. To the extent such cash flow is not
adequate to fund such payment, any remaining balance shall be payable thereafter
as and when cash flow from operations permit. None of the proceeds from this
offering will be used to pay the S Corporation Notes. See "Certain
Transactions."
Accounting Effect. The termination of the Company's S Corporation status on
the Termination Date will result in a deferred tax liability which will be
recorded as a non-recurring charge. Had the Company terminated its S Corporation
status as of September 30, 1996, the deferred tax liability and related charge
would not have been material. The amount of the actual deferred tax liability
and related charge will depend upon a number of factors, including factors
affecting revenues and related accounts receivable and the amounts and timing of
payments of various operating expenses. There can be no assurance that the
actual amount of the deferred tax liability charge will not be material or that
the related charge will not have a material adverse effect on the Company's net
income for the first quarter of 1997 or for the full year. See "Use of Proceeds"
and Note 1 of Notes to Financial Statements.
13
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,700,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$18.3 million (assuming an initial public offering price of $12.00 per share and
after deducting the estimated underwriting discount and offering expenses). The
principal purposes of this offering are to obtain additional working capital,
establish a public market for the Company's Common Stock and facilitate future
access by the Company to public equity markets. The Company will not receive any
proceeds from the sale of the shares by the Selling Shareholders.
The Company intends to use the net proceeds for general corporate purposes,
including product development and working capital. The Company may use a portion
of the net proceeds to acquire or invest in businesses, technologies or products
complementary to the Company's business. The Company has no present
understandings, commitments or agreements with respect to any such transaction
nor is it currently engaged in any discussions or negotiations with respect to
any such transaction. Pending such uses, the Company intends to invest the net
proceeds from the offering in investment-grade, interest-bearing securities.
DIVIDEND POLICY
As an S Corporation, the Company has historically made substantial cash
distributions to its shareholders and intends to make additional distributions
to its current shareholders prior to the termination of the Company's S
Corporation status. Following the termination of the Company's S Corporation
status, the Company intends to repay the S Corporation Notes representing the
unpaid portion of the S Corporation Distribution. See "Prior S Corporation
Status." Thereafter, the Company intends to retain future earnings, if any, to
finance the development and expansion of its business and, therefore, does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future. The decision whether to pay dividends will be made by the Board of
Directors of the Company, from time to time, in light of conditions then
existing, including, among other things, the Company's results of operations,
financial condition and requirements, business conditions and such other factors
as the Board of Directors deems relevant.
14
<PAGE> 17
CAPITALIZATION
The following table sets forth, as of September 30, 1996, the short-term
debt and capitalization of the Company on an actual and pro forma basis.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)
------ --------------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Short-term notes payable to shareholders............................. -- $ 4,000
====== ======
Shareholders' equity:
Preferred Stock, $0.001 par value per share; no shares authorized,
issued or outstanding, actual; 2,000,000 shares authorized, none
issued and outstanding, pro forma as adjusted................... -- --
Common Stock, $0.001 par value per share; 45,000,000 shares
authorized, 15,162,750 shares issued and outstanding, actual;
45,000,000 shares authorized, 16,862,750 shares issued and
outstanding, pro forma
as adjusted(2).................................................. 15 17
Paid-in capital.................................................... 1,936 20,281
Retained earnings (deficit)........................................ 5,758 (542)
Less unearned compensation(3)...................................... 522 522
------ ------
Total shareholders' equity...................................... 7,187 19,234
------ ------
Total capitalization....................................... $7,187 $ 19,234
====== ======
</TABLE>
- ---------------
(1) Gives pro forma effect to (i) the declaration of a $6.3 million distribution
to the Company's current shareholders, representing undistributed previously
taxed S Corporation earnings as of September 30, 1996 and (ii) the sale of
the 1,700,000 shares of Common Stock offered by the Company hereby (at an
assumed initial public offering price of $12.00 per share and after
deducting the estimated underwriting discount and offering expenses). The
deferred tax liability that would have been recorded if the Company had
terminated its S Corporation status at September 30, 1996 would not have
been material. Prior to the closing of this offering, the Company will make
a distribution to its current shareholders of the $6.3 million of
undistributed previously taxed earnings as of September 30, 1996 and all
additional taxable S Corporation earnings generated between October 1, 1996
and the Termination Date, which the Company currently estimates will be
approximately $5.7 million. The Company expects to pay approximately $8.0
million of such distribution out of cash flow and to issue short-term notes
for the balance of approximately $4.0 million. See "Prior S Corporation
Status" and Note 1 of Notes to Financial Statements.
(2) Excludes (i) 1,936,500 shares reserved for issuance under the Company's
stock option plans, of which 1,036,500 shares were subject to outstanding
options as of September 30, 1996, at a weighted average exercise price of
$2.65 per share; and (ii) 400,000 shares reserved for issuance under the
Company's 1996 Employee Stock Purchase Plan. See "Management -- Stock Plans"
and Note 8 of Notes to Financial Statements.
(3) Represents the difference between the exercise price of certain outstanding
unvested options and the appraised market value of the underlying stock,
which will be recorded as compensation charges, as such options vest through
December 31, 1998.
15
<PAGE> 18
DILUTION
The net tangible book value of the Company as of September 30, 1996 was
$7.1 million, or $0.47 per share of Common Stock. Net tangible book value per
share (total tangible assets less total liabilities) is determined by dividing
the net tangible book value of the Company by the number of shares of Common
Stock outstanding at that date. After giving pro forma effect to (i) the sale of
the 1,700,000 shares of Common Stock offered by the Company hereby (at an
assumed initial public offering price of $12.00 per share and after deducting
the estimated underwriting discount and offering expenses) and (ii) the
declaration of a $6.3 million distribution to the Company's shareholders
(representing undistributed previously taxed S Corporation earnings as of
September 30, 1996), the pro forma net tangible book value of the Company as of
September 30, 1996 would have been $19.1 million, or $1.13 per share,
representing an immediate increase in such net tangible book value of $1.08 per
share to existing shareholders and an immediate dilution of $10.87 per share to
the new public investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................... $12.00
Net tangible book value per share as of September 30, 1996.......... $0.47
Decrease attributable to declaration of a distribution of previously
taxed S Corporation earnings as of September 30, 1996............ (0.42)
Increase in net tangible book value attributable to new public
investors........................................................ 1.08
-----
Pro forma net tangible book value per share after the offering........ 1.13
------
Dilution per share to new public investors............................ $10.87
------
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1996, the differences between 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 public investors purchasing shares
of Common Stock in this offering (at an assumed initial public offering price of
$12.00 per share and before deducting the estimated underwriting discount and
offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)......... 15,162,750 89.9% $ 95,000 0.5% $ 0.01
New investors(1)................. 1,700,000 10.1 20,400,000 99.5 12.00
---------- ----- ----------- ---
Total.................. 16,862,750 100.0% $20,495,000 100.0%
========== ===== =========== ===
</TABLE>
- ---------------
(1) Sales by the Selling Shareholders in this offering will reduce the number of
shares held by existing shareholders to 13,962,750 or 82.8% of the total
number of shares of Common Stock to be outstanding after this offering, and
will increase the number of shares to be purchased by the new public
investors to 2,900,000 or 17.2% of the total number of shares of Common
Stock to be outstanding after the offering. See "Principal and Selling
Shareholders."
The foregoing tables assume no exercise of stock options after September
30, 1996. As of September 30, 1996, there were outstanding options to purchase
an aggregate of 1,036,500 shares of Common Stock under the Company's stock
option plans, at a weighted average exercise price of $2.65 per share. To the
extent these options are exercised, there will be further dilution to the new
public investors. See "Capitalization," "Management -- Stock Plans" and Note 8
of Notes to Financial Statements.
16
<PAGE> 19
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the financial statements and the notes thereto included elsewhere herein. The
statement of operations data set forth below with respect to the years ended
December 31, 1993, 1994 and 1995 and the balance sheet data as of December 31,
1994 and 1995 are derived from, and are qualified by reference to, the audited
financial statements of the Company included elsewhere in this Prospectus. The
statement of operations data set forth below with respect to the years ended
December 31, 1991 and 1992 and the balance sheet data as of December 31, 1991,
1992 and 1993 are derived from audited financial statements not included in this
Prospectus. The statement of operations data set forth below with respect to
each of the nine month periods ended September 30, 1995 and September 30, 1996
and the balance sheet data as of September 30, 1996 are derived from, and are
qualified by reference to, the unaudited financial statements of the Company
included elsewhere in this Prospectus. The unaudited financial statements
include all normal recurring adjustments that the Company considers necessary
for a fair presentation of its financial position and results of operations. The
results of operations for the nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 1996, or any other future period. The pro forma statement of
operations data set forth below do not purport to be indicative of the results
of operations that would have occurred had the termination of the Company's S
Corporation status occurred at December 31, 1990. See "Prior S Corporation
Status."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996(1)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenues:
License fees....................................... $ 6,627 $ 7,176 $ 7,551 $ 7,360 $ 9,720 $ 6,064 $ 8,422
Services........................................... 6,130 8,820 10,093 12,545 15,154 10,863 14,548
Third-party equipment and software................. 1,048 1,798 1,773 1,451 1,975 1,591 1,401
------- ------- ------- ------- ------- ------- -------
Total revenues............................... 13,805 17,794 19,417 21,356 26,849 18,518 24,371
------- ------- ------- ------- ------- ------- -------
Operating Expenses:
Cost of software................................... 526 660 665 766 893 584 1,047
Cost of services................................... 2,924 3,579 3,611 4,171 5,151 3,470 5,995
Cost of third-party equipment and software......... 795 1,341 1,298 1,054 1,580 1,247 1,147
Software development............................... 2,248 3,344 3,931 3,877 4,934 3,436 4,658
Sales and marketing................................ 1,104 1,518 1,538 1,852 2,743 1,995 2,467
General and administrative......................... 958 1,293 1,285 1,593 1,875 1,337 1,721
Stock option compensation.......................... -- -- -- -- -- -- 867
Purchased in-process research and development...... -- -- -- -- -- -- 394
------- ------- ------- ------- ------- ------- -------
Total operating expenses..................... 8,555 11,735 12,328 13,313 17,176 12,069 18,296
------- ------- ------- ------- ------- ------- -------
Income from operations............................... 5,250 6,059 7,089 8,043 9,673 6,449 6,075
Interest income...................................... 265 240 242 257 393 295 287
------- ------- ------- ------- ------- ------- -------
Income before state income taxes..................... 5,515 6,299 7,331 8,300 10,066 6,744 6,362
Provision for state income taxes..................... 37 59 51 65 45 34 75
------- ------- ------- ------- ------- ------- -------
Net income........................................... $ 5,478 $ 6,240 $ 7,280 $ 8,235 $10,021 $ 6,710 $ 6,287
======= ======= ======= ======= ======= ======= =======
PRO FORMA STATEMENT OF OPERATIONS DATA
(UNAUDITED)(2):
Income tax provision................................. $ 2,097 $ 2,395 $ 2,787 $ 3,156 $ 3,827 $ 2,564 $ 2,483
Net income........................................... 3,418 3,904 4,544 5,144 6,239 4,180 3,879
Net income per share(3).............................. $ 0.40 $ 0.25
Weighted average shares outstanding(3)............... 15,552 15,555
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------------------------- -------------
1991 1992 1993 1994 1995 1996
------ ------ ------ ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............. $3,588 $4,250 $3,364 $ 3,915 $ 7,521 $ 4,698
Working capital.............................................. 4,557 4,672 4,115 4,024 5,003 2,785
Total assets................................................. 7,198 8,321 8,483 11,506 18,083 18,378
Total shareholders' equity................................... 5,810 6,017 5,765 6,803 8,849 7,187
Cash dividends declared...................................... 4,267 6,033 6,647 7,186 8,011 9,265
</TABLE>
- ---------------
(1) Exclusive of the non-recurring, non-cash charges for stock option
compensation and purchased in-process research and development, income from
operations, net income, pro forma net income and pro forma net income per
share would have been $7.3 million, $7.5 million, $4.6 million and $0.30,
respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Notes 2 and 8 of Notes to Financial
Statements.
(2) For all periods indicated, the Company elected to be treated as an S
Corporation and was not subject to federal and certain state income taxes.
The pro forma statement of operations data reflects federal and state income
taxes based on applicable tax rates as if the Company had not elected S
Corporation status for the periods indicated. See "Prior S Corporation
Status" and Note 1 of Notes to Financial Statements.
(3) See Note 1 of Notes to Financial Statements for a description of the
computation of weighted average shares outstanding and pro forma income per
share.
18
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations includes forward-looking statements with respect to
the Company's future financial performance. These forward-looking statements are
subject to various risks and uncertainties, including the factors described
under "Risk Factors" and elsewhere in this Prospectus, that could cause actual
results to differ materially from historical results or those currently
anticipated.
OVERVIEW
Deltek designs, develops, sells and supports a family of integrated
software products that provide project-oriented businesses with tools to more
effectively manage, operate and grow their operations. From 1985 through 1994,
substantially all of the Company's revenues were derived from licenses of its
DOS-based System 1 business software, designed specifically for use by
organizations having contracts with the federal government, and services related
to the implementation, support and maintenance of System 1. As of September 30,
1996, approximately 1,500 project-oriented organizations were using System 1 as
their primary accounting system. In 1992, the Company began development of its
current flagship product, Costpoint, which was commercially released in June
1995. Costpoint is a client/server-based, enterprise-level business software
system, consisting of over 25 integrated module applications which span
financial accounting, project accounting, human resource and payroll
administration, materials management and reporting. Through September 30, 1996,
the Company had licensed approximately 200 Costpoint systems that had been
implemented or were in the process of being implemented. Deltek also provides a
full range of consulting and maintenance services to assist its customers with
system implementation and integration and to provide training and ongoing
support for the Company's software products.
The Company's revenues consist of fees derived from the licensing of its
software products, service revenues from consulting and support services, and
revenue from the resale of third-party equipment and the sublicensing of
third-party software. The Company typically grants its customers the right to
return its software products for a refund of the license fee during a refund
period which is generally 60 to 90 days from the date of the license agreement,
although the Company occasionally has provided, and may in the future provide,
longer refund periods for larger, more complex Costpoint installations. The
Company recognizes license fees from its System 1 and Electronic Timesheet
products upon delivery, whereas Costpoint license fees are recognized upon the
expiration of the applicable refund period and are recorded as deferred revenue
until recognized. Because of its customers' refund rights and the varying length
of applicable refund periods, deferred revenue at the end of a quarter does not
necessarily reflect revenue which the Company will recognize in the succeeding
quarter. Licensing of the Company's software results in revenues from related
consulting services and ongoing support. Implementation and other consulting
services are provided on a time and materials basis, billed monthly or
semi-monthly and recognized as the services are performed. Telephone support and
periodic enhancements and updates are provided for maintenance fees that are
payable quarterly and initially represent between 15% and 20% of the related
software license fee on an annual basis. Revenue from quarterly maintenance and
support service is recognized over the term of the support. Revenue from
third-party equipment and software is derived from the resale and sublicensing
of third-party hardware and software products in connection with the license and
installation of the Company's systems and is generally recognized on delivery.
Revenue from third-party hardware and software can fluctuate materially from
period to period, and margins on third-party equipment and software typically
are significantly lower than on licenses of the Company's own products.
During 1994 and 1995, the Company capitalized a greater amount of its
software development expenses than it had in previous years due to the
development of Costpoint. Upon the commercial release of Costpoint in June,
1995, the Company ceased capitalizing costs related to the development of core
Costpoint modules and began amortizing previously capitalized costs related to
such development. Since June, 1995, the Company has only capitalized software
development costs related to the development of new Costpoint modules and Web
E.T.
19
<PAGE> 22
In June 1996, the Company amended its 1987 Employee Stock Option Plan to
change the exercise price of future options to be granted thereunder from a
formula price based on book value to the fair market value of the underlying
Common Stock. As a result, the Company recorded a non-recurring, non-cash charge
to operations in the amount of $867,000, representing the aggregate difference
between the exercise price of outstanding vested options and the appraised
market value of the underlying Common Stock at June 30, 1996. Additional
compensation charges of up to $522,000 will be recorded through December 31,
1998, as outstanding options continue to vest under this plan.
In September 1996, the Company acquired substantially all of the assets of
The Allegro Group, Inc. in exchange for 102,000 shares of the Company's Common
Stock. A portion of the acquired assets represented research and development
that was in process at the time of the acquisition. The Company is performing
additional development work to integrate the Allegro product with the Costpoint
product line. The Company allocated $394,000 to this in-process research and
development, resulting in a non-recurring, non-cash charge to operations in the
third quarter of 1996. See Note 2 of Notes to Financial Statements.
Since 1987, the Company has elected to be treated for federal and certain
state income tax purposes as an S Corporation under Subchapter S of the Code. As
a result, the Company's earnings for prior tax years have been taxed, with
certain exceptions, for federal and certain state income tax purposes directly
to the Company's shareholders rather than to the Company. The Company will
terminate its S Corporation status on the Termination Date, prior to the date of
the closing of this offering. The Company and the current shareholders have
entered into an agreement which provides for income taxes attributable to
periods prior to the Termination Date to be borne by the current shareholders
and for income taxes attributable to periods beginning on and after the
Termination Date to be borne by the Company. See "Certain Transactions." In
connection with the termination of its S Corporation status, the Company will
make the S Corporation Distribution in an aggregate amount of approximately
$12.0 million. Prior to the consummation of this offering, the Company expects
to pay approximately $8.0 million of the S Corporation Distribution out of cash
flow from operations and to issue the S Corporation Notes for the balance of
approximately $4.0 million. The S Corporation Notes will be payable only out of
cash flow from operations after the Termination Date. None of the proceeds of
this offering will be used to pay the S Corporation Distribution. The
termination of the Company's S Corporation status on the Termination Date will
result in a deferred tax liability which will be recorded as a non-recurring
charge. Had the Company terminated its S Corporation status as of September 30,
1996, the deferred tax liability and related charge would not have been
material. The amount of the actual deferred tax liability and related charge
will depend upon a number of factors, including factors affecting revenues and
related accounts receivable and the amounts and timing of payments of various
operating expenses. There can be no assurance that such charge will not be
material or that the related charge will not have a material adverse affect on
the Company's net income for the first quarter of 1997 or for the full year. See
"Prior S Corporation Status."
20
<PAGE> 23
RESULTS OF OPERATIONS
The following table sets forth certain historical and pro forma statements
of operations data as a percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ---------------
1993 1994 1995 1995 1996(1)
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
License fees................................... 38.9% 34.5% 36.2% 32.7% 34.6%
Services....................................... 52.0 58.7 56.4 58.7 59.7
Third-party equipment and software............. 9.1 6.8 7.4 8.6 5.7
----- ----- ----- ----- -----
Total revenues......................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Operating Expenses:
Cost of software............................... 3.4 3.6 3.3 3.2 4.3
Cost of services............................... 18.6 19.5 19.2 18.7 24.6
Cost of third-party equipment and software..... 6.7 4.9 5.9 6.7 4.7
Software development........................... 20.2 18.2 18.4 18.6 19.1
Sales and marketing............................ 7.9 8.7 10.2 10.8 10.1
General and administrative..................... 6.7 7.4 7.0 7.2 7.1
Stock option compensation...................... -- -- -- -- 3.6
Purchased in-process research and
development................................. -- -- -- -- 1.6
----- ----- ----- ----- -----
Total operating expenses............... 63.5 62.3 64.0 65.2 75.1
----- ----- ----- ----- -----
Income from operations........................... 36.5 37.7 36.0 34.8 24.9
Interest income.................................. 1.2 1.2 1.5 1.6 1.2
----- ----- ----- ----- -----
Income before state income taxes................. 37.7 38.9 37.5 36.4 26.1
Provision for state income taxes................. 0.3 0.3 0.2 0.2 0.3
----- ----- ----- ----- -----
Net income....................................... 37.4% 38.6% 37.3% 36.2% 25.8%
===== ===== ===== ===== =====
PRO FORMA STATEMENT OF OPERATIONS DATA:
Income tax provision............................. 14.3% 14.8% 14.3% 13.8% 10.2%
Net income....................................... 23.4 24.1 23.2 22.6 15.9
</TABLE>
- ---------------
(1) Exclusive of the non-recurring charges for stock option compensation and
purchased in-process research and development, income from operations, net
income and pro forma net income would have been 30.1%, 30.0% and 19.1%,
respectively, of total revenues.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
License Fees. License fees for the nine months ended September 30, 1996
increased by 38.9% to $8.4 million from $6.1 million for the comparable period
in 1995. For the nine months ended September 30, 1996, license fees comprised
34.6% of the Company's total revenues, compared to 32.7% for the same period in
1995. The increase in license fees was principally attributable to Costpoint
which was commercially released in June 1995. Costpoint license fees increased
by 133.8% to $4.8 million for the nine months ended September 30, 1996 from $2.0
million for the comparable period in 1995. The increase in Costpoint license
fees was partially offset by a 19.5% decrease in license fees for System 1
products to $2.9 million from $3.5 million. License fees for Electronic
Timesheet increased by 16.7% to $700,000 from $500,000 for the comparable period
in 1995.
Services. Service revenues for the nine months ended September 30, 1996
increased by 33.9% to $14.5 million from $10.9 million for the comparable period
in 1995. For the nine months ended September 30, 1996, service revenues
comprised 59.7% of the Company's total revenues, compared to 58.7% for the same
period in
21
<PAGE> 24
1995. The increase in service revenues was principally attributable to increased
consulting services related to new implementations of Costpoint systems.
Consulting service revenues increased by 65.5% to $3.5 million for the nine
months ended September 30, 1996 from $2.1 million for the comparable period in
1995. Maintenance, support and other service revenues increased by 26.4% to
$11.1 million from $8.8 million principally as a result of the addition of new
customers and the sale of additional software products to existing customers
and, to a lesser extent, increases in service rates.
Third-Party Equipment and Software. Revenue from third-party equipment and
software for the nine months ended September 30, 1996 decreased by 11.9% to $1.4
million from $1.6 million for the comparable period in 1995. For the nine months
ended September 30, 1995, revenue from third-party equipment and software
comprised 5.7% of the Company's total revenues, compared to 8.6% for the same
period in 1995.
Cost of Software. Cost of software is comprised primarily of royalties and
maintenance payments to third parties, amortization of software development
costs, and the cost of production and distribution of software and user manuals.
Cost of software for the nine months ended September 30, 1996 increased by 79.3%
to $1.0 million from $584,000 for the same period in 1995. This increase was
attributable to increased amortization and to increased sales of Costpoint
resulting in higher royalty and maintenance payments to third parties.
Amortization of software development for the nine months ended September 30,
1996, increased to $434,000 from $158,000 for the comparable period in 1995.
This increase reflects nine full months of amortization of Costpoint software
development costs during the 1996 period, compared to four months in the 1995
period.
Cost of Services. Cost of services is comprised primarily of personnel
costs for implementation and consulting services, user training and ongoing
maintenance and support. Cost of services for the nine months ended September
30, 1996 increased by 72.8% to $6.0 million from $3.5 million for the comparable
period in 1995. The increase in cost of services was primarily due to increases
in personnel costs to support the Costpoint product line. In addition,
reimbursed travel expenses increased by $490,000 from the prior period due
primarily to consulting activity related to Costpoint implementations. Costs for
the 1996 period also included $283,000 related to the Company's national user
conference in April 1996. Cost of services represented 41.2% and 31.9% of
service revenues for the nine-month periods ended September 30, 1996 and 1995,
respectively. The increase in cost of services as a percentage of service
revenues reflected the Company's investment in the initial implementations of
Costpoint systems by providing consulting services to a number of customers at
reduced fees or no charge and also reflected the increased reimbursed travel
expenses which were billed with no mark-up and the national user conference for
which customer billings approximated cost.
Cost of Third-Party Equipment and Software. Cost of third-party equipment
and software consists of the purchased costs of computer and peripheral
equipment and license fees and royalties for third-party software. Costs of
third-party equipment and software for the nine months ended September 30, 1996
decreased by 8.0% to $1.1 million from $1.2 million for the comparable period in
1995. Cost of third-party equipment and software products represented 81.8% and
78.4% of revenue from third-party equipment and software for the nine month
periods ended September 30, 1996 and 1995, respectively. The increase in these
costs as a percentage of related revenue was the result of several large sales
of third-party equipment at volume discounts in connection with complex
Costpoint implementations performed in early 1996.
Software Development. Software development costs consist primarily of the
personnel costs of analysts and programmers to research, develop, support and
maintain the Company's existing software product lines, enhance existing
products and develop new products. Software development costs for the nine
months ended September 30, 1996 increased by 35.6% to $4.7 million from $3.4
million for the same period in 1995. This increase was due primarily to
increased personnel costs and related benefits and facilities costs, and a
decline in capitalized software production costs, which occurred after the
commercial release of Costpoint in June 1995. Software development costs
represented 18.6% and 19.1% of total revenues for the nine month periods ended
September 30, 1995 and 1996, respectively.
Sales and Marketing. Sales and marketing expenses consist primarily of the
personnel costs of the Company's sales and marketing organizations as well as
the costs of advertising, direct mail and other sales and marketing activities.
Sales and marketing expenses for the nine months ended September 30, 1996
22
<PAGE> 25
increased by 23.7% to $2.5 million from $2.0 million for the comparable period
in 1995. This increase was due primarily to increased personnel, advertising and
trade show expenses. Sales and marketing expenses represented 10.1% of the
Company's total revenues for the nine month period ended September 30, 1996,
compared to 10.8% for the same period in 1995.
General and Administrative. General and administrative expenses consist
primarily of the personnel costs of the Company's management, administrative and
finance staffs as well as the costs of insurance programs, bad debt expenses,
professional fees and other infrastructure costs. General and administrative
expenses for the nine months ended September 30, 1996 increased by 28.7% to $1.7
million from $1.3 million for the comparable period in 1995. This increase was
due primarily to a $245,000 increase in bad debt expense as a result of the
insolvency of a new customer. General and administrative expenses represented
7.1% of the Company's total revenues for the nine months ended September 30,
1996, compared to 7.2% for the same period in 1995.
Stock Option Compensation. In June 1996, the Company recorded a
non-recurring charge to operations in the amount of $867,000 relating to stock
option compensation. See "-- Overview."
Purchased In-Process Research and Development. In September 1996, the
Company recorded a non-recurring charge of $394,000 representing the value of
in-process research and development acquired in connection with its acquisition
of The Allegro Group, Inc. See "-- Overview."
Interest Income. Interest income results from investments and, to a lesser
extent, from installment financing. Interest income for the nine months ended
September 30, 1996 decreased by 2.7% to $287,000 from $295,000 for the
comparable period in 1995. The reduction was due to lower average cash balances
related to the timing and amount of S Corporation dividend distributions.
Pro Forma Income Tax Provision. The Company's pro forma effective tax rate
for the nine months ended September 30, 1996 was 39.0%, compared to 38.0% for
the same period in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
License Fees. License fees for 1995 increased by 32.1% to $9.7 million from
$7.4 million for 1994. License fees comprised 36.2% of the Company's total
revenues for 1995, compared to 34.5% for 1994. The increase in license fees was
principally attributable to Costpoint, which was commercially released in June
1995 and accounted for license fees of $4.1 million in 1995. The increase
attributable to Costpoint license fees was partially offset by a 30.2% decrease
in license fees for System 1 products to $4.8 million from $6.9 million.
Services. Service revenues for 1995 increased by 20.8% to $15.2 million
from $12.5 million for 1994. Service revenues comprised 56.4% of the Company's
total revenues in 1995, compared to 58.7% for 1994. The increase in service
revenues was principally attributable to increased consulting services related
to new implementations of Costpoint systems. Consulting service revenues
increased by 89.9% to $3.1 million for 1995 from $1.6 million for 1994.
Maintenance, support and other service revenues increased by 10.1% to $12.1
million from $10.9 million principally as a result of the addition of new
customers and the sale of additional software products to existing customers
and, to a lesser extent, increases in service rates.
Third-Party Equipment and Software. Revenue from third-party equipment and
software for 1995 increased by 36.1% to $2.0 million from $1.5 million for 1994.
Revenue from third-party equipment and software comprised 7.4% of the Company's
total revenues in 1995, compared to 6.8% in 1994.
Cost of Software. Cost of software for 1995 increased by 16.6% to $893,000
from $766,000 for 1994. This increase was attributable to sales of Costpoint,
which was commercially released in June 1995 and resulted in higher royalty and
maintenance payments to third parties, and was partially offset by a decrease in
amortization of software development to $276,000 from $406,000 in 1994. Due to
the decline in sales of the System 1 product line, the Company accelerated the
amortization of all remaining System 1 software development costs in 1994.
Amortization of Costpoint software development costs did not begin until after
the commercial release of Costpoint in June 1995.
23
<PAGE> 26
Cost of Services. Cost of services for 1995 increased by 23.5% to $5.2
million from $4.2 million in 1994. The increase in cost of services was
primarily due to increases in personnel costs to support the Costpoint product
line. In addition, reimbursed travel expenses increased by $242,000 from 1994
due primarily to consulting activity related to Costpoint implementations. These
increases were offset in part by $236,000 in costs related to the Company's
national user conference in September 1994. Cost of services represented 34.0%
and 33.2% of service revenues for 1995 and 1994, respectively.
Cost of Third-Party Equipment and Software. Cost of third-party equipment
and software for 1995 increased by 49.9% to $1.6 million from $1.1 million for
1994. Cost of third-party equipment and software products represented 80.0% and
72.6% of revenue from third-party equipment and software for 1995 and 1994,
respectively. The increase in these costs as a percentage of related revenue was
the result of several large sales of third-party equipment at volume discounts
in connection with complex Costpoint installations.
Software Development. Software development costs for 1995 increased by
27.3% to $4.9 million from $3.9 million for 1994. This increase was due
primarily to increased personnel costs and related benefits and facilities
costs, and a decline in capitalized software production costs, which occurred
after the commercial release of Costpoint in June 1995. Software development
costs represented 18.4% and 18.2% of the Company's total revenues in 1995 and
1994, respectively.
Sales and Marketing. Sales and marketing expenses for 1995 increased by
48.1% to $2.7 million from $1.9 million in 1994. This increase was due primarily
to increased personnel, advertising and marketing expenses related to the
introduction of Costpoint. Sales and marketing expenses represented 10.2% of the
Company's total revenues for 1995, compared to 8.7% for 1994.
General and Administrative. General and administrative expenses for 1995
increased by 17.7% to $1.9 million from $1.6 million for 1994. General and
administrative expenses represented 7.0% of the Company's total revenues for
1995, compared to 7.4% for 1994, as the Company was able to leverage its fixed
expenses over increased revenues.
Interest Income. Interest income for 1995 increased by 52.9% to $393,000
from $257,000 for 1994. The increase was due primarily to larger average cash
balances attributable to increased profits and the timing and amount of S
Corporation dividend distributions.
Pro Forma Income Tax Provision. The Company's pro forma effective tax rate
was 38.0% for both 1995 and 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
License Fees. License fees for 1994 decreased by 2.5% to $7.4 million from
$7.6 million for 1993. License fees comprised 34.5% of the Company's total
revenues for 1994, compared to 38.9% for 1993. The decrease in license fees was
attributable to the maturation of the Company's System 1 product line. The
decrease in System 1 license fees was partially offset by fees of $400,000 from
initial licenses of Electronic Timesheet in late 1994.
Services. Service revenues for 1994 increased by 24.3% to $12.5 million
from $10.1 million for 1993. Service revenues comprised 58.7% of the Company's
total revenues for 1994, compared to 52.0% for 1993. Maintenance, support and
other service revenues increased by 23.9% to $10.9 million from $8.8 million
principally as a result of the addition of new customers and the sale of
additional software products to existing customers and, to a lesser extent,
increases in service rates. Consulting service revenues increased by 26.7% to
$1.6 million for 1994 from $1.3 million for 1993.
Third-Party Equipment and Software. Revenue from third-party equipment and
software for 1994 decreased by 18.2% to $1.5 million from $1.8 million for 1993.
Revenue from third-party equipment and software comprised 6.8% of the Company's
total revenues in 1994, compared to 9.1% in 1993.
Cost of Software. Cost of software for 1994 increased by 15.2% to $766,000
from $665,0000 in 1993, due to an increase in amortization of software
development to $406,000 from $208,000 in 1993. The increase in amortization was
caused by the Company's acceleration of the amortization of all remaining System
1
24
<PAGE> 27
software development costs in 1994 due to the decline in sales of the System 1
product line. The increase in cost of software due to higher amortization was
partially offset by lower cost of software resulting from reduced System 1
license fees.
Cost of Services. Cost of services for 1994 increased by 15.5% to $4.2
million from $3.6 million in 1993. Cost of services represented 33.2% and 35.8%
of service revenues for 1994 and 1993, respectively.
Cost of Third-Party Equipment and Software. Cost of third-party equipment
and software for 1994 decreased by 18.8% to $1.1 million from $1.3 million for
1993. Cost of third-party equipment and software products represented 72.6% and
73.2% of revenue from third-party equipment and software for 1994 and 1993,
respectively. The decrease in these costs as a percentage of related revenue was
attributable to the change in the product mix of products sold and licensed.
Software Development. Software development costs were $3.9 million for both
1994 and 1993. Software development costs represented 18.2% of the Company's
total revenues in 1994, compared to 20.2% in 1993.
Sales and Marketing. Sales and marketing expenses for 1994 increased by
20.4% to $1.9 million from $1.5 million in 1993. This increase was due primarily
to increased personnel expenses. Sales and marketing expenses represented 8.7%
of the Company's total revenues for 1994, compared to 7.9% for 1993.
General and Administrative. General and administrative expenses for 1994
increased by 24.0% to $1.6 million from $1.3 million for 1993. General and
administrative expenses represented 7.4% of the Company's total revenues for
1994, compared to 6.7% for 1993.
Interest Income. Interest income for 1994 increased by 6.2% to $257,000
from $242,000 for 1993. The increase was due primarily to larger average cash
balances attributable to increased profits, partially offset by a decline in
interest rates.
Pro Forma Income Tax Provision. The Company's pro forma effective tax rate
was 38.0% for both 1994 and 1993.
25
<PAGE> 28
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited historical and pro forma
statement of operations data for the seven quarters ended September 30, 1996,
and such data expressed as a percentage of total revenues for such quarters.
This data has been derived from the Company's unaudited quarterly financial
statements. In management's opinion these quarterly financial statements have
been prepared on a basis consistent with the audited financial statement
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 presented, when read in conjunction with the
Company's audited financial statements and notes thereto appearing elsewhere in
the Prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1995 1995 1995 1995 1996 1996 1996
-------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
License fees..................................... $1,582 $1,749 $ 2,733 $3,656 $2,880 $2,325 $ 3,217
Services......................................... 3,531 3,648 3,684 4,291 4,363 4,951 5,234
Third-party equipment and software............... 695 344 552 384 358 291 752
------ ------ ------ ------ ------ ------ ------
Total revenues............................. 5,808 5,741 6,969 8,331 7,601 7,567 9,203
------ ------ ------ ------ ------ ------ ------
Operating Expenses:
Cost of software................................. 112 180 292 309 364 347 336
Cost of services................................. 1,170 1,144 1,156 1,681 1,885 2,216 1,894
Cost of third-party equipment and software....... 539 278 430 333 271 238 638
Software development............................. 933 1,045 1,458 1,498 1,440 1,486 1,732
Sales and marketing.............................. 603 671 721 748 783 806 878
General and administrative....................... 413 386 538 538 516 626 579
Stock option compensation........................ -- -- -- -- -- 867 --
Purchased in-process research and development.... -- -- -- -- -- -- 394
------ ------ ------ ------ ------ ------ ------
Total operating expenses................... 3,770 3,704 4,595 5,107 5,259 6,586 6,451
------ ------ ------ ------ ------ ------ ------
Income from operations............................. 2,038 2,037 2,374 3,224 2,342 981 2,752
Interest income.................................... 100 96 99 98 104 102 81
------ ------ ------ ------ ------ ------ ------
Income before state income taxes................... 2,138 2,133 2,473 3,322 2,446 1,083 2,833
Provision for state income taxes .................. 9 13 12 11 45 12 18
------ ------ ------ ------ ------ ------ ------
Net income......................................... $2,129 $2,120 $ 2,461 $3,311 $2,401 $1,071 $ 2,815
====== ====== ====== ====== ====== ====== ======
PRO FORMA STATEMENT OF OPERATIONS DATA:
Income tax provision............................... $ 813 $ 811 $ 940 $1,262 $ 954 $ 422 $ 1,105
Net income......................................... 1,325 1,322 1,533 2,060 1,492 661 1,728
STATEMENT OF OPERATIONS DATA:
Revenues:
License fees..................................... 27.2% 30.5% 39.2% 43.9% 37.9% 30.7% 35.0%
Services......................................... 60.8 63.5 52.9 51.5 57.4 65.4 56.9
Third-party equipment and software............... 12.0 6.0 7.9 4.6 4.7 3.9 8.1
------ ------ ------ ------ ------ ------ ------
Total revenues............................. 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ ------ ------
Operating Expenses:
Cost of software................................. 1.9 3.1 4.2 3.7 4.8 4.6 3.7
Cost of services................................. 20.1 19.9 16.6 20.2 24.8 29.3 20.6
Cost of third-party equipment and software....... 9.3 4.8 6.2 4.0 3.6 3.1 6.9
Software development............................. 16.1 18.2 20.9 18.0 18.9 19.6 18.8
Sales and marketing.............................. 10.4 11.7 10.3 9.0 10.3 10.7 9.5
General and administrative ...................... 7.1 6.8 7.7 6.4 6.8 8.2 6.3
Stock option compensation........................ -- -- -- -- -- 11.5 --
Purchased in-process research and development.... -- -- -- -- -- -- 4.3
------ ------ ------ ------ ------ ------ ------
Total costs and expenses................... 64.9 64.5 65.9 61.3 69.2 87.0 70.1
------ ------ ------ ------ ------ ------ ------
Income from operations............................. 35.1 35.5 34.1 38.7 30.8 13.0 29.9
Interest income.................................... 1.7 1.7 1.4 1.2 1.4 1.3 0.9
------ ------ ------ ------ ------ ------ ------
Income before state income taxes .................. 36.8 37.2 35.5 39.9 32.2 14.3 30.8
Provision for state income taxes .................. 0.2 0.2 0.2 0.1 0.6 0.2 0.2
------ ------ ------ ------ ------ ------ ------
Net income......................................... 36.6% 37.0% 35.3% 39.8% 31.6% 14.1% 30.6%
====== ====== ====== ====== ====== ====== ======
PRO FORMA STATEMENT OF OPERATIONS DATA:
Income tax provision............................... 14.0% 14.2% 13.5% 15.2% 12.6% 5.6% 12.0%
Net income......................................... 22.8 23.0 22.0 24.7 19.6 8.7 18.8
</TABLE>
26
<PAGE> 29
The Company experienced significant fluctuations in quarterly operating
results in 1995 and 1996 as a result of a number of factors. Increased revenues
in the last six months of 1995 were primarily attributable to increased
Costpoint license fees and related consulting services associated with initial
Costpoint implementations. Over the last several years, the Company has
experienced seasonal variations in operating results, partly due to customers'
desire to have their systems operational at the beginning of a calendar year.
Accordingly, these customers typically order their systems in the middle of the
preceding year in order to allow adequate time for implementation, resulting in
a seasonably high level of revenue being recognized in the fourth quarter upon
the expiration of refund periods.
Increases in cost of services in the fourth quarter of 1995 and the first
two quarters of 1996 were primarily due to increases in personnel costs to
support the Costpoint product line. In addition, reimbursed travel expenses
increased during this period due primarily to consulting activity related to
Costpoint implementations. Costs of services for the second quarter of 1996 also
included $283,000 related to the Company's national user conference in April
1996. The increase in cost of services as a percentage of service revenues
during this period reflected the Company's investment in the initial
implementations of Costpoint systems by providing consulting services to a
number of customers at reduced fees or no charge and also reflected the
increased reimbursed travel expenses which were billed with no mark-up and the
national user conference for which customer billings approximated cost.
In June 1996, the Company recorded a non-recurring charge to operations in
the amount of $867,000 related to stock option compensation. In September 1996,
the Company recorded a non-recurring charge of $394,000 representing the value
of in-process research and development acquired in connection with its
acquisition of The Allegro Group, Inc. See "-- Overview". Exclusive of these
non-recurring charges, income from operations, net income and pro forma net
income would have been $1.8 million, $1.9 million and $1.1 million,
respectively, for the quarter ended June 30, 1996 and $3.1 million, $3.2 million
and $1.9 million, in the quarter ended September 30, 1996.
The Company expects that it will continue to experience significant
fluctuations in quarterly operating results. The Company's future operating
results will depend upon a number of factors, including the demand for its
products, the size and timing of specific sales, the delay or deferral of
customer implementations, the level of product and price competition that it
encounters, the length of its sales cycles, the successful expansion of its
direct sales force and customer support organization, the timing of new product
introductions and product enhancements by the Company and its competitors, the
mix of products and services sold, the activities of and acquisitions by its
competitors, the timing of new hires and its ability to develop and market new
products and control costs. The Company's operating results could also be
affected by general economic conditions or those within specific geographic
areas where its customers do business. In addition, the decision to license and
implement an enterprise-level business software system is usually discretionary,
involves a significant commitment of customer resources and is subject to
delays, and to budget cycles and internal authorization procedures of the
Company's customers. The loss or delay of individual orders could have a
significant impact on the Company's operating results, particularly on a
quarterly basis. Furthermore, while the Company's revenue from license fees is
difficult to predict because of the length and variability of the Company's
sales cycles, the Company's operating expenses are based on anticipated revenue
trends. Because a high percentage of these expenses are relatively fixed, a
delay in the recognition of revenue from a limited number of license
transactions could cause significant variations in operating results from
quarter to quarter. To the extent such expenses precede, or are not subsequently
followed by, anticipated revenue, the Company's operating results could be
materially and adversely affected.
As a result of these and other factors, the Company's operating results for
any quarter are subject to significant variation, and the Company believes that
period-to-period comparisons of its operating results are not necessarily
meaningful and should not be relied upon as indications of future performance.
It is likely that the Company's future quarterly operating results from time to
time will not meet the expectations of market analysts or investors. In such
event, the price of the Company's Common Stock would likely be materially and
adversely affected.
27
<PAGE> 30
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations almost exclusively from cash flow
from its operations. As of September 30, 1996, the Company had cash and cash
equivalents of $4.7 million and working capital of $2.8 million.
For the nine months ended September 30, 1996, the Company's operating
activities provided net cash of $10.4 million, primarily as a result of income
before depreciation and amortization, after including the non-cash charges for
stock option compensation and the purchase of in-process research and
development. In addition, the increase in accounts receivable was offset by a
greater increase in deferred revenue and accounts payable and other accrued
expenses. Accounts receivable, net of the allowance for doubtful accounts, was
$8.4 million as of September 30, 1996, compared to $6.0 million as of December
31, 1995. Accounts receivable days sales outstanding was 83 days as of September
30, 1996, compared with to 65 days as of December 31, 1995. Days sales
outstanding increased during 1996 primarily due to increased software license
fees and a greater percentage of receivables recorded as deferred revenue. The
increase in deferred revenue reflects increased Costpoint license fees, for
which revenue is recognized upon the expiration of the refund period. Exclusive
of receivables which were recorded as deferred revenue, days sales outstanding
was 51 days as of September 30, 1996, compared to 49 days as of December 31,
1995. The Company's allowance for doubtful accounts decreased during 1996 due to
a write-off of $245,000 as a result of the insolvency of a significant customer.
While the Company believes that its allowance for doubtful accounts as of
September 30, 1996 remains adequate, there can be no assurance that such
allowance will be sufficient to cover receivables which are later determined to
be uncollectible.
Investing activities provided $1.8 million for the nine months ended
September 30, 1996. This amount included $3.1 million from the maturity of
treasury and other investments, offset by $800,000 in purchased property and
equipment and $500,000 of capitalized software production costs for new
Costpoint product modules.
Financing activities for the nine months ended September 30, 1996 consisted
primarily of $11.9 million in dividend and tax distributions to the Company's
shareholders. The Company historically has distributed most of its profits as S
Corporation dividends. See "Prior S Corporation Status."
The Company has a credit facility with a bank providing for a $1.0 million
operating capital line of credit and a $100,000 equipment loan facility to fund
fixed-asset acquisitions. Loans under both facilities are secured by
substantially all of the Company's assets. Borrowings under the operating
capital line of credit bear interest at the lender's prime rate. Borrowings
under the equipment loan facility bear interest at the prime rate plus 1/2%, or
the lenders cost of funds plus 2%. As of September 30, 1996, no amounts were
outstanding under either the operating capital line of credit or the equipment
loan facility.
The Company believes that the net proceeds from this offering, together
with existing sources of liquidity and anticipated cash flow from operations,
will satisfy the Company's anticipated working capital and capital expenditure
requirements through at least 1997. However, depending on its rate of growth and
profitability, the Company may require additional equity or debt financing to
meet its working capital requirements or capital expenditure needs in the
future. There can be no assurance that additional financing will be available
when required or, if available, will be on the terms satisfactory to the
Company.
28
<PAGE> 31
BUSINESS
Deltek designs, develops, sells and supports a family of integrated
software products that provide project-oriented businesses with tools to more
effectively manage, operate and grow their operations. Deltek's products address
the enterprise-level needs of project-oriented businesses and allow these
organizations to manage financial and project accounting, compute costs and
revenues on a project-by-project basis, submit accurate and detailed bills,
comply with complex industry-specific and regulatory requirements, administer
employee time collection, labor costing and payroll, automate materials
management functions, and empower their managers with timely and pertinent
information. Deltek also provides a full range of consulting and maintenance
services to assist its customers with system implementation and integration and
to provide training and ongoing support for the Company's software products.
Deltek sells its products and services, through its direct sales force, to
project-oriented businesses, such as professional and technical service
providers, including engineering and environmental firms, research and
development firms and contract service organizations, as well as not-for profit
organizations and make-to-order manufacturers. Since its inception, the Company
has installed more than 1,900 systems for a wide range of project-oriented
organizations of all sizes, predominantly in the United States. Deltek's
customers include Bell Atlantic, Coopers & Lybrand, LLP, Federal Integrated
Systems, Inc., Lockheed Martin Corp., Northrup Grumman Corp., Raytheon Service
Co., Inc. and Research Triangle Institute, Inc.
INDUSTRY BACKGROUND
The increasingly competitive business environment has created pressure for
business organizations to better utilize information technologies to improve
their efficiency, reduce their costs and provide their employees and management
with more timely and pertinent information. As a result, many organizations are
implementing a new generation of enterprise-level business systems, based on
open, client/server architectures, to automate their operations, including
finance, accounting, manufacturing and human resource management functions.
According to International Data Corporation, the market for client/server
enterprise-level applications exceeded $3.8 billion in 1995, and is projected to
grow at a compound annual growth rate of 37% through 2000.
While organizations are increasing their use of client/server
enterprise-level business systems, most of these systems are general purpose and
fail to address many of the specific requirements of businesses engaged
primarily in providing goods and services to customers under project-specific
contracts and engagements. These project-oriented businesses include a wide
variety of professional and technical service providers, including engineering
and environmental firms, research and development firms and contract service
organizations, as well as not-for-profit organizations, make-to-order
manufacturers and construction companies. Many of these project-oriented
businesses provide goods and services under government contracts.
Project-oriented businesses have many project-specific requirements, including
the need to track costs and profitability on a project-by-project basis, provide
timely project information to managers and customers and submit accurate and
detailed bills, often in compliance with complex industry-specific and
regulatory requirements. Project accounting for these organizations often
requires the use of sophisticated methodologies for allocating and computing
project costs and revenues.
The use of project-oriented business systems is expanding as a result of a
number of trends prevalent throughout the economy. Traditionally, service
organizations have been more prone to utilize project accounting due to their
need to customize their services for each client and properly allocate the
associated costs. Therefore, as the shift from a manufacturing-based economy to
a service-based economy continues, the market for project-oriented businesses is
expanding. Furthermore, the trend toward outsourcing an increasing range of
activities broadens the market for project-oriented businesses as both customers
and vendors need to track the costs associated with their projects. Finally,
many organizations with significant internal development activities can benefit
from the use of project accounting systems to closely monitor their progress and
cost.
As the number and type of project-oriented businesses increase, they also
are demanding increasingly sophisticated tools to address their core information
and accounting needs, including project accounting,
29
<PAGE> 32
employee time collection, project budgeting and project reporting. At the same
time, these organizations are recognizing that, because most aspects of their
business revolve around their project orientation, they can achieve efficiencies
in a number of other accounting and business functions, such as general ledger,
accounts payable, accounts receivable, materials management and human resources,
through the use of software applications designed with the special needs of
project-oriented businesses in mind. Like other businesses, project-oriented
organizations are also demanding solutions that allow them to combine their
business software applications into a single integrated, enterprise-level
system.
The recent emergence of client/server software and computing environments
and other new information technologies offer organizations a powerful and open
data architecture through the use of relational databases that allow for
scalability and growth. Larger project-oriented businesses are reengineering
their legacy business information and management systems to meet the pressures
of increased competition, smaller project-oriented businesses are upgrading from
PC-based systems to client/server environments, and other enterprises are
adopting a more project-oriented approach to their businesses. As a result, such
organizations are seeking integrated, enterprise-level software solutions that
are specifically designed to address the core information and accounting needs
of project-oriented businesses and that will provide their managers with timely
and pertinent information. Project-oriented businesses are also demanding a full
range of implementation, training and support services provided by organizations
experienced in dealing with the needs of project-oriented businesses.
THE DELTEK SOLUTION
Deltek designs, develops, sells and supports a family of integrated
software products that provide project-oriented businesses with tools to more
effectively manage, operate and grow their operations. Deltek's products address
the enterprise-level needs of project-oriented businesses and allow these
organizations to manage financial and project accounting, compute costs and
revenues on a project-by project basis, maintain employee timekeeping systems,
submit accurate and detailed bills, comply with complex industry-specific and
regulatory requirements, administer employee time collection, labor costing and
payroll, automate materials management functions, and empower their managers
with timely and pertinent information. Deltek also provides a full range of
consulting and maintenance services to assist its customers with system
implementation and integration and to provide training and ongoing support for
the Company's software products.
Deltek's family of software products consists of Costpoint, the Company's
advanced client/server, enterprise-level business software system; System 1, a
DOS-based accounting and management system designed primarily for organizations
providing goods and services under contracts with the federal government;
Electronic Timesheet, an employee timekeeping system; and Allegro, a project and
resource management tool. These products include modules spanning financial
accounting, project accounting and management, human resources and payroll
administration, time and labor collection, materials management and reporting
tools. Application modules within each Deltek product are integrated and utilize
a common user interface and database structure, allowing project-oriented
organizations to configure and implement a fully-integrated system solution.
Costpoint, Deltek's current flagship product, is a client/server based business
software system incorporating an open, relational database architecture, an
object-oriented development approach, Microsoft Windows client operating
systems, on-line analytical processing ("OLAP") tools, drill down data
exploration, workflow management and popular network operating systems,
including Windows NT, UNIX and Netware.
An integral part of Deltek's solution is to provide superior services and
support directly to its customers. These services include comprehensive
implementation and consulting services, user training and ongoing product
maintenance and support. The Company believes that its implementation expertise,
together with its focus on the unique requirements of project-oriented
organizations, result in a faster and more cost-effective system implementation
than is typically achieved by companies which choose to adapt general-purpose
business systems to the needs of their project-oriented organizations. After a
customer's implementation is completed, Deltek provides ongoing support services
to assist the customer in maintaining and updating its system, training its
employees and adding functionality as the customer's business grows and its
requirements change.
30
<PAGE> 33
STRATEGY
Deltek's objective is to strengthen its position as a leading supplier of
enterprise-level software systems for project-oriented organizations. Deltek
intends to continue to differentiate itself from providers of general-purpose
business application software by focusing exclusively on providing
cost-effective solutions that meet the unique and changing demands of
project-oriented businesses. Deltek's strategy includes the following key
elements:
Target Additional Project-Oriented Markets. Deltek's expertise in
project accounting and information systems is the result of its years of
experience in addressing the complex requirements of project-oriented
businesses having government contracts. Over time, Deltek has broadened its
product and marketing focus to target a wide range of project-oriented
industries, such as professional and technical service providers, including
engineering and environmental firms, research and development firms and
contract service organizations, as well as not-for-profit organizations and
make-to-order manufacturers. Deltek intends to continue to target
additional project-oriented markets such as architectural and design firms,
construction companies, governmental agencies as well as organizations
managing large internal projects.
Leverage Large Installed Customer Base. Deltek's installed base of
approximately 1,700 active customers enables it to generate revenues from
support and maintenance services provided to these customers. Deltek's
strategy is to maintain and strengthen relationships with its existing
customers through the provision of these services and to derive additional
software licensing and consulting revenues as these companies grow and
their requirements change. An important element of the Company's strategy
is to license its Costpoint products to existing System 1 users as these
customers reengineer their information systems and migrate to new
client/server business software solutions.
Expand and Enhance Product Line. Deltek intends to continue to develop
or acquire additional products and modules in order to provide more
comprehensive enterprise solutions to address the changing requirements of
its existing and prospective customers. For example, Deltek has recently
expanded its product line by adding a comprehensive human resources module
and by acquiring the Allegro resource management product. Deltek also has
an ongoing commitment to enhance the existing capabilities of its
Costpoint, Electronic Timesheet and Allegro products. For example, the
Company is currently adding functionality that will enable its Costpoint
modules to perform additional materials management functions as well as to
handle foreign currencies and international transactions.
Maintain Technological Leadership. Deltek plans to continue to invest
in research and development and to incorporate into its products
advancements in information technologies as they become accepted. Deltek
maintains an in-house research and testing facility where new technologies,
operating systems, hardware platforms and Internet capabilities are
developed and tested. Deltek is currently modifying its products to support
the Microsoft SQLServer database and electronic data interchange ("EDI")
and developing enhanced user interfaces and Internet applications,
including a Web-enabled timesheet product.
Differentiate Through Superior Service. Deltek believes that its
reputation for providing high quality implementation and consulting
services, user training and ongoing support and maintenance and its ability
to work directly with its customers, rather than through third-party
resellers and system implementors, are significant competitive advantages.
Deltek intends to differentiate itself from its competitors by continuing
to build customer loyalty through the delivery of superior service.
31
<PAGE> 34
PRODUCTS
Deltek designs, develops, sells and supports a family of integrated
software products that provide project-oriented businesses with tools to more
effectively manage accounting, projects, people, materials and reporting
requirements in order to operate and grow their businesses. Deltek's family of
software products consists of Costpoint, System 1, Electronic Timesheet and
Allegro.
COSTPOINT
Costpoint, the Company's current flagship product, is a
client/server-based, enterprise-level business software system, consisting of
over 25 integrated module applications which span financial accounting, project
accounting, human resource and payroll administration, materials management and
reporting tools.
Costpoint utilizes an open, relational database architecture on the server
and Microsoft Windows operating systems on the desktop client PC. Costpoint can
be operated on a variety of network operating systems, including Windows NT,
UNIX and Novell Netware and currently supports Oracle, Sybase Inc. ("Sybase")
and Centura Corporation ("Centura") relational databases. Deltek also expects to
introduce support for the Microsoft SQLServer database in the first half of
1997. Costpoint was developed with extensive use of object-oriented programming
techniques utilizing a fourth generation language together with C++ and
database-specific stored procedures to maximize performance.
The Company began development of Costpoint in 1992 in response to the
maturation of Deltek's DOS-based business software system, System 1. Costpoint
differs from System 1 primarily in its inherent design that allows it to handle
a broader range of project-oriented businesses, its ability to utilize advanced
technologies and operating systems, its enhanced reporting capabilities, and its
ability to provide more complete and flexible functionality in project
accounting and other business system areas to allow for business change and
growth.
Costpoint is designed to meet the specialized needs of project-oriented
businesses, including project costing, indirect cost allocation, revenue
recognition, project budgeting and project reporting. Costpoint also meets the
regulatory and reporting requirements of businesses having contracts with the
United States government. Costpoint combines these capabilities with
applications in other business system areas that are designed for the special
needs of project-oriented businesses. Through its open data architecture and the
use of drill-down inquiries, OLAP tools and standard reports, Costpoint is also
designed to provide managers with timely, pertinent and empowering information.
Costpoint was commercially released in June 1995. Through September 30,
1996, the Company had licensed approximately 200 Costpoint systems that had been
implemented or were in the process of being implemented. License fees for
Costpoint systems vary depending on the number of users and sites and the number
and type of modules licensed. For new customers, license fees for an initial
Costpoint installation typically range from $20,000 to $500,000, exclusive of
consulting services. For the nine months ended September 30, 1996, the average
fee for an initial Costpoint license was approximately $100,000.
The following table describes the principal Costpoint application modules:
32
<PAGE> 35
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL ACCOUNTING
- ------------------------------------------------------------------------------------------------------------------
General Ledger............................ Provides flexible account and organization structures and extensive
audit trails; delivers numerous financial reports and responds to
user inquiries.
Accounts Payable.......................... Allows for flexible payment (checks, EFT) and vouchering of invoices
which can also be matched to purchase orders.
Accounts Receivable....................... Tracks customer receivables and cash receipts, provides reporting on
billed and unbilled receivables and simplifies collections.
Travel.................................... Automates all travel transactions from per diems to travel advances
and account reconciliations.
Fixed Assets.............................. Collects acquisition data for company-owned and government-furnished
property. Computes and tracks depreciation and disposal data and
posts to general ledger.
- ------------------------------------------------------------------------------------------------------------------
PROJECT ACCOUNTING
- ------------------------------------------------------------------------------------------------------------------
Project Setup............................. Sets up and tracks information on every project or activity,
including work breakdown structures, modifications, labor categories,
dollars, hours and unit usage.
Project Cost and Revenue Processing....... Allocates indirect costs to projects using various formulas, and
automatically calculates and posts project revenues based on many
different project types.
Project Budgeting and ETC................. Tracks budgets at virtually any level or aspect of the project;
calculates, revises and reports on estimates-to-complete.
Project Billing........................... Allows companies to produce numerous types of bills to satisfy the
requests of each customer. The posting of bills automatically updates
the general ledger and accounts receivables.
Project Reporting......................... Provides numerous standard reports and responds to user inquiries
with flexible formatting options.
- ------------------------------------------------------------------------------------------------------------------
PEOPLE MANAGEMENT AND ADMINISTRATION
- ------------------------------------------------------------------------------------------------------------------
Labor..................................... Manages the collection and proper account and cost distribution of
timesheet hours and dollars.
Payroll................................... Handles payroll processing by calculations from timesheets, updates
information affecting general ledger and earnings tables, tracks
employee labor data and computes and creates checks.
Human Resources*.......................... Includes compensation administration, personnel administration,
affirmative action, 401(k) reporting and forecasting, and COBRA.
Labor/Payroll Interfaces.................. Interfaces for uploading timesheet data as well as interfaces to ADP
and Ceridian payroll services.
- ------------------------------------------------------------------------------------------------------------------
MATERIALS MANAGEMENT
- ------------------------------------------------------------------------------------------------------------------
Product Definition........................ Defines and tracks the parts, goods and services companies will buy
or sell for project specific items; tracks billing and shipping data.
Purchasing................................ Allows businesses to administer the procurement of company-owned or
project-specific parts, goods or services through tracking of
purchase orders, buyer authorizations and commitments.
Procurement Planning...................... On-line entry of requisitions, approvals, requests for quotes and
actual vendor quotes with the automatic creation of purchase orders.
Inventory................................. On-line, real time inventory tracking and control for use by any
company which has project-specific, company-owned, and
government-furnished materials.
Bill of Materials*........................ Defines saleable products in terms of the raw materials, purchased
parts and assemblies which comprise them.
Sales Order Entry*........................ Supports and monitors the sales order process, including procurement,
issuing, shipping and invoicing.
- ------------------------------------------------------------------------------------------------------------------
REPORTING TOOLS
- ------------------------------------------------------------------------------------------------------------------
CP Reports**.............................. Ad-hoc report writing tool which provides for simple queries of data
as well as more advanced and complex formatted reports.
CP Scope**................................ Data analysis tool which provides the ability to view summarized data
from multiple perspectives and drill down to different levels of
detail in the data; provides extensive business graphics
capabilities.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
* Currently in Beta testing.
** Software licensed from third parties and sublicensed to Deltek customers.
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SYSTEM 1
System 1, formerly known as the Government Contractors Software Series, is
Deltek's original business software system. System 1 was designed specifically
for use by organizations having contracts with the federal government and helps
these organizations comply with stringent federal regulations applicable to such
contractors, including the requirements of the Defense Contract Audit Agency.
System 1 is DOS-based, operates on Novell Netware, UNIX and DEC VAX/VMS network
operating systems and utilizes a character-based user interface and a
proprietary COBOL data structure. System 1 consists of 23 application modules
spanning financial accounting, labor and payroll administration, materials
management and reporting tools.
System 1 was commercially released in 1985. As of September 30, 1996,
approximately 1,500 project-oriented organizations were using System 1 as their
primary accounting system. License fees for System 1 vary depending upon the
number of users or facilities and the number and type of modules licensed. Prior
to the introduction of Costpoint in June 1995, license fees for an initial
System 1 installation typically ranged from $10,000 to $200,000, exclusive of
consulting services. Since the introduction of Costpoint, the majority of new
customers have licensed Costpoint systems, and new System 1 sales have decreased
in number and system size. For the nine months ended September 30, 1996, typical
license fees for an initial System 1 installation ranged from $10,000 to
$50,000, and the average license fee was approximately $15,000.
An important element of the Company's strategy is to license Costpoint to
existing System 1 users as those customers reengineer their information systems
and migrate to new client/server business software solutions. In an effort to
influence the migration of its System 1 customers to Costpoint, the Company
offers substantial discounts to existing System 1 users and provides automated
data conversion programs which provide significant assistance in the Costpoint
upgrade/implementation process. As of September 30, 1996, approximately 40 of
the Company's System 1 customers, representing approximately 3% of the installed
base of System 1 users, had migrated to or were in the process of migrating to
Costpoint systems. There can be no assurance that a significant percentage of
current System 1 customers will migrate to Costpoint. In particular, smaller
System 1 customers are less likely to migrate to Costpoint because the cost of
migrating to a client/ server environment is high relative to their size and
because in many cases System 1 adequately meets their present needs. The Company
intends to provide support services and product maintenance for System 1 for the
foreseeable future although it does not currently intend to develop significant
new enhancements to the System 1 product line.
ELECTRONIC TIMESHEET
Electronic Timesheet is a comprehensive timesheet software application
which allows employees to enter their timesheets on a daily basis on their
desktop PC. Electronic Timesheet utilizes either Windows or DOS operating
systems on the desktop PC and provides a graphical, point and click interface.
Using this graphical interface, the employee may select from a list of
authorized charges rather than having to enter complicated account and project
numbers. This feature serves to greatly reduce costly and time-consuming errors.
After the employee electronically signs his or her timesheet, the timesheet then
is forwarded through the network for manager approval. Timesheets and the
appropriate labor charges can then be automatically accumulated and integrated
with the accounting system, completely eliminating the paper timesheet.
Electronic Timesheet also allows managers to view information about employees'
activities and helps them to better manage their employees.
Electronic Timesheet may be licensed together with Costpoint or System 1 or
as a stand-alone application that can be integrated with other accounting
systems. The Company is currently developing a Web-enabled timesheet product and
expects to begin beta testing in early 1997, although there can be no assurance
that development of this product will be successfully completed.
Electronic Timesheet was commercially released in January 1995. As of
September 30, 1996, Electronic Timesheet had been installed for over 150
customers. License fees for Electronic Timesheet typically range from $2,500 to
$100,000. For the nine months ended September 30, 1996, the average license fee
for Electronic Timesheet was approximately $12,000.
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<PAGE> 37
ALLEGRO
Allegro is a software application that enables project managers to plan and
monitor project resources. Using a user interface similar to a spreadsheet,
Allegro allows project managers to create budgets and estimates-to-complete,
plan and schedule employees and other resources, forecast revenue and profits,
and receive timely status on each project from the accounting system interface.
The Company believes that Allegro's principal advantage is its user-friendly,
spreadsheet-like interface and its ability to view and manage resources across
multiple projects in an organization. Allegro is a client/server based system
running on a variety of databases and utilizing Microsoft Windows operating
systems.
The Company acquired the Allegro product through the acquisition of The
Allegro Group, Inc., in September 1996. Prior to the acquisition, The Allegro
Group, Inc. had licensed a limited number of Allegro products, and since the
acquisition the Company has also licensed a limited number of these products on
a stand-alone basis. The Company is in the process of making further
improvements and refinements to Allegro and developing data interfaces that will
allow it to be fully-integrated with its Costpoint and System 1 products. The
Company believes that its ability to market Allegro, particularly to its
existing customer base, will be dependent upon the successful completion of
these improvements and interfaces, of which there can be no assurance. The
Company expects license fees for new Allegro customers to range from $10,000 to
$100,000.
THIRD-PARTY PRODUCTS
Deltek incorporates into its software products certain application software
licensed from third parties. The Costpoint reporting tools, CP Reports and CP
Scope, are both licensed from Cognos Corporation under an OEM agreement, and
System 1 utilizes a report-writer, Intelligent Query, licensed from a third
party. In order to support the Oracle, Sybase and Centura relational databases,
Costpoint contains certain native "router" software licensed from Centura. Also,
the Company's Costpoint and Allegro customers must license applicable database
software from Oracle, Sybase, Centura, or Microsoft, either directly or through
the Company. Because some customers desire a "turnkey" solution, the Company
will purchase servers, network software and other software and hardware
products, which the Company resells or sublicenses to its customers and installs
together with Deltek products to provide a fully operational system.
CUSTOMER SERVICE AND SUPPORT
An integral part of Deltek's solution is to provide superior services and
support directly to its customers. These services include comprehensive
implementation and consulting services, user training and ongoing maintenance
and support. The Company believes that its reputation for providing high quality
services and its ability to work directly with its customers, rather than
through third-party resellers and system implementors, are significant
competitive advantages. Deltek's implementation management and other consulting
services are generally charged on a time and materials basis. Classroom
education and training is charged on a per class basis. Telephone support and
periodic product enhancements and updates are provided for maintenance fees that
are payable quarterly and initially represent between 15% and 20% of the related
software license fee on an annual basis.
Implementation and Consulting Services. Deltek provides a full range of
consulting, training and technical services to customers both during and after
implementation of Deltek software. Since its inception, the Company's staff of
system consultants has been directly involved with over 1,900 installations.
Deltek's system consultants are involved in the important early planning and
design stages of each implementation, participate in user training, and work
closely with the customer during the two to six-month period just before and
after the "going live" date. After the implementation is completed, Deltek's
consultants typically maintain an ongoing relationship with the customer and
assist the customer in refining its systems and adding functionality as its
business grows and its requirements change.
Telephone Support. Deltek provides comprehensive telephone support during
business hours as well as supplemental emergency support after hours and on
weekends. Deltek maintains a "one-hour call-back policy" under which customers
leave a message with a description of their problem and a Deltek support
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<PAGE> 38
representative who is qualified to handle the specific problem returns the call
within one hour. Deltek utilizes a sophisticated in-house support tracking
system which enables call, problem and resolution tracking. Deltek also
maintains an "open phone" policy whereby customers are encouraged to contact any
supervisor or senior manager at Deltek for any reason. Deltek typically handles
between 250 and 450 support calls per day.
Training Classes. Deltek operates training facilities at its McLean,
Virginia headquarters and at its offices in San Jose, where it provides
regularly scheduled training classes on over 25 topics related to the Company's
products to supplement training that its customers receive in connection with
their initial system installation. Deltek maintains system laboratories at its
training facilities which are available for customer use for testing,
benchmarking and troubleshooting. Deltek also offers custom, on-site training
classes.
Product Updates and Enhancements. Since its inception, Deltek has provided
periodic updates and enhancements to each of its software products. Typically,
the Company provides several minor updates per year, which include system error
corrections, tax table updates and other minor enhancements, and new version
releases periodically, which include major enhancements and changes to the
database design. These product updates and enhancements are provided at no
additional charge for customers who purchase support and maintenance services.
Client/Server Technical Services. To address the challenges that many
companies face when implementing a client/server system, Deltek provides
client/server and database consulting services together with turnkey hardware
and third-party database and operating system software. Deltek believes these
services provide a significant benefit to its customers by streamlining their
system implementation and providing a complete, turnkey solution.
Custom Solutions. From time to time, customers require custom modifications
to the Company's software or a custom interface to an in-house application.
Deltek provides custom programming services through its Custom Solutions Group
to assist customers with these needs.
Web Site Services. Deltek has recently begun to provide several other
support services in conjunction with its Web site. Customers may utilize the Web
site to download revised software programs and documentation, to communicate
with other customers and Deltek's employees, and to join Deltek user groups.
These services are provided at no additional charge, as a part of the Company's
support and maintenance program.
CUSTOMERS
Since its inception, the Company has installed more than 1,900 systems for
a wide range of project-oriented organizations of all sizes, predominately in
the United States. Today, more than 1,700 of these customers, or approximately
90%, remain active users of the Company's products. No customer accounted for
more than 10% of the Company's total revenues in 1993, 1994, 1995 or the first
nine months of 1996. The following is a representative list of the Company's
customers who purchased at least $100,000 of the Company's products and services
from January 1, 1992 through September 30, 1996, in some cases for use by a
division of the customer, and who are currently receiving support and
maintenance services:
Alliedsignal Technical Services Corp.
AEL Industries, Inc.
Alcone Marketing Group
American Institute for Research in the Behavioral
Sciences
Anteon Corporation
ARINC, Inc.
Atlanta Regional Commission
Ball Aerospace & Technologies Corp.
Bell & Howell Documail Systems, Inc.
Bell Atlantic Federal Integrated Systems, Inc.
Boeing Information Services, Inc.
BTG, Inc.
Capitol Multimedia, Inc.
Chem-Nuclear Systems, Inc.
Coleman Research Corp.
Comsat RSI Inc.
Computer Sciences Corporation
Concurrent Technologies, Corp.
Continuous Electron Beam Research Accelerator
Facility
Coopers & Lybrand, LLP
Cortez III Service Corp.
Dyncorp
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<PAGE> 39
E-Systems Inc.
EA Engineering Science & Technology, Inc.
EDO Corporation
EG&G Defense Materials
Exide Electronics, Inc.
Frontier Engineering, Inc.
GEC Marconi Avionics, Inc.
Hughes STX Corp.
Institute for Defense Analyses Inc.
Johnson Controls World Services, Inc.
KPMG Peat Marwick LLP
Kuwait Dynamics Limited
Lear Astronics Corp.
Lockheed Martin Corp.
Loral Technical Services
Los Alamos Technical Associates Inc.
The Lovelace Institutes
Lucent Technologies, Inc.
Mantech International Corp.
Market Facts, Inc.
Microcrafts Inc.
Monterey Bay Aquarium Research Institute
National Opinion Research Center
Nichols Research Corp.
Northrop Grumman Corp.
Nortel Federal Systems, Inc.
Norton Diamond Film
Orbital Sciences Corporation
Pacific Architects & Engineers, Inc.
Porter Novelli, Inc.
RAPP Collins Worldwide, Inc.
Raytheon Service Co., Inc.
Research Triangle Institute, Inc.
Southern Research Institute, Inc.
Space Telescope Institute
Telephonics Corp.
Titan Systems Corp.
TRW ESSI
UNC Aviation Services, Inc.
U.S. Generating Company
Universities Space Research Association
VSE Corporation
Wyle Laboratories
Xerox Corporation
SALES AND MARKETING
The Company sells its products and services through its direct sales force.
As of September 30, 1996, the Company's sales organization consisted of 22
full-time sales personnel, based at the Company's corporate headquarters in
McLean, Virginia and at its offices in Denver, Colorado and San Jose,
California.
The Company's sales cycle begins with the generation of a sales lead or the
receipt of a request for proposal. Sales leads are generated by direct mailing
to potential customers in selected markets, as well as through advertising,
seminars and trade shows. The Company's sales personnel work closely with
prospective customers to understand their reasons for undertaking a system
change and to identify their specific business and system requirements. They
then provide prospective customers with information regarding the capabilities
and benefits of the Company's products and to assist in planning for the system
implementation. The licensing and implementation of the Company's business
software products is often a decision with significant enterprise-wide
implications involving a substantial commitment of the customer's management
attention and resources. The period between initial customer contact and the
customer's purchase commitment is often lengthy and typically ranges from 3 to
18 months. Accordingly, the Company's sales process is subject to delays
associated with a lengthy evaluation and approval process that typically
accompanies major initiatives or capital expenditures, including delays over
which the Company has little or no control.
Deltek's installed base of approximately 1,700 active customers enables it
to generate revenues from support and maintenance services provided to these
customers. Deltek's strategy is to maintain and strengthen relationships with
its existing customers through the provision of these services and to derive
additional software licensing and consulting revenues as these companies grow
and their requirements change. An important element of the Company's strategy is
to license its Costpoint products to existing System 1 users as these customers
reengineer their information systems and migrate to new client/server business
software solutions. In support of its efforts to market additional products and
services to its existing customer base, the Company conducts on-going customer
communications programs and national user conferences every 18 to 24 months.
The Company's strategy is to expand its sales and marketing activities to
target project-oriented organizations in additional markets. Deltek's ability to
achieve significant revenue growth in the future will depend in large part on
its success in recruiting, training and retaining additional sales, sales
support and
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<PAGE> 40
marketing personnel. In the future, the Company may seek to develop third-party
distribution channels and use third-party consultants to provide implementation
consulting services. There can be no assurance that the Company would be
successful in establishing such third party arrangements, that any such
expansion of the Company's sales and support capabilities would result in
increased revenues, or that the resulting reduction in the Company's direct
involvement with its customers would not adversely affect its competitive
position.
PRODUCT DEVELOPMENT
The Company utilizes a team approach to product development. Deltek's
product development is generally organized into teams of 6 to 12 developers who
handle a particular product area, a group of programs or functions, or a new
development area. Each development team includes one or more subject matter
experts who are instrumental in the design of each new module and capability.
Following the completion of high-level design, the development team receives
assistance from Deltek's database design team which helps with the important
step of designing or making changes to the relational database architecture.
Throughout the development process, and particularly when the initial
programming has been completed, quality assurance team members provide testing
and analysis to ensure that the application has been developed using standards
and functions appropriate to its design and purpose. Deltek's Object, Class, and
Technology group supports each development group and focuses on development,
enhancement and maintenance of the object-oriented product development tools
used throughout the development process. Deltek utilizes a sophisticated
in-house system for tracking the development process, for program check-in and
check-out, for version control, and for system error and bug tracking.
A significant portion of the development related to the Costpoint product
line is conducted using a fourth generation client/server development tool
called SQLWindows which the Company licenses from Centura. See "Proprietary
Rights and Licenses." Using this tool, the Company has developed a number of
reusable objects and classes to better facilitate development. In order to
optimize performance for process intensive functions in Costpoint, such as
project costing and billing applications, the Company makes extensive use of
database stored procedures which enable specific applications to operate much
faster with considerably less network traffic. C++ programming is also used
throughout Costpoint in various situations to improve performance and
functionality.
The Company's product development groups are currently focused on
enhancements and customary error corrections to existing versions, and
development of future versions of Costpoint, Electronic Timesheet and Allegro.
New capabilities currently under development for Costpoint include full support
for Windows NT on the client PC, support for the Microsoft SQL Server database,
foreign currency handling, enhanced Internet capabilities, additional material
management modules, and enhanced functionality for specific project-oriented
industries. Development efforts relating to Electronic Timesheet are currently
focused on development of a client/server-based version of the software and the
further expansion of Internet and intranet timekeeping capabilities. Allegro
development is currently focused on developing interfaces that will allow
Allegro to be fully integrated with the Company's Costpoint and System 1
products and additional interfaces to products such as Microsoft Project and
Primavera. There can be no assurance that the Company will be successful in
completing the development of these or other new products and enhancements or
that any new product or enhancement that it may introduce will achieve market
acceptance.
The Company intends to continue making substantial investments in product
development to address advancements in technology, respond to changing customer
requirements, extend the functionality of its current products and expand its
product line.
The Company's software development expenses, exclusive of certain
development costs which have been capitalized, were $3.9 million, $3.9 million,
$4.9 million and $4.7 million in 1993, 1994, 1995 and the nine-month period
ended September 30, 1996, respectively. As of September 30, 1996, the Company
had 121 employees engaged in product development and quality assurance
activities.
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COMPETITION
The business application software market, including the market for
client/server-based business software systems, is intensely competitive and
rapidly changing. Deltek's products are targeted toward a wide range of
project-oriented organizations, and the competition that the Company encounters
varies depending upon the customer's size, industry and specific system
requirements. For larger Costpoint implementations, the Company's principal
competitors include Oracle, PeopleSoft and SAP. For smaller and medium-size
Costpoint and System 1 implementations, the Company's competitors include Great
Plains Software, Harper and Shuman, Inc., Maxwell Business Systems, Inc.,
Platinum Software Corporation, Solomon Software, State of the Art, Inc. and
Timberline Software Corporation, some of which offer industry-specific products.
Electronic Timesheet competes with electronic timekeeping systems offered by
vendors including TIMESLIPS Corporation and Kronos, Inc. The Company also faces
indirect competition from systems developed by the internal MIS departments of
large organizations.
Deltek believes that competition in the rapidly evolving markets for
business application software is based primarily on product features and
functions, product architecture, ease of implementation, vendor and product name
recognition and reputation, customer service and support, and price. Deltek
believes that it has competed effectively to date on the basis of these factors,
and, particularly that its product and marketing focus on the unique needs of
profitoriented organizations and its reputation for high quality service and
support, its ability to work directly with its customers (rather than through
third-party resellers and system implementors) and its ability to provide rapid
implementations have constituted competitive advantages.
Many of the Company's competitors have significantly greater financial,
technical, marketing and other resources than the Company. In addition, certain
competitors, particularly Oracle, PeopleSoft and SAP, have well-established
relationships with the Company's current and prospective customers and with
major accounting and consulting firms that may have an incentive to recommend
such competitors over the Company. Further, because the Company's products run
on RDBMS and Oracle has the largest market share for RDBMS software, Oracle may
have a competitive advantage in selling its application products to its
installed RDBMS customer base. Furthermore, as the client/server computing
market develops, companies with significantly greater resources than the Company
could attempt to increase their presence in this market by acquiring or forming
strategic alliances with competitors of the Company. In addition, as the Company
attempts to penetrate other strategic vertical markets, it will likely encounter
competitors with substantially more experience in those markets.
There can be no assurance that the Company's products will continue to
compete favorably or that the Company will be successful in the face of
increasing competition from new products and enhancements introduced by existing
or new competitors entering the markets for its products. In addition, increased
competition may result in price reductions, reduced gross margins and loss of
market share, any of which could have a material adverse effect on the Company's
business, operating results and financial condition.
PROPRIETARY RIGHTS AND LICENSES
The Company's success and ability to compete is dependent in part upon its
proprietary software. Deltek relies on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
establish and protect its rights in its software. Despite the Company's efforts
to protect its proprietary rights, unauthorized parties may attempt to copy,
design around or reverse engineer aspects of the Company's products or to obtain
and use information that the Company regards as proprietary. Furthermore, the
Company has no patents, and existing copyright laws afford only limited
protection. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as do the laws of the United
States. Accordingly, there can be no assurance that the Company will be able to
protect its proprietary software against unauthorized third party copying or
use, which could adversely affect the Company's competitive position. Deltek
believes, however, that because of the rapid rate of technological change in the
software industry, trade secret and copyright protection are less significant
than factors such as the knowledge, ability and experience of the Company's
employees, frequent product enhancements and the timeliness and quality of
support services.
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The Company licenses its products to customers under license agreements
which are generally in standard form, although each license is individually
negotiated and may contain variations. Deltek's standard license agreement
allows the customer to use the Company's products solely on the customer's
computer equipment for the customer's internal purposes, and the customer is
generally prohibited from sublicensing or transferring the products. The license
agreements generally provide that the Company's warranty for its products is
limited to correction or replacement of the affected product and that the
Company will refund the applicable license fee if the customer is not satisfied
with the product for any reason, sets forth the reasons for dissatisfaction,
requests the refund prior to the end of the applicable refund period (normally
90 days) and returns all copies of the product to the Company. Deltek's standard
license agreement also includes a confidentiality provision protecting
proprietary information relating to the Company's products.
The Company's products are generally provided to customers in object code
(machine-readable) format only. From time to time, in limited circumstances, the
Company has licensed certain of its products in source code (human-readable)
form, subject to customary protections such as use restrictions and
confidentiality agreements. In addition, customers can be beneficiaries of a
master source code escrow, pursuant to which the source code for Costpoint and
System 1 products will be released to end users in the event the Company or its
assignee is unable or unwilling to continue to support these products. The
provision of source code to the Company's customers may increase the likelihood
of misappropriation or other misuse of the Company's intellectual property.
The Company licenses from third parties, generally on a nonexclusive basis,
certain software development tools that the Company utilizes in the development
of its products and certain application software that the Company incorporates
into its products. Third parties also license to the Company or its customers
certain relational database software used in conjunction with the Company's
products. See "Business -- Products -- Third-Party Products." Accordingly, the
Company is dependent upon such third parties' abilities to deliver quality
products, to correct errors, to support their current products, to develop new
and enhanced products on a timely and cost-effective basis and to respond to
emerging industry standards and other technological changes. Should these
third-party development tools or software products become unavailable, or should
their developers fail to adequately support or enhance them, the Company would
be required to rewrite its products using different development tools or replace
the functionality provided by the third-party software currently used in and
licensed with its products. Although the Company believes that other development
tools and application and database software with comparable functionality are
currently available from other third parties, there can be no assurance that
replacement products could be obtained when needed. In addition, there can be no
assurance that the Company could successfully rewrite its products using
different development tools or that it would not encounter substantial delays in
doing so. The inability to rewrite its products using different development
tools on a timely and cost-effective basis or the loss of, or any significant
delay in the replacement of, the functionality provided by the third-party
software could have a material adverse effect on the Company's business,
operating results and financial condition. While it may be necessary or
desirable in the future to obtain other licenses relating to one or more of the
Company's products or relating to current or future technologies, there can be
no assurance that the Company will be able to do so on commercially reasonable
terms or at all.
There are currently no claims pending against the Company relating to the
infringement of any proprietary rights of third parties. There can be no
assurance, however, that third parties will not claim infringement by the
Company of their intellectual property rights. Deltek expects that software
product developers will increasingly be subject to infringement claims as the
number of products and competitors in the Company's industry segment grows and
the functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming to defend, result in
costly litigation, divert management's attention and resources or cause delays
in the delivery or implementation of the Company's products. In addition, such
claims could require the Company to discontinue the use of certain software
codes or processes, to cease the manufacture, use and sale of infringing
products, to incur significant litigation costs and expenses and to develop
non-infringing technology or to obtain licenses to the alleged infringing
technology. There can be no assurance that the Company would be able to develop
alternative technologies or to obtain such licenses or, if a license were
obtainable, that the terms would be commercially
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acceptable to the Company. In the event of a successful claim of product
infringement against the Company and failure or inability of the Company to
license the infringed or similar technology, the Company's business, operating
results and financial condition could be materially adversely affected.
EMPLOYEES
As of September 30 1996, the Company had 248 full-time employees, including
121 employees primarily engaged in product development and quality assurance, 88
in customer support and training activities, 22 in sales and marketing, and 17
in finance and administration. None of the Company's employees is represented by
a labor union or is subject to a collective bargaining agreement. Deltek has
never experienced a work stoppage and believes its employee relations are good.
The success of the Company depends in large part upon its ability to
recruit and retain exceptional employees, particularly highly skilled product
developers and system consultants. Deltek will likely experience significant
competition and difficulties in recruiting such personnel.
FACILITIES
Deltek's corporate headquarters, its principal administrative, product
development, sales and marketing operations and its principal customer training
center are located in approximately 60,000 square feet of office space in
McLean, Virginia which the Company occupies under leases expiring in March 1999.
Deltek also leases approximately 2,200 square feet in San Jose, California,
under a lease expiring in December 1996 and approximately 4,000 square feet in
Denver, Colorado, under a lease expiring in January 1998. Deltek believes that
its existing facilities and offices are adequate to meet its current needs and
that, should it be needed, suitable additional or alternative space will be
available in the future on commercially reasonable terms.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- ---------------------------------------------
<S> <C> <C>
Donald deLaski........... 64 Chairman of the Board of Directors and
Treasurer
Kenneth E. deLaski....... 38 President, Chief Executive Officer and
Director
Eric F. Brown............ 32 Vice President, Technical Operations
Donald G. Craft.......... 44 Vice President, Client Services
Johnny C. Cheng.......... 38 Vice President, Material Management Product
Group
Dien Hoang Do............ 44 Vice President, Technology
Alan R. Stewart.......... 42 Chief Financial Officer and Secretary
Robert E. Gregg.......... 49 Director
Darrell J. Oyer.......... 55 Director Nominee
</TABLE>
Donald deLaski was a co-founder of the Company in November 1983 and has
served as Chairman of the Board of Directors and Treasurer since its inception.
Mr. deLaski also served as the Company's Chief Executive Officer from its
inception until February 1996. Mr. deLaski is a certified public accountant.
Donald deLaski is the father of Kenneth E. deLaski, President and Chief
Executive Officer of the Company.
Kenneth E. deLaski was a co-founder of the Company in November 1983 and has
served as a director since its inception. Mr. deLaski also has served as the
Company's President since May 1990 and as its Chief Executive Officer since
February 1996. From May 1990 to February 1996, he served as the Company's Chief
Operating Officer. Mr. deLaski is a certified public accountant. Kenneth E.
deLaski is the son of Donald deLaski, Chairman of the Board of Directors and
Treasurer of the Company.
Eric F. Brown was a co-founder of the Company in November 1983. He has
served as the Company's Vice President, Technical Operations since May 1990.
Prior to May 1990, Mr. Brown held various technical and management positions
with the Company, including management of the Company's Technical Services
Division, which provides custom programming services to the Company's customers,
and various of the Company's product groups responsible for development and
maintenance of the Company's core software products.
Donald G. Craft joined the Company in September 1986. He has served as the
Company's Vice President, Client Services since October 1994, and is responsible
for all of the Company's accounting consultants and telephone support personnel.
From January 1991 to October 1994, Mr. Craft served as the Company's Director of
Client Services. Mr. Craft successfully completed the National Uniform Certified
Public Accountant Examination.
Johnny C. Cheng joined the Company in December 1987. He has served as the
Company's Vice President, Material Management Product Group since May 1994, and
is responsible for the design, development and support of the Company's
materials management software products. From December 1987 to May 1994, Mr.
Cheng was employed as a senior system consultant responsible for implementing
the Company's software systems at customer facilities. Mr. Cheng is a certified
public accountant.
Dien Hoang Do joined the Company in October 1987. He has served as the
Company's Vice President, Technology since January 1995, and is responsible for
the Company's research and development. From October 1987 to January 1995, Mr.
Do held various technical positions with the Company.
Alan R. Stewart joined the Company in July 1992 as Chief Financial Officer
and has served as its Secretary since February 1996. From March 1991 until July
1992, he was employed as Director of Accounting at BTG, Inc., a government
contractor. Prior to March 1991, Mr. Stewart held positions as a senior
accountant with Touche Ross and Co., as assistant Controller of C3, Inc. and as
Controller and Treasurer of Tempest Technologies, Inc. Mr. Stewart is a
certified public accountant.
42
<PAGE> 45
Robert E. Gregg has served as a Director of the Company since September
1986. He has been a shareholder in Hazel & Thomas, P.C., counsel to the Company,
since Hazel & Thomas' inception in 1987.
Darrell J. Oyer has agreed to become a director of the Company immediately
following the closing of this offering. Since June 1991, Mr. Oyer has served as
President of Darrell J. Oyer and Company, a consulting company. Mr. Oyer is a
certified public accountant.
As of the date of this Prospectus, there are two vacancies on the Board of
Directors, one of which will be filled by Mr. Oyer promptly following the
closing of this offering and the other of which the Company intends to fill
within 90 days of the date of this Prospectus.
Deltek's executive officers are appointed annually by, and serve at the
discretion of, the Board of Directors. Each executive officer is a full-time
employee of the Company. Other than the relationship between Donald deLaski and
Kenneth E. deLaski, there are no family relationships between any director or
executive officer of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors intends to establish an Audit Committee
and a Compensation Committee. The Audit Committee will be responsible for
reviewing with management the financial controls, accounting, credit and
reporting activities of the Company. The Audit Committee will review the
qualifications of the Company's independent auditors, will make recommendations
to the Board of Directors regarding the selection of independent auditors, will
review the scope, fees and results of any audit and will review non-audit
services and related fees provided by the independent auditors. The members of
the Audit Committee have not yet been appointed. A majority of the members of
the Audit Committee will be independent directors. The Compensation Committee
will be responsible for the administration of all salary and incentive
compensation plans for the officers and key employees of the Company, including
bonuses. The Compensation Committee will also administer the Company's 1996
Stock Option Plan and 1996 Employee Stock Purchase Plan. The members of the
Compensation Committee have not been appointed. A majority of the members of the
Compensation Committee will be independent directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee prior to this offering.
Accordingly, the Board of Directors made all decisions concerning executive
officer compensation.
DIRECTOR COMPENSATION
Prior to January 1, 1996, directors did not receive any cash compensation
for their services as members of the Board of Directors. Effective January 1,
1996, directors who are not employees of the Company will receive $1,000 for
each board or committee meeting attended in person and $750 for each such
meeting attended telephonically and will be reimbursed for travel expenses
incurred in connection with attending such meetings. Each of the directors who
are not employees of the Company will be granted a nonqualified option to
purchase 5,000 shares of the Company's Common Stock at the initial public
offering price under the Company's 1996 Stock Option Plan. Directors who are
employees of the Company will receive no additional cash compensation for their
services as members of the Board of Directors or committees thereof other than
reimbursement for travel expenses incurred in connection with attending board
and committee meetings.
43
<PAGE> 46
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The following table sets forth information concerning the compensation
earned during the year ended December 31, 1995 by the Company's Chief Executive
Officer and each of the Company's other four most highly compensated executive
officers (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ---------------
-------------- OPTIONS GRANTED ALL OTHER
NAME AND PRINCIPAL POSITION SALARY (SHARES) COMPENSATION(1)
- ------------------------------------------- -------------- --------------- ---------------
<S> <C> <C> <C>
Kenneth E. deLaski......................... $148,339 -- $10,768(2)
President and Chief Executive Officer
Donald deLaski............................. 135,012 -- 1,930(3)
Chairman and Treasurer
Eric F. Brown.............................. 115,673 -- 9,266(4)
Vice President, Technical Operations
Johnny C. Cheng............................ 100,673 5,000 5,034(5)
Vice President, Materials Management
Dien Hoang Do.............................. 106,995 5,000 5,324(5)
Vice President, Technology
</TABLE>
- ---------------
(1) Does not include pro rata distributions of S Corporation dividends to the
individual as a shareholder. See "Prior S Corporation Status" and "Dividend
Policy."
(2) Represents premiums and benefits of $3,351 paid under medical insurance and
benefit plans and a 401(k) plan matching contribution of $7,417.
(3) Represents premiums and benefits paid under medical insurance and benefit
plans.
(4) Represents premiums and benefits of $3,482 and a 401(k) plan matching
contribution of $5,784.
(5) Represents a 401(k) plan matching contribution.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning grants of options to
purchase the Company's Common Stock made during the year ended December 31, 1995
to the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------ ANNUAL RATES OF
NUMBER OF STOCK PRICE
SHARES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM(2)
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION --------------------
NAME GRANTED FISCAL YEAR SHARE(1) DATE 5% 10%
- ----------------------- ---------- --------------- ---------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Kenneth E. deLaski..... -- -- -- -- -- --
Donald deLaski......... -- -- -- -- -- --
Eric F. Brown.......... -- -- -- -- -- --
Johnny C. Cheng........ 15,000 10.4% $ 0.52 7/1/05 $4,905 $12,431
Dien Hoang Do.......... 15,000 10.4 0.52 10/1/05 4,905 12,431
</TABLE>
- ---------------
(1) All options granted during the year ended December 31, 1995 have an exercise
price equal to the book value of the Common Stock on the date of grant. The
Company granted options to purchase an aggregate of 144,000 shares of the
Company's Common Stock to employees during the year ended December 31, 1995.
44
<PAGE> 47
(2) The potential realizable value is based on the term of the option at the
time of grant (ten years). Potential gains are net of the exercise price but
before taxes associated with the exercise. Amounts represent hypothetical
gains that could be achieved for the respective options if exercised at the
end of the option term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of the future Common Stock price. Actual gains, if any, on stock
option exercises are dependant on the future financial performance of the
Company, overall market conditions and the option holders' continued
employment through the vesting period. This table does not take into account
any appreciation in the price of the Common Stock from the date of grant to
the date of this Prospectus.
OPTION EXERCISES AND 1995 YEAR END OPTION VALUES
The following table sets forth information concerning the exercise of stock
options during the year ended December 31, 1995 and the value of options held as
of such date by the Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT DECEMBER 31, 1995 DECEMBER 31, 1995(2)
UPON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- --------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth E. deLaski.... -- -- -- -- -- --
Donald deLaski........ -- -- -- -- -- --
Eric F. Brown......... -- -- -- -- -- --
Johnny C. Cheng....... 3,000 $ 400 2,400 9,600 $ 320 $ 1,280
Dien Hoang Do......... 6,000 1,306 3,600 11,400 735 1,902
</TABLE>
- ---------------
(1) "Value Realized" represents the fair market value of the underlying Common
Stock on the exercise date minus the aggregate exercise price of such
options. For purposes of this calculation, the fair market value of the
Company's Common Stock as of December 31, 1995 of $0.65 per share, as
determined by the Board of Directors, was used.
(2) Based upon the fair market value of the Company's Common Stock as of
December 31, 1995 of $0.65 per share, as determined by the Board of
Directors, minus the aggregate exercise price of such options.
STOCK PLANS
1996 STOCK OPTION PLAN
Deltek's 1996 Stock Option Plan (the "1996 Option Plan") was adopted by the
Company's Board of Directors in November 1996 and approved by the Company's
shareholders in December 1996. A total of 900,000 shares of Common Stock have
been reserved for issuance under the 1996 Option Plan. The 1996 Option Plan will
be administered by the Board of Directors or a committee thereof. The 1996
Option Plan provides for grants of "incentive stock options," within the meaning
of Section 422 of the Code, to employees (including officers and employee
directors), and for grants of nonstatutory options to employees, non-employee
directors and consultants. The 1996 Option Plan will terminate in December 2006,
unless terminated sooner by the Board of Directors.
The exercise price of stock options granted under the 1996 Option Plan must
be not less than the fair market value of the Common Stock on the date of grant.
With respect to any optionee who owns stock representing more than 10% of the
voting power of all classes of the Company's outstanding capital stock, the
exercise price of any incentive stock option must be equal to at least 110% of
the fair market value of the Common Stock on the date of grant, and the term of
the option must not exceed five years. The terms of all other options may not
exceed ten years. The aggregate fair market value of Common Stock (determined as
of the date of the option grant) for which an incentive stock option may for the
first time become exercisable in any calendar year may not exceed $100,000. The
Board of Directors or any committee administering the 1996 Option Plan has
discretion to determine exercise schedules and vesting requirements, if any, of
all option grants under the 1996 Option Plan.
45
<PAGE> 48
As of the date of this Prospectus, no options have been granted under the
1996 Option Plan, and all 900,000 shares remain available for future grants.
EMPLOYEE TIME ACCELERATED STOCK OPTION PLAN
Deltek's Time Accelerated Stock Option Plan (the "Accelerated Plan") was
adopted by the Company's Board of Directors and approved by its shareholders in
April 1996. A total of 1,500,000 shares of Common Stock originally were reserved
for issuance under the Accelerated Plan. In December 1996, the Company's Board
of Directors reduced the number of shares of Common Stock reserved for issuance
under the Accelerated Plan to 648,000, the number of shares of Common Stock
issuable upon the exercise of options outstanding as of September 30, 1996. The
Accelerated Plan provides for grants of nonstatutory options to key employees of
the Company. The Accelerated Plan was discontinued at the time of the adoption
of the 1996 Option Plan, and no additional options will be granted under the
Accelerated Plan. Options previously granted under the Accelerated Plan will
continue to be governed by the terms of the Accelerated Plan, which will be
administered by the Board of Directors.
The exercise price of options granted under the Accelerated Plan must be
not less than the fair market value of the Common Stock on the date of grant.
The term of options granted under the Accelerated Plan is ten years, subject to
certain exceptions. All of the options granted under the Accelerated Plan become
exercisable on January 1, 2004. However, upon the occurrence of certain events,
including a public offering of the Company's Common Stock, such options will
thereafter become exercisable pursuant to a five-year vesting schedule beginning
on the date of grant. Any options that are fully vested at the time an
optionee's employment with the Company terminates for any reason (other than
death, disability or retirement) terminate three months after the date of
termination unless earlier exercised.
As of September 30, 1996, options to purchase 648,000 shares of Common
Stock, at a weighted average exercise price of $4.00 per share, were outstanding
under the Accelerated Plan. None of such outstanding options were vested.
1987 EMPLOYEE STOCK OPTION PLAN
Deltek's 1987 Employee Stock Option Plan (the "1987 Option Plan") was
adopted by the Company's Board of Directors and approved by its shareholders in
December 1987. A total of 900,000 shares of Common Stock originally were
reserved for issuance under the 1987 Option Plan. In December 1996, the
Company's Board of Directors reduced the number shares of Common Stock reserved
for issuance under the 1987 Option Plan to 388,500, the number of shares of
Common Stock issuable upon the exercise of options outstanding as of September
30, 1996. The 1987 Option Plan provides for grants of nonstatutory options to
key employees of the Company. The 1987 Option Plan was discontinued at the time
of the adoption of the 1996 Option Plan, and no additional options will be
granted under the 1987 Option Plan. Options previously granted under the 1987
Option Plan will continue to be governed by the terms of the 1987 Option Plan,
which will be administered by the Board of Directors.
The exercise price of options granted under the 1987 Option Plan is based
on the book value of the Common Stock at the end of the fiscal year immediately
prior to the year in which the option is granted, as reflected in the Company's
audited financial statements, reduced by any dividend declared by the Company
with respect to the previous fiscal year. The term of options granted under the
1987 Option Plan is ten years, subject to certain exceptions. Generally, options
granted under the 1987 Option Plan become exercisable pursuant to a five-year
vesting schedule provided the optionee remains employed full time by the Company
and are subject to a right of repurchase by the Company upon the termination of
the optionee's employment.
As of September 30, 1996, options to purchase 388,500 shares of Common
Stock, at a weighted average exercise price of $0.41 per share, were outstanding
under the 1987 Option Plan. Options to purchase 261,000 of such shares were
fully vested as of September 30, 1996. Assuming all of the optionees remain
continually employed by the Company, the remaining unvested options will become
fully vested by December 31, 1998.
46
<PAGE> 49
1996 EMPLOYEE STOCK PURCHASE PLAN
Deltek's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Company's Board of Directors in November 1996 and approved by its
shareholders in December 1996. A total of 400,000 shares of Common Stock are
reserved for issuance under the Purchase Plan. The Purchase Plan, which is
intended to qualify under Section 423 of the Code, will be administered by the
Compensation Committee of the Board of Directors. Employees (including officers
and employee directors of the Company) are eligible to participate in the
Purchase Plan if they are customarily employed for more than 20 hours per week
five months per year. The Purchase Plan will be implemented during sequential
six-month offering periods. Deltek has not yet offered or sold shares of Common
Stock to employees pursuant to the Purchase Plan, but intends to initiate the
first offering under the Purchase Plan on the date of this offering. The
Purchase Plan permits eligible employees to purchase Common Stock through
payroll deductions, which may not exceed 10% of an employee's compensation. The
price at which stock may be purchased under the Purchase Plan is equal to 85% of
the lower of the fair market value of the Common Stock on the first day of the
offering period or the last day of the offering period. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of a participant's employment
with the Company. In addition, participants may not purchase shares of Common
Stock having a value (measured at the beginning of the offering period) greater
than $25,000 in any calendar year.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Article 9 of the Virginia Stock Corporation Act (the "VSCA") provides
limitations on damages payable by officers and directors, except in cases of
willful misconduct or knowing violation of criminal law or any federal or state
securities law. Article 10 of the VSCA allows, in general, for indemnification
in certain circumstances, by a corporation of any person threatened with or made
a party to any action, suit or proceeding by reason of the fact that he or she
is, or was, a director, officer, employee or agent of such corporation.
As allowed by Article 9 of the VSCA the Company's Articles of Incorporation
eliminate the liability of the officers and directors of the Company for
monetary damages in any proceeding brought by or in the right of the Company or
brought by or on behalf of shareholders of the Company except in cases of
willful misconduct or a knowing violation of criminal law or any federal or
state securities law. As allowed by Article 10 of the VSCA, the Company's
Articles of Incorporation also provide for mandatory indemnification of any
director or officer of the Company who is, was, or is threatened to be made a
party to a proceeding (including a proceeding by or in the right of the Company)
because (i) he or she is or was a director or officer of the Company or (ii) he
or she is or was serving the Company or other legal entity in any capacity at
the request of the Company while a director or officer of the Company, against
all liabilities and expenses incurred in connection with such proceeding, except
such liabilities as are incurred because of such individual's willful misconduct
or knowing violation of the criminal law. In addition the Company's Articles of
Incorporation expressly authorize the Company to enter into agreements to
indemnify its officers and directors to the fullest extent permitted by the
Articles of Incorporation and to advance their expenses incurred as a result of
any proceeding against them as to which they could be indemnified.
The Company intends to enter into agreements to indemnify its directors and
executive officers, in addition to the indemnification provided for in the
Company's Articles of Incorporation. These agreements, among other things,
indemnify the Company's directors and executive officers for certain expenses
(including attorneys' fees), judgments, fines, and settlement amounts incurred
by any such person in any action or proceeding, including any action by or in
the right of the Company, arising out of such person's services as a director or
executive officer of the Company or any other Company or enterprise to which the
person provides services at the request of the Company. The Company believes
that these provisions and agreements are necessary to attract and retain
qualified persons as directors and executive officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employer or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that might result in a demand for such indemnification.
47
<PAGE> 50
CERTAIN TRANSACTIONS
Deltek and all of its current shareholders intend to enter into a Tax
Indemnification Agreement relating to their respective income tax liabilities
prior to the offering. Because the Company will be fully subject to corporate
income taxation on and after the Termination Date the reallocation of income and
deductions between the period during which the Company was treated as an S
Corporation and the period during which the Company will be subject to corporate
income taxation may increase the taxable income of one party while decreasing
that of another party. Accordingly, the Tax Indemnification Agreement is
intended to assure that taxes are borne by the Company on the one hand and by
the current shareholders on the other, only to the extent that such parties are
treated as receiving the related income for income tax purposes. Subject to
certain limitations, the Tax Indemnification Agreement generally provides that
the current shareholders will be indemnified by the Company with respect to
federal and state income taxes shifted from a Company taxable year subsequent to
the Termination Date to a taxable year in which the Company was an S
Corporation, and the Company will be indemnified by the current shareholders
with respect to federal and state income taxes shifted from an S Corporation
taxable year to a Company taxable year subsequent to the Termination Date. Any
payment made by the Company to the current shareholders pursuant to the Tax
Indemnification Agreement may be considered by the Internal Revenue Service or
state taxing authorities to be non-deductible by the Company for income tax
purposes. See "Prior S Corporation Status."
Robert E. Gregg, a director of the Company, is a shareholder in Hazel &
Thomas, P.C., a law firm that the Company has retained. The legal fees paid to
Hazel & Thomas by the Company did not exceed 5% of Hagel & Thomas' gross
revenues during the firm's last full fiscal year.
In August 1993, the Company loaned $100,000 to AmText Inc., a corporation
owned by the Onae Trust which owns 1,515,000 shares of the Company's Common
Stock and on whose Board of Directors Donald deLaski serves. This loan was due
and payable on December 29, 1993, and interest on the loan accrued annually at a
rate of prime plus 200 basis points. The loan was repaid in full in December
1993.
Deltek intends to enter into indemnification agreements with each of its
executive officers and directors. See "-- Limitation of Liability and
Indemnification."
Deltek believes that all of the foregoing transactions were on terms no
less favorable to the Company than would be obtained from unrelated third
parties. Any future transactions between the Company and its executive officers,
directors and affiliates will be on terms no less favorable to the Company than
can be obtained from unaffiliated third parties, and any material transactions
with any such person will be approved by a majority of the members of the
Company's Board of Directors and by a majority of the disinterested members of
the Company's Board of Directors.
48
<PAGE> 51
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 30, 1996, and as
adjusted to reflect the sale of the shares of Common Stock offered hereby, by:
(i) each of the Named Executive Officers; (ii) each of the Company's directors;
(iii) all directors and executive officers as a group; (iv) each other person
known by the Company to own beneficially more than 5% of the Company's Common
Stock; and (v) each Selling Shareholder.
<TABLE>
<CAPTION>
SHARE BENEFICIALLY SHARES BENEFICIALLY OWNED
OWNED PRIOR AFTER
TO THE OFFERING (1) THE OFFERING(1)(2)
-------------------- NUMBER OF SHARES --------------------------
BENEFICIAL OWNER NUMBER PERCENT BEING OFFERED NUMBER PERCENT
- ----------------------------------------- ---------- ------- ---------------- ---------------- -------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Kenneth E. deLaski(3).................. 5,550,000 36.6% 330,000 5,220,000 31.0%
Donald deLaski(3)...................... 5,100,000 33.6% 348,700 4,751,300 28.2%
Eric F. Brown(3)....................... 525,000 3.5% 33,000 492,000 2.9%
Johnny C. and Emily Cheng.............. 36,000 * -- 36,000 *
Donald G. and Monique M. Craft(4)...... 36,000 * 3,300 32,700 *
Dien Hoang and Thanh Hoang Do.......... 34,500 * -- 34,500 *
Robert E. Gregg........................ -- -- -- -- --
Darrell J. Oyer........................ -- -- -- -- --
All directors, director nominees and
executive officers as a group (9
persons)(5)......................... 11,293,500 74.4% 715,000 10,578,500 62.7
OTHER 5% SHAREHOLDERS:
Onae Trust, R.A. Jacobs, Trustee....... 1,515,000 10.0% 200,000 1,315,000 7.8
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, NY 10005-1413
OTHER SELLING SHAREHOLDERS:
Peter S. Novick........................ 735,000 4.8% 73,500 661,500 3.9%
David L. deLaski....................... 225,000 1.5% 22,500 202,500 1.2%
Edward R. and Kathleen Grubb........... 225,000 1.5% 22,500 202,500 1.2%
Nancy A. Drake......................... 150,000 * 120,000 30,000 *
Gerard L. Kelleher..................... 150,000 * 15,000 135,000 *
Ellen Martin........................... 127,500 * 12,750 114,750 *
Dennis P. Barrow....................... 127,500 * 12,750 114,750 *
Richard A. Darr........................ 30,000 * 3,000 27,000 *
Thomas W. Dudenhoefer.................. 30,000 * 3,000 27,000 *
</TABLE>
- ---------------
* Represents less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable, or will become exercisable within 60 days after
September 30, 1996, are deemed outstanding. Such shares, however, are not
deemed outstanding for purposes of computing the percentage ownership of any
other person. Unless otherwise indicated in the footnotes to this table, the
persons and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable. Unless otherwise indicated, the address of
each of the individuals listed in the table is: c/o Deltek Systems, Inc.,
8280 Greensboro Drive, McLean, Virginia 22102.
49
<PAGE> 52
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) Should the Underwriters' over-allotment option be exercised in full, (i) the
number of shares being offered would be 450,000 for Kenneth E. deLaski,
653,700 for Donald deLaski and 43,000 for Eric Brown (ii) the number of
shares beneficially owned after the offering would be 5,100,000 for Kenneth
E. deLaski, 4,446,300 for Donald deLaski and 482,000 for Eric Brown and
(iii) the percentage of shares beneficially owned after the offering would
be 29.5% for Kenneth E. deLaski, 25.7% for Donald deLaski and 2.8% for Eric
Brown.
(4) Includes 3,000 shares issuable upon exercise of stock options which are
exercisable and fully vested within 60 days of September 30, 1996.
(5) Includes 15,000 shares issuable upon exercise of stock options which are
exercisable and fully vested within 60 days of September 30, 1996.
50
<PAGE> 53
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company will consist of 45,000,000
shares of Common Stock, $.001 par value per share, and 2,000,000 shares of
Preferred Stock, $.001 par value per share.
The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of the Company's Articles of Incorporation,
as amended, which is included as an exhibit to the Registration Statement of
which this Prospectus is a part.
COMMON STOCK
As of September 30, 1996, there were 15,162,750 shares of Common Stock
outstanding held of record by 35 shareholders. The holders of Common Stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of shareholders. Accordingly, holders of a majority of the shares of Common
Stock entitled to vote in any election of directors may elect all of the
directors standing for election. Subject to preferences that may be applicable
to any outstanding Preferred Stock, holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available therefor. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in the assets remaining after payment of
liabilities and the liquidation preference of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive, conversion or redemption rights. All
of the outstanding shares of Common Stock are, and the shares to be sold in this
offering when issued and paid for will be, fully paid and non-assessable.
PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of 2,000,000
shares of undesignated Preferred Stock. Deltek's Board of Directors has the
authority, without further action by the shareholders, to issue such Preferred
Stock in one or more series and to fix the designations, powers, preferences,
privileges and relative participating, optional or special rights and the
qualifications, limitations or restrictions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption and liquidation
preferences of each such series, any or all of which may be greater than the
rights of the Common Stock. It is impossible to state the actual effect of the
issuance of any shares of preferred stock upon the rights of holders. Preferred
Stock could thus be issued quickly with terms calculated to delay or prevent a
change in control of the Company or make removal of management more difficult.
Additionally, the issuance of Preferred Stock may have the effect of decreasing
the market price of the Common Stock. At present, the Company has no plans to
issue any of the Preferred Stock.
ANTI-TAKEOVER EFFECTS OF VIRGINIA LAW AND ARTICLES OF INCORPORATION
The Company is a Virginia corporation and subject to the VSCA, which
contains certain anti-takeover provisions regulating affiliated transactions and
control share acquisitions and validating the adoption of shareholder rights
plans. In general, the affiliated transactions provisions prevent a Virginia
corporation from engaging in an "affiliated transaction" (as defined) with an
"interested shareholder" (generally defined as a person owning more than 10% of
any voting securities of the corporation) unless approved by a majority of the
"disinterested directors" (as defined) and the holders of at least two-thirds of
the outstanding voting stock not owned by the interested shareholder, subject to
certain exceptions. Under the control share acquisitions provisions of the VSCA,
shares acquired in a "control share acquisition" (defined generally as
transactions that increase the voting strength of the person acquiring such
shares above certain thresholds in director elections) generally have no voting
rights unless granted by a majority of the outstanding voting stock not owned by
the such acquiring person. If such voting rights are granted and the acquiring
person controls 50% or more of the voting power, all shareholders, other than
the acquiring person, are entitled to receive "fair value" (as defined) for
their shares. If such voting rights are not granted, the corporation may, if
authorized by its articles of incorporation or bylaws, purchase the acquiring
person's shares at their cost to the acquiring person. Deltek's Bylaws authorize
such a purchase. Finally, the shareholder rights plan provisions of the VSCA
permit
51
<PAGE> 54
the Board of Directors to adopt a shareholder rights plan that could render a
hostile takeover prohibitively expensive if the Board determines that such a
takeover is not in the best interests of the corporation. The Board of Directors
has no present plan for the adoption of any shareholder rights plan and does not
intend to adopt any such plan except on terms that the Board of Directors deems
to be in the best interests of the Company and its shareholders. The existence
of the shareholder rights plan provision of the VSCA, as well as the affiliated
transactions and control share acquisition provisions could delay or prevent a
change in control of the Company, impede a merger, consolidation or other
business combination involving the Company or discourage a potential acquiror
from making a tender offer or otherwise attempting to obtain control of the
Company.
Deltek's Articles of Incorporation provides that its Board of Directors are
divided into three classes, with each class serving a staggered three-year term.
The classification system of electing directors may tend to discourage a third
party from making a tender offer or otherwise attempting to obtain control of
the Company and may maintain the incumbency of the Board of Directors, as it
generally makes it more difficult for shareholders to replace a majority of the
directors. The Company's Article of Incorporation also does not provide for
cumulative voting rights in the election of directors. These and other
provisions may have the effect of deferring hostile takeovers or delaying
changes in control or management of the Company. The amendment of any of these
provisions would require approval by holders of 66 2/3% or more of the
outstanding shares of the Company's stock entitled to vote thereon.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is
.
LISTING
Deltek has applied to have its Common Stock approved for quotation on The
Nasdaq National Market under the trading symbol "DLTK."
52
<PAGE> 55
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for the Common
Stock of the Company, and there can be no assurance that a significant public
market for the Common Stock will be developed or sustained after the offering.
Sales of substantial amounts of Common Stock in the public market after this
offering could adversely affect the trading price of the Common Stock.
Upon completion of this offering, the Company will have outstanding
16,862,750 shares of Common Stock, assuming no exercise of the Underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
the 2,900,000 shares offered hereby will be freely tradeable in the public
market without restriction under the Securities Act, unless such shares are held
by "affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act.
The remaining 13,962,750 shares of Common Stock outstanding upon completion
of this offering will be "restricted securities" as that term is defined in Rule
144 ("Restricted Shares"). Restricted Shares may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rules 144 or 701 under the Securities Act, which are summarized below. Sales of
Restricted Shares in the public market, or the availability of such shares for
sale, could adversely affect the market price of the Common Stock.
Pursuant to certain "lock-up" agreements, all of the officers, directors
and certain other holders of Common Stock, who collectively hold approximately
13,275,000 shares, have agreed not to offer, sell, contract to sell or grant any
option to purchase or otherwise dispose of such shares for a period of 180 days
from the date of this Prospectus without the prior written consent of Montgomery
Securities. Taking into account these lock-up agreements, the number of
Restricted Shares that will be available for sale in the public market, subject
in some cases to the volume and other restrictions of Rule 144, will be as
follows: (i) approximately 170,250 shares will be eligible for immediate sale as
of the date of this Prospectus, (ii) approximately 93,000 additional shares will
be eligible for sale beginning 90 days after the date of this Prospectus
pursuant to Rules 144 and 701, and (iii) approximately 13,275,000 additional
shares will be eligible for sale beginning 180 days after the date of this
Prospectus. Approximately 424,500 remaining Restricted Shares will not be
eligible for sale pursuant to Rule 144 until the expiration of their applicable
two-year holding periods, which will expire between January 1, 1998 and
September 15, 1998.
Subject to lock-up agreements, certain shares issued upon exercise of
options granted by the Company prior to the date of this Prospectus will also be
available for sale in the public market pursuant to Rule 701 under the
Securities Act. Rule 701 permits resales of such shares in reliance upon Rule
144 but without compliance with certain restrictions, including the holding
period requirement, imposed under Rule 144. In general, under Rule 144 as
currently in effect, beginning 90 days after the date of this Prospectus, a
person (or persons whose shares are aggregated) who has beneficially owned
Restricted Shares for at least two years (including the holding period of any
prior owner except an affiliate) would be entitled to sell within any three-
month period a number of shares that does not exceed the greater of (i) one
percent of the then outstanding shares of Common Stock (approximately 168,673
shares immediately after this offering) or (ii) the average weekly trading
volume of the Common Stock during the four calendar weeks preceding the filing
of a Form 144 with respect to such sale. Sales under Rule 144 are also subject
to certain manner-of-sale and notice requirements and to the availability of
current public information about the Company. Under Rule 144(k), a person who is
not deemed to have been an affiliate of the Company at any time during the 90
days preceding a sale and who has beneficially owned the shares proposed to be
sold for at least three years (including the holding period of any prior owner
except an affiliate of the Company) is entitled to sell such shares without
complying with the manner-of-sale, public information, volume limitation or
notice provisions of Rule 144.
53
<PAGE> 56
Deltek has reserved an aggregate of 2,336,500 shares of Common Stock for
issuance pursuant to the Company's stock option and purchase plans. As of
September 30, 1996, options to purchase a total of 1,036,500 shares of Common
Stock were outstanding under the Company's stock option plans. The Company
intends to file registration statements on Form S-8 under the Securities Act
approximately 90 days after the date of this Prospectus to register an aggregate
of 1,300,000 shares of Common Stock issued or reserved for issuance under the
1996 Option Plan and the Purchase Plan. Shares of Common Stock issued under the
foregoing plans after the filing of such registration statements will be freely
tradeable in the public market, subject in the case of certain holders to the
Rule 144 limitations applicable to affiliates, the above-referenced lock-up
agreements with the Underwriters and vesting restrictions imposed by the
Company.
54
<PAGE> 57
UNDERWRITING
Montgomery Securities and William Blair & Company, L.L.P. (the
"Underwriters") have severally agreed, subject to the terms and conditions set
forth in the Underwriting Agreement, to purchase from the Company and the
Selling Shareholders the number of shares of Common Stock indicated below
opposite their respective names at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters are committed
to purchase all of such shares, if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Montgomery Securities.....................................................
William Blair & Company, L.L.P. ..........................................
Total........................................................... 2,900,000
</TABLE>
The Underwriters have advised the Company that they initially propose to
offer the Common Stock to the public on the terms set forth on the cover page of
this Prospectus. The Underwriters may allow to selected dealers a concession of
not more than $ per share, and the Underwriters may allow, and such
dealers may reallow, a concession of not more than $ per share to
certain other dealers. After the public offering, the offering price and other
selling terms may be changed by the Underwriters. The Common Stock is offered
subject to receipt and acceptance by the Underwriters and to certain other
conditions, including the right to reject orders in whole or in part. The
Underwriters may offer the shares of Common Stock through a selling group.
Certain of the Selling Shareholders have granted an option to the
Underwriters, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to a maximum of 345,000 additional shares of Common
Stock to cover over-allotments, if any, at the same price per share as the
initial 2,900,000 shares to be purchased by the Underwriters. To the extent the
Underwriters exercise this option, each of the Underwriters will be committed,
subject to certain conditions, to purchase such additional shares in the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with this offering.
55
<PAGE> 58
The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriters against certain liabilities under
the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.
Deltek's officers and directors, the Selling Shareholders and certain other
holders of Common Stock, who collectively hold approximately 13,275,000 shares
of Common Stock, have agreed not to offer, sell, contract to sell or grant any
option to purchase or otherwise dispose of any shares of Common Stock of the
Company, any options or warrants to purchase any shares of Common Stock or any
securities convertible into or exchangeable for any shares of Common Stock for a
period of 180 days from the date of this Prospectus without the prior written
consent of Montgomery Securities. Montgomery Securities may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to agreements not to sell. In addition, the Company has
agreed that for a period of 180 days from the date of this Prospectus it will
not without the prior written consent of Montgomery Securities, directly or
indirectly offer to sell, sell, issue, distribute, grant options to purchase or
otherwise dispose of any equity securities except for: (i) the shares of Common
Stock offered hereby; (ii) shares of Common Stock issued in connection with
acquisitions; (iii) shares of Common Stock issued upon the exercise of
outstanding stock options described in this Prospectus; or (iv) the issuance of
options under the 1996 Option Plan and the issuance of Common Stock upon the
exercise thereof and under the Purchase Plan.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Gray Cary Ware & Freidenrich, A Professional Corporation, Palo Alto,
California. Certain legal matters relating to the offering will be passed upon
for the Underwriters by Brobeck, Phleger & Harrison LLP, Palo Alto, California.
Gray Cary Ware & Freidenrich, A Professional Corporation and Brobeck, Phleger &
Harrison LLP, will rely as to all matters of Virginia law on Hazel & Thomas,
P.C., Falls Church, Virginia, counsel to the Company.
EXPERTS
The audited financial statements of the Company for the three years ended
December 31, 1995 included in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report, and
are included herein in reliance upon the authority of said firm as experts in
giving such reports.
56
<PAGE> 59
ADDITIONAL INFORMATION
Deltek has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall include any amendments
thereto) on Form S-1 under the Securities Act with respect to the Common Stock
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are contained in exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto, and the financial statements and notes filed as a part thereof.
Statements made in this Prospectus concerning the contents of any document
referred to herein are not necessarily complete. With respect to each such
document filed with the Commission as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved. The Registration Statement, including the exhibits thereto and the
financial statements and notes filed as a part thereof, as well as such reports
and other information filed with the Commission, may be inspected without charge
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any part thereof may be obtained from
the Commission upon the payment of certain fees prescribed by the Commission.
Such reports and other information may also be inspected without charge at a Web
site maintained by the Commission. The address of such site is
http://www.sec.gov.
Deltek will furnish its stockholders with annual reports containing
financial statements audited by independent accountants and quarterly reports
for the first three quarters of each year containing unaudited financial
statements. This Prospectus includes trademarks, tradenames and service marks of
other companies.
57
<PAGE> 60
DELTEK SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996 (unaudited).... F-3
Statements of Operations for the Years Ended December 31, 1993, 1994 and 1995 and for
the Nine Months Ended September 30, 1995 (unaudited) and 1996 (unaudited)........... F-4
Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1993,
1994 and 1995 and for the Nine Months Ended September 30, 1996 (unaudited).......... F-5
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995 and for
the Nine Months Ended September 30, 1995 (unaudited) and 1996 (unaudited)........... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE> 61
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Deltek Systems, Inc.:
We have audited the accompanying balance sheets of Deltek Systems, Inc. (a
Virginia corporation), as of December 31, 1994 and 1995, and the related
statements of operations, changes in shareholders' equity, and cash flows for
the three years 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 an 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 Deltek Systems, Inc., as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for the three years ended December 31, 1995, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Washington, D.C.
December 17, 1996
F-2
<PAGE> 62
DELTEK SYSTEMS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
----------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996
------- ------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 1,866 $ 4,393 $ 4,698 $ 4,698
Marketable securities........................... 2,049 3,128 -- --
Accounts receivable, net of allowance for
doubtful accounts of $256, $343, and $207,
respectively................................. 4,153 6,042 8,437 8,437
Inventories..................................... 140 100 241 241
Prepaid expenses and other current assets....... 519 574 600 600
------ ------ ------
Total current assets.................... 8,727 14,237 13,976 13,976
------ ------ ------ ------
Furniture, equipment, and leasehold improvements,
at cost, net of accumulated depreciation and
amortization of $1,247, $1,630, and $2,007,
respectively.................................... 1,061 1,299 1,708 1,708
------ ------ ------ ------
Computer software development costs, at cost, net
of accumulated amortization of $956, $1,232, and
$1,666, respectively............................ 1,718 2,547 2,564 2,564
Other assets...................................... -- -- 130 130
------ ------ ------ ------
Total assets............................ $11,506 $18,083 $18,378 $18,378
====== ====== ====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses........... $ 1,106 $ 1,724 $ 2,909 $ 2,909
Accrued dividends payable....................... -- 2,594 -- 2,300
Short-term notes payable to shareholders........ -- -- -- 4,000
Deferred revenue................................ 3,597 4,916 8,282 8,282
Deferred income taxes........................... -- -- -- --
------ ------ ------ ------
Total current liabilities............... 4,703 9,234 11,191 17,491
------ ------ ------ ------
Commitments (Note 7)
Shareholders' equity:
Preferred stock, $0.001 par value per share;
2,000,000 shares authorized; none issued or
outstanding.................................. -- -- -- --
Common stock, $0.001 par value; 45,000,000
shares authorized; 15,018,750 and 15,050,250
shares issued and outstanding at December 31,
1994 and 1995, respectively, and 15,162,750
shares issued and outstanding at September
30, 1996..................................... 15 15 15 15
Paid-in capital................................. 62 75 1,936 1,936
Retained earnings............................... 6,726 8,736 5,758 (542)
Unrealized gain on marketable securities........ -- 23 --
------ ------ ------ ------
6,803 8,849 7,709 1,409
------ ------ ------ ------
Less -- Unearned compensation................... -- -- 522 522
------ ------ ------ ------
Total shareholders' equity.............. 6,803 8,849 7,187 887
------ ------ ------ ------
Total liabilities and shareholders'
equity................................ $11,506 $18,083 $18,378 $18,378
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE> 63
DELTEK SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
License fees................................... $ 7,551 $ 7,360 $ 9,720 $ 6,064 $ 8,422
Services....................................... 10,093 12,545 15,154 10,863 14,548
Third-party equipment and software............. 1,773 1,451 1,975 1,591 1,401
------- ------- -------- ------- --------
19,417 21,356 26,849 18,518 24,371
------- ------- -------- ------- --------
Operating expenses:
Cost of software............................... 665 766 893 584 1,047
Cost of services............................... 3,611 4,171 5,151 3,470 5,995
Cost of third-party equipment and software..... 1,298 1,054 1,580 1,247 1,147
Software development........................... 3,931 3,877 4,934 3,436 4,658
Sales and marketing............................ 1,538 1,852 2,743 1,995 2,467
General and administrative..................... 1,285 1,593 1,875 1,337 1,721
Stock option compensation...................... -- -- -- -- 867
Purchased in-process research and
development................................. -- -- -- -- 394
------- ------- ------- ------- --------
Total operating expenses............... 12,328 13,313 17,176 12,069 18,296
------- ------- -------- ------- --------
Income from operations........................... 7,089 8,043 9,673 6,449 6,075
Interest income.................................. 242 257 393 295 287
------- ------- -------- ------- --------
Income before state income taxes................. 7,331 8,300 10,066 6,744 6,362
Provision for state income taxes................. 51 65 45 34 75
------- ------- -------- ------- --------
Net income....................................... $ 7,280 $ 8,235 $10,021 $ 6,710 $ 6,287
======= ======= ======== ======= ========
Pro forma statement of operations data
(unaudited):
Income before provision for income taxes, as
reported.................................... $ 7,331 $ 8,300 $10,066 $ 6,744 $ 6,362
Income tax provision........................... 2,787 3,156 3,827 2,564 2,483
------- ------- -------- ------- ---------
Net income..................................... $ 4,544 $ 5,144 $ 6,239 $ 4,180 $ 3,879
======= ======= ======== ======= ========
Net income per share........................... $ 0.40 $ 0.25
======== ========
Weighted average shares outstanding............ 15,552 15,555
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 64
DELTEK SYSTEMS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995, AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK UNREALIZED
---------------------- GAIN ON TOTAL
PAR PAID-IN RETAINED MARKETABLE UNEARNED SHAREHOLDERS'
SHARES VALUE CAPITAL EARNINGS SECURITIES COMPENSATION EQUITY
---------- --------- ------- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992...... 15,000,000 $15 $ -- $ 6,012 $ -- $ -- $ 6,027
Cash dividends................ -- -- -- (6,647) -- -- (6,647)
Exercise of stock options..... 418,500 -- 42 -- -- -- 42
Common stock purchased and
retired.................... (419,250) -- -- (936) -- -- (936)
Net income.................... -- -- -- 7,280 -- -- 7,280
--
---------- ------ ------ ------- ---- ----- -------
Balance, December 31, 1993...... 14,999,250 15 42 5,709 -- -- 5,766
Cash dividends................ -- -- -- (7,186) -- -- (7,186)
Exercise of stock options..... 87,000 -- 20 -- -- -- 20
Common stock purchased and
retired.................... (67,500) -- -- (32) -- -- (32)
Net income.................... -- -- -- 8,235 -- -- 8,235
--
---------- ------ ------ ------- ---- ----- -------
Balance, December 31, 1994...... 15,018,750 15 62 6,726 -- -- 6,803
Cash dividends................ -- -- -- (5,417) -- -- (5,417)
Accrued dividends payable..... -- -- -- (2,594) -- -- (2,594)
Exercise of stock options..... 31,500 -- 13 -- -- -- 13
Unrealized holding gain on
marketable securities...... -- -- -- -- 23 -- 23
Net income.................... -- -- -- 10,021 -- -- 10,021
--
---------- ------ ------ ------- ---- ----- -------
Balance, December 31, 1995...... 15,050,250 15 75 8,736 23 -- 8,849
Cash dividends................ -- -- -- (9,265) -- -- (9,265)
Exercise of stock options..... 10,500 -- 5 -- -- -- 5
Acquisition of the Allegro
Group, Inc................. 102,000 -- 408 -- -- -- 408
Unrealized holding gain on
marketable securities...... -- -- -- -- (23) -- (23)
Conversion of book value plan
to fair value plan (Note
8)......................... -- -- 1,448 -- -- (522) 926
Net income.................... -- -- -- 6,287 -- -- 6,287
--
---------- ------ ------ ------- ---- ----- -------
Balance, September 30, 1996
(unaudited)................... 15,162,750 $15 $ 1,936 $ 5,758 $ -- $ (522) $ 7,187
========== ======= ====== ======= ==== ===== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 65
DELTEK SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995, AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income................................. $ 7,280 $ 8,235 $ 10,021 $ 6,710 $ 6,287
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization........... 524 768 665 427 797
Compensation, noncash................... -- -- -- -- 926
Purchased research and development,
noncash charge........................ -- -- -- -- 394
Loss (gain) on disposal of fixed
assets................................ -- (7) 13 (2) --
Accreted interest on marketable
securities............................ -- (30) (61) (59) 61
Change in accounts receivable, net...... (599) (1,114) (1,889) (1,394) (2,395)
Change in prepaid expenses, inventories,
and other current assets.............. (145) (204) (15) 35 (167)
Change in accounts payable and accrued
expenses.............................. (22) (157) 618 938 1,186
Change in deferred revenue.............. 436 2,142 1,319 1,514 3,223
------ ------ ------- ------ -------
Net cash provided by operating
activities....................... 7,474 9,633 10,671 8,169 10,312
------ ------ ------- ------ -------
Cash flows from investing activities:
Sale (purchase) of marketable securities... -- (2,006) (993) (1,011) 3,068
Purchase of property and equipment......... (476) (516) (642) (473) (769)
Capitalization of computer software
development costs....................... (351) (1,411) (1,105) (1,019) (452)
------ ------ ------- ------ -------
Net cash (used in) provided by
investing activities............. (827) (3,933) (2,740) (2,503) 1,847
------ ------ ------- ------ -------
Cash flows from financing activities:
Cash dividends paid to stockholders........ (6,647) (7,186) (5,417) (5,412) (11,859)
Cash proceeds from exercise of stock
options................................. 52 20 13 11 5
Treasury stock purchased and retired....... (937) (32) -- -- --
------ ------ ------- ------ -------
Net cash used in financing
activities....................... (7,532) (7,198) (5,404) (5,401) (11,854)
------ ------ ------- ------ -------
Net increase (decrease) in cash and cash
equivalents................................ (885) (1,498) 2,527 265 305
Cash and cash equivalents, beginning
of year.................................... 4,249 3,364 1,866 1,866 4,393
------ ------ ------- ------ -------
Cash and cash equivalents, end of year....... $ 3,364 $ 1,866 $ 4,393 $ 2,131 $ 4,698
====== ====== ======= ====== =======
Supplemental disclosure of cash flow
information:
Allegro acquisition (Note 2)............... -- -- -- -- --
Cash paid during the year for income
taxes................................... $ 56 $ 65 $ 45 $ -- $ --
====== ====== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 66
DELTEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1993, 1994, 1995, AND
SEPTEMBER 30, 1996 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Deltek Systems, Inc. (the "Company"), was incorporated in 1983 under the
laws of the Commonwealth of Virginia. The Company designs, develops, sells and
supports a family of integrated software products that provide project-oriented
businesses with tools to manage, operate and grow their operations. The
Company's family of software products consists of Costpoint, the Company's
advanced client/server, enterprise-level business software system designed for
project-oriented organizations; System 1, a DOS-based accounting and management
system designed primarily for organizations providing goods and services under
contracts with the federal government; Electronic Timesheet, an employee
timekeeping system; and Allegro, a project and resource management tool.
Recapitalization and Stock Split
On December 13, 1996, the Company amended its Articles of Incorporation to
increase the number of authorized shares of common stock to 45,000,000 and to
authorize 2,000,000 shares of undesignated preferred stock. The Company's Board
of Directors has the authority, without further action by the shareholders, to
issue such preferred stock in one or more series and to fix the terms and rights
of the preferred stock. Such actions by the Board of Directors could adversely
affect the voting power and other rights of the holders of common stock.
Preferred stock could thus be issued quickly with terms that could delay or
prevent a change in control of the Company or make removal of management more
difficult. At present, the Company has no plans to issue any of the preferred
stock.
On December 13, 1996, the Board of Directors effected a three-for-one stock
split by means of a stock dividend. The stock split has been reflected
retroactively in the financial statements for all periods presented.
Pro Forma Financial Information (Unaudited)
The pro forma financial information gives effect to the planned declaration
of a $6.3 million distribution to the Company's shareholders, representing
undistributed previously taxed S Corporation earnings as of September 30, 1996,
assuming the Company had terminated its S Corporation status as of that date. On
a pro forma basis, this amount is recorded as $2,300,000 in accrued dividends
payable and $4,000,000 in short-term notes payable. The deferred tax liability
that would have been recorded if the Company had terminated its S Corporation
status as of September 30, 1996 would not have been material. Pro forma net
income is based on the assumption that the Company's S Corporation status was
terminated at the beginning of each year.
Net Income Per Share
Net income per common and equivalent shares is based on the weighted
average equivalent shares outstanding during the period and assumes the dilutive
effect of all options as if they were outstanding for all periods presented
prior to the offering (using the treasury stock method and assuming a per share
price of $12.00).
Primary earnings per share are not presented because the difference between
these amounts and the amounts presented is not material.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-7
<PAGE> 67
DELTEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue Recognition
The Company grants perpetual licenses under a standard license agreement.
The Company historically has granted its customers the right to return its
software products for a refund of the license fee during a refund period which
is generally 60 to 90 days from the date of the license agreement, although the
Company occasionally has provided, and may in the future provide, longer refund
periods for larger, more complex Costpoint installations. The Company recognizes
license fees from its System 1 and Electronic timesheet products upon delivery,
whereas Costpoint license fees are recognized upon the expiration of the
applicable refund period and are recorded as deferred revenue until recognized
(Note 6). For contracts that involve significant installment payments, the
Company also evaluates whether fees are fixed and determinable. If the fees are
not fixed and determinable, the Company defers the recognition of revenue until
the payments become due. Implementation and other consulting services are
provided on a time and materials basis, billed monthly or semi-monthly and
recognized as the services are performed. Telephone support and periodic
enhancements and updates are provided for maintenance fees that are payable
quarterly and initially represent between 15% and 20% of the related software
license fee on an annual basis. Revenue from quarterly maintenance and support
service is recognized over the term of the support, which is generally three
months. Revenue from third-party equipment and software is derived from the
resale and sublicensing of third-party hardware and software products in
connection with the license and installation of the Company's systems and is
generally recognized upon delivery.
The American Institute of Certified Public Accountants (the "AICPA")
recently approved for exposure a draft Statement of Position (the "Exposure
Draft") that would supersede SOP 91-1, Software Revenue Recognition. The
Exposure Draft provides additional guidance to multiple elements: returns,
exchanges, and platform transfer rights; resellers; services; funded
software-development arrangements; and contract accounting. If approved, the
Exposure Draft would need to be implemented for years beginning after December
15, 1996. While the Company is still analyzing the Exposure Draft, it believes
that the proposed changes will not have a material adverse financial impact on
the Company.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Furniture, Equipment and Leasehold Improvements
Furniture and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets, which are
generally five years. Leasehold improvements are amortized over the shorter of
the useful life of the asset or the lease term.
Inventories
Inventories are valued at the lower of cost (first-in, first-out) or
market. Inventories consist principally of equipment purchased for resale and
software user manuals.
Capitalized Computer Software Development Costs
Computer software development costs for products are capitalized subsequent
to the establishment of technological feasibility, as evidenced by detailed
program designs. Capitalization ceases when the products are available for
general release to customers, at which time amortization of the capitalized
costs begins on a
F-8
<PAGE> 68
DELTEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
straight-line basis over the estimated lives of the products, which are
generally five years. Amortization expense of approximately $208,000, $406,000,
$276,000, and $434,000 was recorded related to these costs during 1993, 1994,
1995, and for the nine months ended September 30, 1996, respectively, and is
included in cost of software.
Marketable Securities
Effective January 1, 1994, the Company adopted the fair value method of
accounting for certain investments in debt and equity securities under Statement
of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain
Investments in Debt and Equity Securities. The adoption of SFAS No. 115 had no
effect on the Company's financial position or results of operations in the year
ended December 31, 1994. At acquisition, debt and equity securities are
classified into three categories: held-to-maturity, available-for-sale, or
trading. At each reporting date, the appropriateness of the classifications is
reassessed.
Included in the balance sheets at December 31, 1994 and 1995 are marketable
securities of approximately $2,049,000 and $3,103,000, respectively, that are
U.S. Treasury securities classified as available-for-sale and recorded at fair
value. As of December 31, 1995, the Company recorded an unrealized gain of
approximately $23,000 as a separate component of shareholders' equity. No
unrealized gain or loss was recorded at December 31, 1994, as fair value
approximated cost.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents,
marketable securities, and accounts receivable. The Company maintains cash and
cash equivalents with high credit quality financial institutions. Marketable
securities consist primarily of U.S. Treasury securities with original
maturities at date of purchase beyond three months. The credit risk with respect
to accounts receivable is generally diversified due to the large number of
entities comprising the Company's customer base. The Company performs ongoing
credit evaluations of its customers' financial condition and maintains
allowances for potential credit losses. Actual losses and allowances have been
within management's expectations.
Fair Value of Financial Instruments
Financial instruments are defined as cash, evidence of an ownership
interest in an entity, or a contract that imposes an obligation to deliver cash
or other financial instruments to a second party. The carrying amounts of
current assets and current liabilities in the accompanying financial statements
approximate fair value due to the short maturity of these instruments.
Income Taxes
The Company has elected to be treated as an S Corporation for federal
income tax purposes. Accordingly, income or loss is prorated among the
stockholders and reported on their individual income tax returns. The
accompanying statements include a provision for state income taxes related to
certain states that do not recognize S Corporation status for state income tax
purposes.
Income taxes are accounted for in accordance with SFAS No. 109, Accounting
for Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are
computed based on the difference between the financial statement and tax basis
of assets and liabilities are measured by applying enacted tax rates and laws
for the taxable years in which those differences are expected to reverse. As of
December 31, 1994 and 1995, differences between the financial statement and tax
basis of assets and liabilities in states not recognizing S Corporation status
were insignificant. On a pro forma basis, the deferred tax liability that would
have been recorded if the Company had terminated its S Corporation status as of
September 30, 1996 would not have been material.
F-9
<PAGE> 69
DELTEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Impairment of Long-Lived Assets
The Company complies with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company
reviews its long-lived assets, including software development costs; property,
plant, and equipment; identifiable intangibles; and goodwill, for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be fully recoverable. To determine recoverability of its
long-lived assets, the Company evaluates the probability that future
undiscounted net cash flows, without interest charges, will be less than the
carrying amount of the assets. Impairment is measured at fair value.
Interim Financial Statements
The accompanying interim unaudited consolidated financial statements, as of
September 30, 1996, and for the nine months ended September 30, 1995 and 1996,
of the Company have been prepared by the Company and have not been audited.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been omitted from the accompanying interim statements. The Company believes
that the disclosures made are adequate to prevent the information presented from
being misleading.
In the opinion of the Company, the accompanying interim unaudited
consolidated financial statements reflect all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial position
of the Company as of September 30, 1996, and the results of its operations and
its cash flows for the nine months ended September 30, 1995 and 1996.
2. ALLEGRO ACQUISITION:
On September 18, 1996, the Company acquired, in a tax-free exchange, from
The Allegro Group, Inc. ("Allegro"), substantially all of the assets relating
solely to Allegro's software business, and assumed certain related liabilities,
in exchange for 102,000 shares of the Company's common stock, valued at $4.00
per share. The Company recorded the acquisition using the purchase method of
accounting.
Upon evaluation, the Company assigned approximately $130,000 to intangible
assets and is amortizing this amount over five years. The Company assigned
$394,000 to in-process research and development and expensed this amount. In the
opinion of management, the acquired in-process research and development had not
yet reached technological feasibility and had no alternative future uses. The
Company recorded approximately $140,000 in assumed liabilities of Allegro,
primarily related to deferred consulting revenue.
In addition, the Company entered into a three-year employment agreement
beginning October 1, 1996, with the two principals of Allegro for a base salary
and incentive compensation based upon revenue and profit growth of the Allegro
division of the Company.
3. ACCOUNTS RECEIVABLE:
The Company periodically licenses its software to certain customers under
monthly installment plans. Unbilled accounts receivable that relate primarily to
installment sales were approximately $1,697,000 and $1,490,000 at December 31,
1994 and 1995, respectively, and $3,220,000 at September 30, 1996 (unaudited).
Installment plans extending longer than four months are generally
interest-bearing.
F-10
<PAGE> 70
DELTEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- SEPTEMBER 30,
1994 1995 1996
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
(IN THOUSANDS)
Accrued wages and other employee benefits................ $ 742 $ 942 $ 1,579
Deferred rent credit..................................... 116 70 52
Accounts payable and other accrued expenses.............. 248 712 1,278
------ ------ ------
$1,106 $1,724 $ 2,909
====== ====== ======
</TABLE>
5. CREDIT FACILITIES:
The Company has an unused credit facility with a bank providing for a
$1,000,000 operating capital line of credit and a $100,000 equipment loan
facility to fund fixed-asset acquisitions. Loans under both facilities are
secured by substantially all of the Company' s assets. Borrowings under the
operating capital line of credit bear interest at the lender's prime rate.
Borrowings under the equipment loan facility bear interest at the prime rate
plus 1/2%, or the lender's cost of funds plus 2%. Borrowings under the
operating capital line of credit are limited to 80% of eligible billed
receivables, as defined. Borrowings under the equipment loan facility are
limited to 100% of the cost of equipment purchased. The prime rate was 8.5% at
December 31, 1995. The lender's cost of funds ranged from 5.4 to 5.5%, based
upon the term of the loan, at December 31, 1995. Subsequent to year-end, the
credit facility was renewed and will expire on April 30, 1997, subject to the
condition that the Company maintains minimum working capital of at least
$1,500,000; a ratio of debt-to-tangible net worth, as defined, of not more than
3.75:1.0; and a minimum current ratio, as defined, of 1.1:1.0.
6. DEFERRED REVENUE:
The Company had deferred revenue of approximately $1,934,000 and $2,786,000
as of December 31, 1994 and 1995, respectively, and $5,029,293 at September 30,
1996 (unaudited), attributable to the sales of licenses of Costpoint software.
The revenue related to Costpoint will be recognized upon the expiration of the
refund period, right of return, generally 60 to 90 days from the date of sale,
and the fulfillment of any significant vendor obligations (Note 1). Also
included in deferred revenue is ongoing software support and consulting and
training services.
7. COMMITMENTS:
Office Space Lease
The Company leases office space under noncancelable operating leases.
Minimum rental expense is recognized on a straight-line basis over the term of
the lease, regardless of when payments are due. Rent expense was approximately
$757,000 and $809,000 for the years ended December 31, 1994 and 1995,
respectively. The Company's primary lease expires in 1999.
F-11
<PAGE> 71
DELTEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1995, the future minimum lease payments are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
--------------------------------------------------------------- --------------
(IN THOUSANDS)
<S> <C>
1996........................................................... $ 915
1997........................................................... 915
1998........................................................... 915
1999........................................................... 229
------
$2,974
======
</TABLE>
Profit-Sharing Plan
The Company has a 401(k) profit-sharing plan covering all eligible
employees. Employees are eligible to participate in the plan after they have
completed six months of service. Once the eligibility requirement is satisfied,
employees may become participants on the earlier of the first day of the plan
year or the first day of the seventh month of the plan year coinciding with the
employees' eligibility. Company contributions vest ratably over five years. The
Board of Directors approved a contribution of 5% of eligible compensation for
1994 and 1995. The Company's contribution for 1994 and 1995 was approximately
$324,000 and $438,000, respectively.
8. EMPLOYEE STOCK OPTION PLANS:
1987 Employee Stock Option Plan
Prior to April 1, 1996, the Company's sole stock option plan was the 1987
Employee Stock Option Plan (the "Book Value Plan"), a nonqualified plan under
which 900,000 shares of common stock were originally reserved for issuance. In
December 1996, the Board of Directors reduced the number of shares of common
stock reserved for issuance under the Plan to equal the number of shares
issuable upon the exercise of options outstanding at September 30, 1996. The
exercise price of options granted under the Book Value Plan was based on the
book value per share at the end of the fiscal year immediately preceding the
grant, reduced by any dividends declared by the Company related to the previous
year. The Company recorded compensation expense based on the change in the
formula price per share and the exercise price of the option. Options are
exercisable over ten years, subject to a five-year vesting period.
Options granted pursuant to the Book Value Plan are generally
nontransferable, and shares issued pursuant to the exercise of these options are
subject to a right of first refusal by the Company. Since the Company has over
30 shareholders at December 31, 1995, under the provisions of the Book Value
Plan, the Company may decline to accept a notice of exercise of vested options.
This provision expires upon a sale of the Company or upon the initial public
offering of the Company's common stock. In the event that an employee ceases to
be employed, the Company will have the right, but not the obligation, to
purchase at a specified price all the stock purchased by the former employee.
In June 1996, the Company amended the Book Value Plan to change the
exercise price of future options to be granted thereunder from a formula price
based on book value to the fair market value of the underlying common stock. As
a result, the Company recorded a non-recurring, non-cash charge to operations in
the amount of $867,000, representing the aggregate difference between the
exercise price of outstanding vested options and $4.00 per share, the appraised
market value of the underlying common stock at June 30, 1996. Additional
compensation charges of up to $522,000 will be recorded through December 31,
1998, as outstanding options continue to vest under this plan.
F-12
<PAGE> 72
DELTEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Employee Time Accelerated Stock Option Plan
On April 1, 1996, the Company created the Employee Time Accelerated Stock
Option Plan (the "Accelerated Plan"), under which 1,500,000 shares of common
stock are reserved for issuance, and granted options thereunder to purchase
648,000 shares at an exercise price of $4.00 per share, the appraised value of
the common stock on the date of grant. Since the exercise price of these options
is equal to the appraised fair value of the common stock on the date of grant,
the Company recorded no compensation expense in accordance with Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees. These options vest 100% on January 1, 2004. However, in the event of
an acquisition or an initial public offering of the Company's common stock,
these options will vest ratably over a five year period from the date of grant.
Other provisions of the Accelerated Plan are consistent with the Book Value Plan
described above.
1996 Stock Option Plan
The Company's Board of Directors and the shareholders of the Company
adopted a new 1996 Stock Option Plan (the "1996 Option Plan") in December 1996.
A total of 900,000 shares of common stock have been reserved for issuance under
the 1996 Option Plan. No options have been granted. The 1996 Option Plan
provides for grants of incentive stock options to employees (including officers
and employee directors) and for grants of nonstatutory options to employees,
nonemployee directors and consultants.
The exercise price of incentive stock options granted under the 1996 Option
Plan must not be less than the fair market value of the common stock on the date
of the grant, and the exercise price of nonstatutory options must not be less
than 85% of the fair market value of the common stock on the date of the grant.
With respect to any optionee who owns stock representing more than 10% of the
voting power of all classes of the Company's outstanding common stock, the
exercise price of any incentive stock option must be equal to at least 110% of
the fair market value of the common stock on the date of the grant, and the term
of the option must not exceed five years. The terms of all other options may not
exceed 10 years.
1996 Employee Stock Purchase Plan
The Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Company's Board of Directors and approved by the shareholders of
the Company in December 1996. A total of 400,000 shares of common stock have
been reserved for issuance under the Purchase Plan. The Purchase Plan permits
eligible employees to purchase common stock through payroll deductions at a
price equal to 85% percent of the lower of fair market value of the common stock
on the first day of the offering period or the last day of the offering period.
F-13
<PAGE> 73
DELTEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Summary Activity
The following table summarizes the activity of all the Company's stock
option plans:
<TABLE>
<CAPTION>
NUMBER PRICE
OF SHARES PER SHARE
--------- ---------------
<S> <C> <C>
Shares under option, December 31, 1993................. 435,000 $0.075 -- $0.392
Options granted...................................... 33,000 0.443
Options canceled..................................... (61,500) --
Options exercised.................................... (87,000) 0.075 -- 0.392
---------
Shares under option, December 31, 1994................. 319,500 0.249 -- 0.443
---------
Options granted...................................... 144,000 0.517
Options canceled..................................... (24,000) 0.304 -- 0.392
Options exercised.................................... (31,500) 0.249 -- 0.517
---------
Shares under option, December 31, 1995................. 408,000 0.249 -- 0.517
---------
Options granted...................................... 657,000 4.000
Options canceled..................................... (18,000) 0.517 -- 4.000
Options exercised.................................... (10,500) 0.392 -- 4.000
---------
Shares under option, September 30, 1996 (unaudited).... 1,036,500 0.249 -- 4.000
=========
</TABLE>
As of December 31, 1995, a total of 21,750 shares of common stock were
available for future option grants under the Book Value Plan. Of the options
outstanding at December 31, 1995, options to purchase 200,400 shares are
immediately exercisable at exercise prices ranging from $0.249 to $0.517 per
share.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation, which is effective for the
Company's December 31, 1996 financial statements. SFAS No. 123 allows companies
to either account for compensation under the new provisions of SFAS No. 123 or
the provision of APB No. 25, Accounting for Stock Issued to Employees, but
requires pro forma disclosure in the footnotes to the financial statements as if
the measurement provisions of SFAS No. 123 had been adopted. The Company intends
to continue accounting for its stock-based compensation in accordance with the
provisions of APB No. 25. As such, the adoption of SFAS No. 123 will not impact
the financial position or the results of operations of the Company.
F-14
<PAGE> 74
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company, any Selling Shareholder or the Underwriters. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer in such jurisdiction. 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 time subsequent to the date hereof or that there has been no
change in the affairs of the Company since such date.
----------------------------
TABLE OF CONTENTS
----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
Prior S Corporation Status............ 13
Use of Proceeds....................... 14
Dividend Policy....................... 14
Capitalization........................ 15
Dilution.............................. 16
Selected Financial Data............... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 29
Management............................ 42
Certain Transactions.................. 48
Principal and Selling Shareholders.... 49
Description of Capital Stock.......... 51
Shares Eligible for Future Sale....... 53
Underwriting.......................... 55
Legal Matters......................... 56
Experts............................... 56
Additional Information................ 57
Index to Financial Statements......... F-1
</TABLE>
----------------------------
Until , 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,900,000 SHARES
DELTEK SYSTEMS, INC.
COMMON STOCK
----------------------------
PROSPECTUS
----------------------------
MONTGOMERY SECURITIES
WILLIAM BLAIR & COMPANY
, 1997
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 75
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant and the
Selling Shareholders in connection with the sale and distribution of the
securities being registered. All amounts shown are estimates except the
Securities and Exchange Commission registration fee, the NASD filing fee and The
Nasdaq National Market application fee.
<TABLE>
<CAPTION>
TO BE PAID BY TO BE PAID BY
THE THE SELLING
REGISTRANT SHAREHOLDERS TOTAL
------------- ------------- --------
<S> <C> <C> <C>
Securities and Exchange Commission registration fee........ $ 6,697 $ 6,441 $ 13,138
NASD filing fee............................................ 2,710 2,126 4,836
Nasdaq National Market application fee..................... 56,867 -- 56,867
Accounting fees and expenses............................... 100,000 -- 100,000
Legal fees and expenses.................................... 210,000 15,000 225,000
Printing and engraving fees and expenses................... 125,000 -- 125,000
Transfer agent and registrar fees.......................... 15,000 -- 15,000
Blue Sky qualification fees and expenses................... 5,000 -- 5,000
Directors' and Officers' liability insurance............... 75,000 -- 75,000
Miscellaneous expenses..................................... 28,726 1,433 30,159
-------- -------- --------
Total............................................ $ 625,000 $ 25,000 $650,000
======== ======== ========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 10 of the Virginia Stock Corporation Act (the "VSCA") allows for
indemnification, in certain circumstances, by a corporation of any person
threatened with or made a party to any action, suit or proceeding by reason of
the fact that he or she is, or was, a director, officer, employee or agent of
such corporation. The Registrant's Articles of Incorporation (Exhibit 3.1)
provide for mandatory indemnification of its directors and officers and for
discretionary indemnification of any employee or agent to the full extent
permitted by the VSCA, including in circumstances in which indemnification is
otherwise discretionary under the VSCA. In addition, the Registrant intends to
enter into separate indemnification agreements (Exhibit 10.10) with its
directors and officers which would require the Registrant, among other things,
to indemnify them against certain liabilities which may arise by reason of their
status or service (other than liabilities arising from willful misconduct or
knowing violation of the criminal law). These indemnification provisions may be
sufficiently broad to permit indemnification of the Registrant's officers and
directors for liabilities (including reimbursement of expenses incurred) arising
under the Securities Act of 1933, as amended (the "Securities Act").
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by
the Underwriters of the Registrant and its officers and directors for certain
liabilities arising under the Securities 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.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) Since December 31, 1993, the Registrant has sold and issued the
following securities, as adjusted to give effect to the three-for-one stock
split effected in December 1996:
(i) The Company issued 102,000 shares of its Common Stock in
connection with its acquisition of The Allegro Group, Inc., which was
consummated on September 15, 1996.
II-1
<PAGE> 76
(ii) The Company has granted options to purchase an aggregate of
834,000 shares of its Common Stock to employees pursuant to its option
plans.
(iii) The Company has issued an aggregate of 133,500 shares of its
Common Stock upon exercise of employee stock options.
(b) There were no underwriters, brokers or finders employed in connection
with any of the transactions set forth in Item 15(a).
(c) The issuance described in Item 15(a)(i) was deemed to be exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof as a
transaction not involving any public offering. The issuances described in Item
15(a)(ii) and (iii) were deemed exempt from registration under the Securities
Act in reliance upon Rule 701 promulgated thereunder.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------ --------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement (draft dated December , 1996).
3.1 Amended and Restated Articles of Incorporation of the Registrant.
3.2 Amended and Restated Bylaws of the Registrant.
*4.1 Specimen Common Stock certificate of the Registrant.
*5.1 Opinion and Consent of Gray Cary Ware & Freidenrich, A Professional Corporation.
10.1 1987 Employee Stock Option Plan.
10.2 Employee Time Accelerated Stock Option Plan.
10.3 1996 Stock Option Plan.
10.4 1996 Employee Stock Purchase Plan.
+10.5 OEM Software License Agreement by and between the Company and Centura Software
Corporation dated as of March 1, 1993, as amended.
+10.6 Cognos Desktop OEM Agreement by and between the Company and Cognos Corporation
dated as of February 28, 1994, as amended.
+10.7 Micro Focus OSX Application Vendor License Agreement by and between the Company
and Micro Focus Incorporated dated as of June 10, 1993, as amended.
10.8 Agreement of Lease by and between the Company and Tysons Corner Limited
Partnership, dated as of November 12, 1991, as amended.
10.9 Agreement of Lease by and between the Company and Tysons Corner Limited
Partnership, dated as of November 12, 1992, as amended.
*10.10 Form of Indemnity Agreement for officers and directors.
*10.11 Form of Tax Indemnification Agreement.
11.1 Computation of per share earnings.
23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Gray Cary Ware & Freidenrich, A Professional Corporation. Reference
is made to Exhibit 5.1.
*23.3 Consent of Hazel & Thomas, P.C.
23.4 Consent of Darrell J. Oyer.
24.1 Power of Attorney. Reference is made to Page II-4.
27.1 Financial Data Schedule (filed in EDGAR format only).
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment has been requested as to a portion of this Exhibit.
(b) Financial Statement Schedules:
Report of Independent Public Accountants on Schedules
Schedule II -- Valuation and Qualifying Accounts
II-2
<PAGE> 77
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referenced in Item 14 of this Registration
Statement, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered hereunder, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of Prospectus filed by the Registrant pursuant to Rule 424 (b) (1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities
Act of 1933, each posteffective amendment that contains a form of
Prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 78
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"Securities Act") the Registrant has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of McLean, State of Virginia, on the 19th day of December 1996.
DELTEK SYSTEMS, INC.
By: /s/ KENNETH E. DELASKI
------------------------------------
Kenneth E. deLaski
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Kenneth E. deLaski, and Alan R. Stewart,
and each of them, as his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and registration
statements filed pursuant to section 462(b) of the Securities Act, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- -------------------------- ------------------
<C> <S> <C>
/s/ KENNETH E. DELASKI President, Chief Executive December 19, 1996
- ----------------------------------------------- Officer and Director
(Kenneth E. deLaski) (Principal Executive
Officer
/s/ ALAN R. STEWART Chief Financial Officer December 19, 1996
- ----------------------------------------------- (Principal Financial and
(Alan R. Stewart) Accounting Officer)
/s/ DONALD DELASKI Chairman of the Board of December 19, 1996
- ----------------------------------------------- Directors
(Donald deLaski)
/s/ ROBERT E. GREGG Director December 19, 1996
- -----------------------------------------------
(Robert E. Gregg)
</TABLE>
II-4
<PAGE> 79
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Deltek Systems, Inc.:
We have audited in accordance with generally accepted auditing standards
the consolidated financial statements of Deltek Systems, Inc., included in this
registration statement and have issued our report thereon dated December 17,
1996. Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of valuation and qualifying
accounts is the responsibility of the Company's management and is presented for
the purpose of complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. This schedule has been subjected
to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, fairly states, in all material respects, the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Washington, D.C.
December 17, 1996
S-1
<PAGE> 80
SCHEDULE II
DELTEK SYSTEMS, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, 1995,
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
BEGINNING AMOUNTS CHARGED TO ENDING
BALANCE WRITTEN-OFF EXPENSE BALANCE
--------- ----------- ---------- -------
<S> <C> <C> <C> <C>
DECEMBER 31, 1993:
Bad-debt reserves............................. $ 122 $(253) $264 $ 133
DECEMBER 31, 1994:
Bad-debt reserves............................. 133 (370) 493 256
DECEMBER 31, 1995:
Bad-debt reserves............................. 256 (503) 590 343
SEPTEMBER 30, 1996 (UNAUDITED):
Bad-debt reserves............................. 343 (381) 245 207
</TABLE>
S-2
<PAGE> 81
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE PAGE
------ -------------------------------------------------------------------------- ----
<C> <S> <C>
*1.1 Form of Underwriting Agreement (draft dated December , 1996). ..........
3.1 Amended and Restated Articles of Incorporation of the Registrant. ........
3.2 Amended and Restated Bylaws of the Registrant. ...........................
*4.1 Specimen Common Stock certificate of the Registrant. .....................
*5.1 Opinion and Consent of Gray Cary Ware & Freidenrich, A Professional
Corporation. .............................................................
10.1 1987 Employee Stock Option Plan. .........................................
10.2 Employee Time Accelerated Stock Option Plan. .............................
10.3 1996 Stock Option Plan. ..................................................
10.4 1996 Employee Stock Purchase Plan. .......................................
+10.5 OEM Software License Agreement by and between the Company and Centura
Software Corporation dated as of March 1, 1993, as amended. ..............
+10.6 Cognos Desktop OEM Agreement by and between the Company and Cognos
Corporation dated as of February 28, 1994, as amended. ...................
+10.7 Micro Focus OSX Application Vendor License Agreement by and between the
Company and Micro Focus Incorporated dated as of June 10, 1993, as
amended. .................................................................
10.8 Agreement of Lease by and between the Company and Tysons Corner Limited
Partnership, dated as of November 12, 1991, as amended. ..................
10.9 Agreement of Lease by and between the Company and Tysons Corner Limited
Partnership, dated as of November 12, 1992, as amended. ..................
*10.10 Form of Indemnity Agreement for officers and directors.
*10.11 Form of Tax Indemnification Agreement. ...................................
11.1 Computation of per share earnings. .......................................
23.1 Consent of Arthur Andersen LLP. ..........................................
*23.2 Consent of Gray Cary Ware & Freidenrich, A Professional Corporation.
Reference is made to Exhibit 5.1. ........................................
*23.3 Consent of Hazel & Thomas, P.C. ..........................................
23.4 Consent of Darrell J. Oyer. ..............................................
24.1 Power of Attorney. Reference is made to Page II-4. .......................
27.1 Financial Data Schedule (filed in EDGAR format only). ....................
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment has been requested as to a portion of this Exhibit.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
DELTEK SYSTEMS, INC.
1. Name. The name of the Corporation is "Deltek Systems, Inc."
2. Purpose. The Corporation is organized to develop and market
computer software systems and to engage in any lawful business for which
corporations may be incorporated under Virginia law.
3. Authorized Stock. The total number of shares of all classes
of stock which the Corporation shall have authority to issue is forty-seven
million (47,000,000) shares consisting of forty-five million (45,000,000)
shares of common stock having a par value of $.001 per share (the "Common
Stock") and two million (2,000,000) shares of preferred stock having a par
value of $.001 per share (the "Preferred Stock").
Subject to limitations prescribed by law, the Board of Directors of
the Corporation is authorized to issue shares of the Preferred Stock as a class
or in series and, by adopting amendments of these articles of incorporation, to
establish from time to time the number of shares to be included in each such
series and to fix the designations, preferences, limitations and relative
rights of the shares of the class or of each such series and the
qualifications, limitations, and restrictions thereof. The authority of the
Board of Directors with respect to the class or each series shall include, but
not be limited to, determination of the following:
(a) the number of shares constituting any series and the
distinctive designation of that series;
(b) the dividend rate of the shares of the class or of
any series, whether dividends shall be cumulative, and if so, from which date
or dates, and the relative rights of priority, if any of payment of dividends
on shares of the class or of that series;
(c) whether the class or any series shall have voting
rights, in addition to the voting rights provided by law, and if so, the terms
of such voting rights;
(d) whether the class or any series shall have conversion
privileges and, if so, the terms and conditions of conversion, including
provision for adjustment of the conversion rate in such events as the Board of
Directors shall determine;
1 of 7
<PAGE> 2
(e) whether or not the shares of the class or of any
series shall be redeemable, and, if so, the terms and conditions of such
redemption, including the date or date upon or after which they shall be
redeemable and the amount per share payable in case of redemption, which amount
may vary under different conditions and at different redemption dates;
(f) whether the class or any series shall have a sinking
fund for the redemption or purchase of shares of the class or of that series,
and if so, the terms and amount of such sinking fund;
(g) the rights of the shares of the class or of any
series in the event of voluntary or involuntary dissolution or winding up of
the Corporation, and the relative rights of priority, if any, of payment of
shares of the class or of that series; and
(h) any other powers, preferences, rights,
qualifications, limitations and restrictions of the class or of that series.
All rights accruing to the outstanding shares of the Corporation not
expressly provided for to the contrary herein or in any amendment of these
articles of incorporation shall be vested exclusively in the Common Stock.
4. Registered Office. The Corporation's registered office is:
8280 Greensboro Drive
Suite 300
McLean, Virginia 22102
The registered office is located in the County of Fairfax, Virginia.
5. Registered Agent. The name of the Corporation's registered
agent is Donald deLaski, who is a Virginia resident and a director of the
Corporation. His business address is identical to the address of the
Corporation's registered office.
6. Directors. The number of directors of the Corporation shall be
fixed in the Bylaws. Commencing with the first annual meeting of shareholders
after the effective date of these Amended and Restated Articles, the Board of
Directors shall be divided into three classes with each class containing one
third of the total number of directors, as nearly equal in number as possible.
At that annual meeting of shareholders, directors of the first class shall be
elected to hold office for a term expiring at the second annual meeting of
shareholders after the effective date of these Amended and Restated Articles,
directors of the second
2 of 7
<PAGE> 3
class shall be elected to hold office for a term expiring at the third annual
meeting of shareholders after the effective date of these Amended and Restated
Articles, and directors of the third class shall be elected to hold office for
a term expiring at the fourth annual meeting of shareholders after the
effective date of these Amended and Restated Articles. At each annual meeting
of shareholders thereafter, the successors to the class of directors whose
terms then shall expire shall be identified as being of the same class as the
directors they succeed and elected to hold office for a term expiring at the
third succeeding annual meeting of shareholders.
7. Denial of Preemptive Rights. Except as may be otherwise
provided by the Board of Directors, no holder of any shares of stock of the
Corporation shall have any preemptive right to purchase, subscribe for, or
otherwise acquire any shares of the Corporation of any class or series now or
hereafter authorized.
8. Limit on Liability and Indemnification
8.1 Definitions. For purposes of this Article the
following definitions shall apply:
(a) "Corporation" means this Corporation and each
predecessor entity of this Corporation, but no other legal entity;
(b) "expenses" include counsel fees, expert witness
fees, and costs of investigation, litigation and appeal, as well as any amounts
expended in asserting a claim for indemnification;
(c) "liability" means the obligation to pay a
judgment, settlement, penalty, fine, including, without limitation, any excise
tax assessed with respect to an employee benefit plan, or reasonable expenses
incurred with respect to a proceeding;
(d) "legal entity" means a corporation, partnership,
joint venture, limited liability company, trust, employee benefit plan or other
enterprise;
(e) "predecessor entity" means a legal entity the
existence of which ceased upon its acquisition by the Corporation in a merger
or otherwise; and
(f) "proceeding" means any threatened, pending, or
completed action, suit, proceeding or appeal whether civil, criminal,
administrative or investigative and whether formal or informal.
3 of 7
<PAGE> 4
8.2 Limit on Liability.
(a) In any proceeding brought by or in the right
of the Corporation or brought by or on behalf of shareholders of the
Corporation, no officer or director of the Corporation shall be liable to the
Corporation or its shareholders for monetary damages with respect to any
transaction, occurrence or course of conduct, whether prior to or subsequent to
the effective date of this Article, except for liability resulting from such
person having engaged in willful misconduct or a knowing violation of criminal
law or any federal or state securities law, including, without limitation, any
claim of unlawful insider trading or manipulation of the market for any
security.
(b) If the Virginia Stock Corporation Act is
amended to authorize corporate action further eliminating or limiting the
personal liability of officers and directors, then the liability of an officer
or director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Virginia Stock Corporation Act, as so amended. Any
repeal or modification of this provision shall not adversely affect any right
or protection of an officer or director of the Corporation existing at the time
of such repeal or modification.
8.3 Indemnification of Directors and Officers.
(a) The Corporation shall indemnify any
individual who is, was or is threatened to be made a party to a proceeding
(including a proceeding brought by or in the right of the Corporation or
brought by or on behalf of shareholders of the Corporation) because such
individual is or was a director or officer of the Corporation or because such
individual is or was serving the Corporation, or any other legal entity in any
capacity at the request of the Corporation while a director or officer of the
Corporation, against all liabilities incurred by him in connection with such
proceeding, except such liabilities as are incurred because of such
individual's willful misconduct or knowing violation of criminal law. Service
as a director or officer of a legal entity controlled by the Corporation shall
be deemed service at the request of the Corporation, and a person is considered
to be serving an employee benefit plan at the Corporation's request if his
duties to the plan or to participants in or beneficiaries of the plan. The
Board of Directors is hereby empowered, by a majority vote of a quorum of
disinterested directors, to enter into a contract to indemnify, and make
advances and reimbursements for expenses to, any director or officer to the
same extent provided in this Section 8.3(a) in respect of any proceedings
arising from any act or omission, whether occurring before or after the
execution of such contract.
4 of 7
<PAGE> 5
(b) Except as provided in Section 8.3(d) of this
Article, the determination that indemnification under Section 8.3(a) of this
Article is permissible in a specific case shall be made:
(1) By the Board of Directors by a
majority vote of a quorum consisting of directors not at the time parties to
the proceeding;
(2) If a quorum of the Board of
Directors cannot be obtained under subsection (1) of this section, by majority
vote of a committee duly designated by the Board of Directors (in which
designation directors who are parties may participate), consisting solely of
two or more directors not at the time parties to the proceeding;
(3) by special legal counsel selected as
follows:
(i) By the Board of Directors or its
committee in the manner prescribed in subsection (1) or (2) of this section; or
(ii) If a quorum of the Board of
Directors cannot be obtained under subsection (1) and a committee cannot be
designated under subsection (2), by majority vote of the full Board of
Directors, in which selection directors who are parties to the proceeding may
participate; or
(4) By the shareholders, but shares
owned by or voted under the control of directors who are at the time parties to
the proceeding may not be voted on the determination.
(c) Any evaluation as to the reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is appropriate, except that if the determination is made by
special legal counsel, such evaluation as to reasonableness of expenses shall
be made by those entitled under subsection (b)(3) of this section to select
special legal counsel.
(d) Notwithstanding Section 8.3(b) of this
Article, if a majority of the directors of the Corporation has changed after
the date of the alleged conduct giving rise to a claim for indemnification,
such determination and evaluation shall, at the option of the person claiming
indemnification, be made by special legal counsel selected by agreement of the
Board of Directors and the person claiming indemnification. If the Board of
Directors and such person are unable to agree upon such special legal counsel,
the Board of Directors and such person each shall select a nominee, and the
nominees shall select such special legal counsel.
5 of 7
<PAGE> 6
(e) Special legal counsel selected to make
determinations under this Article may be counsel for the Corporation.
(f) Unless a determination has been made that
indemnification is not permissible, the Corporation shall make advances and
reimbursements for expenses incurred by a director or officer in a proceeding
upon receipt of an undertaking from such director or officer to repay the same
if it is ultimately determined that such director or officer is not entitled to
indemnification. Such undertaking shall be an unlimited, unsecured general
obligation of the director or officer and shall be accepted without reference
to such director's or officer's ability to make repayment.
(g) The termination of a proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that a director or officer
acted in such a manner as to make such director or officer ineligible for
indemnification.
8.4 Indemnification of Others. The Board of Directors is
hereby empowered, by majority vote of a quorum consisting of disinterested
directors, to cause the Corporation to indemnify or contract to indemnify any
person not specified in Sections 8.2 or 8.3 of this Article who is, was or is
threatened to be made a party to a proceeding (including a proceeding brought
by or in the right of the Corporation or brought by or on behalf of
shareholders of the Corporation) because such individual is or was an employee
or agent of the Corporation or a director, officer, employee or agent of the
Corporation's subsidiaries or predecessor entities or because such individual
is or was serving the Corporation or any other legal entity in any capacity at
the request of the Corporation, to the same extent as if such person were
specified as one to whom indemnification is granted in Section 8.3 of this
Article. The provisions of Section 8.3 of this Article shall be applicable to
any indemnification provided pursuant to this Section 8.4.
8.5 Insurance. The Corporation is authorized to purchase
and maintain insurance, in such amounts as the Board of Directors may
determine, to indemnify it against the whole or any portion of any liability it
may have under this Article or any of the persons specified in Sections 8.2,
8.3 or 8.4 of this Article against any liability arising from their service to
the Corporation or any other legal entity at the request of the Corporation
regardless of the Corporation's power to indemnify against such liability.
6 of 7
<PAGE> 7
8.6 Miscellaneous.
(a) The Corporation shall promptly take all such
actions, and make all such determinations, as shall be necessary or appropriate
to comply with its obligation to make any indemnity under this Article 8 and
shall promptly pay or reimburse all reasonable expenses, including attorneys'
fees, incurred by any such indemnified person in connection with such actions
and determinations or proceedings of any kind arising therefrom.
(b) Every reference in this Article to directors,
officers, employees or agents shall include former directors, officers,
employees and agents and their respective heirs, executors and administrators.
(c) The indemnification hereby provided and
provided hereafter pursuant to the power hereby conferred by this Article on
the Board of Directors shall not be exclusive of any other right of
indemnification to which any person may be entitled, including indemnification
pursuant to a valid contract, indemnification by legal entities other than the
Corporation and indemnification under policies of insurance purchased and
maintained by the Corporation or others.
(d) The provisions of this Article shall not be
deemed to preclude the Corporation from making or providing for any further
indemnity or from entering into contracts otherwise permitted by law with any
individuals or legal entities, including those specified in this Article.
(e) If any provision of this Article or its
application to any person or circumstance is held invalid by a court of
competent jurisdiction, the invalidity shall not affect other provisions or
applications of this Article, and to this end the provisions of this Article
are severable.
(f) The provisions of this Article 8 shall be
applicable to all proceedings commenced after the adoption hereof by the
Corporation, arising from any act or omission, whether occurring before or
after such adoption.
(g) No amendment, modification or repeal of this
Article shall diminish or have any effect on the rights provided hereunder to
any person arising from conduct or events occurring before the adoption of such
amendment, modification or repeal.
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<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
DELTEK SYSTEMS, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
1.1 Place and Time of Meetings. Meetings of shareholders shall be
held at such place, either within or without the Commonwealth of Virginia, and
at such time, as may be provided in the notice of the meeting and approved by
the Chairman of the Board of Directors (the "Chairman"), the President or the
Board of Directors.
1.2 Annual Meeting. The annual meeting of shareholders shall be held
on the third Tuesday in May of each year, or on such date as may be designated
by resolution of the Board of Directors from time to time for the purpose of
electing directors and conducting such other business as may properly come
before the meeting.
1.3 Special Meetings. Special meetings of the shareholders may be
called by the Chairman, the President or the Board of Directors. Only
business within the purpose or purposes described in the notice for a special
meeting of shareholders may be conducted at the meeting.
1.4 Record Dates.
(a) The Board of Directors may fix, in advance, a record date to
make a determination of shareholders entitled to notice of, or to vote at, any
meeting of shareholders, to receive any dividend or for any purpose, such date
to be not more than 70 days before the meeting or action requiring a
determination of shareholders. If no such record date is set, then the record
date shall be the close of business on the day before the date on which the
first notice is given.
(b) When a determination of shareholders entitled to notice of or
to vote at any meeting of shareholders has been made, such determination shall
be effective for any adjournment of the meeting unless the Board of Directors
fixes a new record date, which it shall do if the meeting is adjourned to a
date more than 120 days after the date fixed for the original meeting.
1.5 Notice of Meetings. Written notice stating the place, day and hour
of each meeting of shareholders and, in case of a special meeting, the purpose
or purposes for which the meeting is called, shall be given not less than ten
nor more than 60 days before the date of the meeting (except when a different
time is required in these Bylaws or by law) either personally or by mail,
telephone, telegraph, teletype, telecopy or other form of wire
<PAGE> 2
or wireless communication, or by private courier, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
effective when deposited in first class United States mail with postage thereon
prepaid, addressed to the shareholder at his or her address as it appears on the
share transfer books of the Corporation. If given in any other manner, such
notice shall be deemed to be effective (i) when given personally or by
telephone, (ii) when sent by telegraph, teletype, telecopy or other form of wire
or wireless communication, or (iii) when given to a private courier to be
delivered.
1.6 Adjournment. Any meeting of shareholders may be adjourned to any
other time and to any other place at which a meeting of shareholders may be
held under these Bylaws by the shareholders present or represented at the
meeting and entitled to vote, although less than a quorum, or, if no
shareholder is present, any officer entitled to preside at or to act as
secretary of such meeting. If a meeting is adjourned to a different date,
time or place, notice need not be given if the new date, time or place is
announced at the meeting before adjournment. However, if a new record date
for an adjourned meeting is fixed, notice of the adjourned meeting shall be
given to shareholders as of the new record date, unless a court provides
otherwise.
1.7 Waiver of Notice. A shareholder may waive any notice required by
law, the Articles of Incorporation or these Bylaws before or after the date
and time of the meeting that is the subject of such notice. The waiver shall
be in writing, be signed by the shareholder entitled to the notice, and be
delivered to the Secretary of the Corporation for inclusion in the minutes or
filing with the corporate records.
1.8 Attendance at Meeting. A shareholder's attendance at a meeting (i)
waives objection to lack of notice or defective notice of the meeting, unless
the shareholder at the beginning of the meeting objects to holding the meeting
or transacting business at the meeting, and (ii) waives objection to
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
1.9 Conduct of the Shareholders' Meeting. At every meeting of
shareholders, the Chairman, or in his absence the President of the
Corporation, or in his absence the Vice President designated by the President,
or in the absence of such designation, any Vice President, or in the absence
of the Chairman, the President and all Vice Presidents, a chairman chosen by
the majority of the voting shares represented in person or by proxy, shall act
as chairman. The Secretary of the Corporation or a person
2
<PAGE> 3
designated by the chairman shall act as Secretary of the meeting. Unless
otherwise approved by the chairman, attendance at the shareholders' meeting is
restricted to shareholders of record, persons authorized in accordance with
Section 1.12 of this Article and officers of the Corporation.
1.10 Conduct of Business.
(a) The Chairman shall call the meeting to order, establish an
agenda and conduct the business of the meeting in accordance therewith, or, at
the Chairman's discretion, the meeting may be conducted otherwise in
accordance with the wishes of the shareholders in attendance. The date and
time of the opening and closing of the polls for each matter upon which the
shareholders will vote at the meeting shall be announced at the meeting.
(b) The Chairman shall conduct the meeting in an orderly manner,
rule on the precedence of and procedures on motions and other procedural
matters, and exercise discretion with respect to such procedural matters with
fairness and good faith toward all those entitled to take part. The Chairman
may impose reasonable limits on the amount of time taken up at the meeting on
discussion in general or on remarks by any one shareholder. Should any person
in attendance become unruly or obstruct the meeting proceedings, the Chairman
shall have the power to have such person removed from participation.
(c) Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at a meeting except in accordance with the
procedures set forth in this Section 1.10 and Section 1.11 of this Article.
The Chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that business was not properly brought before the meeting and
in accordance with the provisions of this Section 1.10 and Section 1.11 of
this Article, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall
not be transacted.
1.11 Notice of Shareholder Business.
(a) At an annual or special meeting of the shareholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before a meeting, business must be (i)
specified in the notice of the meeting (or any supplement thereto) by or at
the direction of the Board of Directors, (ii) properly brought before the
meeting by or at the direction of the Board of Directors, or (iii) properly
brought before the meeting by a shareholder of the Corporation who complies
with the notice procedures set forth in this Section 1.11.
3
<PAGE> 4
(b) For business to be properly brought before a meeting of the
shareholders by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
shareholder proposal to be presented at an annual meeting shall be received at
the Corporation's principal executive offices not less than 120 calendar days
in advance of the date that the Corporation's (or the Corporation's
predecessor's) proxy statement was released to shareholders in connection with
the previous year's annual meeting of shareholders, except that if no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than 30 calendar days from the date contemplated by the previous
year's proxy statement, or in the event of a special meeting, notice by the
shareholder to be timely must be received not later than the close of business
on the tenth day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made.
(c) A shareholder's notice to the Secretary shall set forth as to
each matter the shareholder proposes to bring before the annual or special
meeting (i) a brief description of the business desired to be brought before
the annual or special meeting and the reasons for conducting such business at
the special meeting, (ii) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such business, (iii) the
class and number of shares of the Corporation that are beneficially owned by
the shareholder, and (iv) any material interest of the shareholder in such
business. In addition, the shareholder making such proposal shall promptly
provide any other information reasonably requested by the Corporation.
1.12 Quorum and Voting Requirements.
(a) Unless otherwise required by law, a majority of the votes
entitled to be cast on a matter constitutes a quorum for action on that
matter. Once a share is represented in person or by proxy for any purpose at
a meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
shall be set for that adjourned meeting. At all meetings of shareholders, a
shareholder may vote by proxy appointed by an instrument in writing executed
by the shareholder or by his duly authorized attorney in fact and filed with
the Secretary of the Corporation, or other officer or agent authorized to
tabulate votes before or at the time of the meeting. No shareholder may
authorize more than one proxy for his shares.
(b) Each shareholder shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote and held of record by such
shareholder. If a quorum exists, action on a matter, other than the election
of directors, is approved if the votes cast favoring the action exceed the
votes cast opposing
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the action, unless a greater number of affirmative votes is required by law.
Directors shall be elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present. Less
than a quorum may adjourn a meeting.
(c) All voting, including on the election of directors but
excepting where otherwise required by law, may be by a voice vote; provided,
however, that upon demand therefor by a shareholder entitled to vote or his or
her proxy, a stock vote shall be taken. Every stock vote shall be taken by
ballots, each of which shall state the name of the shareholder or proxy voting
and such other information as may be required under the procedure established
for the meeting. Every vote taken by ballots shall be counted by an inspector
or inspectors appointed by the chairman of the meeting.
1.13 Stock List. A complete list of shareholders entitled to vote at any
meeting of shareholders, arranged in alphabetical order for each class of
stock and showing the address of each such shareholder and the number of
shares registered in his or her name, shall be open to the examination of any
such shareholder, for any purpose germane to the meeting, during normal
business hours for a period of at least 10 calendar 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 stock list also shall be kept
at the place of the meeting during the whole time thereof and shall be open to
the examination of any such shareholder who is present. This list shall
presumptively determine the identity of the shareholders entitled to vote at
the meeting and the number of shares held by each of them.
ARTICLE II
DIRECTORS
2.1 General Powers. The Corporation shall have a Board of Directors.
All corporate powers shall be exercised by or under the authority of, and the
business and affairs of the Corporation managed under the direction of, its
Board of Directors, subject to any limitation set forth in the Articles of
Incorporation.
2.2 Number, Term and Election.
(a) The number of directors of the Corporation shall be fixed by
the Board of Directors, but shall not be less than five (5) nor more than
fifteen (15). Each director shall hold office until his or her death,
resignation, retirement or removal or until his or her successor is elected.
No decrease in the
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number of directors constituting the Board of Directors shall have the effect of
shortening the term of any incumbent director.
(b) Commencing with the 1997 annual meeting of shareholders, the
Board of Directors shall be divided into three classes with each class
containing one third of the total number of directors, as nearly equal in
number as possible. At the 1997 annual meeting of shareholders, directors of
the first class (Class I) shall be elected to hold office for a term expiring
at the 1998 annual meeting of shareholders, directors of the second class
(Class II) shall be elected to hold office for a term expiring at the 1999
annual meeting of shareholders, and directors of the third class (Class III)
shall be elected to hold office for a term expiring at the 2000 annual meeting
of shareholders. At each annual meeting of shareholders after the 2000 annual
meeting, the successors to the class of directors whose terms then shall expire
shall be identified as being of the same class as the directors they succeed and
elected to hold office for a term expiring at the third succeeding annual
meeting of shareholders. When the number of directors is changed, any newly
created directorships or any decrease in directorships shall be apportioned
among the classes by the Board of Directors as to make all classes as nearly
equal in number as possible.
(c) Except as provided in Section 2.4 of this Article, the
directors whose terms expire shall be elected by the holders of the Common
shares at the annual meeting of shareholders, and those persons who receive
the greatest number of votes shall be deemed elected even though they do not
receive a majority of the votes cast. No individual shall be named or elected
as a director without his or her prior consent.
(d) During any period when the holders of preferred stock or any
one or more series thereof, voting as a class, shall be entitled to elect a
specified number of directors by reason of dividend arrearages or other
contingencies giving them the right to do so, then and during such time as
such right continues (i) the then otherwise authorized number of directors
shall be increased by such specified number of directors, and the holders of
the preferred stock or such series thereof, voting as a class, shall be
entitled to elect the additional directors as provided for pursuant to the
provisions of such preferred stock or series; (ii) the additional directors
shall be members of those respective classes of directors in which vacancies
are created as a result of such increase in the authorized number of
directors; and (iii) each such additional director shall serve until the
annual meeting at which the term of office of his class shall expire and until
his successor shall be elected and shall qualify, or until his right to hold
such office terminates pursuant to the provisions of such preferred stock or
series, whichever occurs earlier. Whenever the holders of such preferred
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stock or series thereof are divested of such rights to elect a specified
number of directors, voting as a class, pursuant to the provisions of such
preferred stock or series, the terms of office of all directors elected by the
holders of such preferred stock or series, voting as a class pursuant to such
provisions, or elected to fill any vacancies resulting from the death,
resignation or removal of directors so elected by the holders of such preferred
stock or series, shall forthwith terminate and the authorized number of
directors shall be reduced accordingly.
2.3 Removal. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, the shareholders may remove one or more
directors, with or without cause, if the number of votes cast to remove him or
her constitutes a majority of the votes entitled to be cast at an election of
directors. A director may be removed by the shareholders only at a meeting
called for the purpose of removing him or her and the meeting notice must
state that the purpose, or one of the purposes of the meeting, is removal of
the director.
2.4 Vacancies.
(a) Subject to the rights of the holders of any series of Preferred
Stock then outstanding, a vacancy on the Board of Directors, including a
vacancy resulting from the removal of a director or an increase in the number
of directors, may be filled by (i) the shareholders, (ii) the Board of
Directors, or (iii) the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors, and may, in the
case of a resignation that will become effective at a specified later date, be
filled before the vacancy occurs but the new director may not take office
until the vacancy occurs. A director elected to fill a vacancy caused by
resignation, death, or removal of a director shall be elected to hold office
for the unexpired portion of the term of the director who resigned, died or
was removed.
(b) Increases in the number of directors shall be filled in
accordance with the rule that each class of directors shall be as nearly equal
in number of directors as possible. Notwithstanding such rule, in the event of
any change in the authorized number of directors, each director then
continuing to serve as such will nevertheless continue as a director of the
class of which he is a member, until the expiration of his current term or his
earlier death, resignation or removal. If any newly created directorship or
vacancy on the Board of Directors, consistent with the rule that the three
classes shall be as nearly equal in number of directors as possible, may be
allocated to one or two or more classes, the Board of Directors shall allocate
it to that of the available class whose term of office is due to expire at the
earliest date following such allocation. When a vacancy is filled, the
director chosen to
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fill that vacancy shall be of the same class as the director he succeeds and
shall hold office until such director's successor shall have been elected and
shall qualify or until such director shall resign or shall have been removed.
2.5 Annual and Regular Meetings. An annual meeting of the Board of
Directors, which shall be considered a regular meeting, shall be held
immediately following each annual meeting of shareholders, for the purpose of
electing officers and carrying on such other business as may properly come
before the meeting. The Board of Directors may also adopt a schedule of
additional meetings which shall be considered regular meetings. Regular
meetings shall be held at such times and at such places, within or without the
Commonwealth of Virginia, as the Chairman, the President or the Board of
Directors shall designate from time to time. If no place is designated,
regular meetings shall be held at the principal office of the Corporation.
2.6 Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman, the President or a majority of the
directors of the Corporation, and shall be held at such times and at such
places, within or without the Commonwealth of Virginia, as the person or
persons calling the meetings shall designate. If no such place is designated
in the notice of a meeting, it shall be held at the principal office of the
Corporation.
2.7 Notice of Meetings.
(a) No notice need be given of regular meetings of the Board of
Directors.
(b) Notices of special meetings of the Board of Directors shall be
given to each director in person or delivered to his or her residence or
business address (or such other place as he or she may have directed in
writing) not less than 24 hours before the meeting by mail, messenger,
telecopy, telegraph, or other means of written communication or by telephoning
such notice to him or her. Any such notice shall set forth the time and place
of the meeting and state the purpose for which it is called.
2.8 Waiver of Notice.
(a) A director may waive any notice required by law, the Articles
of Incorporation, or these Bylaws before or after the date and time stated in
the notice, and such waiver shall be equivalent to the giving of such notice.
Except as provided in subsection (b) of this section, the waiver shall be in
writing, signed by the director entitled to the notice and filed with the
minutes or corporate records.
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(b) A director's attendance at or participation in a meeting waives
any required notice to him or her of the meeting unless the director at the
beginning of the meeting or promptly upon his or her arrival objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
2.9 Quorum and Voting Requirements. Except as otherwise provided herein
or required by law, a majority of the number of directors fixed pursuant to
these Bylaws shall constitute a quorum for the transaction of business at a
meeting of the Board of Directors, and if a quorum is present when a vote is
taken, the affirmative vote of a majority of the directors present is the act
of the Board of Directors. A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless (i) he
or she objects at the beginning of the meeting, or promptly upon his or her
arrival, to holding it or transacting specified business at the meeting, or
(ii) he or she votes against, or abstains from, the action taken.
2.10 Telephonic Meetings. The Board of Directors may permit
any or all directors to participate in a regular or special meeting by, or
conduct the meeting through the use of, any means of communication by which
all directors participating may simultaneously hear each other during the
meeting. A director participating in a meeting by this means is deemed to be
present in person at the meeting.
2.11 Action Without Meeting. Action required or permitted to be taken at
a meeting of the Board of Directors may be taken without a meeting if the
action is taken by all members of the Board. The action shall be evidenced by
one or more written consents stating the action taken, signed by each director
either before or after the action taken, and included in the minutes or filed
with the corporate records reflecting the action taken. Action taken under
this section shall be effective when the last director signs the consent
unless the consent specifies a different effective date, in which event the
action taken is effective as of the date specified therein provided the
consent states the date of execution by each director.
2.12 Compensation. The Board of Directors may fix the compensation of
directors and may provide for the payment of all expenses incurred by them in
attending meetings of the Board of Directors or committees of the Board of
Directors.
2.13 Nomination of Director Candidates.
(a) Subject to the rights of holders of any series of Preferred
Stock then outstanding, nominations for the election of directors may be made
by the Board of Directors or a proxy
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committee appointed by the Board of Directors or by any shareholder entitled to
vote in the election of directors generally. However, any shareholder entitled
to vote in the election of directors generally may nominate one or more persons
for election as directors at a meeting only if timely notice of such
shareholder's intent to make such nomination or nominations has been given in
writing to the Secretary of the Corporation.
(b) To be timely, a shareholder nomination for a director to be
elected at an annual meeting shall be received at the Corporation's principal
executive offices not less than 120 calendar days in advance of the date that
the Corporation's (or the Corporation's predecessor's) proxy statement was
released to the shareholders in connection with the previous year's annual
meeting of shareholders, except that if no annual meeting was held in the
previous year or the date of the annual meeting has been changed by more than
30 calendar days from the date contemplated by the previous year's proxy
statement, or in the event of a nomination for director to be elected at a
special meeting, notice by the shareholder to be timely must be received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure
was made.
(c) Each such notice of a shareholder's intent to nominate a director
shall set forth (i) the name and address of the shareholder who intends to make
the nomination and of the person or persons to be nominated, (ii) a
representation that the shareholder is a holder of record of stock of the
Corporation entitled to vote for the election of directors on the date of such
notice and intends to appear in person or by proxy at the meeting and nominate
the person or persons specified in the notice, (iii) a description of all
arrangements or understandings between the shareholder 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 shareholder, (iv) such other
information regarding each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the United States Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated, by the Board, and (v) the consent of
each nominee to serve as a director of the Corporation if so elected. In
addition, the shareholder making such nomination shall promptly provide any
other information reasonably requested by the Corporation.
(d) In the event that a person is validly designated as a nominee
in accordance with this Section 2.13 and shall thereafter become unable or
unwilling to stand for election to the Board of Directors, the Board of
Directors or the shareholder who proposed such nominee, as the case may be,
may designate a substitute nominee upon delivery, not fewer than five days
prior
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to the date of the meeting for the election of such nominee, of a written notice
to the Secretary setting forth such information regarding such substitute
nominee as would have been required to be delivered to the Secretary pursuant to
this Section 2.13 had such nominee been initially proposed as a nominee. Such
notice shall include a signed consent to serve as a director of the Corporation,
if elected, of each such substitute nominee.
(e) No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in
this Section 2.13. If the chairman of the meeting for the election of
Directors determines that a nomination of any candidate for election as a
director at such meeting was not made in accordance with the applicable
provisions of this Section 2.13, such nomination shall be void; provided,
however, that nothing in this Section 2.13 shall be deemed to limit any voting
rights upon the occurrence of dividend arrearages provided to holders of
Preferred Stock.
ARTICLE III
COMMITTEES OF DIRECTORS
3.1 Committees. The Board of Directors may create an Executive
Committee and one or more other committees and appoint members of the Board of
Directors to serve on them. Unless otherwise provided in these Bylaws, each
committee shall have two or more members who serve at the pleasure of the Board
of Directors. The creation of a committee and appointment of members to it
shall be approved by a majority of all of the directors in office when the
action is taken.
3.2 Limitation on Authority of Committees. To the extent specified by
the Board of Directors, each committee may exercise the authority of the Board
of Directors, except that a committee may not (i) approve or recommend to
shareholders action that is required by law to be approved by shareholders,
(ii) fill vacancies on the Board of Directors or on any of its committees,
(iii) amend the Articles of Incorporation, (iv) adopt, amend, or repeal these
Bylaws, (v) approve a plan of merger not requiring shareholder approval, (vi)
authorize or approve a distribution, except according to a general formula or
method prescribed by the Board of Directors, or (vii) authorize or approve the
issuance or sale or contract for sale of shares, or determine the designation
and relative rights, preferences, and limitations of a class or series of
shares, except that the Board of Directors may authorize a committee, or a
senior executive officer of the Corporation, to do so within limits
specifically prescribed by the Board of Directors.
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3.3 Executive Committee.
(a) If created by the Board of Directors, the Executive Committee
shall have not less than three members to be elected annually by the Board
from its own membership. At the time the Executive Committee is elected, the
Board shall designate the Chairman of the Executive Committee who shall not be
a salaried employee of the Corporation or any of its affiliates. Vacancies
occurring in the Executive Committee prior to any annual election may be
filled by the Board.
(b) Between meetings of the Board, the Executive Committee shall
have and exercise the authority of the Board, except (i) to the extent such
authority is limited by the provisions of Section 3.2 of this Article, (ii) to
take action prohibited by law, or (iii) to employ or terminate the employment
of the Corporation's chief executive officer. One or more vacancies at any
time existing in the Executive Committee shall not affect its authority.
3.4 Miscellaneous. The provisions of these Bylaws which govern
meetings, action without meetings, notice and waiver of notice, and quorum and
voting requirements of the Board of Directors shall apply to committees of
directors and their members as well.
ARTICLE IV
OFFICERS
4.1 Officers. The officers of the Corporation shall be a Chairman of
the Board of Directors, a President, one or more Vice-Presidents, a Secretary
and a Treasurer. The Corporation also may have, at the discretion of the Board
of Directors, such other officers as may from time to time be appointed by the
Board of Directors. Officers shall be elected annually by the Board of
Directors at its annual meeting held immediately following the annual meeting of
shareholders. Each officer shall hold office until such officer shall resign or
shall be removed or otherwise disqualified to serve, or until such officer's
successor shall be elected and qualified. Any two or more offices may be held
by the same person.
4.2 Removal and Resignation. The Board of Directors may remove any
officer at any time, with or without cause. Any officer may resign at any
time upon written notice to the Board of Directors or the officer or officers
appointing him or her, and such resignation shall be effective when notice is
delivered unless the notice specifies a later effective date.
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4.3 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification, or otherwise, may be filled by the directors for
the unexpired portion of the term.
4.4 Chairman of the Board. The Chairman of the Board shall preside at
all meetings of stockholders and at all meetings of the Board. The Chairman
shall exercise and perform such powers and duties with respect to the business
and affairs of the Corporation as may be assigned to the Chairman by the Board
or such other powers and duties as may be prescribed by the Board or these
Bylaws.
4.5 President. The President shall be the chief executive officer of
the Corporation and exercise and perform such powers and duties with respect
to the administration of the business and affairs of the Corporation as are
commonly incident to the office of chief executive officer, as may from time
to time be assigned to the President by the Chairman of the Board or by the
Board, or as may be prescribed by these Bylaws. In the absence or disability
of the Chairman of the Board, or in the event and during the period of a
vacancy in the office of Chairman of the Board, the President shall perform
all the duties of the Chairman of the Board, and when so acting shall have all
of the powers of, and be subject to all the restrictions upon, the Chairman of
the Board of the Corporation.
4.6 Vice Presidents. Each Vice President shall have such powers and
perform such duties with respect to the administration of the business and
affairs of the Corporation as may from time to time be assigned to such Vice
President by the Chairman of the Board or the Board, or the President or as
may be prescribed by these Bylaws. In the absence or disability of the
Chairman of the Board and the President, the Vice Presidents in order of their
rank as fixed by the Board, or if not ranked, the Vice President designated by
the Board, shall perform all of the duties of the Chairman of the Board, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the Chairman of the Board.
4.7 Treasurer. The Treasurer shall have the responsibility for
maintaining the financial records of the Corporation and shall have custody of
all moneys and securities of the Corporation. The Treasurer shall make such
disbursements of the funds of the Corporation as are authorized and render
from time to time an account of all such transactions and of the financial
condition of the Corporation and shall perform such other duties as the Board
of Directors may from time to time prescribe.
4.8 Secretary.
(a) The Secretary shall keep, or cause to be kept, at the principal
office of the Corporation or such other place as
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the Board may order, a book of minutes of all meetings of directors and
stockholders, with the time and place of holding, whether regular or special,
and if special, how authorized and the notice thereof given, the names of those
present at meetings of directors, the number of shares present or represented at
meetings of stockholders, and the proceedings thereof.
(b) The Secretary shall keep, or cause to be kept, at the principal
office of the Corporation's transfer agent, a share register, or a duplicate
share register, showing the name of each stockholder, the number of shares of
each class held by such stockholder, the number and date of certificates
issued for such shares, and the number and date of cancellation of every
certificate surrendered for cancellation.
4.9 Salaries. The salaries of the officers shall be fixed from time to
time by the Board of Directors, and no officer shall be prevented from
receiving such salary because he is also a director of the Corporation.
ARTICLE V
SHARE CERTIFICATES
5.1 Form. Shares of the Corporation shall, when fully paid, be
evidenced by certificates containing such information as is required by law
and approved by the Board of Directors. Certificates shall be signed by the
Chairman of the Board of Directors, the President or a Vice President and the
Secretary or an Assistant Secretary and may (but need not) be sealed with the
seal of the Corporation. The seal of the Corporation and any or all
signatures on a share certificate may be facsimile. If any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he or she were such
officer on the date of issue.
5.2 Transfer. The Board of Directors may make rules and regulations
concerning the issue, registration, conversion and transfer of certificates
representing the shares of the Corporation. Transfers of shares and of the
certificates representing such shares shall be made upon the books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the Corporation by surrender of the
certificates representing such shares accompanied by written assignments given
by the owners or their attorneys-in-fact.
5.3 Restrictions on Transfer. A lawful restriction on the transfer or
registration of transfer of shares is valid and enforceable against the holder
or a transferee of the holder if
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the restriction complies with the requirements of law and its existence is noted
conspicuously on the front or back of the certificate representing the shares.
Unless so noted, a restriction is not enforceable against a person without
knowledge of the restriction.
5.4 Lost or Destroyed Share Certificates. The Corporation may issue a
new share certificate in the place of any certificate theretofore issued which
is alleged to have been lost or destroyed and may require the owner of such
certificate, or his or her legal representative, to give the Corporation a
bond, with or without surety, or such other agreement, undertaking or security
as the Board of Directors shall determine is appropriate, to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss or destruction or the issuance of any such new certificate.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 Corporate Seal. The corporate seal of the Corporation shall be
circular and shall have inscribed thereon, within and around the circumference
"Deltek Systems, Inc." In the center shall be the word "SEAL".
6.2 Fiscal Year. The fiscal year of the Corporation shall be determined
in the discretion of the Board of Directors, but in the absence of any such
determination, it shall be the calendar year.
6.3 Voting of Stock in Other Corporations. Any stock in other
corporations, which may from time-to-time be held by the Corporation, may be
represented and voted at any meeting of shareholders of such other corporation
by the President or Treasurer, or by proxy or proxies appointed by the
President or Treasurer, or otherwise pursuant to authorization thereunto given
by a resolution of the Board of Directors adopted by a vote of the directors.
6.4 Waiver of Notices. Whenever notice is required to be given by these
Bylaws or the Articles of Incorporation or by law, the person entitled to said
notice may waive such notice in writing, either before or after the time stated
therein, and such waiver shall be deemed equivalent to notice.
6.5 Time Periods. In applying any provision of these Bylaws which
require that an act be done or not done a specified number of days prior to an
event or that an act be done during a period of a specified number of days
prior to an event, calendar days shall be used, the day of the doing of the
act shall be excluded, and the day of the event shall be included.
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6.6 Amendments. These Bylaws may be amended or repealed, and new Bylaws
may be made at any regular or special meeting of the Board of Directors.
Bylaws made by the Board of Directors may be repealed or changed and new
Bylaws may be made by the shareholders, and the shareholders may prescribe
that any Bylaw made by them shall not be altered, amended or repealed by the
Board of Directors.
ARTICLE VII
CONTROL SHARE ACQUISITIONS
7.1 Redemption.
(a) As permitted by Section 13.1-728.7A of the Virginia Stock
Corporation Act (the "Act"), the shares acquired in a "control share
acquisition" as defined in Section 13.1-728.1 of the Act with respect to which
no control share statement has been filed with the Corporation pursuant to
Section 13.1-728.4 of the Act may, at any time during the period ending sixty
(60) days after the last acquisition of such shares by the "acquiring person"
as defined in Section 13.1-728.1 of the Act, be redeemed by the Corporation at
the redemption price specified in Section 13.1-728.7C of the Act.
(b) As permitted by Section 13.1-728.7B of the Act, shares acquired
in a control share acquisition with respect to which the shareholders of the
Corporation have failed to grant voting rights at a special meeting or, if no
special meeting for such purpose has been convened, at an annual meeting may,
at any time during the period ending sixty (60) days after such meeting, be
redeemed by the Corporation at the redemption price specified in Section
13.1-728.7C of the Act.
7.2 Effective Date. The provisions of this Article VII shall become
effective at such time as the Corporation shall become, and shall continue to
be effective so long as the Corporation shall be, an "issuing public
corporation" as defined in Section 13.1-728.1 of the Act.
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EXHIBIT 10.1
1987 Plan
as Revised
12/31/89,
03/05/93,
12/01/93,
01/01/95,
6/28/96
DELTEK SYSTEMS, INC.
EMPLOYEE STOCK OPTION PLAN
1. Purpose
Deltek Systems, Inc. (the "Company"), a Virginia corporation, hereby
establishes a nonqualified stock option plan for key employees. This
plan shall be known as the Deltek Systems, Inc. Employee Stock Option
Plan (hereinafter called "Plan"). The purpose of this plan is to
promote the growth of the company by attracting, retaining and
motivating key employees of the Company and encouraging key employees
to own stock.
2. Administration
(a) The Plan shall be administered by the Company's Board of
Directors (the "Board"). The Board shall have the power, subject to the
express provisions of the Plan:
(1) To determine the recipients of stock options under the
Plan, the time of grant of the options, and the number of
shares covered by the grant.
(2) To prescribe the terms and provisions of each Option
Agreement and each Notice of Exercise.
(3) To construe and interpret the Plan; to establish, amend,
and revoke rules and regulations for the Plan's Administration;
and to make all other determinations necessary or advisable for
the administration of the Plan.
(b) No member of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or to any
option. The Board may grant options from time to time pursuant to the
Plan. Options granted pursuant to the Plan shall be evidenced by
agreements ("Stock Option Agreement") specifying the number of shares
covered thereby, in such form as the Board shall from time to time
establish, which Stock Option Agreement may incorporate all or any of
the terms of the Plan by reference and shall comply with and be
subject to the terms and conditions of this Plan.
<PAGE> 2
3. Participation
Officers and other key employees of the Company shall be eligible to
receive stock options under the Plan. The Board shall designate the
recipients of the stock options. Nothing in this Plan or an option
granted hereunder shall govern the employment rights and duties
between the optionee and the Company. Neither this Plan, nor any
grant or exercise pursuant thereto, shall constitute an employment
agreement among such parties.
4. Shares Subject to the Plan
The shares to be offered under the Plan shall consist of shares of the
Company' s authorized but unissued common stock, $ 0.001 par value
(hereinafter collectively called "Stock"). Subject to the provisions
of Paragraph 12 (relating to changes in the Stock), the aggregate
amount of Stock to be issued upon the exercise of all options granted
under the Plan shall not exceed 450,000 shares. If any option granted
hereunder shall lapse or be cancelled or terminated without being
exercised, the unpurchased shares subject thereto shall again be
available for the purposes of the Plan. Any shares previously issued
on account of the exercise of all or part of such options but which
have been repurchased by the Company shall also be available for the
Plan. The Company shall not be required upon the exercise of any
option, to issue or deliver any shares of Stock prior to the
completion of such registration or other qualification of such shares
under any state or Federal law, rule or regulation as the Company
shall determine to be necessary or desirable.
5. Option Price
The option price for each option share shall not be less than the fair
market value of a share of the Stock on the date the option is
granted. The fair market value of the shares shall be determined in
good faith by the Company's Board of Directors based upon an
independent appraisal, assuming (i) the full exercise of all then
outstanding options and rights to acquire Stock and (ii) the full
conversion of all then outstanding securities convertible into Stock,
which independent appraisal shall be made on at least an annual basis
after the closing of the Company's fiscal year.
6. Option Period
(a) For the purposes of this Plan, "Long Term Disability" means a
disability that entitles the employee to receive
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<PAGE> 3
benefits pursuant to the Deltek Systems, Inc. long term disability
plan covering the employee at the time his or her employment
terminates.
(b) Subject to the provisions of Paragraph 6(c) and the vesting
provisions set forth in Paragraph 7, the period for exercising an
option granted under this Plan (the "Exercise Period") shall be the
period beginning from the date an option is granted and ending ten
years from that date, except that the Company at its sole discretion
at any time may deem that all options are vested and require the
option holder to exercise such options within 90 days.
(c) If a recipient's employment shall terminate prior to
recipient's reaching age 60, for any reason other than Long Term
Disability or death, whether with or without cause, any options to the
extent vested at the date employment is terminated shall be
exercisable (subject to the Company's right to redeem the option in
paragraph 10) only during the three months following termination of
employment or ten years from the date of grant, whichever is earlier.
(d) If thirty (30) days prior to the end of the Exercise Period
the stock of the Company is not publicly traded in a stock exchange or
in the over-the-counter market, the Company shall, at its sole option,
either extend the Exercise Period by an additional five (5) years or
waive its right of first refusal in paragraph 11.
7. Vesting Period for Options
(a) The stock options under the Plan shall vest at a rate of 20%
per year of continuous full-time employment. If an employee has been
employed for at least one year at the date the option is granted, 20%
shall vest immediately. An additional 20% shall vest each year
following the date of grant, as long as the employee is still employed
full-time throughout the year and has been continuously employed
throughout the year. If an employee has been employed full-time for
less than one year at the date the option is granted, 20% shall vest
at the employee's one-year anniversary, provided the employee was
employed full-time continuously during that year. An additional 20%
shall vest each year on the employee's anniversary date as long as the
employee is still employed full-time and has been continuously
employed throughout the year.
(b) The vesting schedule set forth in Paragraph 7(a) shall not
apply during any years (measured from the date of grant) when an
employee is not continuously employed full-time. During any year when
an employee has been continuously
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<PAGE> 4
employed full-time, his or her stock options under the Plan shall
vest at a rate equal to 20% multiplied by the ratio of (i) the number
of hours the employee actually worked during the year to (ii) 1,896
hours.
8. Payment for Shares
(a) Full payment for shares purchased shall be made at the time
the option is exercised. To the extent the right to purchase shares
has accrued under a Stock Option Agreement, options may be exercised
from time to time by written "Notice of Exercise" to the Company
stating the number of shares being purchased and rights being
exercised, accompanied by the payment in full for the shares being
purchased and execution of such other documents as the Company may
reasonably require or as are required by the Stock Option Agreement.
The purchase price of shares sold pursuant to the options shall be
tendered in cash with the Notice of Exercise unless another form of
payment is specifically approved by the Board. The Company shall
issue no certificate for shares until full payment therefore has been
made, and a recipient shall have none of the rights of a stockholder
until certificates for the shares purchased are issued to him.
(b) The Company shall be entitled to deduct from other
compensation payable to each option holder any sums required by
Federal, state, or local tax law to be withheld with respect to the
exercise of an option. Alternatively, the Company may require the
option holder or other person exercising the option to pay such sums
directly to the Company.
9. Restrictions on Transferability
(a) For the purposes of this Plan, "Transfer" means (i) to sell,
exchange, deliver or assign, dispose of by bequeath or gift, pledge,
mortgage, hypothecate or otherwise encumber, or otherwise transfer,
whether voluntarily, involuntarily or by operation of law (including,
without limitation, the laws of bankruptcy, insolvency, intestacy,
descent and distribution and succession) or (ii) the act of
Transferring.
(b) No option granted pursuant to this Plan and no share issued
pursuant to the exercise of any such option shall or may be
Transferred except as provided in this Plan, without the prior written
consent of the Company.
(c) In the event that at any time or from time to time, any
options granted pursuant to this Plan or any shares issued
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<PAGE> 5
pursuant to the exercise of any such options are Transferred to any
party (other than the Company) pursuant to any provision hereof, the
transferee shall take such options or shares pursuant to all
provisions, conditions and covenants of this Plan, and, as a condition
precedent to the Transfer of such options or shares, the transferee
shall agree in writing to be bound by all provisions of this Plan as a
party hereto, including, without limitation, all restrictions on
Transfer.
(d) Certificates for shares issued pursuant to the exercise of
options granted pursuant to this Plan shall bear appropriate reference
to the restrictions on Transfer contained in this Plan and such other
restrictions as may be required under applicable securities laws.
(e) The Company will not, nor be compelled to, recognize any
Transfer of any options granted pursuant to this Plan or any shares
issued pursuant to the exercise of any options granted pursuant to
this Plan made other than in accordance with the terms of this Plan.
Nor will the Company issue any certificate representing any shares
issued pursuant to the exercise of any options granted pursuant to
this Plan to any person who has received such shares in a Transfer
made other than in accordance with the provisions of this Plan. No
Transfer of any options granted pursuant to this Plan or any shares
issued pursuant to the exercise of any options granted pursuant to
this Plan in violation of the provisions of this Plan shall be valid.
Options granted pursuant to this Plan shall be exercisable only by
recipient and transferees to whom such options have been Transferred
in accordance with the provisions of this Plan.
(f) Strict compliance shall be required with each and every
provision of this Plan and particularly with the procedures set forth
in the provisions of Paragraphs 10, 11 and 12 hereof, it being
understood and agreed that no recipient of any options granted
pursuant to this Plan and no holder of shares issued pursuant to the
exercise of any options granted pursuant to this Plan shall have the
right or power to Transfer any of such options or shares except in
strict compliance with the procedures set forth in the provisions of
Paragraphs 10, 11 and 12 hereof. The parties hereto agree that such
options and shares are unique, that failure to perform the obligations
provided by this Plan shall result in irreparable damage and that
specific performance of these obligations may be obtained by suit in
equity.
(g) This paragraph shall be inapplicable if the shares of the
Company's stock are publicly traded in a stock exchange or in the
over-the-counter market.
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<PAGE> 6
10. Buy-back Provision
(a) In the event a recipient ceases to be employed by the Company
prior to reaching age 60 for any reason whatsoever other than
recipient's death or Long Term Disability (so long as a disabled
recipient does not go to work for another company), the Company shall
have the right, but not the obligation, to purchase all, but not less
than all, of the stock purchased by such employee pursuant to an
option granted under this Plan. The purchase price of the stock to be
sold to the Company pursuant to this provision shall be the stock's
fair market value as of the date the employee's employment ceases
determined by the Board of Directors on the same basis as described in
Paragraph 5.
(b) If the Company elects to acquire all of said stock, then
within one hundred twenty (120) days after the date such employee's
employment ceases or thirty (30) days after the last purchase of the
stock pursuant to an option, whichever occurs later, the Company shall
send (either by personal delivery or by mailing to the address of the
employee or the employee's personal representative at the address
shown on the shareholders' records of the Company) written notice of
its intention and shall then purchase said shares within thirty (30)
days after the date the notice is delivered or mailed.
(c) In the event that a recipient ceases to be employed by the
Company prior to reaching age 60 for any reason whatsoever other than
recipient's death or Long Term Disability (so long as a disabled
recipient does not go to work for another company) and has not
exercised all vested option(s) under this plan (or completed the
purchase of shares pursuant to the exercise of any such option(s))
prior to the date employment ceases, the Company shall have the right,
but not the obligation (i) to refuse to honor any Notice of Exercise
of such options(s), whether received from such employee by the Company
before or after such effective date, and (ii) to redeem such
options(s) by paying such employee an amount (the "Option Redemption
Price") equal to the difference between (i) the exercise price that
the recipient would have paid upon the full exercise of such option
and (ii) the price that the Company would have paid pursuant to
paragraph 10(a) above to repurchase the shares that the recipient
would acquire by exercising such option.
(d) If the Company elects to redeem option(s) pursuant to
paragraph 10(c) above, then within one hundred twenty (120) days after
the date such employee's employment ceases or thirty (30) days after
the Company receives a Notice of Exercise from such employee,
whichever occurs later, the
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<PAGE> 7
Company shall (i) send (either by personal delivery or by mailing to
the address of the employee or the employee's personal representative
at the address shown on the shareholders, records of the Company)
written notice of its intention and then (ii) redeem said option(s)
within thirty (30) days after the date the notice is delivered or
mailed.
(e) Payments for any shares or options to be sold to the Company
pursuant to this paragraph 10 will, at the option of the Company, be
either in cash, notes providing for principal payments amortized over
not more than five (5) years with interest at the applicable federal
rate as determined under Section 1274 of the Internal Revenue Code, or
a combination thereof. The Company shall be entitled to deduct from
any such payments any sums required by Federal, state, or local tax
law to be withheld with respect to the such payments.
(f) This paragraph 10 shall become inapplicable if the stock of
the Company is publicly traded in a stock exchange or in the
over-the-counter market.
11. Right of First Refusal by Company
(a) Options.
(1) Prior to Transferring any options granted pursuant to
this Plan, the holder of such options or the personal
representative of the estate of the holder, if deceased, (the
"Offeror") shall first offer such options (the "Offered
Options") to the Company by giving written notice to the
Secretary of the Company. Such notice shall designate the
proposed transferee, the date of the applicable option
agreement, the number of shares of stock subject to the
Offered Option, the applicable exercise price and the address
of the Offeror. The Company shall have the first right to
elect to purchase the Offered Options for an amount equal to
the difference between (i) the exercise price that the Offeror
would have paid upon the full exercise of the Offered Options
and (ii) the fair market value of the shares of stock subject
to the Offered Option as of the date of the written notice to
the Secretary of the Company determined by the Company's Board
of Directors on the same basis as described in Paragraph 5.
(2) If the Company elects to acquire the Offered Shares,
then within ten (10) days after Secretary of Offeror's notice,
the Company shall send (either by personal delivery or by
mailing to the address shown on
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<PAGE> 8
the Offeror's notice) written notice to the Offeror of the
Company's intention and shall then purchase the Offered
Options within thirty (30) days after the date the Company's
notice is delivered or mailed to the Offeror. Payments for
the Offered Options to be sold to the Company will, at the
option of the Company, be either in cash, notes providing for
principal payments amortized over not more than five (5) years
with interest at the applicable federal rate as determined
under section 1274 of the Internal Revenue Code, or a
combination thereof.
(3) If the Company does not purchase the Offered Options,
the Offeror must carry out the proposed Transfer to the
transferee specified in the notice from the Offeror, but only
if completed within thirty (30) days after the Offeror's
notice. If the Offeror does not carry out the proposed
Transfer but wishes to make a later Transfer, the Offeror
shall again comply with the terms of this subparagraph (a).
(b) Shares.
(1) Prior to Transferring any shares issued pursuant to
the exercise of options granted pursuant to this Plan to any
person other than another shareholder of the Company, the
holder of such shares or the personal representative of the
estate of the holder, if deceased, ("Offeror") shall first
offer such shares (the "Offered Shares") to the Company by
giving written notice to the Secretary of the Company. Such
notice shall designate the proposed transferee, the number of
Offered Shares, and the address of the Offeror. The Company
shall have the first right to elect to purchase all, but not
less than all, of the Offered Shares for a price equal to the
fair market value of the Offered Shares as of the date of the
written notice to the Secretary of the Company determined by
the Company's Board of Directors on the same basis as
described in Paragraph 5.
(2) If the Company elects to acquire the Offered Shares,
then within ten (10) days after receipt by the Secretary of
Offeror's notice, the Company shall send (either by personal
delivery or by mailing to the address shown on the Offeror's
notice) written notice to the Offeror of the Company's
intention and shall then purchase the Offered Shares within
thirty (30) days after the date the Company's notice is
delivered or mailed to the Offeror. Payments for the Offered
Shares to be sold to the Company will, at the option of
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<PAGE> 9
the Company, be either in cash, notes providing for principal
payments amortized over not more than five (5) years with
interest at the applicable federal rate as determined under
section 1274 of the Internal Revenue Code, or a combination
thereof.
(3) If the Company does not purchase the Offered Shares,
the Offeror must carry out the proposed Transfer to the
transferee specified in the notice from the Offeror, but only
if completed within thirty (30) days after the Offeror's
notice. If the Offeror does not carry out the proposed
Transfer but wishes to make a later Transfer, the Offeror
shall again comply with the terms of this subparagraph (b).
(c) Expiration. This paragraph shall become inapplicable if the
stock of the Company is publicly traded in a stock exchange or in the
over-the-counter market.
12. Subchapter S Status
(a) The Company has elected to be taxed as an "S Corporation"
under Subchapter S of the Internal Revenue Code of 1986, as amended,
Section 1361, et.seq. So long as such election remains in effect and
notwithstanding any other provision of this Plan, no option granted
hereunder may be exercised if to do so would (i) result in the
termination or revocation of such election or (ii) increase the total
number of shareholders after such exercise to within ten (10) of the
total number of shareholders that an S Corporation is permitted to
have. In the event that a recipient of an option granted pursuant to
this Plan (or a transferee to whom such options have been Transferred
in accordance with the provisions of this Plan) wishes to exercise an
option granted pursuant to this Plan and is otherwise entitled to do
so but the Company refuses to honor such exercise by reason of the
foregoing restriction, the recipient or transferee may, by written
notice to the secretary of the Company, require the Company to redeem
such option by paying an amount equal to the difference between (i)
the exercise price that would have been paid upon the full exercise of
such options and (ii) the fair market value of the shares of stock
subject to such option as of the date of the written notice to the
Secretary of the Company determined by the Company's Board of
Directors on the same basis as described in Paragraph 5.
(b) The Company will not, nor be compelled to, recognize any
Transfer or issue any certificate representing any shares issued
pursuant to the exercise of options under this
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<PAGE> 10
Plan to any person who has not delivered to the Company (i) a written
undertaking to be bound by the terms and conditions of this Plan and
(ii) for so long as the Company's status as an S corporation
continues, a written consent to the treatment of the Company as an S
corporation. The Company will not, nor be compelled to, recognize any
Transfer or issue any certificate representing any shares issued
pursuant to the exercise of options granted under this Plan to any
person the Transfer to whom or to which, in the opinion of the
Company's counsel, could disqualify the Company as an S corporation.
No Transfer of any shares issued pursuant to the exercise of options
granted under this Plan in violation of this provision shall be valid.
(c) Each holder of any options granted under this Plan or any
shares issued pursuant to the exercise of options granted under this
Plan agrees to include in his or her will a direction and
authorization to his or her executor to comply with the provisions of
this Plan and to sell or otherwise Transfer any options or shares only
in accordance with this Plan and, if the Company is an S corporation
at the time of such Shareholder's death, to take such action as may be
necessary to maintain the Company's status as an S corporation;
provided, however, that the failure of any holder so to direct his or
her executor shall not affect the validity or enforceability of this
Plan.
13. Effect of Changes in Common Stock
If the Company shall combine, subdivide or reclassify the shares of
common stock which have been or may be optioned, or shall declare
thereon any dividend payable in shares of common stock, or shall
reclassify or take any other action of a similar nature affecting the
common stock, then the number and class of shares of stock which may
thereafter be optioned (in the aggregate and to any recipient) shall
be adjusted accordingly and, in the case of options outstanding at the
time of any such action, the number and class of shares which may
thereafter be purchased pursuant to such options and the option price
per share shall be adjusted to such extent as the Board may determine
is necessary to preserve unimpaired the rights of the recipients;
provided, however, that any options to purchase fractional shares
resulting from any such adjustment shall be eliminated. Each and
every such determination by the Board shall be conclusive and binding
upon such recipient.
14. Reorganization
(a) If the Company shall at any time merge or consolidate with or
into another corporation and (1) the Company is not
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<PAGE> 11
with the surviving entity or (2) the Company is the surviving entity
and the shareholders of the Company's common stock are required to
exchange their shares for property and/or securities, the holder of
each option will thereafter receive, upon the exercise thereof, the
securities and/or property to which a holder of the number of shares
of common stock then deliverable upon the exercise of such option
would have been entitled upon such merger or consolidation, and the
Company shall take such steps in connection with such merger or
consolidation as may be necessary to assure that the provisions of
this Plan shall thereafter be applicable, as nearly as reasonably may
be, in relation to any securities or property thereafter deliverable
upon the exercise of such option; provided, however, that under no
circumstances shall any option exercise date be accelerated in
contemplation of such action. A sale of all or substantially all the
assets of the Company for consideration (apart from the assumption of
obligations) consisting primarily of securities shall be deemed a
merger or consolidation for the foregoing purposes. Notwithstanding
the foregoing purposes, the provisions of this paragraph shall be
subject to paragraph 6.
(b) The surviving entity following any reorganization may at any
time, in its sole discretion, tender substitute options as it may deem
appropriate. However, in no event may the substitute options entitle
the optionee to any fewer shares (or at any greater aggregate price)
or any less other property than the optionee would be entitled to
under the immediately preceding paragraph upon an exercise of the
options held prior to the substitution of the new option.
15. Dissolution of Issuer
In the event of the proposed dissolution or liquidation of the
Company, the options granted hereunder shall terminate as of a date to
be fixed by the Board, provided that not less than thirty (30) days,
prior written notice of the date so fixed shall be given to the
optionee, and the optionee shall have the right, during the period of
thirty (30) days preceding such termination, to exercise his option.
Notwithstanding the foregoing, the provisions of this paragraph shall
be subject to paragraph 6.
16. Alternation, Termination, Discontinuance, Suspension of Amendment
The Board reserves the right to alter, terminate, discontinue, suspend
or amend the Plan upon at least thirty (30) days advance written
notice to all the recipients. The Board may not, however, alter or
impair any option
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<PAGE> 12
previously granted to the recipients under the Plan without their
consent.
17. Compliance with Laws and Regulations
No option shall be granted or exercised if the grant of such option,
or the exercise and the issuance of shares pursuant thereto, would be
contrary to the laws or regulations of any duly constituted authority
having jurisdiction.
18. Effective Date of the Plan
The Plan is effective as of December 16, 1987, as revised on December
31, 1989, March 5, 1993, December 1, 1993, January 1, 1995, and June
28, 1996.
12
<PAGE> 1
EXHIBIT 10.2
DELTEK SYSTEMS, INC.
EMPLOYEE TIME ACCELERATED STOCK OPTION PLAN
1. Name and Purpose
(a) This plan shall be known as the Deltek Systems, Inc. Employee
Time Accelerated Stock Option Plan (the "Plan").
(b) The purpose of the Plan is to promote the growth of Deltek
Systems, Inc. (the "Company") by attracting, retaining and motivating
its key employees and encouraging them to own stock.
2. Administration
(a) The Plan shall be administered by the Company's Board of
Directors (the "Board"). The Board shall have the power, subject to
the express provisions of the Plan:
(1) To determine the recipients of stock options under the
Plan, the time of grant of the options, the number of shares
covered by the grant and the option price.
(2) To prescribe the terms and provisions of each Option
Agreement and each Notice of Exercise.
(3) To construe and interpret the Plan; to establish, amend,
and revoke rules and regulations for the Plan's
Administration; and to make all other determinations necessary
or advisable for the administration of the Plan.
(b) No member of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or to any
option.
(c) The Board may grant options from time to time pursuant to the
Plan. Options granted pursuant to the Plan shall be evidenced by
agreements ("Stock Option Agreement") specifying the number of shares
covered thereby (sometimes hereinafter referred to as the "Option
Shares"), in such form as the Board shall from time to time establish,
which Stock Option Agreement may incorporate all or any of the terms
of the Plan by reference and shall comply with and be subject to the
terms and conditions of the Plan.
3. Participation
Officers and other key employees of the Company shall be eligible to
receive stock options under the Plan. The Board
<PAGE> 2
shall designate the recipients of the stock options.
4. Shares Subject to the Plan
Subject to the provisions of Paragraph 11 (relating to changes in the
Stock), the shares that may be sold pursuant to options granted
pursuant to the Plan shall not exceed in the aggregate 500,000 shares
of common stock of the Company, par value $0.001 ("Common Stock"). If
any option granted hereunder shall lapse or be cancelled or terminated
without being exercised, the unpurchased shares subject thereto shall
again be available for the purposes of the Plan. Any shares
previously issued on account of the exercise of all or part of such
options but which have been repurchased by the Company shall also be
available for the purposes of the Plan. The Company shall not be
required upon the exercise of any option, to issue or deliver any
shares prior to the completion of such registration or other
qualification of such shares under any state or Federal law, rule or
regulation as the Company shall determine to be necessary or
desirable.
5. Option Price
(a) The option price for each Option Share shall not be less than
the fair market value of a share of the Common Stock on the date the
option is granted.
(b) Shares of the Company's Common Stock are not currently listed
upon an established stock exchange or traded in the over-the-counter
market. Accordingly, until such time as the shares are listed upon an
established stock exchange or traded in the over-the-counter market,
the fair market value of the shares shall be determined in good faith
by the Board of Directors, assuming (i) the full exercise of all then
outstanding options and rights to acquire Common Stock and (ii) the
full conversion of all then outstanding securities convertible into
Common Stock.
(c) When and if shares of the Company's Common Stock are
listed upon an established stock exchange or exchanges, the fair
market value of the shares as of the date of valuation hereunder shall
be deemed to be the closing price on that date of the shares on the
largest such stock exchange upon which such shares are listed or if no
sale of such shares shall have been made on such stock exchange on
that date, on the next preceding day on which there was a sale of such
shares on such stock exchange.
(d) When and if shares of the Company's Common Stock are
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<PAGE> 3
traded in the over-the-counter market but not on an established
exchange or exchanges, the fair market value per share as of the date
of valuation hereunder shall be the mean between dealer "bid" and
"asked" prices of the shares as reported on that date by the National
Association of Security Dealers, Inc.
6. Term of Option.
(a) No option may be exercisable after the expiration of ten (10)
years from the date such option is granted; provided however, if,
thirty (30) days prior to the expiration of an option, the Common
Stock of the Company is not listed upon an established stock exchange
or traded in the over-the-counter market, the Company shall, at its
sole option, either extend the ten-year option term by an additional
five (5) years or waive the Company's right of first refusal in
paragraph 11.
(b) Any options, which are vested at the date an optionee's
employment by the Company terminates, whether with or without cause,
shall terminate three months following the effective date of
termination unless optionee's employment terminated by reason of (i)
optionee's disability (within the meaning of the Company's long term
disability plan and optionee is entitled to receive benefits
thereunder); (ii) death; or (iii) retirement after the age of 60 or
earlier with the consent of the Company. Notwithstanding the
foregoing, the provisions of this subparagraph shall be subject to
subparagraph (a) above and Paragraph 13 which may earlier terminate
the option.
7. Vesting Period for Options
(a) The Board shall have the right to set the time or
times within which each option shall be exercisable, and to accelerate
the time or times of exercise. Unless the Option Agreement executed by
the optionee expressly otherwise provides, the option shall be
exercisable as set forth in this paragraph.
(b) Unless the vesting schedule in subparagraph (c) below applies,
stock options granted pursuant to the Plan shall vest and be
exercisable as to all Option Shares at the later of (i) five (5) years
from date the option was granted or (ii) 5:00 p.m. eastern time on
January 1, 2003.
(c) The following vesting schedule shall apply (retroactively and
prospectively) if, prior to January 1, 2003, (i) the Company has
issued stock to the public in an underwritten public offering, (ii)
the Company has been acquired (whether
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<PAGE> 4
by merger or the sale of all or substantially all of the company's
assets or a majority of the Company's outstanding Common Stock) or
(iii) the Company no longer qualifies to be taxed as an "S
Corporation" under Subchapter S of the Internal Revenue Code of 1986,
as amended:
(1) The stock options granted pursuant to the Plan shall
vest and be exercisable on a cumulative basis at the rate of
20% of the Option Shares per year of continuous full-time
employment as described herein. If the recipient of an option
granted pursuant to the Plan has been employed for at least
one year at the date the option is granted, 20% of the Option
Shares shall vest immediately. An additional 20% of the
Option Shares shall vest each year following the date of
grant, as long as the optionee is still employed full-time
throughout the year and has been continuously employed
throughout the year. If the recipient of an option granted
pursuant to the Plan has been employed full-time for less than
one year at the date the option is granted, 20% of the Option
Shares shall vest at the optionee's one-year anniversary,
provided the optionee was employed full-time continuously
during that year. An additional 20% of the Option Shares
shall vest each year thereafter on the optionee's employment
anniversary date as long as the optionee is still employed
full-time and has been continuously employed throughout the
year.
(2) The vesting schedule set forth in subparagraph (c)(1)
above shall not apply during any years (measured from the date
of grant) when an optionee is not continuously employed
full-time. During any such year, his or her stock options
under the Plan shall vest and be exercisable at a rate equal
to 20% of the Option Shares multiplied by the ratio of (i) the
number of hours the optionee actually worked during the year
to (ii) 1,896 hours.
8. Exercise of Options
(a) Each option may be exercisable in installments (which need not
be equal) except as limited in the Option Agreement.
(b) To the extent the right to purchase shares has accrued under a
Stock Option Agreement, options may be exercised from time to time by
written "Notice of Exercise" to the Company stating the number of
shares being purchased and rights being exercised, accompanied by the
payment in full for the shares being purchased and execution of such
other documents as the
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Company may reasonably require or as are required by the Stock Option
Agreement. If the shares of Common Stock issuable upon exercise are
not registered under the Securities Act of 1933, the Company at the
time of exercise may require that the registered owner deliver an
investment representation in form acceptable to the Company and its
counsel.
(c) The full purchase price of shares sold pursuant to the option
shall be tendered with the Notice of Exercise and may be made (i) in
cash, (ii) in shares of the outstanding Common Stock of the Company,
(iii) only if specifically approved by the Board at the time of grant
or exercise, on a deferred payment basis the terms of which will be
determined by the Board, or (iv) in a combination of the methods
described in (i) and (ii) and, if approved by the Board, (iii).
(d) If shares of Common Stock are used as part or full payment
upon exercise of the option, such shares shall be valued for the
purpose of such exchange at fair market value as of the date of
exercise of the option in accordance with the provisions of Paragraph
5(b), (c) and (d) above, but the optionee shall state in the Notice of
Exercise the value which the optionee believes is appropriate. If such
shares finally are valued at an amount less than that stated in the
Notice of Exercise, the optionee may (i) withdraw the Notice of
Exercise and the tendered payment, or (ii) pay to the Company any
shortfall in such payment in cash or by a Board approved deferred
payment method as provided above. Any certificates for Common Stock
tendered to pay the option price shall be accompanied by stock powers
duly endorsed in blank by the registered holder thereof (with the
signature thereon guaranteed).
(e) Within thirty (30) days after receipt of the Notice of
Exercise, payment in full and any other required documents, the
Company will deliver to the optionee (or to such other person) at the
principal office of the Company, or such other place as shall be
mutually agreed upon, a certificate or certificates for the shares
being acquired pursuant to the exercise; provided, however, that the
time of delivery may be postponed by the Company for such period as
may be required for it with reasonable diligence to comply with any
requirements of law. If optionee (or other person entitled to
exercise the option) fails to accept delivery, the optionee's payment
shall be returned, and the right to exercise the option with respect
to such undelivered shares shall be terminated.
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9. Restrictions on Transferability
(a) For the purposes of the Plan, "Transfer" means (i) to sell,
exchange, deliver or assign, dispose of by bequeath or gift, pledge,
mortgage, hypothecate or otherwise encumber, or otherwise transfer,
whether voluntarily, involuntarily or by operation of law (including,
without limitation, the laws of bankruptcy, insolvency, intestacy,
descent and distribution and succession) or (ii) the act of
Transferring.
(b) No option granted pursuant to the Plan and no share issued
pursuant to the exercise of any such option shall or may be
Transferred except as provided in the Plan, without the prior written
consent of the Company.
(c) Options granted pursuant to the Plan are nontransferable
except pursuant to laws of descent and distribution.
(d) In the event that at any time or from time to time, any options
granted pursuant to the Plan or any shares issued pursuant to the
exercise of any such options are Transferred to any party (other than
the Company) pursuant to any provision hereof, the transferee shall
take such options or shares pursuant to all provisions, conditions and
covenants of the Plan, and, as a condition precedent to the Transfer
of such options or shares, the transferee shall agree in writing to be
bound by all provisions of the Plan as a party hereto, including,
without limitation, all restrictions on Transfer.
(e) Certificates for shares issued pursuant to the exercise of
options granted pursuant to the Plan shall bear appropriate reference
to the restrictions on Transfer contained in the Plan and such other
restrictions as may be required under applicable securities laws.
(f) The Company will not, nor be compelled to, recognize any
Transfer of any options granted pursuant to the Plan or any shares
issued pursuant to the exercise of any options granted pursuant to the
Plan made other than in accordance with the terms of the Plan. Nor
will the Company issue any certificate representing any shares issued
pursuant to the exercise of any options granted pursuant to the Plan
to any person who has received such shares in a Transfer made other
than in accordance with the provisions of the Plan. No Transfer of
any options granted pursuant to the Plan or any shares issued pursuant
to the exercise of any options granted pursuant to the Plan in
violation of the provisions of the Plan shall be valid. Options
granted pursuant to the Plan shall be exercisable only by recipient
and transferees to whom such
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options have been Transferred in accordance with the provisions of the
Plan.
(g) Strict compliance shall be required with each and every
provision of the Plan and particularly with the procedures set forth
in the provisions of Paragraphs 9 and 10 hereof, it being understood
and agreed that no recipient of any options granted pursuant to the
Plan and no holder of shares issued pursuant to the exercise of any
options granted pursuant to the Plan shall have the right or power to
Transfer any of such options or shares except in strict compliance
with the procedures set forth in the provisions of Paragraphs 9 and 10
hereof. The parties hereto agree that such options and shares are
unique, that failure to perform the obligations provided by the Plan
shall result in irreparable damage and that specific performance of
these obligations may be obtained by suit in equity.
10. Right of First Refusal by Company
(a) Prior to Transferring any shares issued pursuant to the
exercise of options granted pursuant to the Plan, the holder of such
shares or the personal representative of the estate of the holder, if
deceased, ("Offeror") shall first offer to sell such shares (the
"Offered Shares") to the Company pursuant to this paragraph by giving
written notice of the proposed Transfer to the Secretary of the
Company. Such notice shall designate the proposed transferee, the
number of Offered Shares, the proposed purchase price and the address
of the Offeror.
(b) For a period of sixty (60) days from its receipt of
such notice, the Corporation shall have the first right and option to
accept the offer with respect to all, but not less than all, of the
Offered Shares at a price equal to the lower of the fair market value
of the Offered Shares as determined in good faith by the Board of
Directors or the proposed purchase price. Upon written notification
by the Corporation to the Offeror of such acceptance by the
Corporation, prior to 5:00 p.m. EST on the last day of such sixty-day
period, the Offeror shall be bound to sell all of the Offered Shares
to the Corporation at such price.
(c) If the Corporation accepts the offer to purchase the Offered
Shares, the closing on the purchase shall occur no later than thirty
(30) days after the date that the Corporation gives the Offeror notice
thereof. At the closing of the sale of the Offered Shares to the
Corporation, the Offeror shall deliver to the Corporation all
certificates
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evidencing the ownership of the Offered Shares, duly endorsed in
blank. The Corporation shall pay to the Offeror at the closing the
purchase price in cash, notes providing for principal payments
amortized over not more than five (5) years with interest at the
applicable federal rate as determined under section 1274 of the
Internal Revenue Code, or a combination thereof.
(d) Should the Offeror fail to deliver to the Corporation the
certificates at closing as aforesaid, the Offeror hereby appoints the
Secretary of the Corporation to act as his or her attorney-in-fact in
regard to all matters relating to the transfer of the Offered Shares,
including placing the funds to be used for the purchase in a separate
bank account on the Offeror's behalf, and authorizes the Secretary of
the Corporation to make such entries upon the corporate records to
reflect the transfer of the Offered Shares to the Corporation as if
the Offered Shares had been tendered and duly endorsed as provided
herein.
(e) If the Corporation shall not accept the offer to purchase the
Offered Shares within the sixty-day period referenced in (b), above,
then the Offeror shall be free to carry out the proposed Transfer to
the transferee specified in the notice from the Offeror, but only if
the sale is fully consummated within a period of thirty (30) days,
commencing on the earlier to occur of (i) the Corporation's express
refusal to purchase the Offered Shares, or (ii) the expiration of such
sixty-day period. If the Offeror does not carry out the proposed
Transfer within this thirty-day period but wishes to make a later
Transfer, the Offeror shall again comply with the terms of this
paragraph.
(f) This paragraph shall become inapplicable if the stock of the
Company is publicly traded in a stock exchange or in the
over-the-counter market.
11. Effect of Changes in Common Stock
If the Company shall combine, subdivide or reclassify the shares of
Common Stock which have been or may be optioned, or shall declare
thereon any dividend payable in shares of Common Stock, or shall
reclassify or take any other action of a similar nature affecting the
Common Stock, then the number and class of shares of stock which may
thereafter be optioned (in the aggregate and to any recipient) shall
be adjusted accordingly and, in the case of options outstanding at the
time of any such action, the number and class of shares which may
thereafter be purchased pursuant to such options and the
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option price per share shall be adjusted to such extent as the Board
may determine is necessary to preserve unimpaired the rights of the
recipients; provided, however, that any options to purchase fractional
shares resulting from any such adjustment shall be eliminated. Each
and every such determination by the Board shall be conclusive and
binding upon such recipient.
12. Reorganization
(a) If the Company shall at any time merge or consolidate with or
into another corporation and (1) the Company is not with the surviving
entity or (2) the Company is the surviving entity and the shareholders
of the Company's Common Stock are required to exchange their shares
for property and/or securities, the holder of each option will
thereafter receive, upon the exercise thereof, the securities and/or
property to which a holder of the number of shares of Common Stock
then deliverable upon the exercise of such option would have been
entitled upon such merger or consolidation, and the Company shall take
such steps in connection with such merger or consolidation as may be
necessary to assure that the provisions of the Plan shall thereafter
be applicable, as nearly as reasonably may be, in relation to any
securities or property thereafter deliverable upon the exercise of
such option; provided, however, that under no circumstances shall any
option exercise date be accelerated in contemplation of such action.
A sale of all or substantially all the assets of the Company for
consideration (apart from the assumption of obligations) consisting
primarily of securities shall be deemed a merger or consolidation for
the foregoing purposes. Notwithstanding the foregoing purposes, the
provisions of this paragraph shall be subject to paragraph 6.
(b) The surviving entity following any reorganization may at any
time, in its sole discretion, tender substitute options as it may deem
appropriate. However, in no event may the substitute options entitle
the optionee to any fewer shares (or at any greater aggregate price)
or any less other property than the optionee would be entitled to
under the immediately preceding paragraph upon an exercise of the
options held prior to the substitution of the new option.
13. Dissolution of Issuer
In the event of the proposed dissolution or liquidation of the
Company, the options granted hereunder shall terminate as of a date to
be fixed by the Board, provided that not less than thirty (30) days'
prior written notice of the date so fixed
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shall be given to the optionee, and the optionee shall have the right,
during the period of thirty (30) days preceding such termination, to
exercise his option. Notwithstanding the foregoing, the provisions of
this paragraph shall be subject to paragraph 6.
14. Rights as a Stockholder or Employee.
(a) An optionee or a transferee of an option shall have no rights
as a stockholder with respect to any shares of Common Stock covered by
the optionee's option until the date of the issuance of a stock
certificate to the optionee for such shares. No adjustment shall be
made for dividends (ordinary or extraordinary whether in cash,
securities, or other property) or distributions or other rights for
which the record date is prior to the date such stock certificate is
issued, except as provided in paragraph 11 hereof.
(b) Nothing in the Plan or an option granted hereunder shall
govern the employment rights and duties between the optionee and the
Company. Neither the Plan, nor any grant or exercise pursuant
thereto, shall constitute an employment agreement among such parties.
Nothing in the Plan or in any options granted hereunder shall confer
upon any employee any right to continue in the employ of the Company
or of any of its subsidiaries or interfere in any way with the right
of the Company or any such subsidiary to terminate such employee's
employment at any time.
15. Withholding of Tax.
If any governmental entity requires that a tax be paid with respect to
the exercise of an option or any distribution under the Plan, the
amount of that tax may be withheld from salary and other amounts
otherwise payable to the optionee and paid over by the Company to such
governmental authority for the account of the optionee. Alternatively,
the Company may require the option holder or other person exercising
the option or receiving the distribution to pay such sums directly to
the Company.
16. Alternation, Termination, Discontinuance, Suspension or
Amendment
The Board reserves the right to alter, terminate, discontinue, suspend
or amend the Plan upon at least thirty (30) days advance written
notice to all the recipients. The Board may not, however, alter or
impair any option previously granted to the recipients under the Plan
without their consent.
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17. Compliance with Laws and Regulations
No option shall be granted or exercised if the grant of such option,
or the exercise and the issuance of shares pursuant thereto, would be
contrary to the laws or regulations of any duly constituted authority
having jurisdiction.
18. Effective Date of the Plan
(a) The effective date of the Plan is January 1, 1996.
(b) The Plan shall terminate on January 1, 2006; but the Board of
Directors may terminate the Plan at any time prior to ten (10) years
from the effective date of the Plan.
(c) Termination of the Plan shall not alter or impair, without the
consent of the optionee, any of the rights or obligations and any
option theretofore granted under the Plan.
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EXHIBIT 10.3
DELTEK SYSTEMS, INC.
1996 STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Deltek Systems, Inc. 1996 Stock
Option Plan (the "PLAN") is hereby established effective as of December 15,
1996 (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the
interests of the Participating Company Group and its stockholders by providing
an incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect
until the earlier of its termination by the Board or the date on which all of
the shares of Stock available for issuance under the Plan have been issued and
all restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed. However, all Incentive
Stock Options shall be granted, if at all, within ten (10) years from the
earlier of the date the Plan is adopted by the Board or the date the Plan is
duly approved by the stockholders of the Company. Notwithstanding the
foregoing, if the maximum number of shares of Stock issuable pursuant to the
Plan as provided in Section 4.1 has been increased at any time, all Incentive
Stock Options shall be granted, if at all, no later than the last day preceding
the tenth (10th) anniversary of the earlier of (a) the date on which the latest
such increase in the maximum number of shares of Stock issuable under the Plan
was approved by the stockholders of the Company or (b) the date such amendment
was adopted by the Board.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following
terms shall have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of
1986, as amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee
or other committee of the Board duly appointed to administer the Plan and
having such powers as shall be specified by the Board. Unless the powers of
the Committee have been specifically limited, the
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Committee shall have all of the powers of the Board granted herein, including,
without limitation, the power to amend or terminate the Plan at any time,
subject to the terms of the Plan and any applicable limitations imposed by law.
(d) "COMPANY" means Deltek Systems, Inc., a
Virginia corporation, or any successor corporation thereto.
(e) "CONSULTANT" means any person, including an
advisor, engaged by a Participating Company to render services other than as an
Employee or a Director.
(f) "DIRECTOR" means a member of the Board or of
the board of directors of any other Participating Company.
(g) "DISABILITY" means the disability of an
Optionee within the meaning of the Company's long-term disability plan.
(h) "EMPLOYEE" means any person treated as an
employee (including an officer or a Director who is also treated as an
employee) in the records of a Participating Company; provided, however, that
neither service as a Director nor payment of a director's fee shall be
sufficient to constitute employment for purposes of the Plan.
(i) "EXCHANGE ACT" means the Securities Exchange
Act of 1934, as amended.
(j) "FAIR MARKET VALUE" means, as of any date, if
there is then a public market for the Stock, the closing sale price of a share
of Stock (or the mean of the closing bid and asked prices if the Stock is so
quoted instead) as quoted on the Nasdaq National Market, the Nasdaq Small-Cap
Market or such other national or regional securities exchange or market system
constituting the primary market for the Stock, as reported in The Wall Street
Journal or such other source as the Company deems reliable. If the relevant
date does not fall on a day on which the Stock has traded on such securities
exchange or market system, the date on which the Fair Market Value shall be
established shall be the last day on which the Stock was so traded prior to the
relevant date, or such other appropriate day as shall be determined by the
Board, in its sole discretion. If there is then no public market for the
Stock, the Fair Market Value on any relevant date shall be as determined by the
Board without regard to any restriction other than a restriction which, by its
terms, will never lapse.
(k) "INCENTIVE STOCK OPTION" means an Option
intended to be (as set forth in the Option Agreement) and which qualifies as an
incentive stock option within the meaning of Section 422(b) of the Code.
(l) "INSIDER" means an officer or a Director of
the Company or any other person whose transactions in Stock are subject to
Section 16 of the Exchange Act.
(m) "NONSTATUTORY STOCK OPTION" means an Option
not intended to be (as set forth in the Option Agreement) or which does not
qualify as an Incentive Stock Option.
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(n) "OPTION" means a right to purchase Stock
(subject to adjustment as provided in Section 4.2) pursuant to the terms and
conditions of the Plan. An Option may be either an Incentive Stock Option or a
Nonstatutory Stock Option.
(o) "OPTION AGREEMENT" means a written agreement
between the Company and an Optionee setting forth the terms, conditions and
restrictions of the Option granted to the Optionee and any shares acquired upon
the exercise thereof.
(p) "OPTIONEE" means a person who has been
granted one or more Options.
(q) "PARENT CORPORATION" means any present or
future "parent corporation" of the Company, as defined in Section 424(e) of the
Code.
(r) "PARTICIPATING COMPANY" means the Company or
any Parent Corporation or Subsidiary Corporation.
(s) "PARTICIPATING COMPANY GROUP" means, at any
point in time, all corporations collectively which are then Participating
Companies.
(t) "RULE 16b-3" means Rule 16b-3 under the
Exchange Act, as amended from time to time, or any successor rule or
regulation.
(u) "SECTION 162(m)" means Section 162(m) of the
Code, as amended by the Revenue Reconciliation Act of 1993 (P.L. 103-66).
(v) "SECURITIES ACT" means the Securities Act of
1933, as amended.
(w) "SERVICE" means an Optionee's employment or
service with the Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. An Optionee's Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionee renders Service to the Participating Company Group or a change in
the Participating Company for which the Optionee renders such Service, provided
that there is no interruption or termination of the Optionee's Service. An
Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its sole discretion, shall determine whether an Optionee's Service
has terminated and the effective date of such termination.
(x) "STOCK" means the common stock of the
Company, as adjusted from time to time in accordance with Section 4.2.
(y) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f) of
the Code.
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(z) "TEN PERCENT OWNER OPTIONEE" means an
Optionee who, at the time an Option is granted to the Optionee, owns stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of a Participating Company within the meaning of Section
422(b)(6) of the Code.
2.2 CONSTRUCTION. Captions and titles contained herein
are for convenience only and shall not affect the meaning or interpretation of
any provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular.
Use of the term "or" is not intended to be exclusive, unless the context
clearly requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be
administered by the Board, including any duly appointed Committee of the Board.
All questions of interpretation of the Plan or of any Option shall be
determined by the Board, and such determinations shall be final and binding
upon all persons having an interest in the Plan or such Option. Any officer of
a Participating Company shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, determination or
election which is the responsibility of or which is allocated to the Company
herein, provided the officer has apparent authority with respect to such
matter, right, obligation, determination or election.
3.2 ADMINISTRATION WITH RESPECT TO INSIDERS. With
respect to participation by Insiders in the Plan, at any time that any class of
equity security of the Company is registered pursuant to Section 12 of the
Exchange Act, the Plan shall be administered in compliance with the
requirements, if any, of Rule 16b-3.
3.3 POWERS OF THE BOARD. In addition to any other powers
set forth in the Plan and subject to the provisions of the Plan, the Board
shall have the full and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the
time or times at which, Options shall be granted and the number of shares of
Stock to be subject to each Option;
(b) to designate Options as Incentive Stock
Options or Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares
of Stock or other property;
(d) to determine the terms, conditions and
restrictions applicable to each Option (which need not be identical) and any
shares acquired upon the exercise thereof, including, without limitation, (i)
the exercise price of the Option, (ii) the method of payment for shares
purchased upon the exercise of the Option, (iii) the method for satisfaction of
any tax withholding obligation arising in connection with the Option or such
shares, including by the withholding or delivery of shares of stock, (iv) the
timing, terms and conditions of the
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exercisability of the Option or the vesting of any shares acquired upon the
exercise thereof, (v) the time of the expiration of the Option, (vi) the effect
of the Optionee's termination of employment or service with the Participating
Company Group on any of the foregoing, and (vii) all other terms, conditions
and restrictions applicable to the Option or such shares not inconsistent with
the terms of the Plan;
(e) to approve one or more forms of Option
Agreement;
(f) to amend, modify, extend, or renew, or grant
a new Option in substitution for, any Option or to waive any restrictions or
conditions applicable to any Option or any shares acquired upon the exercise
thereof;
(g) to accelerate, continue, extend or defer the
exercisability of any Option or the vesting of any shares acquired upon the
exercise thereof, including with respect to the period following an Optionee's
termination of employment or service with the Participating Company Group;
(h) to delegate to any proper officer of the
Company the authority to grant one or more Options, without further approval of
the Board, to any person eligible pursuant to Section 5, other than a person
who, at the time of such grant, is an Insider; provided, however, that (i) such
Options shall not be granted to any one person within any fiscal year of the
Company for more than Five Thousand (5,000) shares in the aggregate, (ii) the
exercise price per share of each such Option shall be equal to 100% of the Fair
Market Value of a share of Stock on the effective date of grant, and (iii) each
such Option shall be subject to the terms and conditions of the appropriate
standard form of Option Agreement approved by the Board and shall conform to
the provisions of the Plan and such other guidelines as shall be established
from time to time by the Board;
(i) to prescribe, amend or rescind rules,
guidelines and policies relating to the Plan, or to adopt supplements to, or
alternative versions of, the Plan, including, without limitation, as the Board
deems necessary or desirable to comply with the laws of, or to accommodate the
tax policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and
(j) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement and to make all
other determinations and take such other actions with respect to the Plan or
any Option as the Board may deem advisable to the extent consistent with the
Plan and applicable law.
3.4 COMMITTEE COMPLYING WITH SECTION 162(m). If a
Participating Company is a "publicly held corporation" within the meaning of
Section 162(m), the Board may establish a Committee of "outside directors"
within the meaning of Section 162(m) to approve the grant of any Option which
might reasonably be anticipated to result in the payment of employee
remuneration that would otherwise exceed the limit on employee remuneration
deductible for income tax purposes pursuant to Section 162(m).
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4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to
adjustment as provided in Section 4.2, the maximum aggregate number of shares
of Stock that may be issued under the Plan shall be Three Hundred Thousand
(300,000) and shall consist of authorized but unissued or reacquired shares of
Stock or any combination thereof. If an outstanding Option for any reason
expires or is terminated or canceled, or if shares of Stock acquired, subject
to repurchase, upon the exercise of an Option are repurchased by the Company,
the shares of Stock allocable to the unexercised portion of such Option or such
repurchased shares of Stock shall again be available for issuance under the
Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the
event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification or similar change in the
capital structure of the Company, appropriate adjustments shall be made in the
number and class of shares subject to the Plan and to any outstanding Options,
in the Section 162(m) Grant Limit set forth in Section 5.4, and in the exercise
price per share of any outstanding Options. If a majority of the shares which
are of the same class as the shares that are subject to outstanding Options are
exchanged for, converted into, or otherwise become shares of another
corporation (the "NEW SHARES"), the Board may unilaterally amend the
outstanding Options to provide that such Options are exercisable for New
Shares. In the event of any such amendment, the number of shares subject to,
and the exercise price per share of, the outstanding Options shall be adjusted
in a fair and equitable manner as determined by the Board, in its sole
discretion. Notwithstanding the foregoing, any fractional share resulting from
an adjustment pursuant to this Section 4.2 shall be rounded up or down to the
nearest whole number, as determined by the Board, and in no event may the
exercise price of any Option be decreased to an amount less than the par value,
if any, of the stock subject to the Option. The adjustments determined by the
Board pursuant to this Section 4.2 shall be final, binding and conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted
only to Employees, Consultants, and Directors. For purposes of the foregoing
sentence, "Employees" shall include prospective Employees to whom Options are
granted in connection with written offers of employment with the Participating
Company Group, and "Consultants" shall include prospective Consultants to whom
Options are granted in connection with written offers of engagement with the
Participating Company Group. Eligible persons may be granted more than one (1)
Option.
5.2 OPTION GRANT RESTRICTIONS. Any person who is not an
Employee on the effective date of the grant of an Option to such person may be
granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to
a prospective Employee upon the condition that such person become an Employee
shall be deemed granted effective on the date such person commences service
with a Participating Company, with an exercise price determined as of such date
in accordance with Section 6.1.
5.3 FAIR MARKET VALUE LIMITATION. To the extent that
options designated as Incentive Stock Options (granted under all stock option
plans of the Participating Company
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Group, including the Plan) become exercisable by an Optionee for the first time
during any calendar year for stock having an aggregate Fair Market Value
greater than One Hundred Thousand Dollars ($100,000), the portions of such
options which exceeds such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5.3, options designated as Incentive
Stock Options shall be taken into account in the order in which they were
granted, and the Fair Market Value of stock shall be determined as of the time
the option with respect to such stock is granted. If the Code is amended to
provide for a different limitation from that set forth in this Section 5.3,
such different limitation shall be deemed incorporated herein effective as of
the date and with respect to such Options as required or permitted by such
amendment to the Code. If an Option is treated as an Incentive Stock Option in
part and as a Nonstatutory Stock Option in part by reason of the limitation set
forth in this Section 5.3, the Optionee may designate which portion of such
Option the Optionee is exercising and separate certificates representing each
such portion shall be issued upon the exercise of the Option. In the absence
of such designation, the Optionee shall be deemed to have exercised the
Incentive Stock Option portion of the Option first.
5.4 SECTION 162(m) GRANT LIMIT. Subject to adjustment as
provided in Section 4.2, at any such time as a Participating Company is a
"publicly held corporation" within the meaning of Section 162(m), no Employee
shall be granted one or more Options within any fiscal year of the Company
which in the aggregate are for the purchase of more than Ten Thousand (10,000)
shares; provided, however, that the Company may make an additional one-time
grant to any newly-hired Employee of an Option for the purchase of up to Twenty
Thousand (20,000) shares (the "SECTION 162(m) GRANT LIMIT"). An Option which
is canceled in the same fiscal year of the Company in which it was granted
shall continue to be counted against the Section 162(m) Grant Limit for such
period.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced
by Option Agreements specifying the number of shares of Stock covered thereby,
in such form as the Board shall from time to time establish. Option Agreements
may incorporate all or any of the terms of the Plan by reference and shall
comply with and be subject to the following terms and conditions:
6.1 EXERCISE PRICE. The exercise price for each Option
shall be established in the sole discretion of the Board; provided, however,
that (a) the exercise price per share for an Option shall be not less than the
Fair Market Value of a share of Stock on the effective date of grant of the
Option and (b) no Incentive Stock Option granted to a Ten Percent Owner
Optionee shall have an exercise price per share less than one hundred ten
percent (110%) of the Fair Market Value of a share of Stock on the effective
date of grant of the Option. Notwithstanding the foregoing, an Option (whether
an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with
an exercise price lower than the minimum exercise price set forth above if such
Option is granted pursuant to an assumption or substitution for another option
in a manner qualifying under the provisions of Section 424(a) of the Code.
6.2 EXERCISE PERIOD. Options shall be exercisable at
such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria, and restrictions as shall be determined by
the Board and set forth in the Option Agreement evidencing such Option;
provided, however, that (a) no Incentive Stock Option shall be exercisable
after the
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expiration of ten (10) years after the effective date of grant of such Option,
(b) no Incentive Stock Option granted to a Ten Percent Owner Optionee shall be
exercisable after the expiration of five (5) years after the effective date of
grant of such Option, and (c) no Option granted to a prospective Employee or
prospective Consultant may become exercisable prior to the date on which such
person commences service with a Participating Company.
6.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the exercise price for the number of
shares of Stock being purchased pursuant to any Option shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company of shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to
such stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the exercise price, (iii) by the
assignment of the proceeds of a sale or loan with respect to some or all of the
shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T
as promulgated from time to time by the Board of Governors of the Federal
Reserve System) (a "CASHLESS EXERCISE"), (iv) by the Optionee's promissory note
in a form approved by the Company, (v) by such other consideration as may be
approved by the Board from time to time to the extent permitted by applicable
law, or (vi) by any combination thereof. The Board may at any time or from time
to time, by adoption of or by amendment to the standard forms of Option
Agreement described in Section 7, or by other means, grant Options which do not
permit all of the foregoing forms of consideration to be used in payment of the
exercise price or which otherwise restrict one or more forms of consideration.
(b) TENDER OF STOCK. Notwithstanding the
foregoing, an Option may not be exercised by tender to the Company of shares of
Stock to the extent such tender of Stock would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of
the Company's stock. Unless otherwise provided by the Board, an Option may not
be exercised by tender to the Company of shares of Stock unless such shares
either have been owned by the Optionee for more than six (6) months or were not
acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. The Company reserves, at
any and all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.
(d) PAYMENT BY PROMISSORY NOTE. No promissory
note shall be permitted if the exercise of an Option using a promissory note
would be a violation of any law. Any permitted promissory note shall be on such
terms as the Board shall determine at the time the Option is granted. The
Board shall have the authority to permit or require the Optionee to secure any
promissory note used to exercise an Option with the shares of Stock acquired
upon the exercise of the Option or with other collateral acceptable to the
Company. Unless otherwise provided by the Board, if the Company at any time is
subject to the regulations promulgated by the Board of Governors of the Federal
Reserve System or any other governmental entity affecting
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the extension of credit in connection with the Company's securities, any
promissory note shall comply with such applicable regulations, and the Optionee
shall pay the unpaid principal and accrued interest, if any, to the extent
necessary to comply with such applicable regulations.
6.4 TAX WITHHOLDING. The Company shall have the right,
but not the obligation, to deduct from the shares of Stock issuable upon the
exercise of an Option, or to accept from the Optionee the tender of, a number
of whole shares of Stock having a Fair Market Value, as determined by the
Company, equal to all or any part of the federal, state, local and foreign
taxes, if any, required by law to be withheld by the Participating Company
Group with respect to such Option or the shares acquired upon the exercise
thereof. Alternatively or in addition, in its sole discretion, the Company
shall have the right to require the Optionee, through payroll withholding, cash
payment or otherwise, including by means of a Cashless Exercise, to make
adequate provision for any such tax withholding obligations of the
Participating Company Group arising in connection with the Option or the shares
acquired upon the exercise thereof. The Company shall have no obligation to
deliver shares of Stock or to release shares of Stock from an escrow
established pursuant to the Option Agreement until the Participating Company
Group's tax withholding obligations have been satisfied by the Optionee.
6.5 FRACTIONAL SHARES. The Company shall not be required
to issue fractional shares upon the exercise of any Option.
6.6 CERTIFICATE REGISTRATION. Except in the event the
exercise price of an Option is paid by means of a Cashless Exercise, the
certificate for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, if requested by the Optionee, in the
name of the Optionee and his or her spouse, or, if applicable, in the names of
the heirs of the Optionee or such other person or persons who acquired the
right to exercise the Option in accordance with the terms of the Plan and the
Option Agreement.
6.7 EFFECT OF TERMINATION OF SERVICE.
(a) OPTION EXERCISABILITY. Subject to earlier
termination of the Option as otherwise provided herein and unless otherwise
determined by the Board in its discretion, an Option shall be exercisable after
an Optionee's termination of Service as follows:
(i) Retirement. If the
Optionee's Service with the Participating Company Group terminates by reason of
the Optionee's retirement after reaching age sixty (60) (or such younger age as
the Company shall determine) ("RETIREMENT"), the Option, to the extent
unexercised and exercisable on the date on which the Optionee's Service
terminated, may be exercised by the Optionee at any time prior to the date of
expiration of the Option's term as set forth in the Option Agreement evidencing
such Option (the "OPTION EXPIRATION DATE"). (NOTE: If an Incentive Stock
Option is exercised pursuant to this Section more than three (3) months after
the date on which the Optionee's Service as an Employee terminated, the Option
will be treated as a Nonstatutory Stock Option and not as an Incentive Stock
Option to the extent required by Section 422 of the Code.)
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(ii) Disability. If the
Optionee's Service with the Participating Company Group is terminated because
of the Disability of the Optionee, the Option, to the extent unexercised and
exercisable on the date on which the Optionee's Service terminated, may be
exercised by the Optionee (or the Optionee's guardian or legal representative)
at any time prior to the Option Expiration Date. (NOTE: If an Incentive Stock
Option is exercised more than three (3) months after the date on which the
Optionee's Service as an Employee terminated as a result of a Disability other
than a permanent and total disability as defined in Section 22(e)(3) of the
Code, the Option will be treated as a Nonstatutory Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.)
(iii) Death. If the Optionee's
Service with the Participating Company Group is terminated because of the death
of the Optionee, the Option, to the extent unexercised and exercisable on the
date on which the Optionee's Service terminated, may be exercised by the
Optionee's legal representative or other person who acquired the right to
exercise the Option by reason of the Optionee's death at any time prior to the
Option Expiration Date. The Optionee's Service shall be deemed to have
terminated on account of death if the Optionee dies within three (3) months
after the Optionee's termination of Service.
(iv) Other Termination of
Service. If the Optionee's Service with the Participating Company Group
terminates for any reason, except Retirement, Disability or death, the Option,
to the extent unexercised and exercisable by the Optionee on the date on which
the Optionee's Service terminated, may be exercised by the Optionee within
three (3) months (or such other longer period of time as determined by the
Board, in its sole discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.
(b) EXTENSION IF OPTIONEE SUBJECT TO SECTION
16(b). Notwithstanding the foregoing, if a sale within the applicable time
periods set forth in Section 6.4(a) of shares acquired upon the exercise of the
Option would subject the Optionee to suit under Section 16(b) of the Exchange
Act, the Option shall remain exercisable until the earliest to occur of (i) the
tenth (10th) day following the date on which a sale of such shares by the
Optionee would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day after the Optionee's termination of Service, or (iii) the
Option Expiration Date.
(c) EXTENSION IF EXERCISE PREVENTED BY LAW.
Notwithstanding the foregoing, if the exercise of an Option within the
applicable time periods set forth in Section 6.4(a) is prevented by the
provisions of Section 11 below, the Option shall remain exercisable until three
(3) months after the date the Optionee is notified by the Company that the
Option is exercisable, but in any event no later than the Option Expiration
Date.
(d) LEAVE OF ABSENCE. For purposes of Section
6.4(a), the Optionee's Service with the Participating Company Group shall not
be deemed to terminate if the Optionee takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company of ninety (90) days or
less. In the event of a leave of absence in excess of ninety (90) days, the
Optionee's Service shall be deemed to terminate on the ninety-first (91st) day
of such leave unless
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the Optionee's right to return to Service with the Participating Company Group
remains guaranteed by statute or contract.
6.8 RIGHTS AS A STOCKHOLDER, EMPLOYEE OR CONSULTANT. No
person shall have any rights as a stockholder with respect to any shares
covered by an Option until the date of the issuance of a certificate for the
shares for which the Option has been exercised (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company). No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such certificate is
issued, except as provided in Section 4.2. Nothing in the Plan or in any Option
Agreement shall confer upon any Optionee any right to continue in the Service
of a Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Optionee's Service as an Employee
or Consultant, as the case may be, at any time.
7. STANDARD FORMS OF OPTION AGREEMENT.
7.1 INCENTIVE STOCK OPTIONS. Unless otherwise provided
by the Board at the time the Option is granted, an Option designated as an
"Incentive Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of incentive stock option agreement, if any,
adopted by the Board and as amended from time to time.
7.2 NONSTATUTORY STOCK OPTIONS. Unless otherwise
provided by the Board at the time the Option is granted, an Option designated
as a "Nonstatutory Stock Option" shall comply with and be subject to the terms
and conditions set forth in the form of Nonstatutory Stock Option Agreement
adopted by the Board concurrently with its adoption of the Plan and as amended
from time to time.
7.3 STANDARD TERM OF OPTIONS. Except as otherwise
provided in Section 6.2 or by the Board in the grant of an Option, any Option
granted hereunder shall have a term of ten (10) years from the effective date
of grant of the Option.
7.4 AUTHORITY TO VARY TERMS. The Board shall have the
authority from time to time to vary the terms of any of the standard forms of
Option Agreement described in this Section 7 either in connection with the
grant or amendment of an individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that the
terms and conditions of any such new, revised or amended standard form or forms
of Option Agreement are not inconsistent with the terms of the Plan. Such
authority shall include, but not by way of limitation, the authority to grant
Options which are immediately exercisable subject to the Company's right to
repurchase any unvested shares of Stock acquired by an Optionee upon the
exercise of an Option in the event such Optionee's employment or service with
the Participating Company Group is terminated for any reason, with or without
cause.
8. REORGANIZATION OR DISSOLUTION.
8.1 DEFINITION. A "REORGANIZATION" shall be deemed to
occur in the event of (a) a merger or consolidation in which the Company is a
party or (b) the sale, exchange or transfer
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of all or substantially all of the assets of the Company, wherein, in either
such event, the stockholders of the Company immediately before such event do
not retain immediately after such event direct or indirect beneficial ownership
of more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Reorganization, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations.
8.2 EFFECT OF REORGANIZATION ON OPTIONS. In the event of
a Reorganization, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), shall either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. Any Options which
are neither assumed or substituted for by the Acquiring Corporation in
connection with the Reorganization nor exercised as of the date of the
Reorganization shall terminate and cease to be outstanding effective as of the
date of the Reorganization. For the purposes of this Section 8.2, an Option
shall be deemed assumed if, following the Reorganization, the Option confers
the right to purchase, for each share of Stock subject to the Option
immediately prior to the Reorganization, the consideration (whether stock, cash
or other securities or property) to which a holder of a share of Stock on the
effective date of the Reorganization was entitled.
8.3 DISSOLUTION. In the event of the proposed
dissolution or liquidation of the Company, the Company shall notify each
Optionee at least thirty (30) days in advance of such proposed action.
Options, to the extent not exercised, shall terminate and cease to be
outstanding immediately prior to the consummation of such dissolution or
liquidation.
9. PROVISION OF INFORMATION. Each Optionee shall be given access
to information concerning the Company equivalent to that information generally
made available to the Company's common stockholders.
10. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, an Option shall be exercisable only by the Optionee or the Optionee's
guardian or legal representative. No Option shall be assignable or
transferable by the Optionee, except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, a Nonstatutory Stock Option shall
be assignable or transferable to the extent permitted by the Board and set
forth in the Option Agreement evidencing such Option.
11. COMPLIANCE WITH SECURITIES LAW. The grant of Options and the
issuance of shares of Stock upon exercise of Options shall be subject to
compliance with all applicable requirements of federal, state or foreign law
with respect to such securities. Options may not be exercised if the issuance
of shares of Stock upon exercise would constitute a violation of any applicable
federal, state or foreign securities laws or other law or regulations or the
requirements of any stock exchange or market system upon which the Stock may
then be listed. In addition, no
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Option may be exercised unless (a) a registration statement under the
Securities Act shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (b) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable
exemption from the registration requirements of the Securities Act. The
inability of the Company to obtain from any regulatory body having jurisdiction
the authority, if any, deemed by the Company's legal 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. As a condition to
the exercise of any Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance
with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.
12. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board is delegated shall be indemnified by the Company against all
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan, or any right granted hereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
person is liable for gross negligence, bad faith or intentional misconduct in
duties; provided, however, that within sixty (60) days after the institution of
such action, suit or proceeding, such person shall offer to the Company, in
writing, the opportunity at its own expense to handle and defend the same.
13. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or
amend the Plan at any time. However, subject to changes in applicable law,
regulations or rules that would permit otherwise, without the approval of the
Company's stockholders, there shall be (a) no increase in the maximum aggregate
number of shares of Stock that may be issued under the Plan (except by
operation of the provisions of Section 4.2), (b) no change in the class of
persons eligible to receive Incentive Stock Options, and (c) no other amendment
of the Plan that would require approval of the Company's stockholders under any
applicable law, regulation or rule. In any event, no termination or amendment
of the Plan may adversely affect any then outstanding Option or any unexercised
portion thereof, without the consent of the Optionee, unless such termination
or amendment is required to enable an Option designated as an Incentive Stock
Option to qualify as an Incentive Stock Option or is necessary to comply with
any applicable law, regulation or rule.
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IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Deltek Systems, Inc. 1996 Stock Option Plan was duly adopted
by the Board on November 27, 1996 and by the Shareholders of the Company on
December 10, 1996.
/s/ Alan R. Stewart
-------------------------------
Secretary
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PLAN HISTORY
November 27, 1996 Board adopts Plan, with an initial reserve of
300,000 shares.
December 10, 1996 Stockholders approve Plan, with an initial reserve
of 300,000 shares.
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EXHIBIT 10.4
DELTEK SYSTEMS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Deltek Systems, Inc.
Employee Stock Purchase Plan (the "PLAN") is established effective as of the
effective date of the initial registration by the Company of its Stock under
Section 12 of the Exchange Act (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to
provide Eligible Employees of the Participating Company Group with an
opportunity to acquire a proprietary interest in the Company through the
purchase of Stock. The Company intends that the Plan qualify as an "employee
stock purchase plan" under Section 423 of the Code (including any amendments or
replacements of such section), and the Plan shall be so construed.
1.3 TERM OF PLAN. The Plan shall continue in
effect until the earlier of its termination by the Board or the date on which
all of the shares of Stock available for issuance under the Plan have been
issued.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Any term not expressly defined
in the Plan but defined for purposes of Section 423 of the Code shall have the
same definition herein. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "BOARD" means the Board of Directors
of the Company. If one or more Committees have been appointed by the Board to
administer the Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue
Code of 1986, as amended, and any applicable regulations promulgated
thereunder.
(c) "COMMITTEE" means a committee of the
Board duly appointed to administer the Plan and having such powers as shall be
specified by the Board. Unless the powers of the Committee have been
specifically limited, the Committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law.
(d) "COMPANY" means Deltek Systems,
Inc., a Virginia corporation, or any successor corporation thereto.
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(e) "COMPENSATION" means, with respect
to any Offering Period, a Participant's base salary and overtime payable in
cash during such Offering Period before deduction for any contributions to any
plan maintained by a Participating Company and described in Section 401(k) or
Section 125 of the Code. Compensation shall not include commissions, bonuses,
other incentive payments, reimbursements of expenses, allowances, long-term
disability, workers' compensation or any amount deemed received without the
actual transfer of cash or any amounts directly or indirectly paid pursuant to
the Plan or any other stock purchase or stock option plan.
(f) "ELIGIBLE EMPLOYEE" means an
Employee who meets the requirements set forth in Section 5 for eligibility to
participate in the Plan.
(g) "EMPLOYEE" means a person treated as
an employee of a Participating Company for purposes of Section 423 of the Code.
A Participant shall be deemed to have ceased to be an Employee either upon an
actual termination of employment or upon the corporation employing the
Participant ceasing to be a Participating Company. For purposes of the Plan,
an individual shall not be deemed to have ceased to be an Employee while such
individual is on a military leave, sick leave or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event an
individual's leave of absence exceeds ninety (90) days, the individual shall be
deemed to have ceased to be an Employee on the ninety-first (91st) day of such
leave unless the individual's right to reemployment with the Participating
Company Group is guaranteed either by statute or by contract. The Company
shall determine in good faith and in the exercise of its discretion whether an
individual has become or has ceased to be an Employee and the effective date of
such individual's employment or termination of employment, as the case may be.
All such determinations by the Company shall be, for purposes of an
individual's participation in or other rights under the Plan as of the time of
the Company's determination, final, binding and conclusive, notwithstanding
that the Company or any governmental agency subsequently makes a contrary
determination.
(h) "FAIR MARKET VALUE" means, as of any
date, if there is then a public market for the Stock, the closing sale price of
a share of Stock (or the mean of the closing bid and asked prices if the Stock
is so quoted instead) as quoted on the Nasdaq National Market, the Nasdaq
Small-Cap Market or such other national or regional securities exchange or
market system constituting the primary market for the Stock, as reported in The
Wall Street Journal or such other source as the Company deems reliable. If the
relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded
prior to the relevant date, or such other appropriate day as shall be
determined by the Board, in its sole discretion. If there is then no public
market for the Stock, the Fair Market Value on any relevant date shall be as
determined by the Board without regard to any restriction other than a
restriction which, by its terms, will never lapse. Notwithstanding the
foregoing, the Fair Market Value per share of Stock on the Effective Date shall
be deemed to be the public offering price set forth in the final prospectus
filed with the Securities and Exchange Commission in connection with the
initial public offering of the Stock.
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(i) "OFFERING" means an offering of
Stock as provided in Section 6.
(j) "OFFERING DATE" means, for any
Offering Period, the first day of such Offering Period.
(k) "OFFERING PERIOD" means a period
established in accordance with Section 6.1.
(l) "PARENT CORPORATION" means any
present or future "parent corporation" of the Company, as defined in Section
424(e) of the Code.
(m) "PARTICIPANT" means an Eligible
Employee who has become a participant in an Offering Period in accordance with
Section 7 and remains a participant in accordance with the Plan.
(n) "PARTICIPATING COMPANY" means the
Company or any Parent Corporation or Subsidiary Corporation designated by the
Board as a corporation the Employees of which may, if Eligible Employees,
participate in the Plan. The Board shall have the sole and absolute discretion
to determine from time to time which Parent Corporations or Subsidiary
Corporations shall be Participating Companies.
(o) "PARTICIPATING COMPANY GROUP" means,
at any point in time, the Company and all other corporations collectively which
are then Participating Companies.
(p) "PURCHASE DATE" means, for any
Offering Period (or Purchase Period if so determined by the Board in accordance
with Section 6.2), the last day of such period.
(q) "PURCHASE PERIOD" means a period, if
any, established in accordance with Section 6.2.
(r) "PURCHASE PRICE" means the price at
which a share of Stock may be purchased under the Plan, as determined in
accordance with Section 9.
(s) "PURCHASE RIGHT" means an option
granted to a Participant pursuant to the Plan to purchase such shares of Stock
as provided in Section 8, which the Participant may or may not exercise during
the Offering Period in which such option is outstanding. Such option arises
from the right of a Participant to withdraw any accumulated payroll deductions
of the Participant not previously applied to the purchase of Stock under the
Plan and to terminate participation in the Plan or any Offering thereunder at
any time during an Offering Period.
(t) "STOCK" means the common stock of
the Company, as adjusted from time to time in accordance with Section 4.2.
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(u) "SUBSCRIPTION AGREEMENT" means a
written agreement in such form as specified by the Company, stating an
Employee's election to participate in the Plan and authorizing payroll
deductions under the Plan from the Employee's Compensation.
(v) "SUBSCRIPTION DATE" means the last
business day prior to the Offering Date of an Offering Period or such earlier
date as the Company shall establish.
(w) "SUBSIDIARY CORPORATION" means any
present or future "subsidiary corporation" of the Company, as defined in
Section 424(f) of the Code.
2.2 CONSTRUCTION. Captions and titles contained
herein are for convenience only and shall not affect the meaning or
interpretation of any provision of the Plan. Except when otherwise indicated
by the context, the singular shall include the plural and the plural shall
include the singular. Use of the term "or" is not intended to be exclusive,
unless the context clearly requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall
be administered by the Board, including any duly appointed Committee of the
Board. All questions of interpretation of the Plan, of any form of agreement
or other document employed by the Company in the administration of the Plan, or
of any Purchase Right shall be determined by the Board and shall be final and
binding upon all persons having an interest in the Plan or the Purchase Right.
Subject to the provisions of the Plan, the Board shall determine all of the
relevant terms and conditions of Purchase Rights granted pursuant to the Plan;
provided, however, that all Participants granted Purchase Rights pursuant to
the Plan shall have the same rights and privileges within the meaning of
Section 423(b)(5) of the Code. All expenses incurred in connection with the
administration of the Plan shall be paid by the Company.
3.2 AUTHORITY OF OFFICERS. Any officer of the
Company shall have the authority to act on behalf of the Company with respect
to any matter, right, obligation, determination or election that is the
responsibility of or that is allocated to the Company herein, provided that the
officer has apparent authority with respect to such matter, right, obligation,
determination or election.
3.3 POLICIES AND PROCEDURES ESTABLISHED BY THE
COMPANY. The Company may, from time to time, consistent with the Plan and the
requirements of Section 423 of the Code, establish, change or terminate such
rules, guidelines, policies, procedures, limitations, or adjustments as deemed
advisable by the Company, in its sole discretion, for the proper administration
of the Plan, including, without limitation, (a) a minimum payroll deduction
amount required for participation in an Offering, (b) a limitation on the
frequency or number of changes in the rate of payroll deduction during an
Offering, (c) an exchange ratio applicable to amounts withheld in a currency
other than United States dollars, (d) a payroll deduction greater than or less
than the amount designated by a Participant in order to adjust for the
Company's delay or mistake in processing a Subscription Agreement or in
otherwise effecting a Participant's election
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under the Plan or as advisable to comply with the requirements of Section 423
of the Code, and (e) determination of the date and manner by which the Fair
Market Value of a share of Stock is determined for purposes of administration
of the Plan.
4. SHARES SUBJECT TO THE PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject
to adjustment as provided in Section 4.2, the maximum aggregate number of
shares of Stock that may be issued under the Plan shall be Three Hundred
Ninety-Nine Thousand Nine Hundred Ninety-Nine (399,999) and shall consist of
authorized but unissued or reacquired shares of the Stock, or any combination
thereof. If an outstanding Purchase Right for any reason expires or is
terminated or canceled, the shares of Stock allocable to the unexercised
portion of such Purchase Right shall again be available for issuance under the
Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.
In the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification or similar change in the
capital structure of the Company, or in the event of any merger (including a
merger effected for the purpose of changing the Company's domicile), sale of
assets or other reorganization in which the Company is a party, appropriate
adjustments shall be made in the number and class of shares subject to the Plan
and each Purchase Right and in the Purchase Price. If a majority of the shares
which are of the same class as the shares that are subject to outstanding
Purchase Rights are exchanged for, converted into, or otherwise become (whether
or not pursuant to an Ownership Change Event) shares of another corporation
(the "NEW SHARES"), the Board may unilaterally amend the outstanding Purchase
Rights to provide that such Purchase Rights are exercisable for New Shares. In
the event of any such amendment, the number of shares subject to, and the
Purchase Price of, the outstanding Purchase Rights shall be adjusted in a fair
and equitable manner, as determined by the Board, in its sole discretion.
Notwithstanding the foregoing, any fractional share resulting from an
adjustment pursuant to this Section 4.2 shall be rounded down to the nearest
whole number, and in no event may the Purchase Price be decreased to an amount
less than the par value, if any, of the stock subject to the Purchase Right.
The adjustments determined by the Board pursuant to this Section 4.2 shall be
final, binding and conclusive.
5. ELIGIBILITY.
5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Each
Employee of a Participating Company is eligible to participate in the Plan and
shall be deemed an Eligible Employee, except the following:
(a) Any Employee who is customarily
employed by the Participating Company Group for twenty (20) hours or less per
week; and
(b) Any Employee who is customarily
employed by the Participating Company Group for not more than five (5) months
in any calendar year.
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5.2 EXCLUSION OF CERTAIN SHAREHOLDERS.
Notwithstanding any provision of the Plan to the contrary, no Employee shall be
granted a Purchase Right under the Plan if, immediately after such grant, such
Employee would own or hold options to purchase stock of the Company or of any
Parent Corporation or Subsidiary Corporation possessing five percent (5%) or
more of the total combined voting power or value of all classes of stock of
such corporation, as determined in accordance with Section 423(b)(3) of the
Code. For purposes of this Section 5.2, the attribution rules of Section
424(d) of the Code shall apply in determining the stock ownership of such
Employee.
6. OFFERINGS.
6.1 OFFERING PERIODS. Except as otherwise set
forth below, the Plan shall be implemented by sequential Offerings of
approximately six (6) months duration or such other duration as the Board shall
determine. The first Offering Period shall commence on the Effective Date and
end on January 31, 1998 (the "INITIAL OFFERING PERIOD"). Subsequent Offerings
shall commence on or about February 1 and August 1 of each year and end on or
about the next July 31 and January 31, respectively, occurring thereafter.
Notwithstanding the foregoing, the Board may establish a different term for one
or more Offerings or different commencing or ending dates for such Offerings;
provided, however, that no Offering may exceed a term of twenty-seven (27)
months. If the first or last day of an Offering Period is not a day on which
the national securities exchanges or Nasdaq Stock Market are open for trading,
the Company shall specify the trading day that will be deemed the first or last
day, as the case may be, of the Offering Period.
6.2 PURCHASE PERIODS. If the Board so
determines, in its discretion, each Offering Period may consist of two (2) or
more consecutive Purchase Periods having such duration as the Board shall
specify, and the last day of each such Purchase Period shall be a Purchase
Date. If the first or last day of a Purchase Period is not a day on which the
national securities exchanges or Nasdaq Stock Market are open for trading, the
Company shall specify the trading day that will be deemed the first or last
day, as the case may be, of the Purchase Period.
7. PARTICIPATION IN THE PLAN.
7.1 INITIAL PARTICIPATION. An Eligible Employee
may become a Participant in an Offering Period by delivering a properly
completed Subscription Agreement to the Company's payroll office or other
office designated by the Company not later than the close of business for such
office on the Subscription Date established by the Company for such Offering
Period. An Eligible Employee who does not deliver a properly completed
Subscription Agreement to the Company's payroll office or other designated
office on or before the Subscription Date for an Offering Period shall not
participate in the Plan for that Offering Period or for any subsequent Offering
Period unless such Eligible Employee subsequently delivers a properly completed
Subscription Agreement to the appropriate office of the Company on or before
the Subscription Date for such subsequent Offering Period. An Employee who
becomes an Eligible Employee after the Offering Date of an Offering Period
shall not be eligible to participate in such Offering Period but may
participate in any subsequent Offering Period provided such Employee is still
an Eligible Employee as of the Offering Date of such subsequent Offering
Period.
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7.2 CONTINUED PARTICIPATION. A Participant shall
automatically participate in the next Offering Period commencing immediately
after the final Purchase Date of each Offering Period in which the Participant
participates provided that such Participant remains an Eligible Employee on the
Offering Date of the new Offering Period and has not either (a) withdrawn from
the Plan pursuant to Section 12.2 or (b) terminated employment as provided in
Section 13. A Participant who may automatically participate in a subsequent
Offering Period, as provided in this Section 7.2, is not required to deliver
any additional Subscription Agreement for the subsequent Offering Period in
order to continue participation in the Plan. However, a Participant may
deliver a new Subscription Agreement for a subsequent Offering Period in
accordance with the procedures set forth in Section 7.1 if the Participant
desires to change any of the elections contained in the Participant's then
effective Subscription Agreement. Eligible Employees may not participate
simultaneously in more than one Offering if the Company establishes concurrent
Offerings.
8. RIGHT TO PURCHASE SHARES.
8.1 GRANT OF PURCHASE RIGHT. Except as set forth
below, on the Offering Date of each Offering Period, each Participant in such
Offering Period shall be granted automatically a Purchase Right consisting of
an option to purchase that number of whole shares of Stock determined by
dividing Five Thousand Dollars ($5,000) by eighty-five percent (85%) of the
Fair Market Value of a share of Stock on the Offering Date of the Offering
Period. No Purchase Right shall be granted on an Offering Date to any person
who is not, on such Offering Date, an Eligible Employee.
8.2 PRO RATA ADJUSTMENT OF PURCHASE RIGHT.
Notwithstanding the provisions of Section 8.1, if the Board establishes an
Offering Period of less than five and one-half (5 1/2) months or more than six
and one-half (6 1/2) months in duration, the number of shares of Stock subject
to a Purchase Right shall be determined by (a) multiplying Eight Hundred
Thirty-Three and Thirty-Three One Hundredths Dollars ($833.33) by the number of
months (rounded to the nearest whole month) in the Offering Period and (b)
dividing the product by eighty-five percent (85%) of the Fair Market Value of a
share of Stock on the Offering Date of the Offering Period and rounding the
result to the nearest whole share.
8.3 CALENDAR YEAR PURCHASE LIMITATION.
Notwithstanding any provision of the Plan to the contrary, no Purchase Right
shall entitle a Participant to purchase shares of Stock under the Plan at a
rate which, when aggregated with such Participant's rights to purchase shares
under all other employee stock purchase plans of a Participating Company
intended to meet the requirements of Section 423 of the Code, exceeds
Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or such other
limit, if any, as may be imposed by the Code) for each calendar year in which
such Purchase Right has been outstanding at any time. For purposes of the
preceding sentence, the Fair Market Value of shares purchased during a given
Offering Period shall be determined as of the Offering Date for such Offering
Period. The limitation described in this Section 8.3 shall be applied in
conformance with applicable regulations under Section 423(b)(8) of the Code.
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<PAGE> 8
9. PURCHASE PRICE. The Purchase Price at which each
share of Stock may be acquired in an Offering Period upon the exercise of all
or any portion of a Purchase Right shall be established by the Board; provided,
however, that the Purchase Price shall not be less than eighty-five percent
(85%) of the lesser of (a) the Fair Market Value of a share of Stock on the
Offering Date of the Offering Period or (b) the Fair Market Value of a share of
Stock on the Purchase Date. Unless otherwise provided by the Board prior to
the commencement of an Offering Period, the Purchase Price for that Offering
Period shall be eighty-five percent (85%) of the lesser of (a) the Fair Market
Value of a share of Stock on the Offering Date of the Offering Period, or (b)
the Fair Market Value of a share of Stock on the Purchase Date.
10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL
DEDUCTION. Shares of Stock acquired pursuant to the exercise of all or any
portion of a Purchase Right may be paid for only by means of payroll deductions
from the Participant's Compensation accumulated during the Offering Period for
which such Purchase Right was granted, subject to the following:
10.1 AMOUNT OF PAYROLL DEDUCTIONS. Except as
otherwise provided herein, the amount to be deducted under the Plan from a
Participant's Compensation on each payday during an Offering Period shall be
determined by the Participant's Subscription Agreement. The Subscription
Agreement shall set forth the percentage of the Participant's Compensation to
be deducted on each payday during an Offering Period in one percent (1%)
increments not exceeding ten percent (10%) of the Participant's Compensation on
such payday. Notwithstanding the foregoing, the amount deducted from a
Participant's Compensation during each Offering Period shall not exceed Five
Thousand Dollars ($5,000); provided, however, that if the Board establishes an
Offering Period of less than five and one-half (5 1/2) months or more than six
and one-half (6 1/2) months in duration, the such dollar limit shall be
determined by multiplying Eight Hundred Thirty-Three and Thirty-Three One
Hundredths Dollars ($833.33) by the number of months (rounded to the nearest
whole month) in the Offering Period and rounding the product to the nearest
whole dollar. The Board may change the foregoing limits on payroll deductions
effective as of any future Offering Date.
10.2 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll
deductions shall commence on the first payday following the Offering Date and
shall continue to the end of the Offering Period unless sooner altered or
terminated as provided herein.
10.3 ELECTION TO CHANGE OR STOP PAYROLL
DEDUCTIONS. During an Offering Period, a Participant may elect to increase or
decrease the rate of or to stop deductions from his or her Compensation by
delivering to the Company's payroll office or other designated office an
amended Subscription Agreement authorizing such change on or before the "Change
Notice Date." The "CHANGE NOTICE DATE" shall initially be the seventh (7th)
day prior to the end of the first pay period for which such election is to be
effective. However, the Company may change the Change Notice Date from time to
time. A Participant who elects to decrease the rate of his or her payroll
deductions to zero percent (0%) shall nevertheless remain a Participant in the
current Offering Period unless such Participant withdraws from the Offering or
from the Plan as provided in Section 12.1 or 12.2, respectively.
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10.4 PARTICIPANT ACCOUNTS. Individual bookkeeping
accounts shall be maintained for each Participant. All payroll deductions from
a Participant's Compensation shall be credited to such Participant's Plan
account and shall be deposited with the general funds of the Company. All
payroll deductions received or held by the Company may be used by the Company
for any corporate purpose.
10.5 NO INTEREST PAID. Interest shall not be paid
on sums deducted from a Participant's Compensation pursuant to the Plan.
11. PURCHASE OF SHARES.
11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase
Date of an Offering Period, each Participant who has not withdrawn from the
Offering and whose participation in the Offering has not terminated on or
before such Purchase Date shall automatically acquire pursuant to the exercise
of the Participant's Purchase Right the number of whole shares of Stock
determined by dividing (a) the total amount of the Participant's payroll
deductions accumulated in the Participant's account during the Offering Period
and not previously applied toward the purchase of Stock by (b) the Purchase
Price. However, in no event shall the number of shares purchased by the
Participant during an Offering Period exceed the number of shares subject to
the Participant's Purchase Right. No shares of Stock shall be purchased on a
Purchase Date on behalf of a Participant whose participation in the Offering or
the Plan has terminated on or before such Purchase Date.
11.2 LIMIT ON NUMBER OF SHARES PURCHASABLE IN
OFFERING PERIOD. Any provision herein to the contrary notwithstanding, the
Board may establish, effective for any future Offering Period, a limit on the
aggregate number of shares of Stock which may be purchased under the Plan by
all Participants during such Offering Period.
11.3 PRO RATA ALLOCATION OF SHARES. In the event
that the number of shares of Stock which might be purchased by all Participants
in the Plan on a Purchase Date exceeds the number of shares of Stock available
in the Plan as provided in Section 4.1 or the aggregate limit established by
the Board pursuant to Section 11.2, the Company shall make a pro rata
allocation of the remaining shares in as uniform a manner as shall be
practicable and as the Company shall determine to be equitable.
11.4 DELIVERY OF CERTIFICATES. As soon as
practicable after each Purchase Date, the Company shall arrange the delivery to
each Participant, as appropriate, of a certificate representing the shares
acquired by the Participant on such Purchase Date; provided that the Company
may deliver such certificates to a broker that holds such certificates in
street name for the benefit of each Participant. Shares to be delivered to a
Participant under the Plan shall be registered in the name of the Participant,
or, if requested by the Participant, in the name of the Participant and his or
her spouse, or, if applicable, in the names of the heirs of the Participant.
11.5 RETURN OF CASH BALANCE. Any cash balance
remaining in a Participant's Plan account following any Purchase Date shall be
refunded to the Participant as soon as
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practicable after such Purchase Date. However, if the cash to be returned to a
Participant pursuant to the preceding sentence is an amount less than the
amount that would have been necessary to purchase an additional whole share of
Stock on such Purchase Date, the Company may retain such amount in the
Participant's Plan account to be applied toward the purchase of shares of Stock
in the subsequent Purchase Period or Offering Period, as the case may be.
11.6 TAX WITHHOLDING. At the time a Participant's
Purchase Right is exercised, in whole or in part, or at the time a Participant
disposes of some or all of the shares of Stock he or she acquires under the
Plan, the Participant shall make adequate provision for the foreign, federal,
state and local tax withholding obligations of the Participating Company Group,
if any, which arise upon exercise of the Purchase Right or upon such
disposition of shares, respectively. The Participating Company Group may, but
shall not be obligated to, withhold from the Participant's compensation the
amount necessary to meet such withholding obligations.
11.7 EXPIRATION OF PURCHASE RIGHT. Any portion of
a Participant's Purchase Right remaining unexercised after the end of the
Offering Period to which the Purchase Right relates shall expire immediately
upon the end of the Offering Period.
11.8 REPORTS TO PARTICIPANTS. Each Participant
who has exercised all or part of his or her Purchase Right shall receive, as
soon as practicable after the Purchase Date, a report of such Participant's
Plan account setting forth the total payroll deductions accumulated prior to
such exercise, the number of shares of Stock purchased, the Purchase Price for
such shares, the date of purchase and the cash balance, if any, remaining
immediately after such purchase that is to be refunded or retained in the
Participant's Plan account pursuant to Section 11.5.
12. WITHDRAWAL FROM OFFERING OR PLAN.
12.1 VOLUNTARY WITHDRAWAL FROM AN OFFERING. A
Participant may withdraw from an Offering by signing and delivering to the
Company's payroll office or other designated office a written notice of
withdrawal on a form provided by the Company for such purpose. Such withdrawal
may be elected at any time prior to the end of an Offering Period; provided,
however, if a Participant withdraws after a Purchase Date, the withdrawal shall
not affect shares of Stock acquired by the Participant on such Purchase Date.
Unless otherwise indicated by the Participant, withdrawal from an Offering
shall not result in the Participant's withdrawal from the Plan or any
succeeding Offering therein. Following a Participant's withdrawal from an
Offering, the Participant is prohibited from again participating at any time in
the same Offering. The Company may impose, from time to time, a requirement
that the notice of withdrawal from an Offering be on file with the Company's
payroll office or other designated office for a reasonable period prior to the
effectiveness of the Participant's withdrawal.
12.2 VOLUNTARY WITHDRAWAL FROM THE PLAN. A
Participant may withdraw from the Plan by signing and delivering to the
Company's payroll office or other designated office a written notice of
withdrawal on a form provided by the Company for such purpose. A Participant's
withdrawal made after a Purchase Date shall not affect shares of Stock acquired
by the Participant on such Purchase Date. A Participant who voluntarily
withdraws from the Plan is
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prohibited from resuming participation in the Plan in the same Offering from
which he or she withdrew, but may participate in any subsequent Offering by
again satisfying the requirements of Sections 5 and 7.1. The Company may
impose, from time to time, a requirement that the notice of withdrawal from the
Plan be on file with the Company's payroll office or other designated office
for a reasonable period prior to the effectiveness of the Participant's
withdrawal.
12.3 RETURN OF PAYROLL DEDUCTIONS. Upon a
Participant's voluntary withdrawal from an Offering or the Plan pursuant to
Sections 12.1 or 12.2, respectively, the Participant's accumulated payroll
deductions which have not been applied toward the purchase of shares of Stock
shall be returned as soon as practicable after the withdrawal, without the
payment of any interest, to the Participant, and the Participant's interest in
the Offering or the Plan, as applicable, shall terminate. Such accumulated
payroll deductions may not be applied to any other Offering under the Plan.
13. TERMINATION OF EMPLOYMENT OR ELIGIBILITY. Upon a
Participant's ceasing to be an Employee of the Participating Company Group for
any reason, including retirement, disability or death, or the failure of a
Participant to remain an Eligible Employee, the Participant's participation in
the Plan shall terminate immediately. In such event, the payroll deductions
credited to the Participant's Plan account since the last Purchase Date shall,
as soon as practicable, be returned to the Participant or, in the case of the
Participant's death, to the Participant's legal representative, and all of the
Participant's rights under the Plan shall terminate. Interest shall not be paid
on sums returned pursuant to this Section 13. A Participant whose
participation has been so terminated may again become eligible to participate
in the Plan by again satisfying the requirements of Sections 5 and 7.1.
14. TRANSFER OF CONTROL.
14.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be
deemed to have occurred if any of the following occurs with respect to the
Company: (i) the direct or indirect sale or exchange in a single or series of
related transactions by the shareholders of the Company of more than fifty
percent (50%) of the voting stock of the Company; (ii) a merger or
consolidation in which the Company a party; (iii) the sale, exchange, or
transfer of all or substantially all of the assets of the Company; or (iv) a
liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean
an Ownership Change Event or a series of related Ownership Change Events
(collectively, the "TRANSACTION") wherein the shareholders of the Company
immediately before the Transaction do not retain immediately after the
Transaction, in substantially the same proportions as their ownership of shares
of the Company's voting stock immediately before the Transaction, direct or
indirect beneficial ownership of more than fifty percent (50%) of the total
combined voting power of the outstanding voting stock of the Company or the
corporation or corporations to which the assets of the Company were transferred
(the "TRANSFEREE CORPORATION(S)"), as the case may be. For purposes of the
preceding sentence, indirect beneficial ownership shall include, without
limitation,
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an interest resulting from ownership of the voting stock of one or more
corporations which, as a result of the Transaction, own the Company or the
Transferee Corporation(s), as the case may be, either directly or through one
or more subsidiary corporations. The Board shall have the right to determine
whether multiple sales or exchanges of the voting stock of the Company or
multiple Ownership Change Events are related, and its determination shall be
final, binding and conclusive.
14.2 EFFECT OF TRANSFER OF CONTROL ON
PURCHASE RIGHTS. In the event of a Transfer of Control, the surviving,
continuing, successor, or purchasing corporation or parent corporation thereof,
as the case may be (the "ACQUIRING CORPORATION"), shall assume the Company's
rights and obligations under the Plan. If the Acquiring Corporation elects not
to assume the Company's rights and obligations under outstanding Purchase
Rights, the Purchase Date of the then current Offering Period, or Purchase
Period, as the case may be, shall be accelerated to a date before the date of
the Transfer of Control specified by the Board, but the number of shares of
Stock subject to outstanding Purchase Rights shall not be adjusted. All
Purchase Rights which are neither assumed by the Acquiring Corporation in
connection with the Transfer of Control nor exercised as of the date of the
Transfer of Control shall terminate and cease to be outstanding effective as of
the date of the Transfer of Control.
15. NONTRANSFERABILITY OF PURCHASE RIGHTS. A Purchase
Right may not be transferred in any manner otherwise than by will or the laws
of descent and distribution and shall be exercisable during the lifetime of the
Participant only by the Participant.
16. RESTRICTION ON ISSUANCE OF SHARES. The issuance of
shares under the Plan shall be subject to compliance with all applicable
requirements of foreign, federal or state law with respect to such securities.
A Purchase Right may not be exercised if the issuance of shares upon such
exercise would constitute a violation of any applicable foreign, federal or
state securities laws or other law or regulations or the requirements of any
securities exchange or market system upon which the Stock may then be listed.
In addition, no Purchase Right may be exercised unless (a) a registration
statement under the Securities Act of 1933, as amended, shall at the time of
exercise of the Purchase Right be in effect with respect to the shares issuable
upon exercise of the Purchase Right, or (b) in the opinion of legal counsel to
the Company, the shares issuable upon exercise of the Purchase Right may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of said Act. The inability of the Company to obtain
from any regulatory body having jurisdiction the authority, if any, deemed by
the Company's legal counsel to be necessary to the lawful issuance and sale of
any shares under the Plan 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. As a condition to the exercise of a
Purchase Right, the Company may require the Participant to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance
with any applicable law or regulation, and to make any representation or
warranty with respect thereto as may be requested by the Company.
17. RIGHTS AS A SHAREHOLDER AND EMPLOYEE. A Participant
shall have no rights as a shareholder by virtue of the Participant's
participation in the Plan until the date of the issuance of a certificate for
the shares purchased pursuant to the exercise of the Participant's Purchase
Right (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized
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transfer agent of the Company). No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Section 4.2. Nothing herein
shall confer upon a Participant any right to continue in the employ of the
Participating Company Group or interfere in any way with any right of the
Participating Company Group to terminate the Participant's employment at any
time.
18. LEGENDS. The Company may at any time place legends
or other identifying symbols referencing any applicable foreign, federal or
state securities law restrictions or any provision convenient in the
administration of the Plan on some or all of the certificates representing
shares of Stock issued under the Plan. The Participant shall, at the request
of the Company, promptly present to the Company any and all certificates
representing shares acquired pursuant to a Purchase Right in the possession of
the Participant in order to carry out the provisions of this Section. Unless
otherwise specified by the Company, legends placed on such certificates may
include but shall not be limited to the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED
BY THE CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER
AN EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED
HEREBY SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES
BY THE REGISTERED HOLDER HEREOF MADE ON OR BEFORE ____________________. THE
REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE
REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS
DATE."
19. NOTIFICATION OF SALE OF SHARES. The Company may
require the Participant to give the Company prompt notice of any disposition of
shares acquired by exercise of a Purchase Right within two years from the date
of granting such Purchase Right or one year from the date of exercise of such
Purchase Right. The Company may require that until such time as a Participant
disposes of shares acquired upon exercise of a Purchase Right, the Participant
shall hold all such shares in the Participant's name (or, if elected by the
Participant, in the name of the Participant and his or her spouse but not in
the name of any nominee) until the lapse of the time periods with respect to
such Purchase Right referred to in the preceding sentence. The Company may
direct that the certificates evidencing shares acquired by exercise of a
Purchase Right refer to such requirement to give prompt notice of disposition.
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. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to
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whom authority to act for the Board is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them
in satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60)
days after the institution of such action, suit or proceeding, such person
shall offer to the Company, in writing, the opportunity at its own expense to
handle and defend the same.
22. AMENDMENT OR TERMINATION OF THE PLAN. The Board may
at any time amend or terminate the Plan, except that (a) such termination shall
not affect Purchase Rights previously granted under the Plan, except as
permitted under the Plan, and (b) no amendment may adversely affect a Purchase
Right previously granted under the Plan (except to the extent permitted by the
Plan or as may be necessary to qualify the Plan as an employee stock purchase
plan pursuant to Section 423 of the Code or to obtain qualification or
registration of the shares of Stock under applicable foreign, federal or state
securities laws). In addition, an amendment to the Plan must be approved by
the shareholders of the Company within twelve (12) months of the adoption of
such amendment if such amendment would authorize the sale of more shares than
are authorized for issuance under the Plan or would change the definition of
the corporations that may be designated by the Board as Participating
Companies.
IN WITNESS WHEREOF, the undersigned Secretary of the Company
certifies that the foregoing Deltek Systems, Inc. 1996 Employee Stock Purchase
Plan was duly adopted by the Board of Directors of the Company on November 27,
1996, and the Shareholders of the Company on December 10, 1996.
/s/ Alan R. Stewart
-----------------------------
Secretary
14
<PAGE> 15
PLAN HISTORY
November 27, 1996 Board adopts the Plan, with an initial reserve of
399,999 (post share dividend) shares, effective as of
the effective date of the initial registration by the
Company of its Stock under Section 12 of the Exchange
Act.
December 10, 1996 Shareholders approve Plan, with an initial reserve of
399,999 (post share dividend) shares, effective as of
the effective date of the initial registration by the
Company of its Stock under Section 12 of the Exchange
Act.
December 17, 1996 Share Dividend issuing two additional shares for
every issued and then outstanding share of voting
common stock.
15
<PAGE> 1
EXHIBIT 10.5
OEM SOFTWARE LICENSE AGREEMENT
PREAMBLE: This Agreement ("Agreement") is effective as of the date shown on
the signature page between Gupta Corporation ("GUPTA"), a California
corporation, with offices at 1060 Marsh Road, Menlo Park, CA 94025 and the
organization specified on the signature page ("OEM") hereby enter into this
agreement whereby GUPTA is engaged in the business of designing and developing
database management software and has developed proprietary software products
collectively called "THE SQL SYSTEM" and OEM wishes to incorporate one or more
of such software products into OEM Products as defined and specified herein,
and OEM and GUPTA desire to enter into an agreement pursuant to which GUPTA
will provide such products for integration into a OEM Product within the
geographic territory specified on the signature page ("Territory") only who
will then further such Programs to end users in the Territory for their own
use, in accordance with the terms and conditions hereof.
- --------------------------------------------------------------------------------
1. CERTAIN DEFINITIONS
1.1 "Program"
Shall mean the proprietary software programs in object code form specified on
the signature page to this Agreement.
1.2 "List Price" and "Territory List Price"
The term "List Price" shall mean the generally published single copy price for
the Program for a particular country or territory as found in the then-current
applicable Gupta OEM Price List for that specific geographic region if the
reference price only refers to that geographic region.
If the reference price of a given Program applicable to OEM is to vary from
geographic region to region then the term "Territory List Price" will be used.
Then-current applicable, generally published OEM Price Lists for requested
territories or countries will be supplied to OEM upon written request to GUPTA.
GUPTA reserves the right to modify or change the List Price or Territory List
Price of any Program, or of any other produce or services, at its sole
discretion, upon 30 days written notice to OEM.
1.3 "Distributor"
Shall mean any entity who is duly authorized by OEM to sublicense and/or
manufacture the Programs.
1.4 "Sublicensee"
Shall mean any entity who has been sublicensed by OEM or by a Distributor to
use the Programs.
1.5 "OEM Product"
Shall mean only the OEM programs or products specifically described or listed
on the signature page, and shall also include any Derivative Works.
Any OEM Product:
(i) must not provide a general purpose programming interface to the Programs
or links to one;
(ii) must not make the SQL/API or the SQL language directly accessible to
users;
(iii) must not provide a general purpose capability to users to create or
modify tables in the database. The application software may, however, create
tables without knowledge of the user for the purpose of storing application
specific data (e.g., parts table in an inventory control application) or for
storing and manipulating temporary results from queries;
(iv) must not contain a general purpose forms definition, adhoc query,
reporting or data analysis tool, except for the sole purpose of providing data
entry and reporting facilities for application specific data;
(v) must not function as a general purpose database management system.
1.6 "Derivative Works"
Shall mean a revision, modification, enhancement, abridgement, condensation or
expansion of a OEM Product or any form in which such OEM Product may be recast,
transformed, or adapted by OEM.
1.7 "License" or "Copy"
Shall mean a single copy of a Program or a OEM Product.
2. GRANT OF RIGHTS
2.1 Manufacturing, Sublicensing, Distribution and Packaging Rights
GUPTA grants to OEM, during the term of this Agreement, a non-exclusive, right
to manufacture, sublicense, distribute and package the Programs within the
Territory for use in conjunction with and as an embedded component of a OEM
Product only. OEM must specifically restrict its sublicensees from using a OEM
Product or any components thereof for general purpose application development
or for any other purpose that would violate the restrictions specified in this
Section 2.1 or Section 1.5 above.
2.2 Technical Restriction
GUPTA shall be permitted to make, or require OEM to make, reasonable technical
modifications to the Programs to ensure that the provisions of Section 1.5 and
2.1 regarding the sublicensing and use of the Programs are complied with,
provided, however, that the modifications do not unduly affect the legitimate
use of the Programs under the terms of this Agreement.
LICENSEE___________ GUPTA ______
<PAGE> 2
2.3 Sublicense Agreements
OEM agrees to sublicense the Programs only under an enforceable written
agreement, which may be shrinkwrapped, between OEM and its Sublicensees, which
(i) protects GUPTA's (and/or GUPTA's Licensors) proprietary rights and title to
the Programs, and (ii) which expressly prohibits the Sublicensee from using the
Programs for any purpose other than that permitted by the OEM Product.
2.4 Distributor Agreements
If OEM appoints a Distributor to market or otherwise sublicense an OEM Product,
then OEM will do so only under a written agreement between OEM and Distributor
which requires the Distributor to agree to the terms of Section 2.3 above, and
to further sublicense the Programs under the same terms. In addition, such
agreement must require Distributor to comply with the terms of Section 11.2
below.
2.5 Rights and Title
GUPTA and/or GUPTA's Licensors shall retain all right, title and interest in
and to the Programs (including without limitation all improvements, updates,
enhancements and copies thereof made by or for GUPTA) subject to a license to
OEM granted hereunder. Other than for exercising the rights granted in this
Agreement, OEM shall not use, duplicate, transfer, or otherwise modify the
Programs for any other purposes. OEM agrees not to, or cause a third party to,
dissemble or reverse compile, the Programs.
3. FEES AND PAYMENTS
3.1 Initial Payment and Commitment
In consideration for the rights granted in Section 2 above, upon the execution
of this Agreement, OEM agrees to pay to GUPTA the payment as specified on the
signature page. This initial payment shall serve as a noncontingent,
nonrefundable advance against License Fees that may become due to GUPTA under
Section 3.2 below.
3.2 License Fees
For each Copy of a Program distributed, sublicensed and/or shipped to a
customer by OEM under the terms of this Agreement, OEM agrees to pay a License
Fee equal to the single-copy Territory List Price for such Program, less the
applicable discount ("Discount") specified on the signature page.
3.3 Support Fee
In consideration for the support and maintenance services provided by GUPTA as
specified in Section 4 below, for each calendar quarter that this Agreement is
in effect, OEM agrees to pay GUPTA a quarterly Support Fee as specified on the
signature page.
3.4 Product Upgrade Fees
For each Copy of a new Enhancement Release or Major Version of the Programs (as
defined in GUPTA's generally published support policies, which may be changed
from time-to-time by GUPTA) sublicensed, distributed and/or shipped by OEM to
its existing customers for the OEM Products under the terms of this Agreement,
OEM shall pay to GUPTA a fee ("Product Upgrade Fee") equal to GUPTA's generally
published Territory List Price for such new Enhancement Release or Major
Versions less the discount specified on the signature page.
3.5 Reports and Payments
(i) All payments under this Agreement shall be made in U.S. dollars.
(ii) Payments of OEM's initial commitment shall be made as specified in
Section 3.1 above.
(iii) During the term of this Agreement and within thirty (30) days of the end
of each calendar quarter, OEM shall report ("Report") to GUPTA in writing all
copies of OEM Products and the Programs sublicensed, distributed and/or shipped
by OEM. Such Report shall also include a calculation of Licensee Fees and
Product Upgrade Fees due to GUPTA for such Copies, based upon the fees
specified in Sections 3.2 and 3.4, such fee to be based on the gross number of
Copies of the Programs distributed, sublicensed and/or shipped by OEM less
returned copies and a reasonable number of demonstration and evaluation copies.
OEM shall make payment of the fees specified in each Report, with an adjustment
for advances if any are outstanding, along with its submission. Should the
calculation of fees due to GUPTA be found to be in error, an adjustment shall
be made within fifteen days of the discovery of such error.
(iv) Payment of the Support Fee for any given calendar quarter shall be made
on or before the last day of the immediately previous calendar quarter.
3.6 Records and Review
OEM shall keep accurate records necessary to verify compliance with licensing
and payment terms of this Agreement, along with reasonable detail. OEM shall,
with reasonable advance notice, make such records available to GUPTA for
inspection during normal business hours. OEM shall pay GUPTA's reasonable,
documented, out-of-pocket expenses incurred in connection with such inspection
if and only in the case that such inspection reveals that the payments made by
to GUPTA during any applicable period aggregated less than ninety-five percent
(95%) of the payments required to be made during such period.
3.7 Shipping Expenses
All prices are ex-works Menlo Park, and OEM shall reimburse GUPTA for any
shipping expenses incurred by GUPTA.
3.8 Service Charge
A service charge of 1.5% per month will apply to all delinquent payments.
4. SUPPORT AND MAINTENANCE
4.1 Technical Support
GUPTA shall provide OEM with the applicable technical support services
specified on the signature page. GUPTA's support services and maintenance of
the Programs shall be consistent with GUPTA's generally published support
programs and policies, which may be changed from time-to-time by GUPTA.
4.2 Support of OEM's Sublicensees and/or Distributors
OEM shall be responsible for supporting OEM's Sublicensees and/or Distributors
for the Programs.
4.3 Product Updates
Provided that OEM has paid the Support Fee as provided in Section 3.3 above,
during the term of this Agreement periodic updates ("Product Updates") to the
Programs will be provided to OEM, such Product Updates to include Maintenance
Releases. Such Product Updates will be provided to OEM contemporaneously with
when GUPTA first makes such Product Updates commercially available to its other
OEM customers for the Programs. OEM shall have the right to sublicense and
distribute (as provided in Section 2.3 above) such Product Updates to its
existing customers for the OEM Products without payment of additional fees to
GUPTA.
4.4 Product Upgrades
Provided that has paid the Support Fee as provided as provided in Section 3.3
above, during the term of this Agreement periodic upgrades ("Product
Upgrades") to the Programs will be provided to OEM, such Product Upgrades to
include Enhancement Releases and Major Versions to the Programs. GUPTA shall
use reasonable efforts to provide information to
<PAGE> 3
OEM for such Product Upgrades (4) to (6) months in advance of when such Product
Upgrades are commercially available. Furthermore, such Product Upgrades will be
provided to OEM contemporaneously with when GUPTA first makes such Product
Upgrades commercially available to its other OEM customers for the Programs.
OEM shall have the right to sublicense and distribute (as provided in Section
2.1 above) such new Major Versions of the Programs to its existing customers
for the OEM Products, subject to the payment of Product Upgrade Fees as
provided in Section 3.4 above.
4.5 Training and Consulting
OEM may avail of GUPTA's services for product training and custom development
at the then current Territory List Prices for such services, or as contained in
the then current GUPTA U.S. and Canada Price List.
5. CONFIDENTIAL
GUPTA AND OEM agree that each of them shall, during the term of this Agreement
and for five (5) years thereafter, take all steps which are necessary or
reasonable to safeguard the secrecy and confidentiality of, and proprietary
rights to, the confidential information of the other party disclosed hereunder
(including, but not limited to, product plans, marketing and/or other business
plans, technical specifications, the terms and conditions of this Agreement,
and, if disclosed, portions of the Programs source code) and shall not, without
the prior written consent of the other party, disclose the foregoing to any
third party; provided, however, that this provision shall not be construed to
restrict the disclosure of information which (a) is publicly known at the time
of its disclosure to a party, (b) is lawfully received by a party from a third
party not bound in a confidential relationship to GUPTA or OEM, (c) was already
known by GUPTA or OEM at the time of disclosure by the other party, or (d) is
required by law to be disclosed by such party.
6. WARRANTIES
6.1 Representation and Warranties of GUPTA
GUPTA hereby represents and warrants to OEM that (i) to the best of GUPTA's
knowledge, the Program does not infringe any patent, copyright, trade secret or
any other proprietary right of any third party, (ii) GUPTA and/or to the best
of GUPTA's knowledge GUPTA's Licensors owns all right, title and interest in
and to the Program, free and clear of all liens, security interests, charges or
encumbrances by third parties; and (iii) GUPTA has full right, power and
authority to enter into this Agreement and to carry out its obligations
hereunder.
6.2 Limitation of Warranties
OTHER THAN THE REPRESENTATIONS SET FORTH IN THIS AGREEMENT, GUPTA MAKES NO
WARRANTIES EXPRESS OR IMPLIED, CONCERNING THE PROGRAMS, INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IT IS
EXPRESSLY AGREED THAT GUPTA SHALL NOT BE LIABLE, OR IN ANY WAY RESPONSIBLE FOR
THE COMMERCIAL SUCCESS OF THE PROGRAM OR ANY ENHANCEMENT THEREOF.
7. INDEMNIFICATIONS AND LIMITATION OF LIABILITY
7.1 Indemnification by GUPTA
GUPTA agrees to hold OEM harmless from and against any liability whatsoever
associated with any claim or suit for infringement of any United States
copyright, patent, trade secret or other proprietary right of another as a
result of its use or of any version of the Programs. To qualify for indemnity
under this Section 7.1 OEM must (i) give GUPTA prompt written notice of any
such claim or liability, and (ii) allow GUPTA to control and cooperate with
GUPTA (at GUPTA's expense, excluding the time spent by employees or consultants
of OEM) in the defense of any such claim and in all related settlement
negotiations. In the event that OEM wishes to participate in the defense of
any such claim, GUPTA shall allow OEM to participate at its own expense.
GUPTA has no obligations or liability under this Section for any claim based on
the use of the Programs or parts thereof with software not delivered by GUPTA
or when used in a manner for which it was notdesigned or where modified by or
for OEM in a manner to become infringing.
THIS SECTION STATES GUPTA'S ENTIRE LIABILITY WITH RESPECT TO INFRINGEMENT OF
INTELLECTUAL PROPERTY RIGHTS OF ANY KIND.
7.2 Indemnification by OEM
OEM agrees to hold GUPTA harmless from and against any liability whatsoever
associated with the use of the Programs by OEM or its Sublicensees and/or
Distributors except as provided in Section 7.1 and to the extent that such
liability does not result from a breach of Section 6.1. To qualify for
indemnity under this Section 7.2, GUPTA must (i) give OEM prompt written notice
of any such claim or liability, and (ii) allow OEM to control and cooperate
with OEM at OEM's expense in the defense of any such claim and in all related
settlement negotiations. In the event that GUPTA wishes to participate in the
defense of any such claim, OEM shall allow GUPTA to participate at its own
expense.
7.3 Limitation of Liability
EXCEPT AS SET FORTH IN SECTION 7.1 ABOVE, GUPTA'S LIABILITY ARISING OUT OF THIS
AGREEMENT OR THE USE OR DISTRIBUTION OF ANY LICENSE SHALL BE LIMITED TO THE
AMOUNT PAID BY OEM TO GUPTA FOR THAT LICENSE UNDER THE TERMS OF THIS AGREEMENT.
IN NO EVENT SHALL GUPTA BE LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS
BY ANYONE, NOR WILL GUPTA BE LIABLE FOR SPECIAL, CONSEQUENTIAL, OR OTHER
DAMAGES, HOWEVER CAUSED, WHETHER FOR BREACH OF CONTRACT, NEGLIGENCE OR
OTHERWISE, AND WHETHER OR NOT GUPTA HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. THE ESSENTIAL PURPOSE OF THIS SECTION IS TO LIMIT THE POTENTIAL
LIABILITY OF GUPTA ARISING OUT OF THIS AGREEMENT.
8. PROPRIETARY RIGHTS
8.1 Trademarks
GUPTA hereby warrants that SQLBase, SQLGateway, SQLHost, Quest, SQLTalk,
SQLRouter and SQLWindows are registered trademarks of GUPTA in the U.S.A.
GUPTA represents that it is applying for numerous other trademarks in the
U.S.A. and other jurisdictions. GUPTA hereby authorizes OEM to use GUPTA's
trademarks in its product and marketing literature, provided OEM shall
adequately acknowledge and publish GUPTA's ownership of such trademarks. GUPTA
reserves the right to revoke such authorization, at GUPTA's sole discretion.
8.2 Copyrights
Subject to the rights and licenses granted to OEM by this Agreement, GUPTA
shall have sole and exclusive right, title, and interest in and to its
copyright in the Programs (including without limitation all improvements,
updates, enhancements and copies thereof made by or for GUPTA or OEM). OEM
shall reproduce GUPTA's copyright on the title screen or "About Box" of the
Programs and on the package and/or media containing the relevant Program.
9. SALE OR ASSIGNMENT
OEM may not assign this Agreement without the prior written consent of GUPTA.
<PAGE> 4
10. TERM AND TERMINATION
10.1 Term of Agreement
The initial term of this Agreement shall expire on the date specified on the
signature page. Thereafter, it may be renewed, on an annual basis, only upon
mutual written agreement.
10.2 Termination for Breach
Either party may terminate this Agreement for material breach of this Agreement
upon thirty (30) days prior written notice, if said breach is not cured by the
other party within such period (or longer period if the parties agree in
writing).
10.3 Continuing Obligations
The termination of this Agreement for any reason shall not relieve any party of
(i) its obligations to make payments which may have accrued hereunder, but
which remained unpaid as of the date of termination; (ii) to maintain
confidentiality; and (iii) to indemnify against certain actions. The
termination of this Agreement shall not in any manner terminate, abrogate, or
otherwise limit or curtail the rights and licenses previously granted to
Sublicensees pursuant to this Agreement, including OEM's right to continue to
support its customers for the applications that include or access the Programs.
10.4 Force Majeure
Neither party shall be liable for any delays in the performance of any of its
obligations hereunder due to causes beyond its control, including but not
limited to, fire, strike, war, riots, acts of any civil or military authority,
judicial action, acts of God, or other casualty or natural calamity.
11. MISCELLANEOUS PROVISIONS
11.1 Entire Agreement
This Agreement, together with the Exhibits attached hereto, sets forth the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes any and all prior agreements, understandings, promises
and representations made by either party to the other concerning the subject
matter hereof and the terms applicable hereto. This Agreement may not be
released, discharged, amended or modified in any manner except by an instrument
in writing signed by both parties hereto.
11.2 Import and Export Provisions
OEM shall, at its own expense, pay all import and export licenses and permits,
pay customs charges and duty fees, and take all other actions required to
accomplish the export and import of the Programs acquired by OEM. In the
performance of their respective obligations under this Agreement, Gupta and OEM
shall, at all times, strictly comply with all laws, regulations and orders of
the United States of America and other applicable jurisdictions. Without
limiting the generality of this Section 11.2, the parties specifically
acknowledge that the Programs and Confidential Information are subject to
United States export controls, including, without limitation, the Export
Administration Regulations, 15 C.F.R. Parts 768-799. OEM agrees, and shall
cause each end-user and/or reseller to agree, that it will not export or
reexport the Programs, the Confidential Information or any direct product
thereof, directly or indirectly to, or for use in, any country for which such
export is forbidden and/or controlled by the laws of the United States of
America or other applicable jurisdictions.
11.3 Parties Independent
In making and performing this Agreement, the parties act and shall act at all
times as independent contractors and nothing contained in thisAgreement shall
be construed or implied to create an agency, partnership or employer and
employee relationship between OEM and GUPTA or between any party hereto and any
officer or employee of the other party. At no time shall either party make
commitments or incur any charges or expenses for or in the name of the other
party.
11.4 Severability
The invalidity or unenforceability of one or more provisions of this Agreement
shall not affect the validity or enforceability of any of the other portions
hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provisions were omitted.
11.5 Governing Law
This Agreement shall be construed and enforced in accordance with the laws of
the U.S.A. and the state of California. All disputes arising out of this
Agreement shall be subject to the exclusive jurisdiction of the California
State courts, San Mateo County, California (or, if there is exclusive federal
jurisdiction, the United States District Court for the Northern District of
California), and the parties agree and submit to the personal and exclusive
jurisdiction and venue of these courts.
11.6 Injunctive Relief
Each party acknowledges that the other believes that its confidential
information is unique property of extreme value to the other party, and the
unauthorized use or disclosure thereof would cause the other party irreparable
harm that could not be compensated by monetary damages. Accordingly, each party
agrees that the other may seek injunctive and preliminary relief to remedy any
actual or threatened unauthorized use or disclosure of the other party's
confidential information.
11.7 Waivers
The failure of either party to insist, in any one or more instances, upon the
performance of any of the terms, covenants or conditions of this Agreement,
shall not be constructed as a waiver or relinquishment of the future
performance of any such term, covenant or condition, but the obligations of the
other party with respect to such future performance shall continue in full
force and effect.
11.8 Headings
The headings of the articles and sections used in this Agreement are included
for convenience only and are not to be used in construing or interpreting this
Agreement.
11.9 Notices
Any notice required to be made or given to either party hereto shall be made by
personal delivery, to a designated FAX number, telegram, telex, mailgram,
certified or registered mail return receipt requested, postage prepaid, and
addressed to such party at its address set forth on the first page of this
Agreement or to such other address of such party shall designate by written
notice. Written notice shall be deemed to have been given (48) hours after
posting when sent by first class mail, on delivery when sent by hand, and when
to a designated FAX number.
11.10 Counterparts
This Agreement may be executed in two counterparts, each of which shall be an
original; but such counterparts shall together constitute but one and the same
instrument.
11.11 Taxes
OEM shall pay or reimburse GUPTA for all national, federal, state, local or
other taxes and assessments of any jurisdiction, including sales or use taxes,
property taxes, withholding taxes as required by international tax treaties,
customs or other import or export taxes,value added taxes, and amounts levied
in lieu thereof based on charges set, services performed or to be performed or
payments made or to be made under this Agreement. In no case shall OEM be
liable for taxes based on GUPTA's net income.
<PAGE> 5
11.12 Marketing and Promotional Activities
As soon as practicable after the effective date of this Agreement, both parties
will issue a joint press release announcing OEM's rights to distribute and
market the Programs, but in no case shall such press release be issued without
the consent of both parties. GUPTA shall have the right to use the OEM name in
customer lists or promotional documents that incorporate such lists. During
the term of this Agreement, both parties agree to cooperate in ongoing joint
promotional and marketing activity with respect to the Programs and to respect
the other party's reasonable policies with respect to use of its corporate or
product names.
<PAGE> 6
OEM SOFTWARE LICENSE AGREEMENT
(Signature Pages)
IN CASE OF CONFLICT BETWEEN THE TERMS AND CONDITIONS SPECIFIED ON THE SIGNATURE
PAGES BELOW AND THE TERMS AND CONDITIONS CONTAINED IN THE BODY OF THE
AGREEMENT, THE TERMS AND CONDITIONS OF THESE SIGNATURE PAGES SHALL CONTROL.
1. OEM: For purposes of this Agreement, OEM shall be the following
organization at the designated address:
Organization Name: Deltek
Organized Under the laws of: Virginia
Headquarters Address: 8280 Greensboro Drive
Suite 300
McLean, VA 22102
Phone: (703) 734-8606 FAX: (703) 734-0346
-------------- --------------
2. TERRITORY: Worldwide
3. EFFECTIVE DATE OF AGREEMENT: March 1, 1993
4. TERMINATION DATE: March 31, 1996
5. PROGRAMS (PLEASE LIST): SQLBASE FOR SUN UNIX (UNLIMITED USERS)
SQLBASE FOR SUN UNIX (5 USERS)
SQLBASE NLM (UNLIMITED USERS)
SQLBASE NLM (20 USERS)
SQLBASE NLM (5 USERS)
SQLBASE FOR OS/2 (UNLIMITED USERS)
SQLBASE FOR OS/2 (5 USERS)
SQLBASE FOR OS/2 (SINGLE USER)
SQLBASE FOR DOS (UNLIMITED USERS)
SQLBASE FOR DOS (5 USERS)
SQLBASE FOR DOS (SINGLE USER)
SQLBASE SERVER FOR WINDOWS
SQLBASE ENGINE FOR WINDOWS
SQLWINDOWS RUNTIME FOR DOS*
Sig 1
<PAGE> 7
FOR PURPOSES OF THIS AGREEMENT ONLY, THE LIST PRICE FOR THE SQLWINDOWS RUNTIME
FOR DOS AS IT AFFECTS OEM SHALL BE $0 (ZERO U.S. DOLLARS).
6. INITIAL PAYMENT AND COMMITMENT:
(a) In consideration for the rights granted in Section 2 of this Agreement,
OEM agrees that the sum of [*] is immediately due and payable to GUPTA and shall
be paid by OEM to GUPTA net thirty (30) days from receipt of GUPTA's invoice.
This sum shall serve as a noncontingent, nonrefundable advance against License
Fees that may become due to GUPTA under Section 3.2 of the Agreement.
(b) Provided that OEM has not exercised its option to terminate the
agreement or increase its discount as provided in Item 7(b) below, OEM further
agrees that its minimum nonrefundable payments of License Fees (over and above
the initial payment specified in Item 6(a) above) during each twelve month
period that this Agreement is in effect shall be [*]. If, during the annual
period ending March 31 of each calendar year that this Agreement is in effect,
such nonrefundable payments of License Fees to GUPTA do not equal or exceed [*],
then OEM agrees to pay the difference between such payments actually made to
GUPTA and [*] on or before March 31 of such calendar year, such payment to serve
as an additional noncontingent, nonrefundable advance against License Fees that
may become due to GUPTA during the remaining term of the Agreement.
Example: Assume that OEM makes payment to GUPTA of License Fees (over
and above the initial prepayment) of [*] each along with the quarterly
reports for the quarters ending June 30, 1993, September 30, 1993 and
December 31, 1993. Therefore, in order to meet the requirement of the
above paragraph, OEM will make a nonrefundable payment of License Fees
to GUPTA in the amount of [*] on or before March 31, 1994.
7. LICENSE FEES/DISCOUNTS:
(a) For each Copy of a Program distributed, sublicensed and/or shipped to
a customer by OEM under the terms of this Agreement, OEM agrees to pay GUPTA
the following License Fees:
(i) For Copies of the Programs, the U.S. and Canada List Price
for such Program [*];
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSSION]
Sig 2
<PAGE> 8
(ii) For Copies of the Standard Products (as provided in Section
2.l(ii) of this Agreement), the Territory List Price [*].
(iii) In the event that GUPTA is in default of its shipment
obligations for OEM's orders for such Standard Products as provided in
this item 7 under the rights granted to OEM under Section 2.1 (ii) of
this Agreement, for a period in excess of thirty (30) days, then OEM
shall have a limited right to manufacture the Standard Products for
the sole purpose of distribution as provided under Section 2.1(ii) of
this Agreement. OEM shall report to GUPTA within ten (10) days of
manufacture any copies it makes of the Standard Products under this
provision and the applicable License Fees for such Standard Products
shall be credited against OEM's outstanding prepayment balance with
GUPTA.
OEM's right to manufacture copies of such Standard Products hereunder
shall terminate at the earlier of: (i) the termination or expiration
of this Agreement; (ii) when GUPTA has demonstrated that it is able to
meet its shipment obligations hereunder at which time OEM shall notify
GUPTA in writing that such has occurred, or (iii) when the applicable
prepayments are exhausted.
(iv) OEM shall acquire support services for the Standard Products
under GUPTA's then current prices, terms and according to GUPTA's
support policy in effect at the time.
(b) On or before December 15, 1993, OEM agrees to notify GUPTA in writing
whether (i) it elects to terminate this Agreement effective December 31, 1993
at which point OEM shall have no financial obligation to Gupta other than that
which would be due to Gupta for licensing and support through December 31, 1993
or (ii) it will elect to increase the above discount [*]. If OEM so elects,
then the provisions of 6(b) above are waived and OEM agrees to make minimum
nonrefundable, noncontingent advance payments of License Fees in the following
amounts on or before the specified dates:
Amount Date
------ ----
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
Sig 3
<PAGE> 9
8. OEM SUPPORT FEE:
(a) During the initial four calendar quarters following execution of this
Agreement and in consideration for the support and maintenance services provided
by GUPTA as specified in Section 4 of this Agreement, OEM agrees to pay GUPTA a
quarterly fee equal to the sum of (i) [*] of GUPTA's then current fee for STAR
Support Service (as of the date of execution of this Agreement such fee is [*]),
plus (ii) a Support Fee of [*] of the cumulative License Fees for Standard
Product shipped by Gupta to OEM and for License Fees earned by Gupta for
Programs sublicensed by OEM (or distributed by OEM under Section 2.1 of this
Agreement) as of the end of the previous calendar quarter, reduced by those
License Fees paid by OEM for customers of the OEM Product who are not receiving
maintenance support for the OEM Product from OEM.
Example: Assume that at the time a quarterly support fee is due, Gupta
has shipped to OEM [*] worth of Standard Products and OEM has
sublicensed [*] worth of Programs. The fee due to Gupta at that time
would be [*] calculated as [*] for STAR Support (assuming the current
charge of [*] annually has not changed) plus [*] of [*].
The current STAR Support Agreement is attached to these Signature Pages as
Exhibit I.
(b) Subsequent to the initial four calendar quarters following execution of
this Agreement and in consideration for the support and maintenance services
provided by GUPTA as specified in Section 4 of this Agreement, OEM agrees to pay
GUPTA a quarterly fee equal to [*] of the cumulative License Fees for Standard
Product shipped by Gupta to OEM and for License Fees earned by Gupta for
Programs sublicensed by OEM (or distributed by OEM under Section 2.1 of this
Agreement) as of the end of the previous calendar quarter, reduced by those
License Fees paid by OEM for customers of the OEM Product who are not receiving
maintenance support for the OEM Product from OEM. OEM may, at its option,
acquire STAR Support Services for such subsequent period(s) from GUPTA, under
GUPTA's then current STAR Support Services terms and conditions, and unless OEM
so elects, GUPTA shall have no obligation to provide such STAR Support Services
during such subsequent period(s).
(b) For purposes of this Agreement only, GUPTA agrees to support prior
versions of the Programs up to a maximum of one (1) calendar year after release
of a successor version of such Program. Such support services shall be charged
to OEM at GUPTA's then current time and materials rate in effect. Terms of
payment shall be net thirty (30) days from receipt of GUPTA's invoice.
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
Sig 4
<PAGE> 10
9. PRODUCT UPGRADE FEE:
(a) For each Copy of a new Enhancement Release or Major Version of the
Programs (as specified in Section 3.4 of this Agreement) sublicensed,
distributed and/or shipped by OEM to its existing customers for the OEM Product
under the terms of this Agreement, OEM shall pay to GUPTA a Product Upgrade Fee
equal to the [*] (i) GUPTA's generally published U.S. and Canada List Price
for such new Enhancement Release or Major Versions of such Program less
OEM's then-current Discount for the Programs as provided under item 7 above or
(ii) [*] of (a) GUPTA's generally published List Price for the underlying
Program less (b) OEM's then current Discount for the Programs as provided
under item 7 above.
(b) For each Copy of a new Enhancement Release or Major Version of the
Standard Products distributed by OEM to its existing customers for the OEM
Product under the terms of this Agreement OEM shall pay to GUPTA a Product
Upgrade Fee equal to GUPTA's generally published U.S. and Canada List Price for
such new Enhancement Release or Major Versions for such Standard Product less
OEM's then-current Discount.
10. OEM PRODUCT:
For purposes of this Agreement the OEM Product shall mean any accounting, job
cost, or material management software application product which OEM sells.
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
Sig 5
<PAGE> 11
11. OTHER TERMS:
A. SECTION 1 ("CERTAIN DEFINITIONS") OF THE AGREEMENT IS AMENDED TO ADD
THE FOLLOWING ADDITIONAL DEFINITION AS SECTION 1.8.
1.8 "Standard Products"
Shall mean GUPTA's commercially available Quest for Windows, and
SQLWindows Standard Edition and SQLWindows Corporate Edition software
products only, as found in the then current applicable (commercial)
GUPTA Territory Price List. Copies of these price lists shall be
provided to OEM at OEM's written request to Gupta.
B. SECTION 2.1 ("MANUFACTURING, SUBLICENSING, DISTRIBUTION AND PACKAGING
RIGHTS") OF THIS AGREEMENT IS DELETED AND REPLACED AS FOLLOWS:
2.1 Manufacturing. Sublicensing, Distribution and Packaging Rights
(i) GUPTA grants to OEM, during the term of this Agreement, a
non-exclusive, right to manufacture, sublicense, distribute and
package the Programs within the Territory for use in conjunction with
and as an embedded component of a OEM. OEM must specifically restrict
its sublicensees from using a OEM Product or any components thereof
for general purpose application development or for any other purpose
that would violate the restrictions specified in this Section 2.1 or
Section 1.5 above.
(ii) GUPTA further grants to OEM a non-exclusive right to
distribute the Standard Products as manufactured and packaged by GUPTA
within the Territory for use in conjunction with the OEM Product only.
IN WITNESS WHEREOF, the parties hereby confirm that this Agreement is effective
at the date set forth above and that all terms and conditions have been agreed
to:
By: /s/ Kenneth E. deLaski By: /s/ Richard J. Heaps
Name: Kenneth E. deLaski Name: Richard J. Heaps
Title: President Title: President
Date: March 29, 1993 Date: March 29, 1993
Sig 6
<PAGE> 12
EXHIBIT I
STAR SUPPORT SERVICES AGREEMENT
(ATTACHED HERETO)
Sig 7
<PAGE> 13
STRATEGIC TECHNICAL ACCOUNT REPRESENTATION ("STAR")
SUPPORT AGREEMENT
PREAMBLE: Gupta Corporation, ("Gupta") is engaged in the business of
designing, developing, marketing, licensing, and supporting computer software
programs and related user manuals, and ("Licensee") desires to subscribe to the
STAR Support program in accordance with the terms of this Agreement. Gupta
provides STAR Support, a special support applicable to Gupta's proprietary
software products, ("Programs") for which Licensee is licensed, and Licensee
desires to receive STAR Support Services in conjunction with previously
acquired Programs by Licensee and licensed for Licensee's use by Gupta.
1. STAR SUPPORT:
During the initial term of this Agreement, Licensee shall be eligible to
receive Gupta STAR Support Services as described in the STAR Support program
description current as of the date of execution of this Agreement, attached
hereto as Exhibit 1. During such initial term, Gupta may add additional
services to those listed in Exhibit I but may not delete any services or add
additional fees without the written consent of Licensee unless Licensee is in
default of its payment or other obligations to Gupta under this Agreement.
It is expressly understood that STAR Support Services are in addition to any
other support services which may be due Licensee from Gupta including, without
limitation, License Subscription Service ('LSS") as are commercially defined
and provided by Gupta to its other customers for the Programs. To the extent
that Licensee's eligibility to receive STAR Support Services is dependent on
Licensee maintaining such additional support services on the covered Programs,
Licensee expressly agrees to do so.
STAR Support Services as provided by Gupta hereunder shall only apply to those
Product license numbers previously and/or contemporaneously acquired by
Licensee from Gupta and/or Gupta's authorized resellers andlisted on the
signature page, ("STAR Supported Software").
2. RESPONSIBILITIES OF GUPTA:
Gupta agrees, during the initial term of this Agreement, to provide to Licensee
STAR Support Services as specified in Exhibit 1, subject to the following
understandings:
(i) All response times are targets. Gupta shall use its reasonable
efforts to adhere to these targets.
(ii) Gupta's obligations with respect to shipping Maintenance Releases to
the Programs shall be to provide such Maintenance Releases only for the STAR
Support Software listed on the signature page, as soon as reasonably possible
after such Maintenance Releases become available. This Agreement shall not be
construed to obligate Gupta to provide Maintenance Releases to Licensee on any
specific timetable.
(iii) Upon execution of this Agreement, Gupta shall designate on the
signature page the named representatives that may be required as part of
providing STAR Support Services to Licensee. Gupta may change the designated
technical representatives assigned to work with Licensee upon written notice to
Licensee.
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<PAGE> 14
(iv) Nothing in this Agreement shall be construed to obligate Gupta to do any
specific development work on the Programs nor to change Gupta's general
maintenance and support policies with respect to the Programs.
3. SOFTWARE SUPPORT NOT COVERED BY THIS AGREEMENT:
Gupta has no obligation under this Agreement to support the following:
(i) Altered or modified STAR Supported Software;
(ii) Derivative works;
(iii) A combination of the STAR Supported Software and software not covered
by this Agreement;
(iv) Gupta will provide support services only for the most recent version
of the Programs, and will support the preceding version for no more than six
(6) months after a new Enhancement Release or Major Version of the Programs
becomes generally commercially available to Licensee. If Licensee does not
update Licensee's STAR Supported Software within that time, Gupta will have no
further obligation to provide STAR Support Services or other support services
for the Product(s).
(v) Errors or Program problems created by Licensee's negligence or fault;
(vi) Errors or Program problems resulting from hardware malfunction or by
malfunction in other software not provided by Gupta
4. LICENSEE'S RESPONSIBILITIES:
Questions concerning the adaptation or modification of the STAR Supported
Software are not covered by this Agreement. Licensee agrees to furnish
descriptions of malfunctions inthe form requested by the STAR Support Engineer.
Licensee also agrees to assist Gupta's efforts to duplicate any errors or
problems in the STAR Supported Software.
5. LICENSE AGREEMENT:
The Programs are licensed to Licensee under the terms and conditions of the
applicable Gupta Software License Agreement that accompanies the given Program
or has been separately executed by Gupta and Licensee. Nothing in this
Agreement shall affect Licensee's rights to use the given Program as defined in
such applicable Gupta Software License Agreement.
6. FORCE MAJEURE:
Neither party shall be liable for any delays in the performance of any of its
obligations hereunder due to causes beyond its reasonable control, including
but not limited to, fire, strike, war, riots, acts of any civil or military
authority, judicial action, acts of God, or other casualty or natural calamity.
7. LIMITATION OF LIABILITY:
GUPTA'S LIABILITY ARISING OUT OF THIS AGREEMENT SHALL BE LIMITED TO THE AMOUNT
PAID BY LICENSEE TO GUPTA UNDER THE TERMS OF TIES AGREEMENT. IN NO EVENT
SHALL GUPTA BE LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS BY ANYONE,
NOR WILL GUPTA BE LIABLE FOR SPECIAL, CONSEQUENTIAL, OR OTHER DAMAGES, HOWEVER
CAUSED, WHETHER FOR BREACH OF CONTRACT, NEGLIGENCE OR OTHERWISE, AND WHETHER OR
NOT GUPTA HAS BEEN ADVISED OF THE POSSIBILITIES OF SUCH DAMAGES. THE ESSENTIAL
PURPOSE OF THIS SECTION IS TO LIMIT THE POTENTIAL LIABILITY OF GUPTA ARISING
OUT OF THIS AGREEMENT.
2
<PAGE> 15
8. PAYMENT:
Upon execution of this Agreement, Licensee will pay to Gupta a nonrefundable
payment for STAR Support Services as specified on the signature page. This sum
shall be paid to Gupta by Licensee upon receipt of Gupta's invoice. This
payment will be confirmed by Licensee with a purchase order (or equivalent
document) submitted by Licensee to Gupta, the terms and conditions of which
will not supercede this Agreement.
9. EXTRAORDINARY EXPENSES:
Gupta reserves the right to charge for unusual or excessive telephone,
shipping, handling, media or user manual expenses in connection with the STAR
Support to be provided hereunder. In all cases, Gupta shall notify Licensee of
these costs in advance.
10. TERM AND TERMINATION:
The initial term of this Agreement shall expire on the date specified on the
signature page, unless terminated earlier under the provisions of Section 11.
At the expiration of the initial term, this Agreement may be renewed for
additional one (1) year terms upon Licensee's agreement to the terms,
conditions, prices and scope of services applicable to STAR Support Services as
may be generally available from Gupta at that time.
Nothing in this Agreement shall obligate Gupta to (i) offer STAR Support
Services to Licensee beyond the initial term of this Agreement or, if offered
to Licensee for a renewal term, offer STAR Support Services at any set rate,
price or fee or (ii) include within the STAR Support Services any specific set
of services during such renewal term.
11. TERMINATION FOR BREACH:
This Agreement may be terminated at any timeon thirty (30) days written notice
by either party specifying a breach of the terms and conditions of this
Agreement, provided the other party does not cure the breach within that
period.
12. MISCELLANEOUS:
(i) Licensee may not assign this Agreement to a third party without the
prior written consent of Gupta.
(ii) This Agreement cannot be modified or amended unless a written
amendment or modification is executed by authorized representative of Gupta and
Licensee.
(iii) This Agreement supersedes all prior agreements, written or oral,
relating to the Gupta support of the Supported Software.
(iv) This Agreement shall be construed and enforced in accordance with the
laws of the State of California, U.S.A. and shall be subject to the exclusive
jurisdiction of the courts of the State of California.
3
<PAGE> 16
EXHIBIT 1
STAR SUPPORT SERVICES
(EFFECTIVE 6/1/92)
The following features are associated with Gupta's STAR Support Service:
- Two designated support contacts.
- Named Strategic Technical Account Representative ("STAR
Consultant") with designated backup.
- Target response time to telephone calls of 2 working hours maximum.
- 6:00 a.m. to 6:00 p.m. PST service on Monday - Friday (except
holidays)
- Access to Senior Technical Support through STAR Consultant.
- Defined escalation procedure.
- Monthly call tracking reports itemizing correspondence and bug
status ("STAR Reports")
- Monthly conference call review of customer activity and product
alerts ("STAR Review")
- Automatic shipment of product updates ("Maintenance Releases").
- Support license reconciliation to Licensee's fiscal year end date
or other calendar date.
- Advance product information.
- First right of refusal for participation in Gupta's beta program.
4
<PAGE> 17
STRATEGIC TECHNICAL ACCOUNT REPRESENTATION ("STAR")
SUPPORT AGREEMENT
(SIGNATURE PAGE)
1. LICENSEE: For purposes of this Agreement, Licensee shall be the
following organization at the designated address:
Organization Name: Deltek
Organized Under the laws of: Virginia
Headquarters Address: 8280 Greensboro Drive
Suite 300
McLean, VA 22102
Phone: (703) 734-8606 FAX: (703) 734-0346
-------------- --------------
2. EFFECTIVE DATE OF AGREEMENT: MARCH 31, 1993
3. TERMINATION DATE: MARCH 31, 1994
4. STAR SUPPORT SERVICES Fee: $ $12,500 (U.S. DOLLARS)
5. LICENSEE'S DESIGNATED STAR SUPPORT CONTACTS:
Name: Richard Darr Name: Dien Do
------------------- ----------------------------
Phone: 703/734-8606 ext 501 Phone: 703/734-8606 ext 420
-------------------- --------------------
FAX: 703/ 734-0346 FAX: 703/ 734-0346
------------- -----------------
6. STAR SUPPORTED SOFTWARE
(PLEASE LIST ):
GUPTA PROGRAM(S): GUPTA PROGRAM LICENSE NUMBERS:
------------------- ------------------------------
------------------- ------------------------------
5
<PAGE> 18
------------------- ------------------------------
------------------- ------------------------------
------------------- ------------------------------
------------------- ------------------------------
------------------- ------------------------------
------------------- ------------------------------
------------------- ------------------------------
Note: All STAR Supported Software must be covered under LSS.
7. OTHER TERMS:
(a) SECTION 3.(iv) OF THE STAR SUPPORT AGREEMENT IS DELETED AND REPLACED
AS FOLLOWS:
(iv) For purposes of this Agreement only, GUPTA agrees to support prior
versions of the Programs up to a maximum of one (1) calendar year after release
of a successor version of such Program. Such support services shall be charged
to Licensee at GUPTA's then current time and materials rate in effect. Terms
of payment shall be net thirty (30) days from receipt of GUPTA's invoice. If
Licensee does not update Licensee's STAR Supported Software within that time,
GUPTA will have no further obligation to provide STAR Support Services or other
support services for the Program(s).
IN WITNESS WHEREOF, the parties hereby confirm that this Agreement is effective
at the date set forth above and that all terms and conditions have been agreed
to:
LICENSEE: GUPTA:
By: /s/ Kenneth E. deLaski By: /s/ Richard J. Heaps
Name: Kenneth E. deLaski Name: Richard J. Heaps
Title: President Title: Vice President
Date: March 29, 1993 Date: March 29, 1993
6
<PAGE> 19
AMENDMENT NUMBER ONE
TO THE
OEM SOFTWARE LICENSE AGREEMENT
BETWEEN
GUPTA CORPORATION ("GUPTA")
AND
DELTEK ("OEM")
This Amendment Number One to the OEM Software License Agreement
effective March 29, 1993 ("Agreement"), is between Gupta Corporation ("GUPTA"),
a California Corporation with offices at 1060 Marsh Road, Menlo Park,
California and Deltek ("OEM"), a Virginia corporation with principal offices at
8280 Greensboro Drive, Suite 300, McLean, VA 22102.
WHEREAS GUPTA and OEM desire to add additional Programs via this
Amendment One ("Amendment").
NOW, THEREFORE, GUPTA and OEM agree, as follows:
1. CONFLICTS, USE OF TERMS: In the event of conflict between the terms
and conditions of the Agreement and the terms and conditions of this Amendment
the terms and conditions of this Amendment will hold. The headings used in
this Amendment are included for convenience only and are not to be used in
construing or interpreting the Amendment or the Agreement.
2. MODIFICATION OF ITEM 5 OF THE SIGNATURE PAGES ("PROGRAMS") OF THE
AGREEMENT. Upon execution of this Amendment, Item 5 of the Signature Pages of
the Agreement is modified by adding the following Programs:
SQLRouter/Oracle
SQLRouter/Sybase
SQLRouter/AS/400
SQLRouter/Informix
SQLRouter/Ingres
SQLBase Server for NetWare (50 Users)
3. REPLACEMENT OF SECTION 4.4 OF THE AGREEMENT. Upon the execution of
this Amendment, Section 4.4 of the Agreement is deleted and replaced with the
following:
4.4 Product Upgrades
Provided that OEM has paid the Support Fee as provided in Section 3.3
above, during the term of this Agreement periodic upgrades ("Product
Upgrades") to the Programs will be provided to OEM, such Product
Upgrades to include (i) Enhancement Releases and Major
1
<PAGE> 20
Versions of the Programs and (ii) versions of the Programs adapted to
run on additional operating system platforms if and when made
commercially available by GUPTA. Such Product Upgrades will be
provided to OEM contemporaneously with when GUPTA first makes such
Product Upgrades commercially available to its other customers for the
Programs. OEM shall have the right to sublicense and distribute (as
provided in Section 2.1 above) such Product Upgrades to its existing
customers for the OEM Products, subject to the payment of Product
Upgrade Fees as provided in Section 3.4 above.
4. NO FURTHER MODIFICATIONS: Other than as provided above in this
Amendment, all other provisions of the Agreement shall remain unchanged.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and effective as of the day and year first above written.
By: /s/ Eric F. Brown By: /s/ Richard J. Heaps
Name: Eric F. Brown Name: Eric F. Brown
Title: Vice President Title: Vice President
Date: 6/15/94 Date: 6/15/94
2
<PAGE> 21
AMENDMENT NUMBER TWO
TO THE
OEM SOFTWARE LICENSE AGREEMENT
BETWEEN
GUPTA CORPORATION ("GUPTA")
AND
DELTEK ("OEM")
This Amendment Number Two ("Amendment Number Two") to the OEM Software
License Agreement effective March 1, 1993 ("Agreement"), as amended June 15,
1994, ("Amendment Number One") is between Gupta Corporation ("GUPTA"), and
Deltek ("OEM").
WHEREAS GUPTA and OEM have agreed on terms, conditions and payments
whereby certain modifications are to be made to the Agreement.
NOW, THEREFORE, GUPTA and OEM agree by way of this Amendment Number
Two, ("Amendment Two"), as follows:
1. CONFLICTS, USE OF TERMS: In the event of conflict between the terms
and conditions of the Agreement, Amendment Number One and this Amendment Number
Two, the terms and conditions of this Amendment Number Two will hold. Where
applicable, the defined terms in the Agreement and shall have the same meaning
in this Amendment Number Two.
2. MODIFICATION OF ITEM 4 ("TERMINATION DATE") OF THE SIGNATURE PAGES OF
THE AGREEMENT. Upon execution of this Amendment Two, Item 4 of the Signature
Pages of the Agreement is modified by replacing the date "March 31, 1996 " by
"August 31, 1997."
3. MODIFICATION OF ITEM 5 ("PROGRAMS") OF THE SIGNATURE PAGES OF THE
AGREEMENT. Effective September 1, 1994, Item 5 SP of the Agreement is modified
by the addition of the following Programs.
SQLBASE SINGLE-TASKING ENGINE FOR WINDOWS
SQLBASE MULTI-TASKING ENGINE FOR WINDOWS
SQLCONSOLE
REPORT WINDOWS
(a) For purposes of calculating the License Fees due to GUPTA by OEM under
Item 7 of the Signature Pages of the Agreement, the Programs listed in Item 5
of the Signature Pages of the Agreement have been classified as follows:
(i) The SQLBase Programs for Sun UNIX, DOS, NetWare and OS/2 (all user
levels) are collectively referred to as "SQLBASE SERVER PROGRAMS"
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<PAGE> 22
(ii) The SQLBase Single-Tasking and Multi-Tasking Engine for Windows
Programs are collectively referred to as "SQLBASE ENGINE PROGRAMS."
(ii) The SQLRouter/Oracle, AS/400, Informix, Sybase, and Ingres Programs
are collectively referred to as "SQLROUTER PROGRAMS."
4. PAYMENT TO GUPTA: Upon execution of this Amendment Two and in
consideration of GUPTA's agreement to Sections 2 and 3 of this Amendment Two,
OEM irrevocably agrees that the sum of [*] is immediately due and payable to
GUPTA and shall be paid to GUPTA net thirty (30) days from GUPTA's invoice date.
This sum shall serve as an additional noncontingent, nonrefundable advance (over
and above the initial payment of [*] specified in Item 6(a) of the Signature
Pages of the Agreement) against License Fees that may become due to GUPTA under
Section 3.2 of the Agreement.
5. REPLACEMENT OF ITEM 7 ("LICENSE FEES/DISCOUNT") OF THE SIGNATURE PAGES
OF THE AGREEMENT. Effective September 1, 1994, Item 7 of the Signature Pages
of the Agreement is deleted and replaced with the following:
(a) For each Copy of a Program distributed, sublicensed and/or shipped to a
customer by OEM under the terms of this Agreement, OEM agrees to pay GUPTA the
following License Fees:
(i) The License Fee for a single Copy of any of the SQLBase Server
Programs shall be [*]:
(aa) [*] or,
(bb) [*] for each PC workstation (i) on which such Copy of the
relevant SQLBase Server Program or component thereof is distributed,
sublicensed and/or shipped by OEM and/or (ii) any PC workstation that
is concurrently running the OEM Product and/or accessing such Copy of
the SQLBase Server Program, subject to the terms of this Agreement;
(ii) The License Fee for Copies of the SQLBase Engine Programs shall be [*];
(iii) The License Fee for Copies of the SQL Console Program shall be the
United States and Canada List Price [*];
(iv) The License Fees for Copies of the Report Windows Program shall be [*];
(v) For purposes of this Agreement only, the SQLRouter Programs are
licensed to OEM to be sublicensed to customers on a "per server" basis, i.e.,
each License for the SQLRouter Programs shall permit OEM or its sublicensees to
make an unlimited number of copies of the relevant SQLRouter Program provided
that such copies are used to connect to a single copy of the relevant database
server (i.e., running on a single computer) only. The License Fee for the
SQLRouter Programs shall
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
2
<PAGE> 23
be [*].
(vi) For Copies of the Standard Products (as provided in Section 2.1(ii) of
this Agreement), the Territory List Price [*].
(vii) In the event that GUPTA is in default of its shipment obligations for
OEM's orders for such Standard Products as provided in Item 7(vi) above under
the rights granted to OEM under Section 2.1(ii) of this Agreement, for a period
in excess of thirty (30) days, then OEM shall have a limited right to
manufacture the Standard Products for the sole purpose of distribution as
provided under Section 2.1(ii) of this Agreement. OEM shall report to GUPTA
within ten (10) days of manufacture any copies it makes of the Standard
Products under this provision and the applicable License Fees for such Standard
Products shall be credited against OEM's outstanding prepayment balance with
GUPTA. OEM shall specify on its purchase order for the Standard Products the
country or territory to which such Standard Product is to be used by OEM.
OEM's right to manufacture copies of such Standard Products hereunder shall
terminate at the earlier of: (aa) the termination or expiration of this
Agreement; (bb) when GUPTA has demonstrated that it is able to meet its
shipment obligations hereunder at which time OEM shall notify GUPTA in writing
that such has occurred, or (ccc) when the applicable prepayments are exhausted.
(viii) To the extent that OEM's orders for the Standard Products are not
covered by a prepayment, or in the event that OEM wishes to acquire future
versions of such Standard Products (if and when such future versions become
commercially available from GUPTA), terms of payment for such orders shall be
net thirty (30) days from GUPTA's invoice date, subject to available credit
from GUPTA.
(ix) OEM's end-users shall be eligible to acquire support services for the
Standard Products under GUPTA's then current prices, terms and according to
GUPTA's Product Support Policy in effect at the time for the applicable country
or territory.
6. REPLACEMENT OF ITEM 8 ("OEM SUPPORT FEE") OF THE SIGNATURE PAGES OF THE
AGREEMENT. Effective September 1, 1994, Item 8 of the Signature Pages of the
Agreement is deleted and replaced with the following:
In consideration for the support services and maintenance provided by
GUPTA as specified in Section 4 of the Agreement, and for STAR Support
Services to be provided under GUPTA's STAR Support program (or the
equivalent GUPTA premium support program which may then be in effect),
OEM agrees to pay GUPTA follows:
Commencing September 30, 1994 and on the last day of each subsequent
calendar quarter thereafter during the term of this Agreement, OEM
agrees to pay GUPTA a quarterly support fee in advance equal to the
sum of (a) [*] of the cumulative License Fees for Standard Products
shipped by GUPTA to OEM and for the cumulative License Fees for the
Programs sublicensed by OEM (or distributed by OEM under Section 2.1
GTC) as of the end of that
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION]
3
<PAGE> 24
previous calendar quarter, reduced by those License Fees paid by OEM
for customers of the OEM Product who are not receiving maintenance
support for the OEM Product from OEM plus (b) [*] of GUPTA's then
current fee for STAR Support Services.
In consideration for the above payment GUPTA will provide to OEM, the
Support and Maintenance services for the Programs and Standard
Products as specified in Section 4 GTC, plus updates and upgrades to
the Programs and Standard Products. Such upgrades will cover future
like-for-like releases (identical product, user capacity and operating
system) of the Programs and Standard Products that may become
available from GUPTA during the term of this Agreement.
Such STAR Support Services shall be provided by GUPTA consistent with
GUPTA's then-current published service features of the STAR Support
program which may be changed from time-to-time by GUPTA. A copy of
the features of the STAR Support program current as of the date of
this Agreement shall be provided to OEM upon OEM's request.
NOTE: of the date of execution of this Amendment Number 2 GUPTA's annual fee
for STAR Support Services is [*].
7. MODIFICATION OF ITEM 9 ("PRODUCT UPGRADES") OF THE SIGNATURE PAGES OF THE
AGREEMENT. Effective September 1, 1994, Item 9 of the Signature Pages of the
Agreement is deleted and replace with the following:
(a) The fees paid by OEM to GUPTA under Item 8 SP above shall cover any
Product Upgrade Fees due to GUPTA for Product Upgrades for Programs and
Standard Products on a like-for-like basis.
8. SECTION 1.8, ("STANDARD PRODUCTS") OF THE AGREEMENT IS DELETED IN ITS
ENTIRETY AND REPLACED WITH THE FOLLOWING: Effective September 1, 1994,
Section 1.8 of the Agreement is deleted and replaced with the following
1.8 "Standard Products"
Shall mean GUPTA's commercially available GUPTA proprietary PC
software program(s) in packaged form listed below:
Quest, Version 3.x
SQLWindows Network Edition, Version 5.x
SQLWindows Corporate Edition, Version 5.x
SQLConsole Version 1.x
Quest Reporter, Version 3.x
9. ADDITION OF ITEM 11(d) OF THE SIGNATURE PAGES OF THE AGREEMENT. Upon
the effective date
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION]
4
<PAGE> 25
of this Amendment Number Two, Item 11(d) is added as follows:
(d) SQLBase Documentation
(i) OEM shall be eligible to acquire up to twenty (20) Copies of
the SQLBase documentation sets for OEM's internal use or distribution
at the then current United States and Canada List Price for such
documentation [*].
(ii) Terms of payment for any order for the SQLBase documentation
shall be net thirty (30) days from receipt of GUPTA's invoice.
Advance payments paid to GUPTA under Item 6(a) of the Signature Pages
above shall not be applicable against such purchases. OEM shall
specify on its purchase order for the SQLBase documentation the
country or territory to which such documentation is to be used by OEM.
10. ADDITION OF SECTION 2.1(iii) TO THE AGREEMENT: The following is added
as Section 2.1(iii) of the Agreement:
(iii) A personal, fully paid-up license to use, copy and distribute
the User Documentation for the Programs including all applicable
upgrades and updates to such documentation, provided that the
provision of such documentation is consistent with the limitations on
use of the Programs as provided in Sections 2.1 hereunder. OEM may
also acquire such User Documentation pursuant to this Agreement from
GUPTA at GUPTA's then-current price.
11. ROYALTY REPORT: Upon the effective date of this Amendment Number
Two, OEM agrees to provide to GUPTA an interim Report for the period commencing
July 1, 1994 through August 31, 1994.
12. TIME IS OF THE ESSENCE: This Amendment Number Two is null and void
unless executed no later than August 31, 1994.
13. NO ADDITIONAL MODIFICATIONS: Except as provided above, the terms and
conditions of the Agreement remain unchanged.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
and effective as August 31, 1994.
OEM: GUPTA CORPORATION
By: /s/ Alan R. Stewart By: /s/ Richard J. Heaps
Name: Alan R. Stewart Name: Alan R. Stewart
Title: Chief Financial Officer Title: Vice President
Date: August 31, 1994 Date: August 31, 1994
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION]
5
<PAGE> 26
AMENDMENT NUMBER THREE
TO THE
OEM SOFTWARE LICENSE AGREEMENT
BETWEEN
CENTURA SOFTWARE CORPORATION ("CENTURA")
AND
DELTEK ("OEM")
WHEREAS CENTURA and OEM have entered into an OEM Software License
Agreement with an Effective Date of March 1, 1993 ("Agreement") and as amended
June 15, 1994 ("Amendment Number One"), and as amended August 31, 1994
("Amendment Number Two") is between Centura Software Corporation, ("CENTURA")
and Deltek, ("OEM").
WHEREAS CENTURA and OEM have agreed to amend the terms and conditions
of the Agreement with respect to an additional prepayment, additional Standard
Products and License Fees via this Amendment Number Three ("Amendment');
NOW, THEREFORE, CENTURA and OEM agree as follows:
1. CONFLICTS, USE OF TERMS: In the event of conflict between the terms
and conditions of the Agreement, as previously amended, and this Amendment, the
terms and conditions of this Amendment shall take precedence. Where
applicable, the defined terms in the Agreement shall have the same meaning in
this Amendment.
2. CHANGE OF NAME: OEM hereby acknowledges that Gupta Corporation is in
the process of changing its name to and is now operating under the name of
Centura Software Corporation. At all times the term "CENTURA" or "Gupta" as
found in the Agreement and as modified by this Amendment shall be taken to
refer to Centura Software Corporation.
3. PAYMENT: Upon execution of this Amendment, and in consideration for
CENTURA's agreement to Sections 4, 5, 6, 7 and 8 below, OEM irrevocably agrees
to pay CENTURA the nonrefundable, noncontingent payment of [*] [over and above
the previous advances paid to CENTURA under the Agreement]. Such sum to serve
as a noncontingent, nonrefundable advance against License Fees and OEM Support
Fees that may become due to CENTURA under the Agreement. This sum shall be
immediately due and payable to CENTURA and shall be paid by OEM in three (3)
installments as follows:
(i) [*] on or before [*] and;
(ii) [*] on or before [*] and;
(iii) [*] on or before [*]
4. MODIFICATION OF SECTION 1.8, ("STANDARD PRODUCTS") OF THE AGREEMENT.
Effective July 1,
1
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE> 27
1996, Section 1.8 of the Agreement shall be modified to add the following
Standard Products:
Centura Team Developer
Centura Ranger
5. MODIFICATION OF ITEM 4 ("TERMINATION DATE") OF THE SIGNATURE PAGES OF
THE AGREEMENT: Upon the execution of this Amendment, Item 4 of the Signature
Pages of the Agreement shall be modified by deleting "August 31, 1997" and
replacing with "December 31, 1999."
6. REPLACEMENT OF ITEM 7(vi) OF THE SIGNATURE PAGES OF THE AGREEMENT.
Effective July 1, 1996, Item 7(vi) of the of the Signature Pages of the
Agreement is deleted and replaced with the following:
(vi) Excluding the SQLWindows Standard Products, for orders of
copies of the Standard Products, OEM shall pay to CENTURA the
Territory List Price less a discount of [*] and for copies of the
SQLWindows Standard Products, OEM shall pay to CENTURA the Territory
List Price less a discount of [*]
7. REPLACEMENT OF ITEM 8, ("OEM SUPPORT FEE") OF THE SIGNATURE PAGES OF
THE AGREEMENT. Effective June 30, 1996, Item 8 of the of the Signature Pages of
the Agreement is deleted and replaced with the following:
In consideration for the support services and maintenance provided by
CENTURA as specified in Section 4 of the Agreement, and for Gold
Support Services to be provided under CENTURA's Gold Support program
(or the equivalent CENTURA premium support program which may then be
in effect), OEM agrees to pay CENTURA follows:
Commencing June 30, 1996 and on the last day of each subsequent
calendar quarter thereafter during the term of this Agreement, OEM
agrees to pay CENTURA a quarterly support fee in advance equal to the
sum of (a) [*] of the cumulative License Fees for Standard Products
shipped by CENTURA to OEM and for the cumulative License Fees for the
Programs sublicensed by OEM (or distributed by OEM under Section 2.1
GTC) as of the end of that previous calendar quarter, reduced by those
License Fees paid by OEM for customers of the OEM Product who are not
receiving maintenance support for the OEM Product from OEM plus (b)
[*] of CENTURA's then current fee for Gold Support Services.
Such Gold Support Services shall be provided by CENTURA consistent
with CENTURA's then-current published service features of the Gold
Support program which may be changed from time-to-time by CENTURA.
8. REPLACEMENT OF ITEM 9 ("PRODUCT UPGRADE FEES") OF THE SIGNATURE PAGES
OF THE AGREEMENT. Effective June 30, 1996, Item 9 of the Signature Pages of
the Agreement is deleted and replace with the following:
2
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE> 28
9. PRODUCT UPGRADE FEES: For each Copy of a Product Upgrade of
the Programs and/or Standard Products (as specified in Section 4.4 of
the Agreement) sublicensed, distributed and/or shipped by OEM to its
existing customers for the OEM Product as provided under Item 7 above,
OEM shall pay to CENTURA a Product Upgrade Fee equal to CENTURA's
generally published Territory List Price for the Product Upgrade of
such Program or Standard Product less a discount equal to OEM's
applicable Discount for the underlying Program or Standard Product.
Provided, however, that OEM's Product Upgrade Fee on any given
calendar year shall be [*] of the cumulative License Fees for Programs
sublicensed, distributed and/or shipped by OEM and Standard Products
acquired by OEM as of the end of that calendar year.
9. SQLWINDOWS 5 TO CENTURA MIGRATION: CENTURA agrees that the migration
fee of [*] for the migration of OEM's existing SQLWindows Corporate Edition
Standard Product licenses to Centura Team Developer licenses shall be available
to OEM through September 30, 1996.
10. NO OTHER MODIFICATION: Other than as provided in this Amendment
above, the terms and conditions of the Agreement, as previously amended, remain
unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
and effective as of: June 19, 1996.
<TABLE>
<S> <C>
OEM: CENTURA SOFTWARE CORPORATION:
By: /s/ Alan R. Stewart By: /s/ Richard J. Heaps
Name: Alan R. Stewart Name: Richard J. Heaps
Title: Chief Financial Officer Counsel Title: Sr. Vice President & General
Date: June 19, 1996 Date: June 19, 1996
</TABLE>
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
3
<PAGE> 1
EXHIBIT 10.6
COGNOS DESKTOP OEM AGREEMENT
- --------------------------------------------------------------------------------
This Agreement, effective the 28th day of February, 1994, (the "Effective
Date") between:
COGNOS CORPORATION
a Delaware corporation located at
67 South Bedford Street
Burlington, Massachusetts
01803-5164
(on behalf of itself and its subsidiaries and affiliates)
Jack Thomas (617) 229-6600
--------------------------
CONTACT PERSON/TELEPHONE
(herein referred to as "COGNOS")
- and -
DELTEK SYSTEMS. INC.
8280 Greensboro Drive
Suite 300
McLean, VA 22101
Ken deLaski (703) 734-8606
--------------------------
CONTACT PERSON/TELEPHONE
(herein referred to as "OEM")
<PAGE> 2
1.0 DEFINITIONS
For the purpose of this Agreement, the following words are defined terms:
1.1 "Software" means that version of the information processing
program(s), ("Programs") in object code or binary form only, stored on
some medium, and Related Documentation(as hereinafter defined),
developed or marketed by COGNOS under the trade names set out in
Schedule A subject to the restrictions also set out in Schedule A.
1.2 "Related Documentation" shall mean the user manuals,
documentation normally included in the sealed package on delivery of
the Software and source code documentation as described in Schedule A.
1.3 "OEM Product" shall mean one of the OEM's software products
described in Schedule A.
1.4 "Shrink Wrap License" means that document included in the
sealed package on delivery of the Software authorizing an end user to
use the Program and Related Documentation.
2.0 GRANT OF DISTRIBUTION RIGHTS
2.1 COGNOS hereby grants to OEM during the term of this Agreement,
and OEM hereby accepts, subject to the terms and conditions contained
in this Agreement, a non-exclusive, non-transferable right in the
Territory to (a) copy and manufacture the Software, or parts thereof,
only when incorporated into an OEM Product; and (b) market, demonstrate
and distribute the Software as part of the OEM Product to end user
customers for use on computers located in the Territory; and (c)
sublicense end user customers the right to use the Software as part of
the OEM product. Nothing herein shall prevent end user customers from
accessing third party software with the Software, provided the
Software is incorporated into an OEM product and further provided that
the source of data is restricted to the application server on which
the OEM product resides.
2.2 OEM shall have the right to make sufficient royalty-free
copies of the Software for internal development, testing and
demonstration purposes only.
2.3 For greater certainty, OEM shall not be entitled to use the
license granted above except as incorporated into an OEM Product.
2 of 13
<PAGE> 3
2.4 For the protection of COGNOS, the OEM shall license the OEM
Product to end users subject to terms and conditions of similar effect
to those in the Shrink Wrap License.
2.5 COGNOS shall use its best effort to remove the name COGNOS or
any trade name or trade mark associated with the Software from the
Software when incorporated into an OEM Product so that the fact that
the Software is incorporated into the OEM Product is not apparent to
an end user. OEM shall have the right to use a mark or logo
authorized by COGNOS, indicating that OEM is an OEM partner of COGNOS.
3.0 OEM'S OBLIGATIONS
3.1 OEM shall use its best efforts to market, demonstrate and
distribute the Software as part of the OEM Product to customers in the
Territory.
3.2 OEM shall not make any reference or claim about COGNOS or the
Software except as set out in COGNOS's current sales literature.
3.3 OEM shall provide its customers with Level 1 technical
support for the Software as described in Schedule C.
3.4 OEM shall provide COGNOS, within thirty (30) days of
execution of this Agreement and each renewal hereof, a business
summary statement respecting the future marketing and distribution
efforts contemplated by the OEM. OEM shall provide COGNOS with a
written monthly sales report, on or before the twentieth (20th)
business day of any month specifying: (i) for each OEM Product
licensed during the previous month: customer name, address and number
of copies licensed and royalties owed COGNOS; and (ii) payment for any
fees that may be due COGNOS.
4.0 COGNOS'S OBLIGATIONS
4.1 COGNOS shall deliver to OEM a master disk for the Software,
the Related Documentation and source code from which OEM may modify
and copy the Software as permitted pursuant to this Agreement. COGNOS
shall use its best effort to ensure that the Software is compatible
with the environment in which it is designed to operate.
4.2 COGNOS shall integrate OEM's logo into the Software so that
it will be displayed at initial program load. OEM shall provide its
logo to COGNOS in a BMP format with such compatibility as COGNOS may
require.
3 of 13
<PAGE> 4
4.3 COGNOS shall provide training in the operation and use of the
Software to OEM's staff at a Cognos office as set forth in Schedule B.
Travel and living expenses of OEM staff shall be borne and paid by OEM.
4.4 COGNOS shall make available to OEM, for the benefit of
subscribing end-users, Level 2 maintenance and upgrade options to the
OEM as described in Schedule C.
5.0 LICENSE FEES AND CHARGES
5.1 OEM shall pay to COGNOS the fees set out in Schedule B.
5.2 All sales and other taxes relating to a Software order,
including those levied by federal, state, municipal or other
governmental authority, shall be paid by OEM.
5.3 All monies are due and payable under this Agreement by OEM as
set forth in Section 3.4 and Schedule B. OEM shall pay interest on
accounts overdue by more than thirty (30) days at a rate of one and
one half percent (1.5%) per month (18% annually) or the maximum legal
interest rate, whichever is less.
5.4 COGNOS may change the terms of payment if OEM's previous
payment record shows that OEM is consistently in arrears by sixty (60)
days or more. OEM will be advised in writing of any change in the
payment terms.
6.0 ACKNOWLEDGMENT OF COGNOS OWNERSHIP RIGHTS
6.1 OEM acknowledges that the Programs contain confidential and
proprietary information and trade secrets belonging to COGNOS and its
licensors, and that title and ownership rights to the Programs shall
remain exclusively with COGNOS and its licensors. OEM's rights to the
Software are strictly limited to those specifically granted in this
Agreement. In particular, OEM shall not reverse compile the
Software.
7.0 CONFIDENTIAL INFORMATION
7.1 In order for OEM and COGNOS to effectively carry out their
respective obligations hereunder, each may from time to time disclose
to the other confidential information relating to its business and
affairs ("Confidential Information"). Neither party shall disclose
Confidential Information of the other to any third party without the
express written consent of the other party, and not make use of any
Confidential Information other than in the performance of this
Agreement. Each party shall use at least the same degree of care to
avoid disclosure of Confidential Information as it uses with respect
to its own Confidential
4 of 13
<PAGE> 5
Information. Each party acknowledges a relationship of trust and
confidence with respect to the Confidential Information of the other.
7.2 Confidential Information shall be clearly designated in
writing as confidential, or if verbally disclosed, identified as being
confidential. Confidential Information does not include:
(a) information generally available to or known to the public;
(b) information previously known to the recipient;
(c) information independently developed by the recipient outside
the scope of this Agreement; or
(d) information lawfully disclosed by a third party.
7.3 The Software and the provisions of this Agreement are
"Confidential Information".
8.0 WARRANTY
8.1 EXCEPT TO THE EXTENT SET OUT IN THE SHRINK-WRAP LICENSE, THE
SOFTWARE IS NOT WARRANTED TO OEM OR END USER CUSTOMERS IN ANY WAY.
COGNOS DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH
RESPECT TO THE SOFTWARE, INCLUDING BUT NOT LIMITED TO, THOSE OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
8.2 COGNOS agrees to provide OEM with the support and maintenance
services set forth in Schedule C.
9.0 LIMITATION OF LIABILITY
9.1 Neither party shall be liable or deemed to be in default for
any delay or failure to perform its obligations hereunder if such
failure results directly or indirectly from any cause beyond its
reasonable control.
9.2 COGNOS SHALL IN NO EVENT BE LIABLE TO OEM FOR LOSS OF PROFITS,
OR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES,
INCLUDING COSTS OR LEGAL EXPENSES, IN CONNECTION WITH THE SUPPLY, USE
OR PERFORMANCE OF THE SOFTWARE.
9.3 COGNOS'S TOTAL LIABILITY TO OEM FOR ANY CLAIM FOR DAMAGES
UNDER THIS AGREEMENT SHALL BE LIMITED TO DIRECT DAMAGES AND SHALL NOT
EXCEED THE SUM OF TWENTY THOUSAND DOLLARS ($20,000).
5 of 13
<PAGE> 6
10.0 INDEMNITY
10.1 OEM shall indemnify and hold COGNOS harmless from and against
any claims or actions ("claims") made by any third party arising from
any damages, costs, or losses arising from the performance of the OEM
Product except claims directly arising from the performance of the
Software.
11.0 TERM AND TERMINATION
11.1 The term of this Agreement shall commence on the Effective
Date and shall continue in force until midnight on the fifth (5th)
anniversary of the Effective Date. Thereafter, this Agreement shall be
automatically renewed for additional one (1) year terms. During any
renewal term either party may terminate this agreement by giving
thirty (30) days written notice.
11.2 Either party ("Terminating Party") may immediately terminate
this Agreement or suspend any rights granted under it on notice to the
other, if the other party ("Defaulting Party"):
(a) breaches any material term of this Agreement;
(b) merges or becomes amalgamated with another firm, person or
corporation which the Terminating Party, in its sole opinion,
deems to be a competitor;
(c) fails to perform any obligation under this Agreement within
fifteen (15) days after notice from the Terminating Party; or
(d) ceases to conduct business in a normal course, becomes
insolvent or is declared bankrupt.
11.3 On expiration or termination, each party shall promptly remit
to the other all unpaid monies due under this Agreement. OEM shall
either return to COGNOS or destroy all copies of the Software in its
possession and provide a certificate from an officer of OEM to that
effect.
11.4 The obligations set forth in Sections 2.0 and 7.0 shall
survive expiration or termination of this Agreement.
12.0 AUDIT RIGHTS
12.1 OEM grants COGNOS the right, which COGNOS will exercise
reasonably and at its own expense, to enter OEM's premises during
business hours on forty-eight (48) hours notice for the purpose of
examining OEM's relevant books and records or to have such books and
records examined by its certified public accountant to verify the
locations and
6 of 13
<PAGE> 7
hardware into which copies of the Software have been installed by OEM
as well as OEM's fulfillment of its obligations set forth herein.
13.0 NOTICE
13.1 Any notices, requests or demands shall be in writing and
delivered or mailed to the other party at the address written on the
front page of this Agreement. Each party shall promptly give written
notice of any change in its address or addressee. All notices shall
be sent either by registered or certified mail, postage prepaid, or by
facsimile transmission with answerback. Notices shall be deemed to be
received on the fifth (5th) business day after mailing, or if given by
facsimile transmission, upon transmission. In the case of a mail
interruption such notices, requests or demands shall be delivered by
prepaid courier delivery or facsimile transmission with answerback.
14.0 GENERAL PROVISIONS
14.1 The Schedules to this Agreement are incorporated into and
form part of this Agreement.
14.2 OEM is an independent contractor and the parties are not
agents or legal representatives of each other and have no power of
attorney to represent, act for, bind or commit each other except as
described in this Agreement. Neither execution nor performance of
this Agreement shall be construed to have established any joint
venture or partnership between COGNOS and OEM.
14.3 No delay or failure in exercising any right hereunder and no
partial or single exercise thereof shall be deemed to constitute a
waiver of such right or any other rights hereunder. No consent to a
breach of any express or implied term of this Agreement shall
constitute a consent to any subsequent breach.
14.4 If any provision of this Agreement is not enforceable, the
remainder of this Agreement shall remain in full force and effect.
14.5 OEM shall not assign all or any portion of its rights under
this Agreement without the prior written consent of COGNOS.
14.6 All covenants, agreements and conditions of this Agreement
shall be binding upon and enure to the benefit of both parties and
their representatives.
14.7 This Agreement and any matters relating thereto shall be
governed, construed and interpreted in accordance with the laws of the
Commonwealth of Massachusetts.
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<PAGE> 8
14.8 This Agreement constitutes the full and entire understanding
and agreement between OEM and COGNOS with respect to the marketing,
demonstration and distribution of the Software and supersedes all
negotiations, commitments and understandings, both verbal and written,
with respect thereto. No modifications, additions, or amendments to
the terms of this Agreement shall be effective unless in writing and
signed by the duly authorized representatives of OEM and COGNOS.
AS WITNESS the parties have duly executed this Agreement.
DELTEK SYSTEMS, INC. COGNOS INCORPORATED
/s/ Alan R. Stewart /s/ John B. Thomas
- ------------------------- ---------------------------
Signature Signature
Alan R. Stewart
- ------------------------- ---------------------------
Printed Name Printed Name
Chief Financial Officer
- ------------------------- ---------------------------
Title Title
8 of 13
<PAGE> 9
SCHEDULE A
A. SOFTWARE AND TERRITORY
SOFTWARE
PowerPlay Administrator
PowerPlay Enterprise
Impromptu Administrator
Impromptu Enterprise
PowerPlay Host
TERRITORY
United States
OEM PRODUCT
Deltek Software Series Version 1 & 2
B. RELATED DOCUMENTATION:
PowerPlay:
Viewer online file,
Reporter online file,
User reference file.
Impromptu:
Enterprise Editor help file,
Enterprise Editor Getting Started file,
Enterprise Editor User's Guide file.
Related Documentation will be provided to OEM electronically, in RTF format.
9 of 13
<PAGE> 10
SCHEDULE B
PAYMENT TERMS
PROGRAM AND LICENSE FEES
1. OEM shall pay COGNOS a program fee of [*] within thirty (30) days of the
Effective Date. This fee is in respect of the following: (a) 8 Days
Training, (b) embedding OEM's Logo, (c) master diskettes for duplication
of the Software, and (d) Provision of related documentation on RTF
electronic format.
2. SEE ADDENDUM 1; and (b) for the PowerPlay item of Software incorporated
into the EIS Module of the OEM Product, the license fee shall be equal to
the per user fees set forth below:
NUMBER OF USERS LICENSE FEE (PER USER)
--------------- ----------------------
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
The current published list price for the OEM Product is attached as Schedule
B-1. OEM may change its published per user list price for the OEM Product on
thirty (30) days written notice to COGNOS. Notwithstanding anything to the
contrary above, in no event will the License Fee for each copy of the Impromptu
item of Software incorporated into the Report Writer Module be [*] .
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
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<PAGE> 11
ADDENDUM 1
2. OEM shall pay COGNOS a license fee ("License Fee") as follows:
(a) For the Impromptu item of Software incorporated into the Report Writer
Module of the OEM Product, the License Fee due to COGNOS shall be equal
to [*] of the price of the Report Writer Module.
The price Deltek charges for its Report Writer Module shall be
equal to [*] of the then-current published per user list price for the OEM
product. The number of Report Writer Module users shall be deemed to be
equal to the number of users purchased for the OEM product except when a
license over [*] users is sold.
When Deltek sells its OEM product with a license in excess of [*]
users, in addition to the normal License Fee for a 20 user license, Deltek
will pay to COGNOS an additional license fee of [*] of Deltek's Report
Writer Module revenue that exceeds the list price of a twenty user license
or (b), [*] for each licensed user of the Report Writer module over [*]
users.
At anytime [*] from the date of this agreement, Deltek at its
option, may elect to pay to COGNOS a license fee of [*] of the
then-current published per user list price for the Report Writer Module.
In the event this election is made, the number of Report Writer Module
users does not need to be equal to the number of users purchased for the
OEM product. Deltek shall notify COGNOS in writing if this election is
made.
2/28/94
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE> 12
Upon execution of this Agreement, OEM shall pay COGNOS [*] as a
non-refundable prepayment against which License Fees due and payable shall
be credited as follows: [*] upon execution of this Agreement; [*] within
forty-five (45) days of the Effective Date of this Agreement, and [*]
within ninety (90) days of the Effective Date of the Agreement
SUPPORT AND MAINTENANCE FEES
In respect of the provision of Level 2 services by COGNOS to an end user,
OEM shall pay COGNOS an annual fee equal to [*] subject to the fee
adjustment described below. This amount shall not be credited to the
prepayment of the License Fee. OEM shall pay COGNOS the support and
maintenance fee quarterly beginning ninety (90) days from the date of
delivery of the OEM Product to end user customers.
UPGRADE FEE
In respect of the provision of upgrades to the Software for each end user,
OEM shall pay COGNOS an annual fee equal to [*] subject to the fee
adjustment described below. This amount shall not be credited to the
prepayment of the License Fee. OEM shall pay COGNOS the upgrade fee
quarterly beginning ninety (90) days from the date of delivery of the OEM
Product to end user customers.
FEE ADJUSTMENT
The Maintenance Fee and the Upgrade Fee shall be increased on each
anniversary of the Effective Date by an amount equal to [*] of the fee for
the immediately preceding year.
TRAINING PROGRAM
OEM can contract with COGNOS for the right-to-copy our training classes
for the purpose of training it's customers:
Impromptu User Class $[*]
PowerPlay User Class $[*]
These prices are good until December 31, 1994.
TRAINING AND CONSULTING
Additional Training and Consulting will be offered to OEM at a fee of
[*] per day. This price is good until December 31, 1994.
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
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<PAGE> 13
SCHEDULE B-1
OEM PRODUCT
PUBLISHED LIST PRICE
<TABLE>
<CAPTION>
NUMBER OF USERS PUBLISHED LIST PRICE
--------------- --------------------
<S> <C>
[*] [*]
</TABLE>
POWERPLAY HOST: OEM shall pay COGNOS a fee for each copy of the Software
sublicensed by OEM. OEM fee for PowerPlay Host shall be determined by
[*] from the then current local list price for the Software.
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
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<PAGE> 14
SCHEDULE C
SUPPORT AND MAINTENANCE AND UPGRADES
1. SUPPORT AND MAINTENANCE
COGNOS agrees to provide OEM with the following support and maintenance
services.
Level I - Telephone technical support for OEM end users providing
advice on usage and installation of Software. OEM personnel
shall collect end user diagnostics as requested by COGNOS.
Level 2 - A maintenance plan provided by COGNOS consisting of:
Telephone technical support for OEM personnel providing
advice on Software functionality and debugging and
troubleshooting in accord with COGNOS current policies. OEM
customers will participate in this plan by paying the
Maintenance Fee set out in Schedule B.
Level 2 services shall be provided to OEM and its end user
customers free of charge for ninety (90) days from the date
of delivery of the OEM product to the end user customers.
Thereafter the fees for Level 2 services shall be as set
forth in Schedule B.
2. UPGRADES:
OEM may subscribe end users for upgrades to the Software. The service
will consist of the provision of new versions of the Software and Related
Documentation when issued. OEM shall pay the Upgrade Fee set out in
Schedule B for upgrade services to each end user. If OEM pays the
Upgrade Fee set out in Schedule B for upgrade services to each end user
customer, Impromptu 3.0 will be provided to OEM's end user customers at
no charge.
3. FUTURE RELEASES:
With respect to the Impromptu item of Software, (versions 2.0D and 3.0)
COGNOS agrees to include Gupta SQLBASE support within ninety (90) days of
the Effective Date of this Agreement. With respect to the Impromptu item
of Software (version 3.0), COGNOS agrees to include the following
functionality: crosstab support, frame-based reporting and OLE 2.0
support.
13 of 13
<PAGE> 15
AMENDMENT TO
COGNOS DESKTOP OEM AGREEMENT
This Amendment (the "Amendment") is effective this 28th of November,
1995, (the "Effective Date") and is made a part of the Cognos Desktop OEM
Agreement between COGNOS CORPORATION ("Cognos") and DELTEK SYSTEMS, INC.
("OEM') dated February 28, 1994 (the "Agreement").
1. DEFINITIONS. All capitalized terms not otherwise defined in this
Amendment shall have the same meanings as set forth in the Agreement.
2. GRANT OF DISTRIBUTION RIGHTS. Notwithstanding anything to the
contrary in Section 2.1 of the Agreement, OEM may distribute the Software to
customers in the Territory for use by such customers' subsidiaries, affiliates
or joint ventures outside the Territory (but not in any country where
distribution of the Software is prohibited by U.S. laws or regulations). OEM
shall be responsible for complying with all applicable export laws and
regulations when transferring the Software outside the Territory.
3. NO OTHER CHANGES. Except as expressly modified by this Amendment, the
terms and conditions set forth in the Agreement shall remain in full force and
effect.
COGNOS INCORPORATED DELTEK SYSTEMS, INC.
By: /s/ John B. Thomas By: /s/ Alan R. Stewart
Name: John B. Thomas Name: Alan R. Stewart
Title: V.P. Partner Channels Title: Chief Financial Officer
<PAGE> 16
[COGNOS LETTERHEAD]
May 24, 1995
Mr. Alan Stewart
Chief Financial Officer
Deltek Systems, Inc.
8280 Greensboro Drive
McLean, VA 22101
Dear Mr. Stewart:
This letter is to confirm our agreement regarding the [ ] payment by
Deltek Systems, Inc. ("Deltek") to Cognos Corporation ("Cognos") which Cognos
will invoice upon execution of this letter, payable net 60 days.
This [ ] shall be a non-refundable payment against future license & support
fees due Cognos under the Cognos Desktop OEM Agreement between Cognos and
Deltek dated February 28th, 1994 ("Agreement"). The Agreement shall be further
amended upon execution of this letter in the following manner:
The license & support fees set forth in the Agreement will be further
discounted by [ ] for the period commencing May 1st, 1995 and ending the
later of:
a) The date upon which Deltek net license & support fees due Cognos exceed
[ ]; or
b) February 28, 1996
If you are in agreement with the foregoing, please sign the duplicate copy of
this letter in the space provided below and return one copy to me for our files
by May 30th, 1995. Thank-you.
Sincerely,
/s/ DANA HIGLEY
----------------------------
Dana Highley
OEM Partner Manager
Accepted and Agreed to:
/s/ ALAN STEWART Date: May 24, 1995
- --------------------------- -------------
Alan Stewart
Chief Financial Officer
Deltek Systems, Inc.
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION]
<PAGE> 17
[COGNOS LETTERHEAD]
November 27, 1995
Mr. Alan Stewart
Chief Financial Officer
Deltek Systems, Inc.
8280 Greensboro Drive
McLean, VA 22101
Dear Mr. Stewart:
This letter is to confirm our agreement regarding the [*] payment by
Deltek Systems, Inc. ("Deltek") to Cognos Corporation ("Cognos") which Cognos
will invoice upon execution of this letter, payable [*] net 60 days and
[*] net 180 days.
The [*] shall be a non-refundable payment against future license &
support fees due Cognos under the Cognos Desktop OEM Agreement between Cognos
and Deltek dated February 28th, 1994 ("Agreement"). The Agreement shall be
further amended upon execution of this letter in the following manner:
The license & support fees set forth in the Agreement will be further
discounted by [*] for the period commencing [*] and ending the later of:
a) The date upon which Deltek net license & support fees due Cognos exceed
[*] or
b) [*]
and
The support and upgrade fees due Cognos, as set forth in the Agreement for the
period August 1994 through September 1995 shall be credited to Deltek Systems
for no additional charge.
If you are in agreement with the foregoing, please sign the duplicate copy of
this letter in the space provided below and return one copy to me for our files
by Nov. 30th, 1995. Thank you.
Sincerely,
/s/ Dana Higley
-------------------
Dana Higley
OEM Partner Manager
Accepted and Agreed to:
/s/ Alan M. Stewart Date: November 30, 1995
- --------------------------- ---------------------------
Alan Stewart
Chief Financial Officer
Deltek Systems, Inc.
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE> 18
[DELTEK SYSTEMS LOGO]
November 30, 1995
Mr. Dana Higley
OEM Partner Manager
COGNOS CORPORATION
4770 Duke Drive, Suite 201
Mason, Ohio 45040
Subject: Amendment to OEM Agreement
This letter clarifies our agreement of the method and application for
recording the software maintenance, support and upgrade fees on a monthly
basis.
Cognos has agreed to apply a prepayment of [*] for the
contractual obligation of an additional [*] as specified in the letter of
November 27, 1995. Effective on January 1, 1996, Deltek will be obligated to
Cognos 90 days after a shipment for a maintenance, support, and upgrade fee
based on the royalty reported for that period, calculated as follows:
A) The monthly royalty fee less a [*] discount (with the fee due 90
days after that shipment)
B) Times a [*] fee for maintenance/support/upgrades
C) With this fee divided by one twelfth for that months additional fee,
thereby spreading any annual fee over the twelve months earned
D) Refer to the attached schedule for the computation and application
of this method for the maintenance/support/upgrade fees due for the
period ending December 31, 1995.
Based upon this agreement, Deltek will report a charge in the December
1995 royalty report due January 20, 1996 of [*], which represents [*]
for maintenance fees and [*] for upgrade fees for the period from August
1994 through December 31, 1995.
Please return a signed copy to my attention, my number is (703)
734-8606, 491.
Sincerely,
/s/ Alan R. Stewart
Alan R. Stewart
Chief Financial Officer
Deltek Systems, Inc.
Accepted and agreed to by COGNOS CORPORATION:
/s/ Dana Higley
- ---------------------
Date: 12-4-95
---------------
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE> 19
[COGNOS LETTERHEAD]
July 26, 1996
Mr. Alan Stewart
Chief Financial Officer
Deltek Systems, Inc.
8280 Greensboro Drive
McLean, Virginia 22102-3841
Dear Alan:
The purpose of this letter is to propose an amendment to our OEM agreement
dated February 28, 1994. Cognos would like to offer Deltek a standard per seat
rate for both CP Scope and CP Reports. The proposed royalty license fee due is:
- - [*] for PowerPlay (both Windows and Macintosh versions, as available)
- - [*] for Impromptu.
The above changes in royalty license fee is effective July 1, 1996.
Other changes to the contract would include the expansion of the territory
internationally with a specified [*] international uplift on the proposed
royalties above, the inclusion of future products (PowerPlay Server, Impromptu
Server, etc.) at a [*] discount on standard list price, and the extension
of the contract expiration date for an additional year.
As part of this proposal, Deltek would agree to a non-refundable payment
against future license & support fees due Cognos in the amount of [*]. This
pre-payment will be due in quarterly installments according to the following
schedule:
- - [*] due on or before [*]
- - [*] due on or before [*]
If you are in agreement with the foregoing, please sign the duplicate copy of
this letter in the space provided below and return one copy to me for our
files by July 31, 1996.
Sincerely,
/s/ Jeff Hilbert
Jeff Hilbert
OEM Deployment Representative
Accepted and Agreed to:
/s/ Kenneth E. deTaski Date: 7/29/96
----------------------- -------------
President
-----------------------
Deltek Systems, Inc.
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE> 1
EXHIBIT 10.7
MICRO FOCUS
OSX APPLICATION VENDOR LICENSE AGREEMENT
This OSX Application Vendor License Agreement ("Agreement") is entered into as
of June 10, 1993 by and between Micro Focus Incorporated ("Micro Focus") and
DELTEK ("Licensee").
Background
Micro Focus develops and distributes a line of COBOL programmer productivity
tools. Licensee has licensed such tools and used them for development and has
determined to distribute the Micro Focus Operating Systems Extensions ("OSX")
product in connection with Licensee's products. This Agreement sets forth the
terms on which Licensee may distribute the OSX product.
Agreement
NOW, THEREFORE, the parties agree as follows:
1. THE SOFTWARE
The software ("Software") consists of the Operating System Extensions
("OSX") for Micro Focus COBOL in object code form for the operating
environment in the single or multi-user systems specified below. Attached
as Exhibits C and D are the lists of files that make up the OSX under
DOS-OS/2 and UNIX respectively.
2. LICENSE FEES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Software Version Operating Current Single Copy
Environment License Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OSX DOS-OS/2 Single User 3.0 DOS-OS/2 [*]
- -----------------------------------------------------------------------------------------------------------------
OSX DOS-OS/2 per Server 3.0 DOS-OS/2 [*]
(Fileshare NLM)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The OSX Single User Single Copy License Fee permits i) one user license
on, a DOS-OS/2 single user system or ii) one user license on a DOS-OS/2
multi-user system. A DOS-OS/2 multi-user system consists of one server
and its clients. A Single User License Fee is payable for each user
licensed on a DOS-OS/2 multi-user system. The license fee for each
multi-user system in the DOS-OS/2 environment is computed by combining the
Server Fee plus the total Single User Fees for each user licensed on that
system. Additional users linked to a previously licensed Server require
payment of additional Single User Fees as users are added.
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE> 2
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Software Version Operating Current Single Copy
Environment License Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNIX OSX per Initial User 3.0 UNIX [*]
- -----------------------------------------------------------------------------------------------------------------
UNIX OSX per Additional 3.0 UNIX [*]
Concurrent User
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The UNIX OSX Initial User Fee permits a single user license for each UNIX
OSX installation. An installation shall consist of a single UNIX computer
which may have one or more terminals. The OSX Initial User Fee shall
support only one user unless additional concurrent users are licensed.
Licenses for additional users on the same installation require the Per
Additional Concurrent User Single Copy License Fee be paid for each
additional concurrent user. License fees for each multi-user system are
computed by adding the UNIX OSX Per OSX Initial User Fee to the total Per
Additional Concurrent User Fees for that system.
Licensee agrees to pay Micro Focus for the right to make additional copies
of the OSX during the term of this Agreement based on the Cumulative
Discount Schedule shown below. The Cumulative Discount Schedule will only
apply for the term of this Agreement. Any subsequent renewal of this
Agreement pursuant to the terms herein may be subject to different
discount conditions at the sole discretion of Micro Focus and which will
be confirmed in writing by Micro Focus at the time of renewal. The
Current Single Copy License Fee for all the above products is subject to
change without notice.
3. CUMULATIVE DISCOUNT SCHEDULE
Licensee, for the duration of this Agreement, will have the right to
procure additional licenses for OSX according to the following discount
schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Cumulative Number of Copies Licensed $ Discount Applicable to the
During the Term of the Agreement Most Recent Order
- --------------------------------------------------------------------------------------
<S> <C>
[*] [*]
- --------------------------------------------------------------------------------------
[*] [*]
- --------------------------------------------------------------------------------------
[*] [*]
- --------------------------------------------------------------------------------------
[*] [*]
- --------------------------------------------------------------------------------------
[*] [*]
- --------------------------------------------------------------------------------------
[*] [*]
- --------------------------------------------------------------------------------------
[*] [*]
- --------------------------------------------------------------------------------------
[*] [*]
- --------------------------------------------------------------------------------------
[*] [*]
- --------------------------------------------------------------------------------------
</TABLE>
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
2
<PAGE> 3
<TABLE>
- --------------------------------------------------------------------------------------
<S> <C>
[*] [*]
- --------------------------------------------------------------------------------------
[*] [*]
- --------------------------------------------------------------------------------------
[*] [*]
- --------------------------------------------------------------------------------------
[*] [*]
- --------------------------------------------------------------------------------------
[*] [*]
- --------------------------------------------------------------------------------------
</TABLE>
4. INITIAL ORDER
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Software Single Copy License Fee Quantity Initial License Fee
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OSX DOS-OS/2 Single User [*] 90 [*]
- --------------------------------------------------------------------------------------------------------
OSX DOS-OS/2 per Server [*]
- --------------------------------------------------------------------------------------------------------
UNIX OSX per Initial User [*] 1 [*]
- --------------------------------------------------------------------------------------------------------
UNIX OSX per Additional [*] 9 [*]
Concurrent User
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(All prices quoted in U.S. Dollars)
Total Initial License Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ [*]
Discount Applied (Per Paragraph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [*]
Prepaid License Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 00
INITIAL ORDER FEE PAYABLE TO MICRO FOCUS (NOT LESS THAN $1,000.00) . . . . . . . . . . . . . . . $ [*]
</TABLE>
Licensee agrees that upon execution of this Agreement the above Initial
Order Fee shall be due and payable to Micro Focus, any prepaid license fee
shall be irrevocable and non-refundable.
The Initial Order will be paid upon submission of a signed copy of this
Agreement to Micro Focus by Licensee. License Fees for additional
quantities of the OSX must be paid within 30 days of the end of each month
during which the additional copies were made by Licensee.
5. SCOPE OF LICENSE
Licensee may (i) make and distribute the number of copies of OSX for which
License Fees have been paid to or will be paid Micro Focus for use solely
in combination with Licensee's own application software, only on the same
recording medium in object code form only, and (ii) sublicense the OSX to
end user customers only in such combination for use each on a single-user
or multi-user computer system for OSX subject to the following:
a. Licensee will make all reports and payments as provided in this
Agreement.
[CONFIDENTIAL PORTION DELETED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
3
<PAGE> 4
b. Copies of the OSX may be distributed to end users only if the OSX is
delivered together with a written end user license agreement which
provides the same protection to Micro Focus as the Micro Focus End
User Software License Agreement attached as Exhibit A, and which (i)
is signed by the end user or (ii) is an agreement which is
prominently displayed on the outside of the package containing
Licensee's product and contains terms to the effect that such end
user license agreement is accepted by the end user when the end user
removes the shrink-wrap packaging surrounding Licensee's product.
Licensee agrees to indemnify Micro Focus in the event that Micro
Focus sustains any loss due to Licensee's failure to comply with the
provisions in this clause (b).
c. Licensee will not authorize any third party to copy all or any part
of the OSX except as permitted in Exhibit A.
d. Licensee may not modify, reverse engineer, reverse compile, or
disassemble any object code for the OSX.
e. Licensee may not distribute, make copies of or prepare derivative
works of any Micro Focus documentation without the express written
permission of Micro Focus.
6. SERIALIZATION AND REPORTING
Licensee agrees to reference the copies it makes of the OSX by the same
serial or other identification number it gives to the copies of its own
applications which are co-resident with the OSX on the distribution
medium. Licensee agrees to report to Micro Focus the serial numbers,
registration numbers, or other identification numbers or codes which
Licensee uses to identify the copies it makes of its own applications
software and which are distributed in conjunction with the copies it takes
of the OSX. These numbers will be treated as the identifying numbers of
the copies of the OSX which Licensee is granted the right to make under
this Agreement. Licensee agrees to submit the OSX Report Form along with
Licensee fee payments due, if any, within fifteen (15) days of the last
day of each month; and the timely presentation of such reports and payment
to Micro Focus are a condition of the grant by Micro Focus to Licensee to
make further copies of the OSX.
7. RECORD KEEPING/AUDITS
Licensee agrees to make and keep for at least three years from the date of
the entry a record of the serial or other identification number of each
copy of the OSX made or delivered by Licensee to its customers, along with
a record of the name and address of each customer at the time of transfer
of the OSX.
Micro Focus will have the right, at least once per calendar year during
the term of the Agreement and for three (3) years thereafter to have
independent certified public accountants,
4
<PAGE> 5
reasonably acceptable to Licensee, audit all records that this Agreement
requires Licensee to make and keep. All audits will begin upon at least
forty-eight (48) hours prior notice. Micro Focus will pay for the audit
unless the audit shows a shortfall of more than 5% between the results of
the audit and the reports submitted for the period audited, then Licensee
will pay the auditor's fee.
8. ASSIGNMENT
Either party may assign this Agreement to the surviving entity in a merger
or consolidation in which it participates or to a purchaser of all or
substantially all of its assets. In addition, Micro Focus may assign this
Agreement to any person to whom Micro Focus transfers all or substantially
all of its rights in the OSX. Otherwise, neither party may assign any
rights or delegate any duties under this Agreement without the other's
prior written consent, and any attempt to do so without that consent will
be void. This Agreement will bind and inure to the benefit of the parties
and their respective successors and permitted assigns of the parties
hereto.
9. DISCLAIMER OF WARRANTY FOR OSX
THE OSX IS LICENSED ON AN "AS IS" BASIS. THIS MEANS THAT THE ENTIRE RISK
AS TO THE QUALITY AND PERFORMANCE OF THE OSX IS ON LICENSEE. SHOULD THE
OSX PROVE DEFECTIVE FOLLOWING ITS USE, LICENSEE, AND NOT MICRO FOCUS,
ASSUMES THE ENTIRE COST OF ALL NECESSARY SERVICE, REPAIR OR CORRECTION.
MICRO FOCUS DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. MICRO FOCUS MAKES
NO REPRESENTATIONS CONCERNING THE QUALITY OF THE OSX AND DOES NOT PROMISE
THAT THE OSX WILL BE ERROR FREE OR WILL OPERATE WITHOUT INTERRUPTION.
10. EXPORT CONTROLS IN GENERAL
In exercising its rights under the Agreement, Licensee agrees to comply
strictly and fully with all export controls imposed on the OSX by any
country or organization of nations within whose jurisdiction Licensee
operates or does business. Examples of organizations of nations that may
have export controls pursuant to treaty or international agreement are:
the North Atlantic Treaty Organization, the European Economic Community,
the Asian Common Market and the Association of Southeast Asian Nations.
11. DUTIES, TAXES AND SIMILAR CHARGES
Licensee will pay or reimburse Micro Focus for all duties, sales and use
taxes, other taxes and other charges relating to the OSX, this Agreement
or payments hereunder, with the sole exception of taxes on Micro Focus'
income.
5
<PAGE> 6
12. OWNERSHIP OF THE OSX
Micro Focus and its suppliers have and will retain all ownership rights in
the OSX including all patent rights, copyrights, trade secrets,
trademarks, service marks, related goodwill and confidential and
proprietary information. Licensee will have no rights in the OSX except
as explicitly stated in this Agreement.
13. NOTICES
Licensee will include copies of a notice regarding proprietary rights
approved in writing by Micro Focus on all copies of the OSX that Licensee
distributes, as follows: (i) on the distribution diskette label and (ii)
prominently displayed on Licensee's packaging and/or documentation for his
application software (this may be on the copyright page, title page, outer
binder, cover, or elsewhere). Licensee's performance of this obligation
is a condition of Micro Focus' authorization of Licensee's distribution of
copies of the OSX. Object code provided by Micro Focus will have an
appropriate notice embedded in it, which Licensee will keep intact. An
acceptable notice would be as follows:
Copyright - [year of publication] [Licensee]; portions copyright 19xx
Micro Focus Ltd. All rights reserved. This program or documentation
contains confidential information and trade secrets of [Licensee] and its
suppliers. Reverse engineering of object code is prohibited. Use of
copyright notice is precautionary and does not imply publication.
Unless Micro Focus otherwise instructs, the year 19xx denotes the years
that the OSX or portions thereof have been copyrighted. If no year(s) is
(are) indicated in the documentation, Micro Focus will supply this
information upon request.
14. LIMITATION OF LIABILITY
IN NO EVENT WILL MICRO FOCUS BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
SPECIAL, CONSEQUENTIAL OR OTHER DAMAGES ARISING OUT OF THE USE OF THE
RECORDING MEDIUM OR THE OSX BY ANY PERSON, WHETHER OR NOT MICRO FOCUS IS
INFORMED OF THE POSSIBILITIES OF SUCH DAMAGES IN ADVANCE. MICRO FOCUS'
TOTAL LIABILITY WITH RESPECT TO ALL CAUSES OF ACTION TOGETHER WILL NOT
EXCEED AMOUNTS PAID BY LICENSEE TO MICRO FOCUS FOR USE OF THE OSX
HEREUNDER. THESE LIMITATIONS APPLY TO ALL CAUSES OF ACTION, INCLUDING,
BUT NOT LIMITED TO, BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE,
STRICT LIABILITY, MISREPRESENTATION AND OTHER TORTS, AND CAUSES OF ACTION
BASED ON ANY OTHER LEGAL THEORY.
6
<PAGE> 7
15. TERMINATION
This Agreement will terminate:
a. End of Term. Upon the expiration of the Term of the Agreement. The
initial term shall be three (3) years from the Effective Date of this
Agreement.
b. Distribution of All Copies. Upon the distribution by Licensee of all
copies of the OSX permitted to be distributed by Licensee hereunder.
c. Breach. On the thirtieth (30th) day after either party gives the
other notice of a material breach by the other of any term or
condition of this Agreement, unless the breach is cured before that
day; or
d. Bankruptcy or Insolvency. When either party at its discretion gives
the other notice of termination after the other has been for more
than sixty (60) days the subject of any voluntary or involuntary
proceeding relating to bankruptcy, insolvency, liquidation,
receivership, composition of or assignment for the benefit of
creditors.
16. EFFECT OF TERMINATION
After termination:
a. End of Licenses. Licensee will have no right to copy, market or
distribute the OSX and will promptly destroy or return to Micro Focus
all copies of the OSX in its possession or under its control.
b. End User's Rights. End users properly sublicensed prior to
termination may continue to use the OSX under the terms of their
written sublicense agreements, but all sublicense agreements will
inure to Micro Focus' benefit, and Licensee will execute documents
and provide assistance as reasonably requested by Micro Focus to
enable Micro Focus to enforce them.
c. No Damages for Termination: No Effect on Other Rights and Remedies.
Neither party will be liable for damages of any kind as a result of
exercising its right to terminate this Agreement according to these
Terms and Conditions, and termination will not affect any other right
or remedy of either party.
d. Continuing Obligations. Payment obligations arising prior to
termination will remain in force.
7
<PAGE> 8
17. MISCELLANEOUS
a. Choice of Law. This license will be governed by and construed
according to the laws of the State of California, applicable to
contracts entered into and wholly to be performed within the State of
California by California residents.
b. Entire Agreement. This Agreement represents the entire agreement
between the parties relating to OSX and supersedes all prior
representations, discussions, negotiations and agreements, whether
written or oral.
c. Amendment. This Agreement may be amended or supplemented only by a
writing signed on behalf of both parties. No purchase order, invoice
or similar document will affect this Agreement by the receiving
party.
d. Waiver. No waiver will be implied from conduct or failure to enforce
rights. No waiver will be effective unless in writing signed on
behalf of the party claimed to be waived.
e. Contingencies. Neither party will have the right to claim damages or
to terminate this Agreement as a result of the other's failure or
delay in performance due to circumstances beyond its reasonable
control, such as labor disputes, strikes, lockouts, shortages of or
inability to obtain labor, fuel, raw materials or supplies, war,
riot, insurrection, epidemic, act of God, or governmental action not
the fault of the nonperforming party.
f. Severability. If any part of this Agreement is found invalid or
unenforceable, it will be enforced to the maximum extent permitted by
law, and all other parts of this Agreement will remain in force.
g. Equitable Relief. Either party may have injunctive, preliminary or
other equitable relief to remedy any actual or threatened
unauthorized disclosure of confidential information or unauthorized
use, copying, marketing, distribution or sublicensing of the OSX.
h. Attorneys' Fees. In any suit to enforce this Agreement, the
prevailing party will have the right to recover its costs and
reasonable attorney's fees, including costs and fees upon appeal.
i. Relationship of Parties. The parties to this Agreement are
independent contractors. There is no relationship of principal to
agent, master to servant, employer to employee or franchisor to
franchisee between the parties. Neither party has the authority to
bind the other or incur any obligation on its behalf.
8
<PAGE> 9
MICRO FOCUS INCORPORATED DELTEK
("Micro Focus") ("Licensee")
/s/ ROBERT CONNORS /s/ ERIC BROWN
- --------------------------------- --------------------------------
Signature Signature
Robert Connors, CFO Eric Brown
- --------------------------------- --------------------------------
Printed Name and Title Printed Name and Title
2465 East Bayshore Road LICENSEE'S ADDRESS:
Palo Alto, CA 94303 8280 Greensboro Dr., #300
McLean, VA 22102
9
<PAGE> 10
EXHIBIT A
MICRO FOCUS END USER SOFTWARE LICENSE AGREEMENT
IMPORTANT. YOU SHOULD CAREFULLY READ THIS LEGAL AGREEMENT BEFORE OPENING THIS
PACKAGE. BY OPENING THIS PACKAGE, YOU ACCEPT ALL THE TERMS AND CONDITIONS OF
THIS AGREEMENT AND AGREE TO ABIDE BY THEM. IF THESE TERMS AND CONDITIONS ARE
NOT ACCEPTABLE TO YOU, DO NOT OPEN THIS PACKAGE, BUT RETURN IT UNOPENED TO YOUR
DISTRIBUTOR AND YOUR MONEY WILL BE REFUNDED.
1. Scope of Agreement. This Agreement covers, and the "Software" includes,
the computer programs enclosed in this package, their accompanying user
documentation, and any related computer programs, documentation and
information subsequently provided by Micro Focus Incorporated ("Micro
Focus").
2. License. Micro Focus grants to you a nonexclusive, nontransferable
license to use the Software in object code form on one "Computer System",
in the United States, Canada, Mexico and Central America. The Computer
System must be a single-user computer. Any use of the Software on a local
area network or mufti-user system requires separate network or multi-user
licensing. Please contact your Micro Focus Account Representative for
details and charges.
You agree not to:
a. Copy. Make any copies of any computer program contained in the
Software, except as set forth in (3) below, and not to make any
copies of all or any part of the user documentation;
b. Disseminate. Provide or disseminate all or any part of the Software
to any other person; or
c. Modify or Reverse Engineer. Attempt to modify, reverse engineer,
reverse compile or disassemble the object code for the Software.
3. Run Time License; Operating System Extension. Micro Focus grants you a
royalty free right to reproduce and distribute executable files created
using the Software. In addition, Micro Focus grants you a royalty-free
right to reproduce and distribute the COBOL Run Time System files of the
Software, provided that you: (a) distribute the COBOL Run Time System
files only in conjunction with and as a part of your software product;
(b) do not use Micro Focus' name, logo, or trademarks to market your
software product; (c) include Micro Focus' copyright notice for the
Software on your product label and as a part of the sign-on message for
your software product: and (d)indemnity, hold harmless, and defend Micro
Focus from and against any claims or lawsuits, including attorney's fees,
that arise or result from the use
10
<PAGE> 11
or distribution of your software product. The COBOL Run Time System files
and Operating System Extension are further described in the "Read this
First" card that is packaged with your Micro Focus product. Please
contact your Micro Focus Account Representative for information on
licensing the Operating System Extension.
4. Term of License. Subject to termination for your breach of this
Agreement, this Agreement and your license will last indefinitely. If you
violate any term or condition of this Agreement, Micro Focus or its agents
may terminate this Agreement and your license immediately by giving you
written notice of termination. You may also terminate this Agreement and
your license voluntarily by giving notice of termination to Micro Focus
and destroying or returning to Micro Focus all copies of all or any part
of the Software in your possession or under your control. You will have no
right to keep or use any copy of the Software for any purpose after
termination.
5. Changes in Software. Micro Focus has a policy of continuous improvement
to the Software and reserves the right to make changes without notice in
new releases and versions of it. Specifications of the Software, including
the amount of memory or time required for execution of any program, may be
changed in new releases and versions.
6. Limited Warranty for Recording Medium. Micro Focus will repair or replace
free of charge any defective recording medium on which the Software is
recorded d the medium is returned to Micro Focus by you within ninety (90)
days after purchase. This warranty does not cover defects due to accident,
abuse, service or modification by any unauthorized person, or any cause
occurring after initial delivery of the medium to you. THIS WARRANTY GIVES
YOU SPECIFIC LEGAL RIGHTS, AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH VARY
FROM STATE TO STATE. ALL IMPLIED WARRANTIES WITH RESPECT TO THE RECORDING
MEDIUM, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE, ARE LIMITED IN DURATION TO NINETY (90) DAYS FROM
THE DATE OF RETAIL PURCHASE. SOME JURISDICTIONS DO NOT ALLOW LIMITATIONS
ON HOW LONG AN IMPLIED WARRANTY LASTS, SO THE ABOVE LIMITATION MAY NOT
APPLY TO YOU
7. Procedure for Returning Media. Defective media may be mailed to Micro
Focus, postage prepaid, or may be delivered in person and picked up when
repairs or replacement is completed. Your name, address, telephone number
and User Registration Number (on the registration card) must be attached
to the returned medium. The address for mailing media may be obtained by
telephoning Micro Focus at (415) 856-4161.
8. Disclaimer of Warranty for Software. MICRO FOCUS SOFTWARE IS LICENSED ON
AN "AS IS" BASIS. MICRO FOCUS DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. MICRO
FOCUS MAKES NO REPRESENTATIONS CONCERNING THE QUALITY OF THE SOFTWARE AND
DOES NOT PROMISE
11
<PAGE> 12
THAT THE SOFTWARE WILL BE ERROR FREE OR WILL OPERATE WITHOUT INTERRUPTION.
9. Limitation of Liability. IN NO EVENT WILL MICRO FOCUS BE LIABLE FOR ANY
INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR OTHER DAMAGES ARISING OUT
OF THE USE OF THE RECORDING MEDIUM OR THE SOFTWARE BY ANY PERSON, WHETHER
OR NOT INFORMED OF THE POSSIBILITIES OF DAMAGES IN ADVANCE. MICRO FOCUS'
TOTAL LIABILITY WITH RESPECT TO ALL CAUSES OF ACTION TOGETHER WILL NOT
EXCEED AMOUNTS PAID BY YOU FOR THE SOFTWARE. THESE LIMITATIONS APPLY TO
ALL CAUSES OF ACTION, INCLUDING BREACH OF CONTRACT, BREACH OF WARRANTY,
NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION AND OTHER TORTS. SOME
JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR
CONSEQUENTIAL DAMAGES SO THE ABOVE LIMITATION OR EXCLUSION MAY NOT APPLY
TO YOU.
10. Ownership of Software. Micro Focus and its suppliers have and will retain
all ownership rights to the Software, including all patent rights,
copyrights, trademarks, service marks, related goodwill and confidential
and proprietary information. You have no rights in the Software except as
explicitly stated in this Agreement.
11. Use by Government. Use, duplication or disclosure by the Government is
subject to restrictions as set forth in subparagraph (c)(1)(ii) of the
Rights in Technical Data and Computer Software cause at DFARS 52.227-7013
or subparagraphs (c)(1) and (2) of Commercial Computer Software -
Restricted Rights at 48 CFR 52.227-19, as applicable. Contact Micro
Focus, 2465 East Bayshore Road, Palo Alto, California 94303.
12. Assignment and Delegation. You may not assign this Agreement or any
rights under it and may not delegate any duties under this Agreement
without Micro Focus' prior written consent. Any attempt to assign or
delegate without that consent will be void.
13. Exclusive Agreement. THIS AGREEMENT IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF AGREEMENT BETWEEN THE PARTIES AND SUPERSEDES ALL PROPOSALS,
COMMUNICATIONS, PURCHASE ORDERS AND PRIOR AGREEMENTS, VERBAL OR WRITTEN,
BETWEEN THE PARTIES. THIS AGREEMENT IS GOVERNED BY THE LAWS OF THE STATE
OF CALIFORNIA.
12
<PAGE> 13
EXHIBIT B
OSX V3.0 MONTHLY REPORT
To: MICRO FOCUS INCORPORATED
2465 East Bayshore Road
Palo Alto, CA 94303
From:
Report Date:
Month/Year:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Name/No. of Equipment Model and Operating System Serial # Date Issued # of
Users
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Balance of Prepaid License Fees . . . . . . . . . . . . . $
-------
TOTAL LICENSE FEES FOR MONTH . . . . . . . . . . . . . . $
-------
LICENSE FEES DUE (if any) . . . . . . . . . . . . . . . . $
-------
Signature
Date
13
<PAGE> 14
EXHIBIT C
MICRO FOCUS COBOL V3.0 FOR DOS-OS/2
MICRO FOCUS COBOL RTS AND OSX FILES LISTING FOR DOS-OS/2
IMPORTANT: CREATING, DISTRIBUTING AND LICENSING YOUR APPLICATIONS
FOR INTERNAL USE AND RESALE
The files listed below under the headings COBOL Run Time System and Operating
System Extensions which are supplied by Micro Focus as part of the product may
be distributed by you for use with your application programs. COBOL Run Time
System files may be distributed free of additional charge. However, a charge
is payable to Micro Focus for distribution of Operating System Extension files.
Please contact your Micro Focus Account Representative for details of these
charges.
Files which are supplied by Micro Focus as part of the product other than those
listed below may not be reproduced or distributed.
COBOL RUN TIME SYSTEM
The files listed directly below constitute the COBOL Run Time System, which is
part of the Micro Focus COBOL product. You do not need to pay a license fee to
distribute these.
ADISCF.EXE COBLIB.DLL MFEXTMAP.DLE
ADISCF.LBR COBLIB.DLW MFEXTMAP.DLL
ADISCFW.EXE COBNLS.DLL MFEXTMAP.DLW
ADISCTRL COBNLS.DLW PAN2PM.DLL
CBLSSEG.DLL COBNLS.ERR PCINST.DLL
CBLWIN.DLL DWPM.DLL REBUILD.EXE
CBLWIN31.DLW GENATT.DLE _BTRV.DLL
COBFP87.DLE GENATT.DLL _BTRV.DLW
COBFP87.DLL GENATT.DLW _BTRV.EXE
COBFP87.DLW HELPADCF.LBR _SQLPRI.DLL
COBIFN.DLL KEYBCF.EXE _SQLPRE.DLL
COBIFN.DLW KEYBCFW.EXE _SQLPRM.DLL
COBLIB.DLE MCSETUP.EXE
OPERATING SYSTEM EXTENSIONS
The files listed directly below constitute the Operating System Extensions. To
distribute any of these you must obtain OSX licenses from Micro Focus.
14
<PAGE> 15
The following files are from Micro Focus COBOL:
ADDPROG.EXE CCINETB.DLL MSHELP.DLL
ADDWPROG.EXE CCINETB.DLW MSHIF.DLL
CCIAPPC.DLL CCINETB.EXE MSHIF.EXE
CCIIPX.DLL HELPNAME.LBR NAME.HNF
CCIIPX.DLW HYHELP.EXE NAME.LBR
CCIIPX.EXE HYHELP.HNF UTILS.LBR
CCIIPX2.EXE HYHELP.ICO _SORT.DLL
CCINAMP.DLL HYHELP.LBR _SORT.DLW
CCINAMP2.DLL HYHELPW.EXE
The following files are from Micro Focus COBOL Toolset:
APPCAPI.DLL CWRX.DLE ON-LINE.LBR
CALLRB.LBR CWRX.DLL PAN2CHR.LBR
CCITCP.DLL CWRX.DLW PAN2WIN.DLL
CCITCP2.EXE FS.EXE PANELS2.GNT
CMENU.LBR FSW.EXE PARMPASS.LBR
COBOLAPI.DLL FS.LBR REPORTER.LBR
COBTHRED.DLE HYH-INTF.GNT SETPPTR.DLL
COBTHRED.DLL LBRMAN.GNT SETUP.EXE
COBTHRED.DLW MFDIR2.HNF TOOLS.LBR
CWRCLI.CFG MFDIR2.LBR XFHFB.DLE
CWRCLI.EXE MFICONS.DLL XFHFB.DLL
CWRCLI.GNT MFICONS.SF XFHFB.DLW
CWRCLIW.EXE MFICONSW.DLL XM.EXE
CWRMSGS.REL ON-LINE.HNF XM.SYS
15
<PAGE> 16
MICRO FOCUS COBOL V3.1 FOR DOS, OS/2 AND WINDOWS
MICRO FOCUS COBOL RTS AND OSX FILES LISTING
IMPORTANT-CREATING, DISTRIBUTING AND LICENSING YOUR
APPLICATIONS FOR INTERNAL USE AND RESALE
The files listed below under the headings COBOL Run Time System and Operating
System Extensions which are supplied by Micro Focus as part of the product may
be distributed by you for use with your application programs. COBOL Run Time
System files may be distributed free of additional charge. However, a charge
is payable to Micro Focus for distribution of Operating System Extension files.
Please contact your Micro Focus Account Representative for details of these
charges.
Files which are supplied by Micro Focus as part of the product other than those
listed below may not be reproduced or distributed.
COBOL RUN TIME SYSTEM
The files listed directly below constitute the COBOL Run Time System, which is
part of the Micro Focus COBOL product. You do not need to pay a license fee to
distribute these.
ADISCF.EXE COBNLS.ERR XFHFB.DLL
ADISCF.LBR DWPM.DLL XFHFB.DLW
ADISCFW.EXE GENATT.DLE XM.EXE
ADISCTRL GENATT.DLL XM.SYS
CBLSSEG.DLL GENATT.DLW _BTRV.DLL
CBLWIN.DLL HELPADCF.LBR _BTRV.DLW
CBLWIN31.DLW KEYBCF.EXE _BTRV.EXE
COBFP87.DLE KEYBCFW.EXE _SORT.DLL
COBFP87.DLL MCSETUP.EXE _SORT.DLW
COBFP87.DLW MFEXTMAP.DLE _SQLEEN.DLL
COBIFN.DLL MFEXTMAP.DLL _SQLEEX.DLL
COBIFN.DLW MFEXTMAP.DLW _SQLEIN.DLL
COBLIB.DLE PAN2PM.DLL _SQLEIX.DLL
COBLIB.DLL PCINST.DLL _SQLPRI.DLL
COBLIB.DLW REBUILD.EXE _SQLPRE.DLL
COBNLS.DLL SYSRUNG.LBR _SQLPRM.DLL
COBNLS.DLW XFHFB.DLE
OPERATING SYSTEM EXTENSIONS
The files listed directly below constitute the Operating System Extensions. To
distribute any of these you must obtain OSX licenses from Micro Focus.
The following files are from Micro Focus COBOL:
CCIAPPC.DLL CCINETB.DLW MSHELP.DLL
CCIIPX.DLL CCINETB.EXE MSHIF.DLL
CCIIPX.DLW HELPNAME.LBR MSHIF.DLW
CCIIPX.EXE HYHELP.CFX MSHIF.EXE
CCIIPX2.EXE HYHELP.EXE NAME.LBR
CCINAMP.DLL HYHELP.HNF UTILS.LBR
CCINAMP2.DLL HYHELP.LBR
CCINETB.DLL HYHELPW.EXE
16
<PAGE> 17
The following files are from Micro Focus COBOL Toolset:
APPC_DOS.CFG CCITCPW.LIB MNETONE.EXE
APPCAPI.DLL CMENU.CFG MNOVLWP.DLL
CALLRB.LBR CMENU.LBR MPATHWAY.DLL
CALLRB.OBJ CMENU.MNT MPCNFS.EXE
CCI.H CMENU.MNU MPCNFS2.EXE
CCI.INI COBENV.DLE MPCNFS4.DLL
CCIAPPC.DLW COBENV.DLL MSCVSUB.OBJ
CCIAPPC.EXE COBENV.DLW MSOCKLIB.DLL
CCIAPPC.LIB COBOLAPI.DLL MSOCKLIB.RC
CCIAPPC2.EXE COBTHRED.DLE MWINSOCK.DLL
CCIAPPCD.LIB COBTHRED.DLL MWINTCP.EXE
CCIAPPCW.EXE COBTHRED.DLW NAME.HNF
CCIAPPCW.LIB CWRCLI.CFG NETCONF
CCIIPX.LIB CWRCLI.EXE ON-LINE.CFX
CCIIPXD.LIB CWRCLI.GNT ON-LINE.LBR
CCIIPXW.LIB CWRCLIW.EXE ON-LINE.HNF
CCILU2.DLL CWRMSGS.REL PAN2CHO1.OBJ
CCILU2.DLW CWRX.DLE PAN2CHO2.OBJ
CCILU2.EXE CWRX.DLL PAN2CHR.LBR
CCILU2.LIB CWRX.DLW PAN2CHR.LNK
CCILU2D.LIB FS.EXE PAN2CHR.OBJ
CCILU2W.LIB FS.LBR PAN2NULL.OBJ
CCINAMP.LIB FSMGR.LBR PAN2PM.LIB
CCINETB.LIB FSMGR.OBJ PAN2VIO.LIB
CCINETBD.LIB FSVIEW.CFG PAN2WIN.DLL
CCINETBW.LIB FSVIEW.EXE PANELS2.GNT
CCITCP.DLL FSVIEW.HNF PANELS2.OBJ
CCITCP.DLW FSVIEW.LBR PARMPASS.LBR
CCITCP.EXE FSVIEWPM.EXE PCMEFIN.OBJ
CCITCP.INI FSVIEWW.EXE PCMINIT.OBJ
CCITCP.LIB FSW.EXE RBLDMAIN.OBJ
CCITCP2.EXE HYHINTF.GNT RBLDSUB.OBJ
CCITCP2.FTP INSTALL.NFS REPORTER.LBR
CCITCP2.IBM LBRMAN.GNT RNMFILE.EXE
CCITCP2W.EXE LSOCKLIB.LIB RNMNIS.EXE
CCITCP2W.FTP LU2LOGON.C RNMREM.EXE
CCITCP2W.JSB LU2LOGON.CD RTM.EXE
CCITCPD.FTP LU2LOGON.CW RTMREM.EXE
CCITCPD.IBM LU2LOGON.DLL RUN.CFG
CCITCPD.LIB LU2LOGON.DLW RUN.EXE
CCITCPDW.FTP M3OPEN.DLL RUNPM.EXE
CCITCPDW.JSB M3OPEN.EXE RUNW.EXE
CCITCPE.FTP MBW.EXE SETPPTR.DLL
CCITCPE.JSB MFDIR2.HNF SETUP.EXE
17
<PAGE> 18
CCITCPL.FTP MFDIR2.LBR SHELL.LBR
CCITCPL.IBM MFICONS.DLL TOOLS.LBR
CCITCPLD.FTP MFICONS.SF VSL.INI
CCITCPLD.JSB MFICONSW.DLL
CCITCPLW.FTP MLOCUS2.EXE
CCITCPLW.JSB MFTP.EXE
CCITCPW.DLW MHPARPA.DLL
18
<PAGE> 19
EXHIBIT D
MICRO FOCUS COBOL V3.0 FOR UNIX OSX FILES LISTING
The files listed below constitute the OSX for UNIX, and a charge is payable to
Micro Focus for the distribution of the OSX files.
Files which are supplied by Micro Focus as part of the product other than those
listed below may not be reproduced or distributed.
ADIS.gnt fhxscomp.gnt
ADISCF.gnt fs
ADISCTRL help.gnt
ADISDYNA.gnt help.lbr
ADISINT.gnt helpadcf.lbr
ADISKEY.gnt helpname.lbr
ADISKEY2.gnt hyh-intf.gnt
BTR2XFH.gnt hyhelp.lbr
CBLDC001.gnt install
DISPCONV.gnt Im.err
FHREDIR.gnt Imbin
KEYBCF.gnt lmgrd
MFTOOLS.CFG mFFH.gnt
PANELS.gnt mfconfig.gnt
banner.gnt mfocusd
bin name.gnt
ccitcp2 osxver
cob.msg reporter.lbr
cobintfn.gnt rgb.txt
coblib rts.err
cobver rts.msg
commi.gnt rts32
comms.gnt rtstype
cpylib src
cwrcli.gnt terminfo
cwrmsgs.rel tools.lbr
docs utils.lbr
fhrdrpwd.gnt
19
<PAGE> 20
FIRST AMENDMENT TO
THE OSX APPLICATION VENDOR
LICENSE AGREEMENT
The OSX Application Vendor License Agreement between Micro Focus Incorporated
and Deltek effective as of June 10, 1991 ("the Agreement") is hereby amended as
follows.
The term of the Agreement is extended to March 31, 1998.
All terms and conditions including the discount schedule and payment terms
apply.
Except as modified herein, the terms and conditions remain in full force and
effect. Terms not defined in this First Amendment have the same meaning as in
the Agreement.
Effective date: December 12, 1996
AGREED AND ACCEPTED:
MICRO FOCUS INCORPORATED DELTEK
Signature: /s/ Loren E. Hillberg Signature: /s/ Alan Stewart
Name: Loren E. Hillberg Name: Alan Stewart
Title: Vice President Title: Chief Financial Officer
Date: December 12, 1996 Date: December 12, 1996
<PAGE> 1
EXHIBIT 10.8
AGREEMENT OF LEASE
by and between
Tysons Corner Limited Partnership
and
Deltek Systems, Inc.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C>
1. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Use of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4. Insurance and Indemnification . . . . . . . . . . . . . . . . . . . 13
5. Improvements to Premises . . . . . . . . . . . . . . . . . . . . . . 14
6. Maintenance and Services . . . . . . . . . . . . . . . . . . . . . . 17
7. Landlord's Right of Entry . . . . . . . . . . . . . . . . . . . . . 18
8. Fire and Other Casualties . . . . . . . . . . . . . . . . . . . . . 19
9. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10. Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . 22
11. Rules and Regulations . . . . . . . . . . . . . . . . . . . . . . . 24
12. Subordination; Attornment and Non-Disturbance . . . . . . . . . . . 24
13. Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . 25
14. Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
15. Access to the Premises--Security System . . . . . . . . . . . . . . 26
16. Floor Load -- Heavy Machinery . . . . . . . . . . . . . . . . . . . 27
17. Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18. Signage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
19. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . 28
20. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 28
21. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
22. Additional Expansion Space . . . . . . . . . . . . . . . . . . . . . 31
23. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
EXHIBITS
A Floor Plans of the Premises
B Agreement Regarding Commencement Dates
c Final Drawings for Tenant Improvements
D Current Rules and Regulations
E Additional Expansion Space
F Agreement Regarding Cancellation Penalty
G Prior Leases
2
<PAGE> 3
AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE (hereinafter referred to as the "Lease"), made
this 12th day of November, 1991, by and between TYSONS CORNER LIMITED
PARTNERSHIP, an Illinois limited partnership, having an address at c/o Menard
Doswell & Co., 8280 Greensboro Drive, Suite 120, McLean, Virginia 22102
(hereinafter referred to as "Landlord"), and DELTEK SYSTEMS, INC., a Virginia
corporation, having an address at 8280 Greensboro Drive, Suite 300, McLean,
Virginia 22102 (hereinafter referred to as "Tenant").
WITNESSETH, THAT FOR AND IN CONSIDERATION of the mutual entry into
this Lease by the parties hereto, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged by
each party hereto, Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, all of that real property, situate and lying in Fairfax County,
Virginia, which consists of the space (consisting of a maximum aggregate of
approximately 28,242 rentable square feet) shown on Exhibits A-1 through A-5
attached hereto (hereinafter collectively referred to as the "Premises") and
located in a building (hereinafter referred to as the "Building") having an
address of 8280 Greensboro Drive, McLean, Virginia 22102 [the Premises, the
remainder of the Building, the land ("Land") on which the Building is located
and any other buildings or improvements thereon being hereinafter referred to
collectively as the "Property"].
SUBJECT TO THE OPERATION AND EFFECT of any and all instruments and
matters of record or in fact,
UPON THE TERMS AND SUBJECT TO THE CONDITIONS which are hereinafter set
forth:
Section 1. Term.
1.1. Commencement Date.
(a) This Lease shall be for a term (the "Term")
commencing on the following dates (each of which is referred to as a
"Commencement Date"):
(i) With respect to the 1,250 square feet of
space located on the third floor (currently occupied by Financial Planning
Corporation of McLean) and outlined in red on Exhibit A-1 (the "Financial
Planning Space"), on the date that Landlord substantially completes Tenant
Improvements with respect to such space;
<PAGE> 4
(ii) With respect to the 1,902 square feet of
space located on the second floor (currently vacant) and outlined in red on
Exhibit A-2 (the "Second Floor Expansion Space"), on the earlier to occur of
April 1, 1992 or the date that Landlord substantially completes Tenant
Improvements with respect to such space; and
(iii) With respect to (A) the 16,335 (subject to
architect's measurement) square feet of space located on the third floor
(currently occupied by Tenant) and outlined in red on Exhibit A-3 (the
"Existing Third Floor Space"), (B) the 4,820 square feet of space located on
the third floor (currently occupied by Gowin and Company, P.C.) and outlined in
red on Exhibit A-4 (the "Third Floor Expansion Space"), and (C) the {3,935}
square feet of space located on the second floor (currently occupied by Tenant)
and outlined in red on Exhibit A-5 (the "Existing Second Floor Space"), on the
earlier to occur of April 1, 1992 or the date that Landlord substantially
completes Tenant Improvements with respect to such space. Landlord hereby
represents to Tenant that the above measurement of usable square footage for
the Existing Third Floor Space does not include the atrium penetration on the
southwest (front) side of the third floor elevator lobby.
(b) When the first Commencement Date occurs, Landlord and
Tenant shall execute an Agreement Regarding Commencement Date in the form
attached hereto as Exhibit B. Thereafter, as subsequent Commencement Dates
occur, the existing Agreement Regarding Commencement Dates shall be updated by
the parties to reflect such subsequent Commencement Dates.
(c) If Landlord shall be unable to give possession of any
portion of the Premises to Tenant on the applicable Commencement Date because
of the retention of possession by any occupant thereof, alteration or
construction work, or for any other reason, Landlord shall not be subject to
any liability for such failure. In such event, this Lease shall stay in full
force and effect, without extension of the Term. However, the monetary
obligations of Tenant hereunder with respect to such portion of the Premises
shall not commence until such portion of the Premises are available for Tenant
as provided herein. Notwithstanding the foregoing, if delay in possession of
any portion of the Premises is due to changes or decoration being made by or
for Tenant or is otherwise caused by Tenant, there shall be no rent abatement
therefor and rent shall commence on the Commencement Date. If permission is
given to Tenant to occupy other premises prior to the Commencement Date, such
occupancy shall be deemed to be pursuant to the terms of this Lease, except
that the parties shall separately agree as to the obligation of Tenant to pay
rent for such occupancy. Tenant hereby expressly agrees that the foregoing
provisions shall
2
<PAGE> 5
govern and control in lieu of any law contrary to the provisions of this
Section.
1.2 Termination Date. Provided not earlier terminated by default,
the Term of this Lease shall terminate on March 31, 1998 (the "Termination
Date").
1.3 Surrender. Tenant shall at its expense, at the expiration of
the Term or any earlier termination of this Lease, (a) promptly surrender to
Landlord possession of the Premises (including any fixtures or other
improvements which, under the provisions of Section 5, are owned by Landlord)
in good order and repair (damage to the Premises reasonably beyond Tenant's
control and ordinary wear and tear excepted) and broom clean, (b) remove from
the Premises Tenant's signs, goods and effects and any machinery, trade
fixtures and equipment which are used in conducting Tenant's trade or business
and are not owned by Landlord, and (c) repair any damage to the Premises or the
Building caused by such removal.
1.4 Holding Over. If Tenant continues to occupy the Premises
after the expiration of the Term or any earlier termination of this Lease
without having obtained Landlord's express written consent thereto, then
without altering or impairing any of Landlord's rights under this Lease or
applicable law, (i) Tenant hereby agrees to pay to Landlord as Rent for the
Premises, immediately on demand by Landlord, for each calendar month or portion
thereof after such expiration of the Term or such earlier termination of this
Lease, as aforesaid, until Tenant surrenders possession of the Premises to
Landlord, an amount equal to 150% of the monthly Base Rent and Additional Rent
which would have been due and payable under the provisions of Section 2
(calculated in accordance with such provisions of section 2 as if this Lease
had been renewed for a period of twelve full calendar months after the
termination of the Term) and (ii) Tenant shall surrender possession of the
Premises to Landlord immediately on Landlord's having demanded same. Nothing
in the provisions of this Lease shall be deemed in any way to give Tenant any
right to remain in possession of the Premises after such expiration or
termination, regardless of whether Tenant has paid any such Rent to Landlord.
1.5 Renewal Term. Provided no Event of Default shall have
occurred and then be continuing and no event shall have occurred which with
notice and/or time would constitute an Event of Default hereunder, Tenant shall
have the option to renew the Term of this Lease for one (1) additional term of
five (5) years (the "Renewal Term"). In order to exercise its renewal option,
Tenant must notify Landlord of its exercise of the option at least one hundred
eighty (180) days prior to the expiration of the initial Term of this Lease.
In the event that Tenant exercises its
3
<PAGE> 6
renewal option, the Premises covered by the Renewal Term shall be all space
occupied by Tenant at the expiration of the initial Term (including any
Additional Expansion Space obtained by Tenant pursuant to Section 22), unless
Landlord and Tenant negotiate otherwise. All of the terms of this Lease
applicable to the initial Term of this Lease shall apply during the Renewal
Term, except that Rent during the Renewal Term shall be ninety percent (90%) of
Fair Market Rental Value (determined in accordance with Section 1.6 below).
1.6 Fair Market Rental Value.
(a) Definition. For the purpose of this Lease, the term
"Fair Market Rental Value" shall mean the then-current annual rental charge
(i.e., the sum of Base Rent plus escalation, operating cost pass-through
charges and all other charges, less rent abatements) being charged by Landlord
for new leases in substantially equivalent space in the Building, which leases
are being negotiated or have been executed within six (6) months prior to the
first day of the Renewal Term; and contain provisions for subsequent rental
increases, operating cost pass-throughs and other rental adjustments; provided,
however, that if no such leases are currently being negotiated or have been
executed within such six (6) month period, then in such event the Fair Market
Rental Value shall be equal to the then-current annual rental charge (i.e., the
sum of base rent, plus escalation, operating cost pass-throughs and all other
charges) being charged by landlords for new leases then currently being
negotiated or most-recently executed for comparable first-class space in most
recently-completed first-class office buildings located in the market area
surrounding the Property, which leases shall contain comparable provisions for
subsequent rental increases, operating cost pass-throughs and other rental
adjustments. Notwithstanding anything else herein to the contrary, in no event
shall ninety percent (90%) of the Fair Market Rental Value for the first Lease
Year of the Renewal Term be less (on a per square foot basis) than the highest
Base Rent and Additional Rent payable during any Lease Year during the initial
Term.
(b) Dispute as to Fair Market Rental Value. To implement the
provisions of Section 1.5 above, Landlord shall, after receiving timely written
notice from Tenant of its intent to exercise its renewal option, designate the
Fair Market Rental Value of the Premises and shall furnish data in support of
such designation not later than thirty (30) days after receipt of such notice.
If Tenant disagrees with Landlord's designation of Fair Market Rental Value,
Tenant shall notify Landlord of such disagreement within ten (10) days after
Tenant has been notified of Landlord's designation, whereupon Landlord and
Tenant shall each use their good faith best efforts to agree upon the Fair
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Market Rental Value. In the event that Landlord and Tenant are unable to agree
upon the Fair Market Rental Value within thirty (30) days after Tenant notifies
Landlord of its disagreement with Landlord's designation of the Fair Market
Rental Value, Tenant's renewal option or expansion option with respect to the
space as to which Landlord and Tenant are unable to agree upon the Fair Market
Rental Value (pursuant to Section 1.5 or Section 22.4(a), whichever is
applicable) shall become null and void and of no further force or effect.
Section 2. Rent.
2.1 Amount. As rent for the Premises (all of which is hereinafter
referred to collectively as "Rent"), Tenant shall pay to Landlord all of the
following:
(a) Base Rent. An annual rent (hereinafter referred to
as the "Base Rent") comprised of the aggregate of the following components:
(i) Net Component. A net component (hereinafter
referred to as the "Net Component") which:
(A) for the first Lease Year during the Term, is
(i) Fourteen and 20/100 Dollars ($14.20) per square foot in the Premises plus
(ii) if the Term commences on a day other than the first (1st) day of a
calendar month, one three-hundred sixty-fifth (1/365) of the Net Component for
each day of such calendar month falling within the Term; and
(B) for each Lease Year thereafter during the
Term, is a sum equalling the product obtained by multiplying (i) the Net
Component for the immediately preceding Lease Year by (ii) a fraction, whose
numerator is the total of (x) the Consumer Price Index for Urban Wage Earners
and Clerical Workers Revised (1982-84=100), Metropolitan Washington, D.C.
Index, published by the Bureau of Labor Statistics of the United States
Department of Labor ("Consumer Price Index") for the calendar month containing
the Commencement Date ("Initial Consumer Price Index") plus (y) thirty percent
(30%) of the amount by which the Consumer Price Index for the calendar month
immediately preceding that during which such Lease Year commences ("Lease Year
Consumer Price Index") exceeds the Initial Consumer Price Index and whose
denominator is the Initial Consumer Price Index. In each case, if the Consumer
Price Index is not so published for such calendar month, then the Consumer
Price Index for the most recent calendar month or other period for which it is
so published; provided, that if the Lease Year Consumer Price Index has not
been published by the date on which the first installment of the Base Rent
accrues for such Lease Year, then until such Consumer Price Index is published
for such calendar month, Tenant shall pay on
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account of the Net Component for the calendar month immediately preceding that
during which the Lease Year commenced, and shall thereafter pay to Landlord,
promptly upon written demand by Landlord after such Consumer Price Index is so
published, the amount, if any, by which the installments of the Base Rent for
such Lease Year, when calculated by reference to such published Consumer Price
Index, exceeds the aggregate amount of such installments theretofore paid
during such Lease Year; provided, however, that the Net Component shall not
increase by more than three percent (3%) from any Lease Year to the next; and
(ii) Costs Component. An amount ("Costs
Component") representing the portion of Annual Operating Costs attributable to
the Premises, as further defined and described in subsection 2.2. The initial
Costs Components (based on Landlord's estimate on the date hereof of the cost
during the current calendar year of providing to or for the benefit of the
Premises all of the services or other items, the costs of which are included in
the Annual Operating Costs, excluding any of such services or other items to be
provided at Tenant's direct expense under the provisions of Section 6) is the
sum of (i) Six and 80/100 Dollars ($6.80), per square foot in the Premises plus
(ii) if the Term commences on a day other than the first (1st) day of a
calendar month, for the initial Lease Year, one three-hundred sixty-fifth
(1/365) of the Costs Component for each day of such calendar month falling
within the Term (but without impairing Tenant's liability for any Additional
Rent accruing under the provisions of subsection 2.2).
(b) Additional Rent. Additional rent (hereinafter
referred to as "Additional Rent") in the amount of any payment referred to as
such in any provision of this Lease which accrues while this Lease is in effect
(which Additional Rent shall include all charges or amounts which Tenant is
obligated to pay to Landlord under the provisions of this Lease, other than the
Base Rent).
(c) Lease Year. As used in the provisions of this Lease,
the term "Lease Year" means (i) the period commencing on the Commencement Date
and terminating on the first (1st) anniversary of the last day of the calendar
month containing the Commencement Date, and (ii) each successive period of
twelve (12) calendar months thereafter during the Term.
(d) Tenant Concessions Payment. "Tenant Concessions"
shall mean the total value of any rent abatement and any other payments to or
for the account of Tenant in connection with, or for the purpose of inducing
the entry by Tenant into this Lease. For purposes of this paragraph, Tenant
Concessions shall be amortized over the Term in equal monthly amounts. In the
event of an early termination of this Lease for any reason (including,
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without limitation, a termination if an Event of Default by Tenant occurs),
Tenant shall pay to Landlord the unamortized portion of the total value of
Tenant Concessions ("unamortized Tenant Concessions"). The unamortized Tenant
Concessions shall be the amount of Tenant Concessions so remaining at the time
of any such termination of this Lease.
(e) Rent Abatement. Notwithstanding any provision herein
to the contrary, Tenant's obligation to pay Base Rent with respect to the
Second Floor Expansion Space shall not commence until the date that is eighteen
(18) months after the Commencement Date for the Second Floor Expansion Space.
During such eighteen (18) month period, Tenant shall be obligated to pay Base
Rent with respect to all other space in the Premises as to which the
Commencement Date has occurred; provided, however, that in the event that the
Commencement Date for the Third Floor Expansion space occurs after February 1,
1992, a portion of Tenant's Base Rent shall be abated for the period from
February 1, 1992 until such Commencement Date occurs at the rate of Eight
Thousand and 00/100 Dollars ($8,000.00) per calendar month (which amount shall
be pro-rated for any partial month(s) and shall be credited by Landlord against
the Base Rent due for such month(s) under the Prior Leases). Notwithstanding
anything herein to the contrary, Tenant's obligation to pay Base Rent shall
commence with respect to the Financial Planning Space, the Existing third Floor
Space, the Third Floor Expansion Space and the Existing Second Floor Space on
the Commencement Date with respect to each such space.
2.2 Annual Operating Costs.
(a) Definition. As used herein, the term "Annual
Operating Costs" means the actual costs incurred by Landlord in operating and
maintaining the Property during each calendar year falling wholly or partially
within the Term. Such costs shall include, by way of example rather than of
limitation, (i) real property, front-foot benefit, other metropolitan district
or any other similar taxes or assessments (whether regular or special) levied
against any and all of the Property; (ii) charges or fees for, and taxes on,
the furnishing of water, sewer service, gas, fuel, electricity or other utility
services to the Property; (iii) costs of providing elevator, janitorial and
trash removal service, and of maintaining grounds, common areas and mechanical
systems of buildings; (iv) all other costs of maintaining, repairing or
replacing any or all of the Building or the rest of the Property (including, by
way of example rather than limitation, (1) the cost amortized in such calendar
year of capital improvements which are made by Landlord in its reasonable
judgment in order to reduce any of the costs of operating and maintaining the
Building, or to cause any or all of the Property to comply with any applicable
law or regulation which was not
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applicable to the same at the entry into this Lease by the parties hereto,
which cost shall be amortized over a period selected by Landlord in its
reasonable judgment, plus (2) interest on the unamortized balance of such costs
calculated at the rate actually paid by Landlord on debt incurred for such
capital improvements or if Landlord has not borrowed money for such
improvements at the rate which would be paid by Landlord on debt incurred for
working capital purposes); (v) charges or fees for any necessary governmental
permits; (vi) management fees, overhead and expenses; (vii) premiums for
hazard, liability, workmen's compensation, or similar insurance upon any or all
of the Property; (viii) costs arising under service contracts with independent
contractors; (ix) costs of any services not provided by Landlord to the
Property on the date hereof but hereafter provided by Landlord in its prudent
management of the Property; and (x) the cost of any other items which, under
generally accepted accounting principles consistently applied from year to year
with respect to the Property, constitute operating or maintenance costs
attributable to any or all of the Property. Such costs shall not include (i)
the expense of principal and interest payments made by Landlord pursuant to the
provisions of any mortgage or deed of trust covering the Property; (ii) any
deduction for depreciation of the Property taken on Landlord's income tax
returns; or (iii) subject to subsection (iv) of the preceding sentence, the
cost of capital improvements made to the Property if and to the extent not
taken as a deduction on Landlord's federal income tax returns.
(b) Computation. After the end of each calendar year
during the Term, Landlord shall compute the total of the Annual Operating Costs
incurred for all of the Property during such calendar year, and shall allocate
them to the net rentable space within the Property by dividing such Annual
Operating Costs by the aggregate square footage of all of the net rentable
space within the Property, thereby deriving the cost of such categories of
services and items per square foot of such net rentable space; provided, that
anything contained in the foregoing provisions of this subsection 2.2 to the
contrary notwithstanding, wherever Tenant and/or any other tenant of space
within the Property has agreed in its lease or otherwise to provide any item of
such services partially or entirely at its own expense, or wherever in
Landlord's sole but reasonable judgment any such significant item of expense is
not incurred with respect to or for the benefit of all of the net rentable
space within the Property, in allocating the Annual Operating Costs pursuant to
the foregoing provisions of this subsection Landlord shall make an appropriate
adjustment, using generally acceptable accounting principles so as to avoid
allocating to Tenant or to such other tenant (as the case may be), those Annual
Operating Costs covering such services already being provided by Tenant or by
such other tenant at its own expense, or to avoid allocating to all of the net
rentable space
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within the Property those Annual Operating Costs incurred only with respect to
a portion thereof.
(c) Payment As Additional Rent. Tenant shall, within
fifteen (15) days after demand therefor by Landlord (with respect to each
calendar year during the Term), pay to Landlord as Additional Rent the amount
by which (i) the product obtained by multiplying (A) the rentable area of the
Premises in square feet (as set forth hereinabove) by (B) the amount of the
Annual Operating Costs per square foot of rentable area or Costs Component for
the preceding Lease Year for such calendar year (as derived under the
provisions of subsection 2.2(b)) exceeds (ii) the Costs Component of the Base
Rent. This subsection survives the termination or expiration of the Lease.
(d) Proration. If only part of any calendar year falls
within the Term, the amount computed as Additional Rent with respect to such
calendar year under the foregoing provisions of this subsection shall be
pro-rated in proportion to the portion of such calendar year falling within the
Term (but the expiration of the Term before the end of such calendar year shall
not impair Tenant's obligation hereunder to pay such pro-rated portion of such
Additional Rent with respect to that portion of such year falling within the
Term, which shall be paid on demand, as aforesaid).
(e) Landlord's Right to Estimate. Anything contained in
the foregoing provisions of this subsection to the contrary notwithstanding,
Landlord may, at its discretion, (a) make from time to time during the Term a
reasonable estimate of the Additional Rent which may become due under the
provisions of this Lease with respect to any calendar year, (b) require Tenant
to pay to Landlord with respect to each calendar month during such year
one-twelfth (1/12) of such Additional Rent, at the time and in the manner that
Tenant is required hereunder to pay the monthly installment of the Base Rent
for such month, and (c) at Landlord's reasonable discretion, increase or
decrease from time to time during such calendar year the amount initially so
estimated for such calendar year, all by giving Tenant written notice thereof.
In such event, Landlord shall cause the actual amount of Additional Rent to be
computed and certified to Tenant within 120 days after the end of such calendar
year, and Tenant or Landlord, as the case may be, shall promptly thereafter pay
to the other the amount of any deficiency or overpayment therein, as the case
may be. This subsection survives termination or expiration of this Lease.
2.3 When Due and Payable.
(a) The Base Rent for any Lease Year shall be due and
payable in twelve (12) consecutive, equal monthly installments,
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in advance, on the first (1st) day of each calendar month during such Lease
Year; provided, that the installment of the Base Rent payable for the first
full calendar month of the Term (and, if the Term commences on a day other than
the first (1st) day of a calendar month, that portion of the Base Rent which is
payable for such month) shall be due and payable on the full execution and
delivery of this Lease.
(b) Any Additional Rent accruing to Landlord under any
provision of this Lease shall, except as is otherwise set forth herein, be due
and payable when the installment of the Base Rent next falling due after such
Additional Rent accrues becomes due and payable, unless Landlord makes written
demand upon Tenant for payment thereof at any earlier time, in which event such
Additional Rent shall be due and payable at such time.
(c) Each such payment shall be made promptly when due,
without any deduction or setoff whatsoever, and without demand, failing which
Tenant shall pay to Landlord on demand as Additional Rent, a late payment
service charge (to cover Landlord's administrative and overhead expenses of
processing late payment) equal to the greater of $100.00 or 5% of such unpaid
sum for each and every calendar month or part thereof after the due date that
such sum has not been paid to Landlord. Such payment shall be deemed
liquidated damages and not a penalty, but shall not excuse the untimely payment
of Rent or Additional Rent.
2.4 Where and How Payable. Tenant shall pay the Rent, in lawful
currency of the United States of America, to Landlord by delivering or mailing
it (postage prepaid) to Landlord's address which is set forth hereinabove, or
to such other address or in such other manner as Landlord from time to time
specifies by written notice to Tenant. Any payment made by Tenant to Landlord
on account of Rent may be credited by Landlord to the payment of any Rent when
past due before being credited to Rent currently falling due. Any such payment
which is less than the amount of Rent then due shall constitute a payment made
on account thereof, the parties hereto hereby agreeing that Landlord's
acceptance of such payment (whether or not with or accompanied by an
endorsement or statement that such lesser amount or Landlord's acceptance
thereof constitutes payment in full of the amount of Rent then due) shall not
alter or impair Landlord's rights hereunder to be paid all of such amount then
due, or in any other respect.
2.5 Tax on Lease. If federal, state or local law now or hereafter
imposes any tax, assessment, levy or other charge (other than any income tax)
directly or indirectly upon (a) Landlord with respect to this Lease or the
value thereof, (b) Tenant's use or occupancy of the Premises, (c) the Base
Rent,
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Additional Rent or any other sum payable under this Lease, or (d) this
transaction, except if and to the extent that such tax, assessment, levy or
other charge is included in the Annual Operating Costs, Tenant shall pay the
amount thereof as Additional Rent to Landlord upon demand, unless Tenant is
prohibited by law from doing so, in which event Landlord may, at its election,
terminate this Lease by giving written notice thereof to Tenant.
2.6 Security Deposit.
(a) Prior to the execution and delivery of this Lease by
the parties hereto, Tenant has deposited with Landlord the sum of Eighteen
Thousand Seven Hundred Fifty and 00/100 Dollars ($18,750.00) ("Security
Deposit"), which shall be retained by Landlord as security for Tenant's payment
of the Rent, and its performance of all of its other obligations under the
provisions of this Lease. The Security Deposit shall not bear interest while
being held by Landlord. Tenant shall not use the Security Deposit for the
payment of the last month's installment (or any other installment) of Rent. If
at anytime and from time to time, the Security Deposit is applied or retained
by Landlord as described in subsection 3.5 (b) and this Lease shall not have
been or thereafter be terminated by Landlord, Tenant shall replenish and
restore the Security Deposit to the original amount specified above, promptly
upon request by Landlord.
(b) In addition to the provisions of subsection 8.3,
Landlord shall have the right:
(i) to apply any and all of the Security Deposit
in payment of (A) any Rent for the payment of which an Event of Default has
occurred, (B) any expense incurred by Landlord in curing any Event of Defau1t,
and/or (C) any damages incurred by Landlord by reason of any Event of Default
(including, by way of example rather than of limitation, the expense of
reasonable attorney's fees); or
(ii) to retain any or all of the Security Deposit
in liquidation of any or all damages suffered by Landlord by reason of such
Event of Default.
(c) Notwithstanding anything in the foregoing to the
contrary, provided no Event of Default shall have occurred and then be
continuing and no event or condition shall have occurred which with notice
and/or time would constitute an Event of Default hereunder on the first
anniversary of the Commencement Date for the Third Floor Expansion Space, any
of the Security Deposit which is not so paid or retained shall be returned to
Tenant within thirty (30) days after such anniversary date.
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Section 3. Use of Premises.
3.1 Tenant shall, continuously and without interruption throughout
the Term, occupy and use the Premises for, and only for, general office
purposes, subject to and in accordance with all applicable zoning and other
governmental regulations.
3.2 Tenant will not, and will not permit its employees, agents,
contractors, guests or invitees to obstruct or interfere with the rights of
other tenants, or in any other way injure or annoy them or those having
business with them, or conflict with them, or conflict with the fire laws or
regulations now existing or subsequently enacted or established by the local,
state or federal governments. Nor will Tenant use or permit the Premises, or
any part thereof, to be used for any disorderly, unlawful or hazardous purpose,
and will not manufacture any commodity therein, without the prior written
consent of Landlord.
3.3 License.
3.3.1 Landlord hereby grants to Tenant a non-exclusive
license to use (and to permit its officers, directors, agents, employees and
invitees to use in the course of conducting business at the Premises),
throughout the Term,
(a) any and all elevators, common stairways, lobbies,
common hallways and other portions of the Building which, by their nature, are
manifestly designed and intended for common use by the occupants of the
Building, for pedestrian ingress and egress to and from the Premises and for
any other such manifest purposes; and
(b) any and all portions of the Property on which the
Building is located (excluding that portion thereof which is improved by any
other building) which, by their nature, are manifestly designed and intended
for common use by the occupants of the Building and of any other improvements
on such Property, for pedestrian ingress and egress to and from the Premises
and for any other such manifest purposes; and
(c) any and all portions of the Property as from time to
time are designated (by striping or otherwise) by Landlord for such purpose,
for the parking of automobiles.
3.3.2 Such license shall be exercised in common with the exercise
thereof by Landlord, any tenant or owner of the building or any other building
located on the Property, and their respective officers, directors, agents,
employees and invitees, and in accordance with the Rules and Regulations
promulgated from time to time pursuant to the provisions of Section 11.
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Section 4. Insurance and Indemnification.
4.1 Increase In Risk. Tenant
(a) shall not do or permit to be done any act or thing as
a result of which either (i) any policy of insurance of any kind covering any
or all of the Property or any liability of Landlord in connection therewith may
become void and suspended, or (ii) the insurance risk under any such policy
would (in the opinion of the insurer thereunder) be made greater; and
(b) shall pay as Additional Rent the amount of any
increase in any premium for such insurance resulting from any breach of the
covenant in this subsection 4.1.
4.2 Insurance To Be Maintained by Tenant. Tenant shall maintain
at its expense, throughout the Term, insurance against loss or liability in
connection with bodily injury, death, property damage and destruction,
occurring within the Premises or arising out of the use thereof by Tenant or
its agents, employees, officers or invitees, visitors and guests under one or
more policies of general public liability insurance having such limits as to
each as are reasonably required by Landlord from time to time, but in any event
not less than (a) One Million and no/100 Dollars ($1,000,000.00) for injury to
or death of any one or more persons during any one occurrence, and (b) Two
Million and no/00 Dollars ($2,000,000.00) for property damage or destruction
during any one occurrence. Such policies shall name Landlord and Tenant (and,
at Landlord's request, any Mortgagee) as the insured parties, shall provide
that they shall not be cancelable or materially altered without at least thirty
(30) days' prior written notice to Landlord (and, at Landlord's request, any
such Mortgagee), and shall be issued by insurers of recognized responsibility
licensed to do business in the Commonwealth of Virginia.
4.3 Insurance To Be Maintained by Landlord. Landlord shall
maintain throughout the Term all-risk or fire and extended coverage insurance
upon the Building in such minimum amounts and having such forms of coverage as
are required from time to time by Landlord's lender. The cost of premiums for
such insurance and of each endorsement thereto shall be deemed, for purposes of
Section 2, to be part of the cost of operating and maintaining the Property.
4.4 Waiver of Subrogation. If either party hereto is paid any
proceeds under any policy of insurance naming such party as an insured, on
account of any loss, damage or liability, then such party hereby releases the
other party hereto, to and only to the extent of the amount of such proceeds,
from any and all liability for such loss, damage or liability, notwithstanding
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that such loss, damage or liability may arise out of the negligent or
intentionally tortious act or omission of the other party, its agents or
employees, invitees, visitors or guests; provided, that such release shall be
effective only with respect to loss or damage occurring during such time as the
appropriate policy of insurance of the releasing party provides that such
release shall not impair the effectiveness of such policy or the insured's
ability to recover thereunder. Each party hereto shall use reasonable efforts
to have a clause to such effect included in its said policies, and shall
promptly notify the other in writing if such clause cannot be included in any
such policy, in which event neither party hereto shall be required to have its
said insurance policies contain such a clause and the provisions of this
subsection 4.4 shall be of no further force or effect.
4.5 Liability of Parties. Except if and to the extent that such
party is released from liability to the other party hereto pursuant to the
provisions of subsection 4.4,
(a) Landlord (i) shall be responsible for, and shall
indemnify and hold harmless Tenant against and from any and all liability
arising out of, any injury to or death of any person or damage to any property,
occurring anywhere upon the Property, if, only if, and to the extent that such
injury, death or damage is proximately caused by the gross negligence of or
intentionally tortious act or omission of Landlord or its agents, officers or
employees, but (ii) shall not be responsible for or be obligated to indemnify or
hold harmless Tenant against or from any liability for any such injury, death or
damage occurring anywhere upon the Property (including the Premises), by reason
of Tenant's occupancy or use of the Premises or any other portion of the
Property, or because of fire, windstorm, act of God or other cause unless
proximately caused by such gross negligence or intentionally tortious act or
omission, as aforesaid; and
(b) subject to the operation and effect of the foregoing
provisions of this subsection, Tenant shall be responsible for, and shall
indemnify and hold harmless Landlord against and from, any and all liability
arising out of any injury to or death of any person or damage to any property,
occurring within the Premises.
Section 5. Improvements to Premises.
5.1 Upon Delivery of Premises.
(a) Landlord's Obligations. At Landlord's sole cost and
expense, Landlord shall construct building-standard improvements to the
Premises (the "Tenant Improvements") substantially in accordance with
architectural drawings to be prepared by The M Group and mutually agreed to by
Landlord and
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Tenant. Tenant will cause The M Group to commence work on such drawings
promptly after the execution of this Lease, and once such drawings are so
prepared and finally agreed to by Landlord and Tenant, they shall be attached
to this Lease as Exhibit C. Provided the final drawings are completed by
December 31, 1991, Landlord agrees to complete construction of Tenant
Improvements to all space which is then either occupied by Tenant or vacant,
not later than April 1, 1992. With respect to any space which may be occupied
by someone other than Tenant at the time of completion of the final drawings,
Landlord agrees to commence construction of Tenant Improvements with respect to
such space within two (2) weeks after the date that the current occupant
vacates the space and to complete construction of such Tenant Improvements by
the later of April 1, 1992 or the date which is eight (8) weeks after
commencement of construction.
(b) Cash Allowance. Landlord shall provide Tenant with a
cash allowance of Forty-Five Thousand and 00/100 Dollars ($45,000.00) (the
"Cash Allowance"). In the event that Tenant desires Landlord to construct
improvements to the Premises in addition to the building-standard improvements
described on Exhibit C (the "Construction Upgrades"), Landlord agrees to
construct the same at its sole cost and expense, provided the cost of the
Construction Upgrades does not exceed the Cash Allowance. In the event that
the estimated cost of the Construction Upgrades exceeds the Cash Allowance,
Landlord shall be obligated to construct the Construction Upgrades only if
Landlord and Tenant agree upon suitable arrangements for Tenant to pay such
excess to Landlord. In the event that the cost of the Construction Upgrades is
less than the Cash Allowance (as certified by Landlord to Tenant upon
completion of Tenant Improvements and the Construction Upgrades), the balance
of the Cash Allowance shall be credited by Landlord against the next due
installment(s) of Base Rent until the Cash Allowance is depleted.
5.2 Landlord's Obligation to Repaint. Provided no Event of
Default has occurred and is then continuing and no event or condition exists
which with notice and/or time would constitute an Event of Default hereunder,
Landlord agrees that promptly upon Tenant's request [which request shall be
made by Tenant within one (1) month after the third anniversary of the
Commencement Date with respect to the Third Floor Expansion Space], Landlord
shall repaint the Premises for Tenant at Landlord's sole cost and expense.
5.3 By Tenant. Tenant shall not make or permit to be made any
alteration, addition or improvement to the Premises without first obtaining
Landlord's written consent thereto (which, in the case of non-structural
alterations, additions and improvements only, shall not be unreasonably
withheld), which consent may be conditioned as Landlord in its discretion deems
necessary or
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appropriate, including without limitation requesting Tenant to submit
information concerning Tenant's contractor and approving same and requiring
Tenant to provide appropriate insurance (including builders risk on an Inland
Marine form) naming Landlord as an insured thereunder. If Landlord consents to
any such proposed alteration, addition or improvement, it shall be made at
Tenant's sole expense (and Tenant shall hold Landlord harmless from any cost
incurred on account thereof), and at such time and in such manner as not
unreasonably to interfere with the use and enjoyment of the remainder of the
Property by any tenant thereof or any other person. Tenant shall indemnify and
hold harmless Landlord from and against any and all costs, damages, liability,
claim of liability, or expense (including, without limitation, reasonable
attorney's fees) incurred by Landlord, caused by, arising out of, or related to
Tenant's alterations, additions, or improvements and the making thereof
(whether or not consented to as herein required).
5.4 Mechanics's Liens; Indemnification. Tenant shall:
(a) bond or cause to be removed any mechanic's,
materialman's or other lien filed or claimed against any or all of the
Premises, the Property, or any other property owned or leased by Landlord, by
reason of labor or materials provided for or at the request of Tenant or any of
its contractors or subcontractors (other than labor or materials provided by
Landlord pursuant to the provisions of subsection 5.1), or otherwise arising
out of Tenant's use or occupancy of the Premises or any other portion of the
Property, and
(b) defend, indemnify and hold harmless Landlord against
and from any and all liability, claim of liability, damage or expense
(including, by way of example rather than of limitation, that of reasonable
attorney's fees) incurred by Landlord on account of any such lien or claim.
5.5 Fixtures. Any and all improvements, repairs, alterations and
all other property attached to, used in connection with, or otherwise installed
within the Premises by Landlord or Tenant shall immediately on the completion
of their installation, become Landlord's property without payment therefor by
Landlord, except that any machinery, equipment or fixtures installed by Tenant
and used in the conduct of Tenant's trade or business (rather than to service
the Premises or any of the remainder of the Building or the Property generally)
shall remain Tenant's property, and shall be removed by Tenant, at Tenant's
expense, at the end of the Term (and any damage to the Premises caused by such
removal shall be repaired at Tenant's expense).
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Section 6. Maintenance and Services.
6.1 Ordinary Services. Landlord shall furnish the Premises with
(a) electricity suitable for general office use, (b) heating and air
conditioning for the comfortable use and occupancy of the Premises between 8:00
A.M. and 7:00 P.M., Monday through Friday, and 8:00 A.M. and 1:00 P.M on
Saturday (in each case, except for legal holidays) of each week during the
Term, (c) janitorial service, and (d) trash removal from the Premises. Such
services shall be furnished at Landlord's expense (subject to the operation and
effect of the provisions of Section 2.2). For purposes hereof, "legal holidays"
shall mean the days on which the following holidays are observed in the
Commonwealth of Virginia:
New Year's Day
Washington-Lincoln Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Christmas Day
6.2 Extraordinarv Services. If Tenant
(a) requires electrical current or installs electrical
equipment (including, by way of example rather than of limitation, any
electrical heating or refrigeration equipment, electronic data processing
machine, punch-card machine, or machinery or equipment using current in excess
of 110 volts which in any way increases the amount of electricity which would
normally be consumed upon the Premises when used for general office space), or
(b) intends to use the Premises in such a manner that the
services to be furnished by Landlord hereunder would be required during periods
other than or in addition to the business hours specified in subsection 6.1,
then in either case Tenant shall not do so without first obtaining Landlord's
written approval thereof, and shall pay periodically as Additional Rent the
additional direct expense resulting therefrom, including that resulting from
any installation of such equipment. Landlord's standard charges for services
during non-business hours (which standard charges are subject to change without
prior notice to Tenant) are currently $30.00 per unit per hour each for heat or
air conditioning. Notwithstanding the foregoing, Landlord agrees to provide
heat or air conditioning services to Tenant on any of the legal holidays listed
in Section 6.1 at Landlord's actual cost for such services. Landlord's actual
cost for such services during non-business hours (which actual cost is subject
to change
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without prior notice to Tenant) is currently $15.00 per unit per hour each for
heat or air conditioning.
6.3 Interruption. Landlord shall not be liable to Tenant for any
failure, modification or interruption of any service which either (a) arises
out of (i) strike, lock-out or other labor troubles, (ii) government
restrictions or limitations, (iii)-failure or shortage of electrical power,
gas, water, fuel oil, or other utility or service, (iv) riot, war, insurrection
or other national or local emergency, (v) accident, flood, fire or other
casualty, (vi) adverse weather conditions, (vii) other act of God, or (viii)
other causes similar or dissimilar to any of the foregoing and beyond
Landlord's reasonable control or (b) is required by applicable law (including,
by way of example rather than of limitation, any federal law or regulation
relating to the furnishing or consumption of energy or the temperature of
buildings).
6.4 Maintenance by Tenant. Tenant shall maintain the
nonstructural parts of the interior of the Premises in good repair and
condition, damage by causes reasonably beyond Tenant's control and ordinary
wear and tear excepted.
6.5 Maintenance by Landlord. Landlord shall furnish, supply and
maintain in good order and repair (a) the roof, the structure and the remainder
of the exterior of the Building, and (b) any and all hallways, stairways,
lobbies, elevators, heating and air conditioning facilities, electrical,
sanitary sewer and water lines and facilities, restroom facilities, grounds and
parking areas (including the removal of snow from such sidewalks and parking
areas) and other common areas, all if located within the Building or the rest
of the Property but not within the Premises, all at Landlord's expense except
as is set forth and subject to the provisions of Section 2 or any other
provision of this Lease.
Section 7. Landlord's Right of Entry. Landlord and its agents shall
be entitled to enter the Premises at any reasonable time: (a) to inspect the
Premises, (b) to exhibit the Premises to any existing or prospective purchaser
or Mortgagee thereof or any prospective tenant thereof, (c) to make any
alteration, improvement or repair to the Building or the Premises, or (d) - for
any other purpose relating to the operation or maintenance of the Property;
provided, that Landlord shall (i) (unless doing so is impractical or
unreasonable because of emergency) give Tenant at least twenty-four (24) hours
prior notice of its intention to enter the Premises, and (ii) use reasonable
efforts to avoid interfering any more than is reasonably necessary with
Tenant's use and enjoyment thereof.
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Section 8. Fire and Other Casualties.
8.1 General. If the Premises are damaged by fire or any other
casualty during the Term:
(a) Landlord shall restore the Premises with reasonable
promptness (taking into account the time required by Landlord to effect a
settlement with, and to procure any insurance proceeds from, any insurer
against such casualty, but in any event within one hundred eighty (180) days
after the date of such casualty) to substantially their condition immediately
prior to such casualty, and may temporarily enter and possess any or all of the
Premises for such purpose (provided, that Landlord shall not be obligated to
repair, restore or replace any fixture, improvement, alteration, furniture or
other property owned, installed or made by Tenant) but
(b) the times f or commencement and completion of any
such restoration shall be extended for the period (not longer than sixty (60)
days) of any delay occasioned by Landlord in doing so arising out of any of the
causes enumerated in the provisions of subsection 6.3. If Landlord undertakes
to restore the Premises and such restoration is not accomplished within the
said period of one hundred eighty (180) days plus the period of any extension
thereof, as aforesaid, Tenant may terminate this Lease by giving written notice
thereof to Landlord within thirty (30) days after the expiration of such
period, as so extended;
(c) for so long as Tenant is deprived of the use of any
or all of the Premises on account of such casualty, the Base Rent and any
Additional Rent payable under the provisions of subsection 2.2 shall be
abated in proportion to the number of square feet of the Premises rendered
substantially unfit for occupancy by such casualty, unless, because of any such
damage, the undamaged portion of the Premises is made materially unsuitable for
use by Tenant for the purposes set forth in the provisions of Section 3, in
which event the Base Rent and any such Additional Rent shall be abated entirely
during such period of deprivation; and
(d) Landlord shall have no liability to Tenant on account
of any (a) interruption of Tenant's business upon the Premises, (b) diminution
in Tenant's ability to use the Premises, or (c) other injury or damage
sustained by Tenant as a result of a casualty.
8.2 Substantial Destruction. Anything contained in the foregoing
provisions of this Section to the contrary notwithstanding,
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(a) if during the Term the Building is so damaged by
fire or any other casualty that (i) either the Premises or (whether or
not the Premises are damaged) the Building is rendered substantially unfit for
occupancy, as reasonably determined by Landlord, or (ii) the Building is damaged
to the extent that Landlord reasonably elects to demolish, abandon or otherwise
not to restore the Building, then, in either case, Landlord may elect to
terminate this Lease as of the date of occurrence of such damage, by giving
written notice thereof to Tenant within ninety (90) days after such date; and
(b) in such event, (i) Tenant shall pay to Landlord the
Base Rent and any Additional Rent (apportioned, where applicable) to the time
of such termination, (ii) Landlord shall repay to Tenant any and all prepaid
Rent for periods beyond such termination, and (iii) Landlord may enter upon and
repossess the Premises without further notice.
8.3 Tenant's Negligence. Anything contained in any provision of
this Lease to the contrary notwithstanding, if any damage to the Premises, the
Building and/or the Property is caused by or results from the negligent or
intentionally tortious act or omission of Tenant, those claiming under Tenant
or any of their respective officers, employees, agents or invitees,
(a) the Rent shall not be suspended or apportioned as
aforesaid, and
(b) except if and to the extent that Tenant is released
from liability therefor pursuant to the provisions of subsection 4.4, Tenant
shall pay to Landlord upon demand, as Additional Rent, the cost of (i) any
repairs and restoration made or to be made as a result of such damage, or (ii)
(if Landlord elects not to restore the Building) any damage, expense or loss
which Landlord may incur as a result of such damage.
Section 9. Condemnation.
9.1 Right to Award.
(a) If any or all of the Premises are taken by the
exercise of any power or eminent domain or are conveyed to or at the direction
of any governmental entity under a threat of any such taking (each of which is
hereinafter referred to as a "Condemnation"), Landlord shall be entitled to
collect from the condemning authority thereunder the entire amount of any award
made in any such proceeding or as consideration for such deed, without
deduction therefrom for any leasehold or other estate held by Tenant by virtue
of this Lease.
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(b) Tenant hereby (i) assigns to Landlord all of Tenant's
right, title and interest, if any, in and to any such award; (ii) waives any
right which it may otherwise have in connection with such condemnation, against
Landlord or such condemning authority, to any payment for (A) the value of the
then unexpired portion of the Term, (B) leasehold damages, and (C) any damage
to or diminution of the value of Tenant's leasehold interest hereunder or any
portion of the Premises not covered by such Condemnation; and (iii) agrees to
execute any and all further documents which may be required in order to
facilitate Landlord's collection of any and all such awards.
(c) Subject to the operation and effect of the foregoing
provisions of this Section, Tenant may seek, in a separate proceeding, a
separate award on account of any damages or costs incurred by Tenant as a
result of such Condemnation, so long as such separate award in no way
diminishes any award or payment which Landlord would otherwise receive as a
result of such Condemnation.
9.2 Effect of Condemnation.
(a) If (i) all of the Premises are covered by a
Condemnation, or (ii) if any part of the Premises is covered by a Condemnation
and the remainder thereof is insufficient for the reasonable operation therein
of Tenant's business, or (iii) if in Landlord's reasonable opinion, it would be
impractical to restore the remainder thereof, then in any such event, the Term
shall terminate on the date upon which possession of so much of the Premises or
the Building, as the case may be, as is covered by such Condemnation is taken
by the condemning authority thereunder, and all Rent and other charges-payable
hereunder shall be prorated and paid to such date.
(b) If there is a Condemnation and the Term does not
terminate pursuant to the foregoing provisions of this subsection, the
operation and effect of this Lease shall be unaffected by such Condemnation,
except that the Base Rent and the Additional Rent payable under the provisions
of subsection 2.2 shall be reduced proportionate to the amount of rentable
area, if any, of the Premises covered by such Condemnation.
9.3 If there is a Condemnation, Landlord shall have no liability
to Tenant on account of any (a) interruption of Tenant's business upon the
Premises, (b) diminution in Tenant's ability to use the Premises, or (c) other
injury or damage sustained by Tenant as a result of such Condemnation.
9.4 Except for any separate proceeding brought by Tenant under the
provisions of subsection 9.1(c), Landlord shall be entitled to conduct any such
Condemnation proceeding and any
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settlement thereof free of interference from Tenant, and Tenant hereby waives
any right which it might otherwise have to participate therein.
Section 10. Assignment and Subletting.
10.1 Tenant acknowledges that Landlord has entered into this Lease
because of Tenant's financial strength, goodwill, ability and expertise and
that accordingly, this Lease is one which is personal to Tenant, and Tenant
agrees for itself and its successors and assigns in interest hereunder that it
will not (a) assign any of its rights under this Lease, or (b) make or permit
any total or partial sale, lease, sublease, assignment, conveyance, license,
mortgage, pledge, encumbrance or other transfer of any or all of the Premises
or the occupancy or use thereof voluntarily or involuntarily (including, by way
of example rather than of limitation, any sale at foreclosure or by the
execution of any judgment, of any or all of Tenant's rights hereunder) (each of
which is hereinafter sometimes referred to as a "Transfer"), without first
obtaining Landlord's written consent thereto, which consent shall not be
unreasonably withheld, conditioned or delayed by Landlord. If such consent is
given, it shall not constitute a consent to any subsequent such Transfer,
whether by the person hereinabove named as the "Tenant" or by any such
transferee. If Tenant proposes to make a Transfer, Tenant shall notify
Landlord, in writing, of the proposed Transfer, at least ninety (90) days prior
to the effective date of such proposed Transfer. The notice must include a
copy of the proposed Transfer documents and an audited copy of the proposed
transferee's most recent financial statement, prepared by a certified public
accountant; the proposed transferee must have a credit rating satisfactory to
Landlord (in Landlord's sole judgment); and Tenant must not be in default of
this Lease, or have committed two (2) Events of Default hereunder during the
previous twelve (12) months, whether cured or not. Landlord shall be entitled,
at its sole discretion, to condition any such consent upon the entry by such
transferee into an agreement with (and in form and substance satisfactory to)
Landlord, by which it assumes all of Tenant's obligations hereunder. Any
person to whom any Transfer is attempted without such consent shall have no
claim, right or remedy whatsoever hereunder against Landlord, and Landlord
shall have no duty to recognize any person claiming under or through the same.
No Transfer made with or without Landlord's consent shall alter or impair the
obligations hereunder of any person constituting, or liable as a guarantor for
the obligations of, Tenant before such Transfer, or of any other person holding
any interest or obligation hereunder before such Transfer. For purposes of the
foregoing provisions of this subsection, a Transfer, by any person or persons
controlling Tenant on the date hereof, of such control to a person or persons
not controlling Tenant on the date hereof shall be deemed a
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Transfer of this Lease. Landlord shall be entitled to be paid by Tenant any
Profit derived by Tenant from any Transfer, whether or not with Landlord's
consent, as aforesaid. "Profit" is defined to mean excess of the rent and all
other payments received by Tenant (whether or not denominated as Rent,
Additional Rent, or any comparable term) over the Rent plus Additional Rent due
at the time or from time to time due and payable by Tenant to Landlord pursuant
to this Lease.
10.2 Landlord's Right of First Refusal. Landlord shall have the
right, within sixty (60) days after receipt of the notice of the proposed
Transfer from Tenant, to elect (i) to sublet the Premises from Tenant at the
Rent then being paid by Tenant for the Premises under Section 2 hereof (or to
sublet that portion of the Premises which Tenant proposes to sublease with a
proportionate reduction in the Rent), or (ii) to terminate this Lease in its
entirety if Tenant intends to Transfer all, or substantially all of the
Premises or, if Tenant proposes to Transfer a portion of the Premises, to
terminate this Lease only with respect to such portion of the Premises. Upon
exercise by Landlord of either of the options set forth in this subsection,
Tenant shall surrender the Premises or such portion of the Premises, as the
case may be, to Landlord and thereafter the Rent to be paid by Tenant pursuant
to Section 2 above shall be that portion of the total Rent which the amount of
rentable area remaining in the possession of Tenant bears to the total rentable
area of the Premises. In the event that Landlord does not exercise its right
to sublet the Premises, or such portion of the Premises, as the case may be, or
to terminate this Lease, within said sixty (60) day period, Tenant shall have
the right to sublet the Premises or a portion thereof after first obtaining the
written consent of Landlord as provided in subsection 10.1.
10.3 No Waiver or Release. The consent by Landlord to any Transfer
shall not be construed as a waiver or release of Tenant from the terms of any
covenant or obligation under this Lease, nor shall the collection or acceptance
of rent from any transferee constitute a waiver or release of Tenant of any
covenant or obligation contained in this Lease, nor shall any such Transfer be
construed to relieve Tenant from obtaining the consent in writing of Landlord
to any further Transfer. Tenant hereby assigns to Landlord the rent due from
any transferee of Tenant and hereby authorizes each such transferee to pay said
rent directly to Landlord, at Landlord's option, in the event of any default by
Tenant under the terms of this Lease.
10.4 Anything contained in the foregoing provisions of this Section
to the contrary notwithstanding, neither Tenant nor any other person having an
interest in the possession, use or occupancy of the Premises or any other
portion of the Property shall enter into any lease, sublease, license,
concession or
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other agreement for the possession, use or occupancy of space in the Premises
or any other portion of the Property which provides for any rental or other
payment for such use, occupancy or utilization based in whole or in part upon
the net income or profits derived by any person from the space in the Premises
or other portion of the Property so leased, used or occupied (other than any
amount based on a fixed percentage or percentages of receipts or sales).
Section 11. Rules and Regulations. Landlord hereby reserves the right
to prescribe, at its sole discretion, reasonable rules and regulations
(hereinafter referred to as the "Rules and Regulations"), having uniform
applicability to all tenants of the Building and governing the use and
enjoyment of the Building and the remainder of the Property; provided, that the
Rules and Regulations shall not materially interfere with Tenant's use and
enjoyment of the Premises, in accordance with the provisions of this Lease, for
the purposes enumerated in Section 3. Tenant shall adhere to the Rules and
Regulations and shall cause its agents, employees, invitees, visitors and
guests to do so. A copy of the Rules and Regulations in effect on the date
hereof is attached hereto as Exhibit D.
Section 12. Subordination; Attornment and Non-Disturbance.
12.1 Subordination. This Lease shall be subject and subordinate
at all times to the lien of any first mortgage, first deed of trust, ground
lease, and/or other instrument of encumbrance (together with each renewal,
modification, consolidation, replacement or extension thereof, herein referred
to as a "Mortgage") heretofore or hereafter placed by Landlord upon any or all
of the Premises or the remainder of the Property, all automatically and without
the necessity of any further action on the part of Tenant to effectuate such
subordination.
12.2 Attornment and Non-Disturbance. Tenant shall, promptly at the
request of Landlord or the holder of any Mortgage (herein referred to as a
"Mortgagee"), execute, enseal, acknowledge and deliver such further instrument
or instruments,
(a) evidencing such subordination as Landlord or such
Mortgagee deems necessary or desirable, and
(b) (at such Mortgagees request) attorn to such
Mortgagee, provided that such-Mortgagee agrees with Tenant that such Mortgagee
will, in the event of a foreclosure of any such Mortgagee, take no action to
interfere with Tenant's rights hereunder, except on the occurrence of an Event
of Default.
12.3 Mortgage Subordination. Anything contained in the provisions
of this Section to the contrary notwithstanding, any
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Mortgagee may at any time subordinate the lien of its Mortgage to the operation
and effect of this Lease without obtaining Tenant's consent thereto, by giving
Tenant written notice thereof, in which event this Lease shall be deemed to be
senior to such Mortgage without regard to their respective dates of execution,
delivery and/or recordation among the Land Records of Fairfax County, Virginia,
and thereafter such Mortgagee shall have the same rights as to this Lease as it
would have had, were this Lease executed and delivered before the execution and
recordation of such Mortgage.
12.4 Default Notice to Mortgagee. Tenant agrees to give any
mortgagee under any mortgage or beneficiary under any deed of trust affecting
the Premises ("Mortgagee"), by Registered Mail, a copy of any Notice of Default
served upon Landlord, provided that prior to such notice Tenant has been
notified in writing, (by way of Notice of Assignment of Rents and Leases, or
otherwise) of the address of such Mortgagee. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
this Lease, then the Mortgagee shall have an additional sixty (60) days within
which to cure such default or if such default cannot be cured within that time,
then such additional time as may be necessary to cure such default shall be
granted if within such sixty (60) days, any Mortgagee has commenced and is
diligently pursuing the remedies necessary to cure such default, (including but
not limited to commencement of foreclosure proceedings, if necessary to effect
such cure), in which event this Lease shall not be terminated while such
remedies are being so diligently pursued.
Section 13. Estoppel Certificate. Tenant shall from time to time,
within five (5) days after being requested to do so by Landlord or any
Mortgagee, execute, enseal, acknowledge and deliver to Landlord an instrument
in recordable form,
(a) certifying,
(i) that this Lease is unmodified and in full
force and effect (or, if there has been any modification thereof, that it is in
full force and effect as so modified, stating therein the nature of such
modification);
(ii) as to the date on which the Term commenced,
and that Tenant has accepted possession of the Premises, and that any
improvements to the Premises required by the provisions of this Lease to be
made by Landlord have been completed to Tenant"s satisfaction (except as Tenant
may otherwise expressly state in such certificate);
(iii) that Tenant has not made any payment of the
Base Rent, any Additional Rent or any other charge arising under
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the provisions of this Lease in advance of the date on which it becomes due,
except as set forth in subsection 2.3(a) and subsection 2.5, if applicable;
(iv) that, as of the date of such certification,
Tenant has no charge, lien or claim of setoff under the provisions of this
Lease or otherwise, against any Rent or other charge due or hereinafter
becoming due hereunder;
(v) that, to the best of Tenant's knowledge,
information and belief whether Landlord is then in default in the performance
of any of its obligations hereunder (and, if so, specifying the nature of each
such default); and
(vi) as to any other fact or condition reasonably
requested by Landlord, any first Mortgagee, or prospective first Mortgagee or
purchaser of any or all of the Premises, the Property or any interest therein,
or any assignee or prospective assignee of any interest of Landlord under this
Lease; and
(b) acknowledging and agreeing that any statement
contained in any such certificate may be relied upon by Landlord and any such
other person.
Section 14. Parking. During the Term, Tenant shall have the right to
utilize 3.6 non-reserved parking spaces in or on the garage structure for each
1,000 square feet of the Premises then being leased by Tenant in the Building,
as well as thirteen (13) reserved spaces (6 on the outside parking lot in front
of the Building and 7 on parking level "B"), which thirteen (13) spaces shall
be marked "Reserved, Deltek Systems, Inc." All such parking spaces shall be
available to Tenant, its employees and invitees at no additional charge.
Section 15. Access to the Premises--Security System. Tenant shall
have access to the Property, the Building, and the Premises twenty-four (24)
hours a day, seven (7) days a week. Landlord shall install, at its cost, a
card reader security entry system to enable Tenant's employees and staff to
gain entry into the Building during non-business hours while maintaining
security for the Premises. After its initial installation, all maintenance and
repair costs associated with such entry system shall be included in the Annual
Operating Costs of the Building. Not less than one elevator shall remain in
operation for service to the Premises and the remainder of the Building during
non-business hours. For the purposes of the section, the term "non-business
hours" means days and times other than Monday through Friday (except holidays),
8:00 a.m. to 7:00 p.m., and Saturdays (except holidays), 8:00 a.m. to 1:00 p.m.
Landlord reserves the right to charge a reasonable amount for each security
system access card or other device provided to Tenant.
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Section 16. Floor Load -- Heavy Machinery. Tenant shall not place a
load upon any floor of the Premises exceeding a floor load of 100 pounds per
square foot of area. Landlord reserves the right to prescribe the weight and
position of all business machines and mechanical equipment, including safes,
located in the Premises. Business machines and mechanical equipment shall be
placed and maintained by Tenant at Tenant's expense in settings sufficient in
Landlord's reasonable judgment to absorb and prevent vibration, noise and
annoyance. Tenant shall not move any safe, heavy machinery, equipment,
freight, bulky matter or fixtures into or out of the Building without
Landlord's prior written consent, which shall not be unreasonably withheld. If
such safe, machinery, equipment, freight, bulky matter or fixtures require
special handling, Tenant agrees to employ only persons holding a Master
Rigger's License to do said work, and that all work in connection therewith
shall comply with applicable laws and regulations. Any such moving shall be at
the sole risk and hazard of Tenant and Tenant will defend, indemnify and save
Landlord harmless against and from any liability, loss, injury, claim or suit
resulting directly or indirectly from such moving. Proper placement of all
such business machines in the Premises shall be Tenant's responsibility.
Section 17. Fixtures. All fixtures attached to or built into the
Premises prior to or during the Term, whether by Landlord or by Tenant and
whether at the expense of Landlord or Tenant (or both), shall be, and remain,
part of the Premises and shall not be removed by Tenant during or at the end of
the Term unless otherwise expressly provided in this Lease. The term fixture
shall include but not be limited to all plumbing, heating and sprinkling
systems, outlets, vaults, paneling, molding, floors, and ventilating,
air-conditioning and cooling equipment installed in the Premises. If this
Lease shall be terminated by reason of an Event of Default by Tenant, then,
notwithstanding anything to the contrary in this Lease contained, Landlord
shall have a lien against all Tenant's property in the Premises or elsewhere in
the Building at the time of such termination to secure Landlord's rights
hereunder.
Section 18. Signage. Tenant shall not erect or install any signs of
any nature which are visible from the exterior of the Premises, without first
obtaining Landlord's specific written consent, which shall not be unreasonably
withheld, conditioned or delayed. The scope of Landlord's consent includes
without limitation the location, type, kind, character, dimensions, materials,
colors, and all other particulars of each and every sign, and the method of
installation, maintenance, operation and removal of each and every sign. For
all Landlord approved signs, Tenant shall (i) pay all costs associated with the
signs, including without limitation, the costs associated with the
installation, operation, maintenance and removal of the signs,
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(ii) pay the premium of any insurance Landlord may reasonably deem appropriate
and obtain which relates to the signs, (iii) maintain and operate the signs in
a first class manner, (iv) be responsible for the prompt removal of the signs
upon expiration or termination of this Lease, or upon vacatur or abandonment of
the Premises, or upon an Event of Default (in the event Tenant fails to
promptly remove the signs in such cases, Landlord may remove the signs without
liability to Tenant and at the cost of Tenant), and (v) be fully responsible
for, and shall repair all damage caused to the Building by installation,
maintenance, operation and removal of the signs. Landlord hereby consents to
continue to permit to exist Tenant's building signage which exists on the
exterior of the Building as of the date hereof, and to allow Tenant to replace
such existing signage with exterior building signage of the type and size
identical to such existing exterior building signage. Notwithstanding anything
herein to the contrary, all of the signage rights described in this Section 18
shall be personal to Tenant and in the event of any subletting of all or any
portion of the Premises or an assignment or other Transfer of this Lease, the
provisions of this Section 18 shall not convey or be applicable to Tenant's
assignee, sublessee or other transferee.
Section 19. Quiet Enjoyment. Landlord hereby covenants that Tenant,
on paying the Rent and performing the covenants set forth herein, shall
peaceably and quietly hold and enjoy, throughout the Term, (a) the Premises,
and (b) such rights as Tenant may hold hereunder with respect to the remainder
of the Property (including, by way of example rather than of limitation, any
such right to use any parking lot within the Property).
Section 20. Events of Default.
20.1 Definition. As used in the provisions of this Lease, each of
the following events shall constitute, and is hereinafter referred to as, an
"Event of Default":
(a) if Tenant fails to (i) pay the Rent or any other sum
which Tenant is obligated to pay by any provision of this Lease, when and as it
is due and payable hereunder and without demand therefor, (ii) perform any of
its other obligations under the provisions of this Lease or any agreement
referred to herein, or (iii) perform any of its obligations under the
provisions of any other agreement with Landlord; or,
(b) if Tenant (i) applies for or consents to the
appointment of a receiver, trustee or liquidator of Tenant or of all or a
substantial part of its assets, (ii) files a voluntary petition in bankruptcy
or admits in writing its inability to pay its debts as they come due, (iii)
makes an assignment for the benefit of its creditors, (iv) files a petition or
an answer
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<PAGE> 31
seeking a reorganization or an arrangement with creditors, or seeks to take
advantage of any insolvency law, (v) performs any other act of bankruptcy, or
(vi) files an answer admitting the material allegations of a petition filed
against Tenant in any bankruptcy, reorganization or insolvency proceeding; or,
(c) if (i) an order, judgment or decree is entered by any
court of competent jurisdiction adjudicating Tenant as bankrupt or an
insolvent, approving a petition seeking such a reorganization, or appointing a
receiver, trustee or liquidator of Tenant or of all or a substantial part of
its assets, or (ii) there otherwise commences with respect to Tenant or any of
its assets any proceeding under any bankruptcy, reorganization, arrangement,
insolvency, readjustment, receivership or similar law, and if such order,
judgment, decree or proceeding continues unstayed for more than sixty (60)
consecutive days after any stay thereof expires; or,
(d) if Tenant fails to occupy and assume possession of
the Premises within fifteen (15) days after the Commencement Date, or,
(e) if Tenant substantially ceases to conduct its
business at the Premises during normal business hours, for a period of ten (10)
business days or more, without the prior written consent of Landlord.
20.2 Notice to Tenant; Grace Period. Anything contained in the
provisions of this Section to the contrary notwithstanding, on the occurrence
of an Event of Default, which does not involve a payment hereunder or
contemplated hereby, Landlord shall not exercise any right or remedy which it
holds under any provision of this Lease or under applicable law unless and
until:
(a) Landlord has given written notice thereof to Tenant,
and
(b) Tenant has failed within twenty (20) days thereafter
to cure such Event of Default (or, if and only if such Event of Default is not
reasonably curable within such period of twenty (20) days, to proceed within
such period actively, diligently and in good faith to cure such Event of
Default and to continue to do so thereafter until it is fully cured);
provided that no such notice shall be required, and Tenant shall be entitled to
no such grace period, (i) more than twice during any twelve (12) month period,
or (ii) if Tenant has substantially terminated or is in the process of
substantially terminating its continuous occupancy and use of the Premises for
the purpose set f orth in Section 3, or (iii) if any Event of Default
enumerated in subsections 20.1(b), 20.1(c), or 20.1(e) has occurred.
29
<PAGE> 32
20.3 Landlord's Rights on Event of Default. On the occurrence of
an Event of Default, Landlord may (subject to the operation and effect of the
provisions of subsection 20.2) take any or all of the following actions:
(a) re-enter and repossess the Premises and any and all
improvements thereon and additions thereto;
(b) declare the entire balance of the Rent including
unamortized Tenant Concessions for the remainder of the Term to be due and
payable, and collect such balance in any manner not inconsistent with
applicable law;
(c) terminate this Lease;
(d) enter the Premises and relet the same or any part
thereof without terminating this Lease, as Tenant's agent, in the name of
Landlord, or otherwise, for a term shorter or longer than the balance of the
Term, and may grant tenant concessions (including, without limitation, free
rent), but Tenant shall remain liable for, and covenants and agrees to pay, any
deficiency after Tenant is credited with the rent thereby obtained, less all
repairs and expenses (including, but not limited to, the expenses of obtaining
possession, brokerage expenses, tenant concessions, tenant work modifications,
legal fees and decorating expenses), and less the unamortized Tenant
Concessions, first referred to in subsection 2.1(d) hereof which shall be due
and payable immediately upon Tenant vacating or abandoning the Premises. Any
deficiency shall become due and payable monthly, as it is determined. Landlord
shall have no obligation to relet the Premises, and its failure to do so, or
failure to collect rent on reletting, shall not affect Tenant's liability
hereunder. In no event shall Tenant be entitled to a credit or repayment for
income from reletting which is payable by Tenant hereunder or which covers a
period after the original term of this Lease. Tenant hereby expressly waives
any right of redemption granted by any present or future law. Any entry or
re-entry by Landlord, whether had or taken under summary proceedings or
otherwise, shall not absolve or discharge Tenant from liability hereunder.
"Re-enter" and "re-entry" as used in this Lease are not restricted to their
technical legal meaning. In the event of a breach or threatened breach of any
of the covenants or provisions hereof, Landlord shall have the right of
injunction. Landlord may resort to any two or more of such remedies or rights,
and adoption of one or more such remedies or rights shall not necessarily
prevent the enforcement of others concurrently or thereafter. If Tenant shall
default in the performance of any provision of this Lease or if Landlord is
required to take any action to enforce this Lease or defend the validity or
interpretation of this Lease, then Landlord shall be entitled to recover all
costs and expenses incurred thereby,
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<PAGE> 33
including court costs and reasonable attorney's fees at every level of
litigation. Such fees and expenses shall become immediately due and owing to
Landlord as Additional Rent;
(e) cure such Event of Default in any other manner (after
giving Tenant written notice of Landlord's intention to do so except as
provided in subsection 20.2(c)), in which event Tenant shall reimburse Landlord
for all expenses incurred by Landlord in doing so, plus interest thereon at the
lesser of the rate of twenty percent (20%) per annum or the highest rate then
permitted on account thereof by applicable law, which expenses and interest
shall be Additional Rent and shall be payable to Landlord by Tenant immediately
on demand therefor by Landlord; and/or
(f) pursue any combination of such remedies and/or any
other right or remedy available to Landlord on account of such Event of Default
at law or in equity. Tenant hereby waives any right which it may otherwise
have to a trial by jury, whether at law or in equity, in connection with any
suit or proceeding at law or in equity brought by Landlord against Tenant or
otherwise in connection with this Lease as a result of an Event of Default.
20.4 No Waiver. No action taken by Landlord under the provisions
of this Section or any other provision of this Lease (including, by way of
example rather than of limitation, Landlord's acceptance of the payment of Rent
after the occurrence of any Event of Default) shall operate as a waiver of any
right which Landlord would otherwise have against Tenant for the Rent hereby
reserved or of any other right provided to Landlord under this Lease or
applicable law, and Tenant shall remain responsible to Landlord for any loss
and/or damage suffered by Landlord by reason of any Event of Default,
regardless of any action by Landlord.
Section 21. Notices. Any notice, demand, consent, approval, request
or other communication or document to be provided hereunder to a party hereto
shall be (a) given in writing; and (b) deemed to have been given (i)
forty-eight (48) hours after being sent as certified or registered mail in the
United States mails, postage prepaid, return receipt requested, or the day
after being delivered to an overnight courier service, in each case to the
address of such party set forth hereinabove or to such other address in the
United States of America as such party may designate from time to time by
notice to the other, or (ii) (if such party's receipt thereof is acknowledged
in writing) upon its hand or other delivery to such party.
Section 22. Additional Expansion Space. Tenant shall have the option
to lease certain additional expansion space pursuant
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<PAGE> 34
to the provisions of this Section 22. All space so leased by Tenant is
referred to herein as the "Additional Expansion Space".
22.1 Currently Vacant Space.
(a) Provided no Event of Default has occurred and is then
continuing and no event or condition has occurred which with notice and/or time
would constitute an Event of Default hereunder, Tenant shall have an option to
lease any of the space described as "currently vacant" on Exhibit E, by
notifying Landlord of its intention to do so prior to the date that Landlord
notifies Tenant that Landlord has obtained a bona fide offer from a prospective
tenant to lease such space. In the event that Tenant fails to notify Landlord
of its intention to exercise its option with respect to any currently vacant
space prior to the date that Landlord notifies Tenant that Landlord has
obtained a bona fide offer from a prospective Tenant for such space, the
provisions of Section 22.1(b) below shall apply.
(b) Landlord shall promptly notify Tenant if Landlord has
obtained a bona fide offer from a prospective tenant to lease any of the space
described as "currently vacant" on Exhibit E. Upon Tenant's receipt of such
notice, Tenant shall have a period of five (5) days to elect whether or not to
lease such space. If Tenant elects not to lease such vacant space or if Tenant
fails to notify Landlord of its election within the aforesaid five (5) day
period, this option shall become null and void and of no further force or
effect with respect to such currently vacant space, and Landlord shall
thereafter be entitled to lease such space to any third party without having to
offer such space to Tenant.
22.2 Currently Occupied Space.
(a) Provided that no Event of Default has occurred and is
then continuing and no event or condition has occurred which with notice and/or
time would constitute an Event of Default hereunder, Tenant shall have an
option to lease any of the space described as "currently occupied" on Exhibit
E, by notifying Landlord of its intention to do so at least six (6) months
prior to the date listed as the "anticipated vacancy date" on such Exhibit. In
the event that any anticipated vacancy date changes (because the current tenant
exercises a renewal option or for any other reason), Landlord will promptly
notify Tenant of such change and Exhibit E will be revised accordingly. In the
event that a change in any anticipated vacancy date results in such anticipated
vacancy date being less than six (6) months after the date that Landlord
notifies Tenant of the change, Tenant shall be required to notify Landlord of
its intention to lease such currently occupied space within thirty (30) days
after Landlord notifies Tenant of the change in such anticipated vacancy date.
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<PAGE> 35
Notwithstanding anything herein to the contrary, Tenant shall be required to
notify Landlord of its intention to lease Suite No. 450 and/or Suite No. 460 by
January 1, 1992 unless the anticipated vacancy date(s) of such space changes as
a result of the current tenant's election to exercise its renewal option. In
the event that Tenant fails to notify Landlord of its intention to exercise its
option to lease any currently occupied space within the time periods or by the
dates specified in this subsection, the provisions of Section 22.2(b) shall
apply.
(b) In the event that Tenant fails to notify Landlord of
its intention to exercise its option to lease any currently occupied space
within the time periods or by the dates specified in Section 22.2(a) above,
Landlord shall nonetheless be required to notify Tenant if Landlord obtains a
bona fide offer from a prospective tenant to lease such space. Upon Tenant's
receipt of such notice, Tenant shall have a period of five (5) days to elect
whether or not to lease such currently occupied space. If Tenant elects not to
lease such space or if Tenant fails to notify Landlord of its election within
the aforesaid five (5) day period, this option shall become null and void and
of no further force or effect with respect to such space, and Landlord shall
thereafter be entitled to lease such space to any third party without having to
offer the space to Tenant.
22.3 Additional 13,000 Square Feet.
(a) Additional 7,000 Square Feet. Provided (i) no Event
of Default has occurred and is then continuing and no event or condition has
occurred which with notice and/or time would constitute an Event of Default
hereunder, and (ii) Tenant has exercised all of the expansion options which
become available to Tenant during the six (6) month period commencing on the
date which is thirty-three (33) months after the Commencement Date of the Third
Floor Expansion Space, Tenant shall have an option to lease an additional 7,000
square feet of space in either the Building or in a building (not yet
constructed) on the parcel of land known as 1660 International Drive, McLean,
Virginia, which is located adjacent to the Building. If Tenant fails to notify
Landlord of its intention to exercise this option by the date which is
thirty-nine (39) months after the Commencement Date, this option shall become
null and void and of no further force or effect.
(b) Additional 6,000 Square Feet. Provided (i) no Event
of Default has occurred and is then continuing and no event or condition has
occurred which with notice and/or time would constitute an Event of Default
hereunder, (ii) Tenant has exercised all of the expansion options which become
available to Tenant during the six (6) month period commencing on the date
which is forty-five (45) months after the Commencement Date of
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<PAGE> 36
the Third Floor Expansion Space, and (iii) Tenant has exercised its option to
lease an additional 7,000 square feet of space pursuant to Section 22.3(a)
above, Tenant shall have an option to lease an additional 6,000 square feet of
space in either the Building or in a building (not yet constructed) on the
parcel of land known as 1660 International Drive, McLean, Virginia, which is
located adjacent to the Building. If Tenant fails to notify Landlord of its
intention to exercise this option by the date which is fifty-one (51) months
after the Commencement Date, this option shall become null and void and of no
further force or effect.
(c) Termination Option. In the event that Tenant validly
exercises its option and Landlord is unable for any reason to provide Tenant
with the additional 7,000 square feet of space described in Section 22.3(a) or
the additional 6,000 square feet of space described in Section 22.3(b), then in
either such event Tenant's sole remedy against Landlord shall be to terminate
this Lease, effective (i) in the case of Landlord's inability to provide the
7,000 square feet of space, on the date which is forty-eight (48) months after
the Commencement Date of the Third Floor Expansion Space, and (ii) in the case
of Landlord's inability to provide the 6,000 square feet of space, on the date
which is sixty (60) months after such Commencement Date. In order to exercise
this termination option, Tenant must (A) notify Landlord of its exercise of
this option within thirty (30) days after the date that Landlord notifies
Tenant of its inability to deliver the additional space, and (B) pay Landlord
not later than the effective date of Lease termination all amounts due under
this Lease, plus a cancellation penalty equal to the sum of the following: the
unamortized portion of all Tenant Concessions [as described in Section 2.1(d))
provided to Tenant; the unamortized portion of all tenant concessions provided
to Gowin; the unamortized portion of all tenant concessions provided to
Financial Planning; and all of Landlord's other reasonable costs and expenses
incurred in connection with terminating existing leases with Gowin and
Financial Planning and/or relocating them to different space in the Building
(including without limitation, brokerage fees and attorney's fees). Within one
hundred eight (180) days after the execution of this Lease, Landlord and Tenant
will agree upon the amount of the cancellation penalty, and they shall execute
an Agreement Regarding Cancellation Penalty in the form of Exhibit F.
22.4 Rental Rate and other Additional Expansion Space Terms.
(a) Expansion Rental Rate. The Rent for the Additional
Expansion Space shall be (i) in the case of any Additional Expansion Space
obtained pursuant to Section 22.2 (b), the rent described in the bona fide
offer of the prospective tenant, and (ii) in the case of all other Additional
Expansion
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<PAGE> 37
Space, an escalating base rent determined in accordance with the following
schedule:
<TABLE>
<CAPTION>
Net Component Base Rent
Calendar Year Per Square Foot Per Square Foot
- ------------- --------------- ---------------
<S> <C> <C>
1992 $14.20 $21.00
1993 $15.30 $22.10
1994 $16.45 $23.25
1995 - 1998 Fair Market Rental Value
(determined in accordance
with Section 1.6)
</TABLE>
(b) Expansion Allowance. Landlord will provide Tenant
with an allowance of Fifteen and 00/100 Dollars ($15.00) per rentable square
foot (the "Expansion Allowance") for tenant improvements to any Additional
Expansion Space obtained by Tenant during the 1992, 1993 and/or 1994 calendar
years (the "Expansion Improvements"). The Expansion Improvements shall be
constructed by Landlord in accordance with plans agreed to by Landlord and
Tenant; provided, however, that if the estimated cost of the Expansion
Improvements exceeds $15.00 per rentable square foot, Landlord shall be
obligated to construct such improvements only if Landlord and Tenant agree upon
suitable arrangements for Tenant to pay such excess to Landlord. If the actual
cost of the Expansion Improvements is less than $15.00 per rentable square foot
(as certified by Landlord to Tenant upon completion of such improvements),
Landlord will credit the balance of Expansion Allowance against the next due
installments) of Base Rent until the Expansion Allowance is depleted. The
Expansion Allowance shall be amortized over a period of five (5) years from the
date of Commencement of the term of each Additional Expansion Space lease; and
if Tenant terminates this Lease prior to occupying any Additional Expansion
Space for less than five (5) years, Tenant shall be obligated to pay Landlord,
at Lease termination, an amount equal to the unamortized portion of the
Expansion Allowance attributable to all such Additional Expansion Space.
(c) Term. The term of all Additional Expansion Space
leases shall run concurrently with the Term of this Lease and shall expire on
March 31, 1998 unless sooner terminated in accordance with the provisions
hereof. The commencement of the term of the Additional Expansion Space leases
shall be (i) in the case of the 7,000 square feet obtained pursuant to Section
22.3(a), the date which is forty-eight (48) months after the Commencement Date
for the Third Floor Expansion Space; (ii) in the case of the 6,000 square feet
obtained pursuant to Section 22.3(b), the date which is sixty (60) months after
the
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<PAGE> 38
Commencement Date for the Third Floor Expansion Space; and (iii) for all other
Additional Expansion Space obtained pursuant to Section 22, a date mutually
agreed upon by Landlord and Tenant [which date shall be not more than thirty
(30) days after Tenant notifies Landlord of its election to exercise its option
to lease such space].
Section 23. General.
23.1 Effectiveness. This Lease shall become effective upon and
only on its execution and delivery by each party hereto.
23.2 Complete Understanding. This Lease represents the complete
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior negotiations, representations, warranties, statements or
agreements, either written or oral, between the parties hereto as to the same.
In particular, this Lease supersedes in all respects all of the existing Leases
and lease-related documents previously entered into between Landlord and Tenant
and between Landlord's predecessor in interest (Rouse & Associates-Tysons
Corner) and Tenant, including but not limited to the leases and lease-related
documents described on Exhibit F (collectively the "Prior Leases"). The
parties hereby agree that the Prior Leases shall terminate effective as of the
Commencement Date for the Third Floor Expansion Space, and neither Landlord nor
Tenant shall have any further obligations under any of the Prior Leases after
such termination date. Upon termination of the Prior Leases, Landlord's and
Tenant's obligations with respect to year-end adjustments of Annual Operating
Costs shall cease; Tenant shall not be required to make any additional payments
nor shall Tenant be entitled to any credit or refund from Landlord on account
of any year-end adjustments that would otherwise have been made pursuant to
Sections 2.2 and 2.3 of the Prior Leases if the Prior Leases had not been so
terminated. No inducements, representation, understandings or agreements have
been made or relied upon in the making of this Lease, except those specifically
set forth in the provisions of this Lease. Neither party hereto has any right
to rely on any other prior or contemporaneous representations made by anyone
concerning this Lease which are not set forth herein.
23.3 Amendment. This Lease may be amended by and only by an
instrument executed and delivered by each party hereto.
23.4 Applicable Law. This Lease shall be given effect and
construed by application of the laws of the Commonwealth of Virginia, without
regard to choice of law provisions.
23.5 Waiver. Landlord shall not be deemed to have waived the
exercise of any right which it holds at law, in equity, or
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<PAGE> 39
under this Lease unless such waiver is made expressly and in writing (and no
delay or omission by Landlord in exercising any such right shall be deemed to
be a waiver of the future exercise). No such waiver made to any instance
involving the exercise of any such right shall be deemed a waiver as to any
other such instance, or any other such right.
23.6 Waiver of Jury Trial. Landlord and Tenant each hereby waive
jury trial in any action, proceeding or counterclaim brought by either of the
parties hereto against the other with respect to any matter whatsoever arising
out of or in any way connected with this Lease, the relationship of Landlord
and Tenant hereunder, Tenant's use or occupancy of the Premises, any claim of
breach, injury or damage, and/or in connection with an Event of Default.
23.7 Time of Essence. Time shall be of the essence of this Lease.
23.8 Headings. The headings of the Sections, subsections,
paragraphs and subparagraphs hereof are provided herein for and only for
convenience of reference, and shall not be considered in construing their
contents.
23.9 Construction. As used herein:
(a) the term "person" means a natural person, a trustee,
a corporation, a partnership and any other form of legal entity;
(b) all references made (i) in the neuter, masculine or
feminine gender shall be deemed to have been made in all such genders, (ii) in
the singular or plural number shall be deemed to have been made, respectively,
in the plural or singular number as well, and (iii) to any Section, subsection,
paragraph or subparagraph shall, unless therein expressly indicated to the
contrary, be deemed to have been made to such Section, subsection, paragraph or
subparagraph of this Lease; and
(c) all reference to "attorneys fees" shall mean all
reasonable attorney's fees, court costs and related expenses incurred in
connection with Tenant's breach of any provision of this Lease, whether suit is
brought or not, and if suit is brought shall include all reasonable costs and
expenses relating to any and all legal and/or equitable trial and appellate
court proceedings.
23.10 Exhibits. Each writing or plat referred to herein as being
attached hereto as an exhibit or otherwise designated herein as an exhibit
hereto is hereby made a part hereof.
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23.11 Severability. No determination by any court, governmental
body or otherwise that any provision of this Lease or any amendment hereof is
invalid or unenforceable in any instance, shall affect the validity or
enforceability of (a) any other such provision, or (b) such provision in any
circumstance not controlled by such determination. Each such provision shall
be valid and enforceable to the fullest extent allowed by, and shall be
construed wherever possible as being consistent with, applicable law.
23.12 Definition of "Landlord".
23.12.1 As used herein, the term "Landlord" means the entity
hereinabove named as such, and its heirs, personal representatives, successors
and assigns (each of whom shall have the same rights, remedies, powers,
authorities and privileges as it would have had, had it originally signed this
Lease as Landlord).
23.12.2 No person holding Landlord's interest hereunder (whether or
not such person is named as the "Landlord" herein) shall have any liability
hereunder after such person ceases to hold such interest, except for any such
liability accruing while such person holds such interest.
23.12.3 No Mortgagee not in possession of the Premises or the Building
shall have any liability hereunder.
23.12.4 Neither Landlord nor any principal or parties of Landlord,
whether disclosed or undisclosed, shall have any personal liability under any
provision of this Lease. If Landlord defaults in the performance of any of its
obligations hereunder or otherwise, Tenant shall look solely to Landlord's
equity, interest and rights in the Property for satisfaction of Tenant's
remedies on account thereof.
23.13 Definition of "Tenant". As used herein, the term "Tenant"
means each person or entity hereinabove named as such and such person's or
entity's heirs, personal representatives, successors and assigns, each of whom
shall have the same obligations, liabilities, rights and privileges as it would
have possessed had it originally executed this Lease as Tenant; provided, that
no such right or privilege shall inure to the benefit of any transferee of
Tenant, immediate or remote, unless the Transfer to such person or entity is
made in accordance with the provisions of Section 10. Whenever two or more
persons constitute Tenant, all such persons shall be jointly and severally
liable for the performance of Tenant's obligations hereunder.
23.14 Brokers. The parties acknowledge that they have not directly
or indirectly dealt with any broker concerning this
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<PAGE> 41
Lease except for Menard Doswell & Co., whose brokerage commissions shall be
paid by Landlord. Each party agrees to defend, exonerate, indemnify and hold
the other harmless from and against all other claims for commissions relating
to the execution and delivery of this Lease (or out of negotiations between
Landlord and Tenant in respect to leasing the Premises), which arise directly
out of its conduct, acts, omissions, or agreements.
23.15 Contingency Clause. The parties acknowledge that this Lease
is expressly subject to and contingent upon Landlord's ability (i) to terminate
its existing lease with Gowin and Company, P.C. ("Gowin") with respect to the
Second Floor Expansion Space, and (ii) to enter into a new lease with Gowin for
approximately 2,650 square feet of space contiguous to the Third Floor
Expansion Space. Although Landlord agrees to use its good faith best efforts
in this regard, there can be no assurance that Landlord will be successful. In
the event that Landlord is unable to terminate its existing lease with Gowin
and enter into a new lease by December 15, 1991, Landlord will so notify
Tenant, whereupon (A) the Prior Leases shall continue in full force and effect
with respect to the space covered thereby, and (B) Tenant will be deemed to
have a month-to-month tenancy (terminable by either Landlord or Tenant upon
thirty (30) days notice to the other) with respect to any other space in the
Building then being occupied by Tenant. During such month-to-month tenancy,
all of the provisions of this Lease shall apply (other than Sections 1.2, 1.5
and 22 and as the context clearly requires otherwise). Notwithstanding
anything herein to the contrary, this Lease is not subject to or contingent
upon Landlord"s ability to get Financial Planning, Inc. ("Financial Planning")
to vacate the Financial Planning Space by any particular date.
IN WITNESS WHEREOF, each party hereto has executed and ensealed this
Lease, or has caused it to be executed and ensealed on its behalf by its duly
authorized representatives, as of the day and year first above written.
Landlord:
--------
TYSONS CORNER LIMITED PARTNERSHIP,
an Illinois Limited partnership
By: /s/ Jeffrey D. ?
--------------------------------
Name:
------------------------------
Title:
-----------------------------
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<PAGE> 42
Tenant:
------
WITNESS OR ATTEST: DELTEK SYSTEMS, INC.,
a Virginia corporation
/s/ ? By:/s/Kenneth E. deLaski (SEAL)
- -------------------------- --------------------------------
Name:
-------------------------------------
Kenneth E. de Laski, President
40
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EXHIBIT A
FLOOR PLANS OF THE PREMISES
EXHIBIT A-1 Financial Planning Space
EXHIBIT A-2 Second Floor Expansion space
EXHIBIT A-3 Existing Third Floor Space
EXHIBIT A-4 Third Floor Expansion Space
EXHIBIT A-5 Existing Second Floor Space
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<PAGE> 44
EXHIBIT B
AGREEMENT REGARDING COMMENCEMENT DATES
Pursuant to Section 1.1(b) of that certain Agreement of Lease dated
November 12, 1991, by and between Tysons Corner Limited Partnership, an
Illinois limited partnership ("Landlord") and Deltek Systems, Inc., a Virginia
corporation ("Tenant"), Landlord and Tenant hereby agree upon the following
dates as the Commencement Dates for the various space which comprises the
Premises:
<TABLE>
<CAPTION>
Space Commencement Date
----- -----------------
<S> <C>
Financial Planning Space August 1, 1992
Existing Third Floor Space March 10, 1992
Third Floor Expansion Space March 10, 1992
Existing Second Floor Space March 10, 1992
Second Floor Expansion Space January 10, 1992
</TABLE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement
Regarding Commencement Dates as of the 31st day of July, 1992.
LANDLORD:
--------
TYSONS CORNER LIMITED PARTNERSHIP,
an Illinois limited partnership
By: Balcor Property Management, Inc. as Agent
By: /s/ Charles B. Pullar
--------------------------------------
Name: Charles B. Pullar
------------------------------------
Title: Senior Vice President
-----------------------------------
TENANT:
------
DELTEK SYSTEMS, INC.,
a Virginia corporation
By: /s/ Donald deLaski
--------------------------------------
Name: Donald de Laski
------------------------------------
Title: CEO
-----------------------------------
42
<PAGE> 45
EXHIBIT C
FINAL DRAWINGS FOR TENANT IMPROVEMENTS
[TO BE ATTACHED IN ACCORDANCE WITH SECTION 5.1(a)]
43
<PAGE> 46
EXHIBIT D
CURRENT RULES AND REGULATIONS
1. The sidewalks, lobbies, passages, elevators and stairways
shall not be obstructed by the Tenant or used by the Tenant for any purpose
other than ingress and egress from and to the Tenant's offices. The Landlord
shall in all cases retain the right to control or prevent access thereto by any
person whose presence, in the Landlord's judgment, would be prejudicial to the
safety, peace, character or reputation of the Building or of any tenant of the
Property.
2. The toilet rooms, water closets, sinks, faucets, plumbing and
other service apparatus of any kind shall not be used by the Tenant for any
purpose other than those for which they were installed, and no sweepings,
rubbish, rags, ashes, chemicals or other refuse or injurious substances shall
be placed therein or used on connection therewith by the Tenant, or left by the
Tenant in the lobbies, passages, elevators or stairways of the Building.
3. No skylight, window, door or transom of the Building shall be
covered or obstructed by the Tenant, and no window shade, blind, curtain,
screen, storm window, awning or other material shall be installed or placed on
any window or in any window space, except as approved in writing by the
Landlord. If the Landlord has installed or hereafter installs any shade, blind
or curtain in the Premises, the Tenant shall not remove it without first
obtaining the Landlord's written consent thereto.
4. No sign, lettering, insignia, advertisement, notice or other
thing shall be inscribed, painted, installed, erected or placed in any portion
of the Premises which may be seen from outside the Building, or on any window,
window space or other part of the exterior or interior of the Building, unless
first approved in writing by the Landlord. Names on suite entrances shall be
provided by and only by the Landlord and at the Tenant's expense, using in each
instance lettering of a design and in a form consistent with the other
lettering in the Building, and first approved in writing by the Landlord. The
Tenant shall not erect any stand, booth or showcase or other article or matter
in or upon the Premises and/or the Building without first obtaining the
Landlord's written consent thereto.
5. The Tenant shall not place any additional lock upon any door
within the Premises or elsewhere upon the Property, and shall surrender all
keys for all such locks at the end of the Term. The Landlord shall provide the
Tenant with one set of keys to the Premises when the Tenant assumes possession
thereof.
44
<PAGE> 47
6. The delivery of towels, ice, water, food, beverages,
newspapers and other supplies, equipment and furniture will be permitted only
under the Landlord's direction and control.
7. The Tenant shall not do or permit to be done anything which
obstructs or interferes with the rights of any other tenant of the Property.
The Tenant shall not keep anywhere within the Property any matter having an
offensive odor, or any kerosene, gasoline, benzine, camphene, fuel or other
explosive or highly flammable material. The Tenant shall comply with all
federal, state and local laws and regulations pertaining to hazardous materials
and toxic substances. The Tenant will provide the Landlord with copies of any
and all environmental audits and/or similar reports for the Premises which are
obtained by the Tenant during the Term. In addition, the Tenant will provide
the Landlord with prompt written notice of: (A) any proceeding or inquiry by,
notice from, or order of any governmental authority with respect to the
presence of any hazardous materials or toxic substances on, under or about the
Premises, and (B) all claims made or threatened by any third party against the
Tenant or the Premises related to any damage, contribution, cost recovery,
compensation, loss or injury resulting from any hazardous materials or toxic
substances.
8. So that the Premises may be kept in a good state of
preservation and cleanliness, the Tenant shall, while in possession of the
Premises, permit only the Landlord's employees and contractors to clean the
Premises unless prior thereto the Landlord otherwise consents in writing. The
Landlord shall not be responsible to the Tenant for any damage done to any
furniture or other property of the Tenant or any other person caused by any of
the Landlord's employees or any other person, for any loss sustained by any of
the Tenant's employees, or for any loss of property of any kind in or from the
Premises, however occurring. The Tenant shall see each day that the windows
are closed and the doors securely locked before leaving the Premises, and that
all lights and standard office equipment within the Premises are turned off.
9. If the Tenant desires to install signalling, telegraphic,
telephonic, protective alarm or other wires, apparatus or devices within the
Premises, the Landlord shall direct where and how they are to be installed and,
except as so directed, no installation, boring or cutting shall be permitted.
The Landlord shall have the right (a) to prevent or interrupt the transmission
of excessive, dangerous or annoying current of electricity or otherwise into or
through the Building or the Premises, (b) to require the changing of wiring
connections or layout at the Tenant's expense, to the extent that Landlord may
deem necessary, (c) to require compliance with such reasonable rules as the
Landlord may establish relating thereto, and (d) in
45
<PAGE> 48
the event of noncompliance with such requirements or rules, immediately to cut
wiring or do whatever else it considers necessary to remove the danger,
annoyance or electrical interference with apparatus in any part of the
Building. Each wire installed by the Tenant must be clearly tagged at each
distributing board and junction box and elsewhere required by the Landlord,
with the number of the office to which such wire leads and the purpose for
which it is used, together with the name of the Tenant or other concern, if
any, operating or using it.
10. A directory will be provided by the Landlord on the ground
floor of the Building, on which the Tenant's name may be placed.
11. No furniture, package, equipment, supplies or merchandise may
be received in the Building, or carried up or down in the elevators or
stairways, except during such hours as are designated for such purpose by the
Landlord, and only after the Tenant gives notice thereof to the Landlord. The
Landlord shall have the exclusive right to prescribe the method and manner in
which any of the same is brought into or taken out of the Building, and the
right to exclude from the Building any heavy furniture, safe or other article
which may create a hazard and to require it to be located at a designated place
in the Premises. The Tenant shall not place any weight anywhere beyond the
safe carrying capacity of the Building. The cost of repairing any damage to
the Building or any other part of the Property caused by taking any of the same
in or out of the Premises, or any damage caused while it is in the Premises or
the rest of the Building, shall be borne by the Tenant.
12. Without the Landlord's prior written consent, (a) nothing
shall be fastened to (and no hole shall be drilled, or nail or screw driven
into) any wall or partition, (b) no wall or partition shall be painted, papered
or otherwise covered or moved in any way or marked or broken, (c) no connection
shall be made to any electrical wire for running any fan, motor or other
apparatus, device or equipment, (d) no machinery of any kind other than
customary small business machinery shall be allowed in the Premises, (e) no
switchboard or telephone wiring equipment shall be placed anywhere other than
where designated by the Landlord, and (f) no mechanic shall be allowed to work
in or about the building other than one employed by the Landlord.
13. The Tenant shall have access to the Premises at all reasonable
time. The Landlord shall in no event be responsible for admitting or excluding
any person from the Premises. In case of invasion, hostile attack,
insurrection, mob violence, riot, public excitement or other commotion,
explosion, fire or any casualty, the Landlord shall have the right to bar or
limit
46
<PAGE> 49
access to the Building to protect the safety of occupants of the Property, or
any property within the Property.
14. The Landlord shall have the right to rescind, suspend or
modify the Rules and Regulations and to promulgate such other Rules or
Regulations as, in the Landlord's reasonable judgment, are from time to time
needed for the safety, care, maintenance, operation and cleanliness of the
Building, or for the preservation of good order therein. Upon the Tenant's
having been given notice of the taking of any such action, the Rules and
Regulations as so rescinded, suspended, modified or promulgated shall have the
same force and effect as if in effect at the time at which the Tenant's lease
was entered into (except that nothing in the Rules and Regulations shall be
deemed in any way to alter or impair any provision of such lease).
15. The use of any room within the Building as sleeping quarters
is strictly prohibited at all times.
16. The Tenant shall keep the windows and doors of the Premises
(including those opening on corridors and All doors between rooms entitled to
receive heating or air conditioning service and rooms not entitled to receive
such service), closed while the heating or air conditioning system is
operating, in order to minimize the energy used by, and to conserve the
effectiveness of, such systems. The Tenant shall comply with all reasonable
Rules and Regulations from time to time promulgated by the Landlord with
respect to such systems or their use.
17. The Tenant shall not during any period of time use or permit
to be used the Premises on a regular basis by more than one (1) person for each
one hundred fifty (150) square feet of floor area within the Premises.
18. Nothing in these Rules and Regulations shall give any Tenant
any right or claim against the Landlord or any other person if the Landlord
does not enforce any of them against any other tenant or person (whether or not
the Landlord has the right to enforce them against such tenant or person), and
no such nonenforcement with respect to any tenant shall constitute a waiver of
the right to enforce them as to the Tenant or any other tenant or person.
47
<PAGE> 50
EXHIBIT E
ADDITIONAL EXPANSION SPACE
<TABLE>
<CAPTION>
Suite Square Currently Vacant Anticipated
No. Footage or occupied Vacancy Date
--- ------- ----------- ------------
<S> <C> <C> <C>
100 5,476 Occupied July 1, 1994*
(Great Western)
470 1,252 Vacant --------
410 953 Vacant --------
450 1,673 Occupied (Manpower) January 1, 1992*
460 1,605 Occupied (Eli Lilly) February 1, 1992*
420 5,952 Occupied (MIC) January 1, 1993
400 7,529 Occupied (Anderson) September 1, 1993
600 7,529 Occupied (Grant Thornton June 30, 1995*
</TABLE>
*Subject to renewal option
48
<PAGE> 51
EXHIBIT F
AGREEMENT REGARDING CANCELLATION PENALTY
Pursuant to Section 22.3(c) of that certain Agreement of Lease dated
___________________, 1991 (the "Lease"), by and between Tysons Corner
Limited Partnership, an Illinois limited partnership ("Landlord") and Deltek
Systems, Inc., a Virginia corporation ("Tenant"), Landlord and Tenant hereby
agree that Tenant must pay the sum of __________________ Dollars ($____________)
as the cancellation penalty in the event that Tenant elects to exercise its
option to terminate the Lease in accordance with such Section.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
Regarding Cancellation Penalty as of the ____ day of ________________, 19___.
LANDLORD:
--------
TYSONS CORNER LIMITED PARTNERSHIP,
an Illinois limited partnership
By: MENARD DOSWELL & CO.,
Management Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
TENANT:
------
DELTEK SYSTEMS, INC.,
a Virginia corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
49
<PAGE> 52
EXHIBIT G
PRIOR LEASES
<TABLE>
<CAPTION>
Title of Date of
Document Document Square Footage Suite
-------- -------- -------------- -----
<S> <C> <C> <C>
Agreement of Lease October, 1986 10,285 300
Agreement of Lease June 20, 1989 3,935 310
Agreement of Lease January 16, 1990 1,718 320
Agreement of Lease March 1, 1990 3,935 220
(formerly 4,039)
First Amendment to Lease March 21, 1991 3,935 220
</TABLE>
50
<PAGE> 53
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (the "First Amendment") is entered into
effective as of the 31st day of July, 1992, by and between TYSONS CORNER
LIMITED PARTNERSHIP, an Illinois limited partnership ("Landlord"), and DELTEK
SYSTEMS, INC., a Virginia corporation ("Tenant").
R E C I T A L S
R-1. Tenant and Landlord entered into an Agreement of Lease dated
November 12, 1991, whereby Tenant agreed to lease from Landlord certain space
located on the second floor of the building (the "Building") located at 8280
Greensboro Drive, McLean, Virginia 22102 (the "Lease").
R-2. Tenant and Landlord have agreed to amend the Lease, pursuant
to and in accordance with the provisions of this First Amendment.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00), the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant
hereby agree as follows:
1. TERMINATION UNDER GOWIN LEASE. In the event (i) Tenant has
exercised its right under Section 22 of the Lease and rented all of the
Additional Expansion Space described therein, and (ii) Tenant desires to lease
additional space within the Building, but Landlord is unable to offer Tenant
such additional space which is acceptable to Tenant, then Landlord agrees to
exercise its right of termination under Section 22(a)(ii) of that certain
undated Agreement of Lease by and between Landlord and Dennis L. Gowin, P.C.
(the "Gowin Lease"), and terminate the Gowin Lease in order to lease to Tenant
the space subject to the Gowin Lease. Notwithstanding the foregoing, Landlord
shall not be required to terminate the Gowin Lease unless and until (i) Tenant
provides Landlord with ten (10) months prior written notice ("Ten Month
Notice") of its intent to lease such additional space, and (ii) Landlord and
Tenant enter into a binding lease agreement for such additional space within
five (5) days after Tenant gives Landlord the Ten Month Notice.
2. LEASE RATIFICATION. Landlord and Tenant hereby ratify and
confirm the Lease in all respects and agree that the Lease, as modified by this
First Amendment, is in full force and effect.
3. MISCELLANEOUS. This First Amendment shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia, and
shall be binding upon the parties hereto and their respective successors and
permitted assigns. All capitalized terms not specifically defined herein shall
have the meanings set forth in the Lease. This First Amendment may be executed
in multiple counterparts, each of which shall be deemed an original hereof and
all of which when taken together shall constitute one and the same instrument.
<PAGE> 54
IN WITNESS WHEREOF, the parties have executed this First Amendment or
caused the same to be executed as of the date first above written.
LANDLORD:
WITNESS OR ATTEST: TYSONS CORNER LIMITED PARTNERSHIP,
an Illinois limited partnership
Balcor Property Management, Inc.
as Agent
/s/ Terri Ann Scheimrf By: /s/ Charles B. Pullar
Name: Charles B. Pullar
Title: Senior Vice President
Date: August 12, 1992
TENANT:
DELTEK SYSTEMS, INC., a Virginia
corporation
/s/ Babette J. Aller By: /s/ Donald de Laski
Name: Donald de Laksi
Title: C.E.O.
Date: July 30, 1992
2
<PAGE> 55
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE (the "Agreement") is made and entered
into this 1st day of July, 1994, by and between Tysons Comer Limited
Partnership (hereinafter referred to as "Landlord") and Deltek Systems, Inc.
(hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have previously entered into a lease
agreement dated November 12, 1991, as amended by a certain First Amendment to
Lease dated July 31, 1992 (together referred to herein as the "Lease") for the
use and occupancy of certain premises by Tenant (the "Demised Premises")
located in the 8280 Greensboro Drive Office Building; and
WHEREAS, Landlord and Tenant do hereby intend to amend and modify the
Lease as hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
1. Expansion Space: Suite 250 comprising approximately 2,648 square feet
of space in the Building, on the area shown on the attached site plan
identified as Exhibit A and incorporated herein (the "Expansion
Space") is hereby added to the Demised Premises effective August 1,
1994.
2. Rental: The total Basic Rental for the Expansion Space shall be equal
to $180,284.81, and shall be payable in equal monthly installments of
$4,192.67 per month for a term commencing September 1, 1994 and
terminating March 31, 1998. Such Basic Rental amounts shall be in
addition to the Basic Rental payable by Tenant for the original
Demised Premises as set forth in the Lease. Effective September 1,
1994, the Tenant's Prorata Share of Operating Expenses and Taxes as
set forth in the Lease, shall hereby be increased by 1.3407% so that
Tenant's total Prorate Share of Operating Expenses and Taxes shall be
18.6534%. Tenant's occupancy of Suite 250 shall be subject to all of
the general terms and conditions contained in the Lease.
3. Improvements to the Expansion Space: Landlord agrees to contribute
Twelve Dollars ($12.00) per rentable square foot of the Expansion
Space (the "Tenant Allowance") towards the cost of constructing
certain tenant improvements (the "Tenant Improvements") for the
Expansion Space in accordance with the space plans (the "Plans") to be
approved by both Landlord and Tenant and attached hereto as Exhibit B.
It is understood and agreed that Landlord's contractors shall perform
the work in connection with the Tenant Improvements. If the cost to
construct the Tenant Improvements pursuant to the Plans exceeds the
Tenant Allowance, then within ten (10) days of Tenant's receipt of an
invoice from Landlord, Tenant shall pay Landlord, as additional rent,
by certified or cashier's check, an amount equal to the difference
between the cost to construct the Tenant Improvements and the Tenant
Allowance. Tenant agrees it shall not make any changes to the Plans
without obtaining the prior written consent of Landlord. In the event
Tenant shall make changes to the Plans that are approved by Landlord
and which result in an additional cost to Landlord of completing the
Tenant Improvements in excess of the Tenant Allowance, or in the event
Tenant, its employees or agents, causes any delays or is otherwise
responsible, in whole or in part, for any additional costs in excess
of the Tenant Allowance incurred by Landlord in constructing the
Tenant Improvements, Tenant shall pay to Landlord within ten (10) days
of receipt of written notice from Landlord, as additional rent, by
certified or cashier's check, any such additional costs incurred by
Landlord in excess of the Tenant Allowance. Tenant's failure to
timely pay any such amounts to be paid by Tenant as set forth in this
Paragraph, at the time and in the manner set forth in this Paragraph,
shall be an event of default. In the event, after the Tenant
Improvements have been completed, Landlord determines that the
<PAGE> 56
costs actually incurred to construct the Tenant Improvements is less
than the Tenant Allowance, the difference between the amount of the
Tenant Allowance and the costs actually incurred to construct the
Tenant Improvements shall be credited against Tenant's next payment of
Basic Rental.
4. Termination of Rights to Suites 400 and 460: Pursuant to the terms of
Section 22 of the Lease, Tenant has certain expansion rights with
respect to Suites 400 and 460 in the Building. Tenant hereby
acknowledges and agrees that Landlord has fulfilled all notice and
other obligations to Tenant with respect to Suite 400 and Suite 460
and that Tenant hereby relinquishes and terminates all present and
future rights and interests of whatever nature which Tenant presently
or in the future may have with respect to Suites 400 and 460 in the
Building.
5. Right of First Offer: (for Suites 410, 430, 440 and 450)
So long as the Lease is in full force and effect and Tenant:
(i) is occupying and doing business from the Demised Premises at
the time the elections described in this Paragraph are
exercised; and
(ii) is not in default under the Lease either at the time of the
elections described in this Paragraph or at the effective date
thereof, and
(iii) has maintained a history of payments within the applicable
grace period, if any, provided under the Lease;
Tenant shall have a right of first offer ("Right of First Offer") to
lease each of (i) Suite 410, currently leased by Amerifax, Inc. and
comprising approximately 2,562 rentable square feet of space, (ii)
Suite 430, currently leased by Mehdi Rezazad, CPA and comprising
approximately 508 rentable square feet of space, (iii) Suite 440,
currently leased by Nathan Olshan, CPA and comprising approximately
963 rentable square feet of space, and (iv) Suite 450, currently
leased by Manpower, Inc. and comprising approximately 1,673 square
feet of space (collectively, the "First Offer Spaces", and
individually, a "First Offer Space") effective upon the expiration of
the applicable lease with the current tenant of each of the First
Offer Spaces. The expiration dates of the current leases for the
First Offer Spaces are as follows: Suite 410 - May 31, 1996; Suite 430
- January 31, 1995; Suite 440 - December 31, 1996; and Suite 450 -
January 14, 1997. In order to exercise its Right of First Offer with
respect to any of the First Offer Spaces, Tenant must notify Landlord
in writing, by certified or registered mail, no later than one hundred
eighty (180) days prior to the applicable expiration date described
above for the current lease for such space. If for any reason
Tenant's notice is not timely given in the manner set forth herein
with respect to any of the First Offer Spaces, Tenant's right under
this Paragraph, with respect to such First Offer Spaces, shall
terminate and be null and void and without further force and effect
throughout the remainder of the Term of the Lease or any extensions,
modifications or amendments thereof.
If Tenant timely exercises the Right of First Offer with respect to
any First Offer Space, Landlord and Tenant will promptly enter into a
lease amendment agreement prepared by Landlord for the applicable
First Offer Space (the "New Lease"). The terms of each New Lease
shall, among other things, provide that (i) the definition of the
Demised Premises in the Lease shall be amended to include the
applicable First Offer Space, (ii) the Term of the New Lease shall be
coterminous with the Term of the Lease, (iii) the Basic Rental payable
for the applicable First Offer Space shall be equal to the then
current market rate for such space as determined by Landlord in
Landlord's sole discretion, (iv) Tenant's Prorata Share of Operating
Expenses and Taxes shall be adjusted to reflect the addition of the
applicable First Offer Space to the Demised Premises, and (v) any and
all tenant improvement costs and other construction costs which Tenant
requires or desires to make to the applicable First Offer Space shall
be at Tenant's sole cost and expense, subject to the prior written
approval by Landlord of all contractors to be used and work to be
performed. Tenant
2
<PAGE> 57
shall accept the applicable First Offer Space in its then "as is"
condition. If for any reason Tenant fails to timely exercise the
Right of First Offer with respect to any applicable First Offer Space,
or if Tenant properly exercises the Right of First Offer with respect
to any applicable First Offer Space but thereafter for any reason
(except for delays caused by Landlord) does not enter into the New
Lease within five business days after its submission to Tenant,
Landlord will be free to rent the applicable First Offer Space to any
other prospective tenant. In such event, the Right of First Offer
shall terminate and be null and void and without further force and
effect with respect to the applicable First Offer Space throughout the
remainder of the Term of the Lease or any extensions, modifications or
amendments thereof.
Notwithstanding any of the foregoing to the contrary, Tenant
acknowledges and agrees that Tenant's Right of First Offer set forth
herein is subject and subordinate to (a) any right of first refusal,
right of first offer, expansion right or other similar right or option
to lease any First Offer Space held by any current tenant in the
Building, or any of their assignees, sublessees, transferees or
successors-in-interest, and (b) any agreement entered into between
Landlord and the then current tenant for the applicable First Offer
Space, or its assignee, sublessee, transferee or
successor-in-interest, to extend, renew, continue, lease or re-lease
such First Offer Space. In the event of the exercise or occurrence of
the events described in (a) or (b) above, even if Tenant properly
exercises or has exercised its Right of First Offer and executes or
has executed the New Lease, Tenant's Right of First Offer with respect
to such First Offer Space shall terminate and be null and void and
without further force and effect throughout the remainder of the Term
of the Lease or any extensions, modifications or amendments thereof.
Landlord shall not be liable to Tenant for any loss or damage
sustained by Tenant as a result thereof. This Right of First Offer is
personal and unique to Tenant and is not transferable to any assignee,
sublessee, transferee or successor-in-interest to the initial Tenant
under the Lease.
6. Conflict of Terms: Except as expressly amended herein, all terms and
conditions in the Lease, shall remain unchanged and in full force and
effect. In the event of any conflict between the terms and conditions
of the Lease and the terms and conditions of this Agreement, the terms
and conditions of this Agreement shall control. All capitalized terms
not otherwise defined herein shall have the meaning set forth in the
Lease.
LANDLORD: TENANT:
Tysons Corner Limited Partnership Deltek Systems, Inc.
By: Allegiance Realty Group, Inc.
Its Authorized Agent
By: /s/ Charles B. Pullar By: /s/ Donald deLaski
Sr. VP
Witness: /s/ Teri Ana Scheinfeif Witness: /s/ Babette J. Aller
Date: 7/11/94 Date: 7/1/94
3
<PAGE> 58
THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE (the "Agreement") is made and entered
into this 30th day of September 1994, by and between TYSONS CORNER LIMITED
PARTNERSHIP (hereinafter referred to as "Landlord") and DELTEK SYSTEMS, INC.,
(hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have previously entered into a lease
agreement dated November 12, 1991, as amended by a certain First Amendment to
Lease dated July 31, 1992, and a Second Amendment to Lease dated July 1, 1994
(together referred herein as the "Lease") for the use and occupancy of certain
premises by Tenant of space located in the 8280 Greensboro Drive Office
Building; and
WHEREAS, Landlord and Tenant do hereby intend to amend and modify the
Second Amendment to Lease as hereinafter set forth in order to amend and modify
the provisions in the Lease regarding tenant improvements to the Demised
Premises.
NOW THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
1. Improvement to Premises: Paragraph 3 of the Second Amendment
to Lease is hereby deleted in its entirety and replaced with the following:
Landlord agrees to contribute Twelve and No/100 Dollars ($12.00) per
rentable square foot of the Demised Premises (the "Tenant Allowance")
towards the cost of constructing certain tenant improvements (the
"Tenant Improvements") for the Demised Premises in accordance with the
space plan which has been mutually agreed upon by both Landlord and
Tenant (the "Plan") attached hereto as Exhibit B and made a part
hereof. Tenant agrees to contribute an amount equal to Four and
55/100 Dollars ($4.55) per rentable square foot of the Demised
Premises toward the cost of the construction of the Tenant
Improvements (the "Tenant's Contribution"). The Tenant's Contribution
shall be payable by Tenant to Landlord as additional rent on the first
day of each month during the term of the Lease in equal monthly
installments of Two Hundred Eighty Six and 65/100 Dollars ($286.65)
per month. It is understood and agreed that Landlord's contractors
shall perform the work in connection with the Tenant Improvements. If
the cost to construct the Tenant Improvements pursuant to the Plans
exceeds the combined total of the Tenant Allowance and the Tenant's
Contribution, Tenant shall pay Landlord within ten (10) days of
Tenant's receipt of an invoice from Landlord, as additional rent in
certified funds, an amount equal to the difference between the cost to
construct the Tenant Improvements and the combined total of the Tenant
Allowance and Tenant's Contribution. Tenant agrees it shall not make
any changes to the Plans without obtaining the prior written consent
of Landlord. In the event Tenant shall make changes to the Plans that
are approved by Landlord and which result in an additional cost to
Landlord of completing the Tenant Improvements in excess of the
combined total of the Tenant Allowance and the Tenant's Contribution,
Tenant shall pay Landlord prior to construction of such changes, as
additional rent, any increase in the cost of completing the Tenant
Improvements resulting from such changes in the Plans.
<PAGE> 59
In the event Tenant, its employees or agents, causes any delays or is
otherwise responsible, in whole or in part, for any additional costs
incurred by Landlord in constructing the Tenant Improvements (other
than additional costs arising due to changes in the Plans as described
above) which are in excess of the combined total of the Tenant
Allowance and the Tenant's Contribution, Tenant shall pay to Landlord
within ten (10) business days of receipt of written notice from
Landlord, as additional rent, any such additional costs incurred by
Landlord. Tenant's failure to timely pay any such amounts to be paid
by Tenant as set forth in this paragraph, at the time and in the
manner set forth in this paragraph, shall be an event of default under
the Lease. Provided that Tenant is not in default under any Lease
provision, in the event the costs incurred by Landlord in connection
with the Tenant Improvements are less than the combined total of the
Tenant Allowance and the Tenant's Contribution, the amount of the
Tenant's Contribution which exceeds the costs incurred by Landlord in
connection with the Tenant Improvements shall be payable to Tenant by
way of a credit against the next installment of Basic Rental due
hereunder.
2. Conflict of Terms: Except as expressly amended herein, all
terms and conditions in the Lease dated November 12, 1991, shall remain
unchanged and in full force and effect. In the event of any conflict between
the terms and conditions of the Lease and the terms and conditions of this
Agreement, the terms and conditions of this Agreement shall control. All
capitalized terms not otherwise defined herein shall have the meaning set forth
in the Lease.
LANDLORD: TENANT:
Tysons Corner Limited Partnership Deltek Systems, Inc.
By: Allegiance Realty Group, Inc.
Its Authorized Agent
By: /s/ Charles B. Pullar By: /s/ Donald deLaski
Charles B. Pullar Donald DeLaski
Senior Vice President President
Witness: /s/ Teri Ann Scheinreif Witness:/s/Babette J. Aller
2
<PAGE> 60
FOURTH AMENDMENT TO LEASE
THIS FOURTH AMENDMENT TO LEASE (the "Agreement") is made and entered
into this 18th day of October, 1994, by and between Tysons Corner Limited
Partnership (hereinafter referred to as "Landlord") and Deltek Systems, Inc., a
Virginia Corporation (hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have previously entered into a lease
agreement dated November 12, 1991, as amended by a certain First Amendment to
Lease dated July 31, 1992, by a certain Second Amendment to Lease dated July 1,
1994, and by a certain Third Amendment to Lease dated September 30, 1994
(together collectively referred to herein as the "Lease") for the use and
occupancy of certain premises by Tenant (the "Demised Premises") located in the
8280 Greensboro Drive Office Building; and
WHEREAS, Landlord and Tenant do hereby intend to amend and modify the
Lease as hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
1. Expansion Space: Suite 210 comprising approximately 1,402
square feet of space in the Building, on the area shown on the
attached site plan identified as Exhibit A and incorporated
herein (the "Expansion Space") is hereby added to the Demised
Premises effective December 1, 1994 for the remaining of the
Term of the Lease, as extend from time to time. The total
square footage for the Demised Premises shall be 38,244.
2. Rental: The total additional Basic Rental for the Expansion
Space shall be equal to $88,793.33, and shall be payable in
equal monthly installments of $2,219.83 per month for a term
commencing December 1, 1994 and terminating March 31, 1998.
Such Basic Rental amounts shall be in addition to the Basic
Rental payable by Tenant for the Demised Premises as set forth
in the Lease. Effective December 1, 1994, the Tenant's
Prorata Share of Operating Expenses and Taxes as set forth in
the Lease, shall hereby be increased by 0.7065% so that
Tenant's total Prorate Share of Operating Expenses and Taxes
shall be 19.3599%. Tenant's occupancy of Suite 210 shall be
subject to all of the general terms and conditions contained
in the Lease.
3. Improvements to the Expansion Space: Landlord agrees to
contribute Twelve Dollars ($12.00) per rentable square foot of
the Expansion Space (the "Tenant Allowance") towards the cost
of constructing certain tenant improvements (the "Tenant
Improvements") for the Expansion Space in accordance with the
space plans (the "Plans") to be approved in writing by both
Landlord and Tenant and attached hereto as Exhibit B. It is
understood and agreed that Landlord's contractors shall
perform the work in connection with the Tenant Improvements.
If the cost to construct the Tenant Improvements pursuant to
the Plans exceeds the Tenant Allowance, then within ten (10)
days of Tenant's receipt of an invoice from Landlord, Tenant
shall pay Landlord, as additional rent, by certified or
cashier's check, an amount equal to the difference between the
cost to construct the Tenant Improvements and the Tenant
Allowance. Tenant agrees it shall not make any
<PAGE> 61
changes to the Plans without obtaining the prior written
consent of Landlord. In the event Tenant shall make changes
to the Plans that are approved by Landlord and which result in
an additional cost to Landlord of completing the Tenant
Improvements in excess of the Tenant Allowance, or in the
event Tenant, its employees or agents, causes any delays or is
otherwise responsible, in whole or in part, for any additional
costs in excess of the Tenant Allowance incurred by Landlord
in constructing the Tenant Improvements, Tenant shall pay to
Landlord within ten (10) days of receipt of written notice
from Landlord, as additional rent, by certified or cashier's
check, any such additional costs incurred by Landlord in
excess of the Tenant Allowance. Tenant's failure to timely
pay any such amounts to be paid by Tenant as set forth in this
Paragraph, at the time and in the manner set forth in this
Paragraph, shall be an event of default. In the event, after
the Tenant Improvements have been completed, Landlord
determines that the costs actually incurred to construct the
Tenant Improvements is less than the Tenant Allowance, the
difference between the amount of the Tenant Allowance and the
costs actually incurred to construct the Tenant Improvements
shall be credited against Tenant's next payment of Basic
Rental.
4. Possession. If for any reason the Expansion Space shall not
be ready for occupancy by Tenant by December 1, 1994, this
Lease shall not be affected thereby, nor shall Tenant have any
claim against Landlord by reason thereof, but no Base Rent
shall be payable with respect to the Expansion Space for the
period during which the Expansion Space shall not be ready for
occupancy. All claims for damages arising out of any such
delay are waived and released by Tenant. With respect to the
foregoing, if delivery of possession of the Expansion Space
shall be delayed beyond December 1, 1994, it is understood and
agreed that the commencement of the Lease Term for the
Expansion Space shall be extended to the date that the
Expansion Space is tendered to the Tenant. In the event of
such delay in tendering the Expansion Space to the Tenant the
Landlord shall not be liable to Tenant for any damage
whatsoever resulting from the delay in the delivery of
possession of the Expansion Space. Notwithstanding the
foregoing, it is understood that if and to the extent that
Landlord is unable to deliver timely possession of the
Expansion Space to Tenant due to delays by Tenant, then the
Base Rent reserved for the Expansion Space shall commence to
accrue on the date possession of the Expansion Space would
have been delivered to Tenant but for the delays of Tenant.
If permission is given to Tenant to occupy the Expansion Space
prior to December 1, 1994, such occupancy shall be subject to
all of the provisions of this Lease (including the payment of
Base Rent).
5. Brokerage: Landlord and Tenant represent and warrant to each
other that they have not directly or indirectly dealt with any
broker in connection with this Agreement or the Lease except
as expressly set forth therein. Each party agrees to defend,
exonerate and hold the other harmless from and against any and
all claims for brokerage fees and commissions by reason of its
breach of the aforesaid representation and warranty.
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<PAGE> 62
6. Conflict of Terms: Except as expressly amended herein, all
terms and conditions in the Lease, shall remain unchanged and
in full force and effect. In the event of any conflict
between the terms and conditions of the Lease and the terms
and conditions of this Agreement, the terms and conditions of
this Agreement shall control. All capitalized terms not
otherwise defined herein shall have the meaning set forth in
the Lease.
LANDLORD: TENANT:
Tysons Corner Limited Deltek Systems, Inc., a Partnership
Virginia Corporation
By: Allegiance Realty
Group, Inc.
Its Authorized Agent
By: /s/ Charles B. Pullar By: /s/ Donald deLaski
Charles B. Pullar Donald DeLaski
Senior Vice President President
Witness: /s/ Teri Ann Scheinreif Witness: /s/ Babette Aller
3
<PAGE> 63
FIFTH AMENDMENT TO LEASE
THIS FIFTH AMENDMENT TO LEASE (the "Fifth Amendment") is made and
entered into this 30th day of June, 1995 by and between TYSON'S CORNER LIMITED
PARTNERSHIP ("Landlord") and DELTEK SYSTEMS, INC. ("Tenant").
WITNESSETH
WHEREAS, Landlord and Tenant have previously entered into a lease
agreement dated November 12, 1991, as amended by the First Amendment to Lease
dated July 31, 1992, by the Second Amendment to Lease dated July 1, 1994, by
the Third Amendment to Lease dated September 30, 1994, and by the Fourth
Amendment to Lease dated October 18, 1994 (together collectively referred to
herein as the "Initial Lease") for the use and occupancy of premises consisting
of Suites 210, 220, 250 and 300 by Tenant (the "Initial Premises") located in
the 8280 Greensboro Drive Office Building; and
WHEREAS, Tenant desires to lease additional space in the Building
consisting of approximately 8,694 square feet of space commonly known as Suite
600 (the "Expansion Space") and Landlord desire to let the Expansion Space to
Tenant on the terms set forth herein (the Initial Premises as expanded by the
Expansion Space shall be referred to as, the "Premises"); and
WHEREAS, Landlord and Tenant desire to further amend the Initial Lease
as set forth herein and to provide for the addition of the Expansion Space to
the Premises (the Initial Lease, as amended by this Fifth Amendment shall be
referred to as, the "Lease").
NOW THEREFORE, in consideration of the mutual covenants and promises
herein contained, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Landlord and Tenant agree as
follows:
1. DEFINITIONS. Unless otherwise herein defined, all capitalized terms
in this Fifth Amendment shall have the meaning given to them in the
Initial Lease.
2. EXPANSION SPACE. Suite 600 comprising approximately 8,694 square feet
of space in the Building, on the area shown on the attached site plan
identified as Exhibit A and incorporated herein (the "Expansion
Space") is hereby added to the Premises effective as of the "Expansion
Space Commencement Date" (as defined in Paragraph 5 hereof) for the
remainder of the Initial Lease Term and for the "Renewal Term" (as
defined in Paragraph 6 hereof). Effective on the Expansion Space
Commencement Date, the total square footage for the Premises shall be
40,986.
3. BASE RENT AND ADDITIONAL RENT FOR THE INITIAL PREMISES AND FOR THE
EXPANSION SPACE DURING THE REMAINDER OF THE INITIAL LEASE TERM.
Effective July 1, 1995, Tenant shall pay as Base Rent for the Initial
Premises, for the remainder of the Initial Lease Term, a total amount
of One Million Six Hundred Eighty Seven Thousand Two Hundred Fifty
Seven Dollars ($1,687,257.00), payable in installments, in advance, on
the first day of each month during the Initial Lease Term, in the
amount of Fifty One Thousand One Hundred Twenty Nine Dollars
($51,129.00) each.
Tenant shall pay as Base Rent for the Expansion Space, for the period
beginning on the Expansion Space Commencement Date and terminating on
March 31, 1998, a total amount of Four Hundred Forty Thousand Four
Hundred Ninety-Six Dollars
<PAGE> 64
($440,496.00), payable in installments, in advance, on the first day
of each month during the Initial Lease Term, in the amount of Thirteen
Thousand Seven Hundred Sixty-Five and 50/100ths Dollars ($13,765.50)
each.
Tenant shall also pay Additional Rent on the Premises during the
remainder of the Initial Lease Term in the same manner set forth in
the Lease.
Effective on the Expansion Space Commencement Date, the Tenant's
Prorata Share of Operating Expenses and Taxes as set forth in the
Lease, shall be increased by 4.38% so that Tenant's total Prorata
Share of Operating Expenses and Taxes shall be 20.64%. Tenant's
occupancy of the Expansion Space shall be subject to all of the
general terms and conditions contained in the Lease.
4. IMPROVEMENTS TO THE EXPANSION SPACE. Landlord agrees to contribute
Twelve Dollars ($12.00) per rentable square foot of the Expansion
Space which totals $104,328.00 (the "Expansion Space Tenant
Allowance") towards the cost of constructing certain tenant
improvements (the "Expansion Space Tenant Improvements") for the
Expansion Space in accordance with the space plans (the "Expansion
Space Plans") to be approved in writing by both Landlord and Tenant
and attached hereto as Exhibit B. It is understood and agreed that
Landlord's contractors shall perform the work in connection with the
Expansion Space Tenant Improvements. Tenant agrees it shall not make
any changes to the Expansion Space Plans without obtaining the prior
written consent of Landlord.
If the cost to construct the Expansion Space Tenant Improvements
pursuant to the Expansion Space Plans exceeds the Expansion Space
Tenant Allowance, or if Tenant shall make changes to the Expansion
Space Plans that are approved by Landlord and which result in an
additional cost to Landlord for completing the Expansion Space Tenant
Improvements in excess of the Expansion Space Tenant Allowance, or in
the event Tenant, its employees or agents, causes any delays or is
otherwise responsible, in whole or in part, for any additional costs
in excess of the Expansion Space Tenant Allowance incurred by Landlord
in constructing the Tenant Improvements, then in any of the foregoing
cases, the additional amounts in excess of the Expansion Space Tenant
Allowance shall be amortized over the remainder of the Initial Lease
Term and the Renewal Term at an interest rate of ten percent (10%) per
annum and payable in monthly installments by Tenant as Additional Rent
under the Lease. In the event the cost of the Expansion Space Tenant
Improvements are in excess of the Expansion Space Tenant Allowance,
Landlord and Tenant will promptly enter into a lease amendment
prepared by Landlord to reflect the adjustments to Additional Rent as
set forth above. Tenant's failure to timely pay any such amounts to
be paid by Tenant as set forth in this Paragraph, at the time and in
the manner set forth in this Paragraph or to sign any such lease
amendment within five (5) business days after submission to Tenant
(except for delays caused by Landlord), shall constitute an event of
default under the Lease.
5. POSSESSION OF THE EXPANSION SPACE. The Expansion Space Commencement
Date shall be the later of (i) August 1, 1995 or (ii) the date on
which preparation of the Expansion Space in accordance with the
Expansion Space Plans is substantially complete, as accelerated by the
number of days of delay caused by the Tenant. The Expansion Space
shall be deemed to be substantially complete when the Tenant
Improvements have been completed with exception of minor
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<PAGE> 65
"punchlist" items. The Expansion Space shall be conclusively presumed
to be delivered and accepted in full compliance with this Fifth
Amendment on the Expansion Space Commencement Date.
If for any reason the Expansion Space shall not be ready for occupancy
by Tenant by August 1, 1995, the Lease shall not be affected thereby,
nor shall Tenant have any claim against Landlord by reason thereof,
but no Base Rent shall be payable with respect to the Expansion Space
for the period during which the Expansion Space shall not be ready for
occupancy. All claims for damages arising out of any such delay are
waived and released by Tenant. Notwithstanding the foregoing, it is
understood that if and to the extent that Landlord is unable to
deliver timely possession of the Expansion Space to Tenant due to
delays by Tenant, then the Base Rent reserved for the Expansion Space
shall commence to accrue on the date possession of the Expansion Space
would have been delivered to Tenant but for the delays of Tenant. If
permission is given to Tenant to occupy the Expansion Space prior to
August 1, 1995, such occupancy shall be subject to all of the
provisions of this Lease (including the payment of Base Rent).
6. EXTENSION OF INITIAL LEASE TERM. The Initial Lease Term is hereby
extended for both the Initial Premises and the Expansion Space for an
additional period of one year (the "Renewal Term") commencing on April
1, 1998 (the "Renewal Term Commencement Date") and terminating on
March 31, 1999 (the "Termination Date").
7. BASE RENT AND ADDITIONAL RENT DURING THE RENEWAL TERM. As of the
Renewal Term Commencement Date, Tenant shall pay as Base Rent rental
on the Premises for the Renewal Term a total amount of Eight Hundred
Two Thousand Ninety-Five and 96/100ths Dollars ($802,095.96), payable
in installments, in advance, on the first day of each month during the
Renewal Term, in the amount of Sixty-Six Thousand Eight Hundred
Forty-One and 33/100ths Dollars ($66,841.33) each.
Tenant shall also pay Additional Rent on the Premises during the
Renewal Term in the same manner as set forth in the Initial Lease.
8. TENANT IMPROVEMENTS TO THE INITIAL PREMISES. Section 5.2 of the
Initial Lease is hereby deleted in its entirety and the following is
substituted therefore:
"Landlord agrees to contribute Two Dollars ($2.00) per rentable square
foot of the Initial Premises totaling $64,584.00 (the "Initial Tenant
Allowance") towards the cost of making minor drywall repairs and
repainting the Initial Premises (the "Initial Premises Tenant
Improvements") at a time to be mutually agreed-upon but, in any event,
prior to the start of the Renewal Term. It is understood and agreed
that Landlord's contractors shall perform the work in connection with
the Initial Premises Tenant Improvements. If the cost of the Initial
Premises Tenant Improvements exceeds the Initial Premises Tenant
Allowance, then such additional amounts in excess of the Initial
Premises Tenant Allowance shall be amortized over the remaining Lease
Term (including the Renewal Term) at an interest rate of ten percent
(10%) per annum and payable in monthly installments by Tenant as
Additional Rent under the Lease. In the event the cost of the Initial
Premises Tenant Improvements are in excess of the Initial Premises
Tenant Allowance, Landlord and Tenant will promptly enter into a lease
amendment prepared by Landlord to reflect the adjustments to
Additional Rent as set forth above. Tenant's failure to
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<PAGE> 66
timely pay any such amounts to be paid by Tenant as set forth in this
Paragraph, at the time and in the manner set forth in this Paragraph
or to sign any such lease amendment within five (5) business days
after submission to Tenant (except for delays caused by Landlord),
shall constitute an event of default under the Lease."
9. CROSS DEFAULT. In the event Tenant shall default under the Lease for
Suite 420 of the Building, as amended from time to time, which default
is not timely cured, such default shall be deemed an event of default
under the Lease and Landlord shall be entitled to enforce any and all
rights and remedies against Tenant as provided for a default therein.
10. AMENDMENT OF RENEWAL OPTION. Sections 1.5 and 1.6 of the Initial
Lease are hereby deleted in their entirety and the following is
substituted therefore:
"OPTION TO RENEW. So long as the Lease is in full force and
effect and Tenant both at the time of exercising the Option to
Renew described in this Paragraph and at the time of the
commencement of the following described Option Period:
(i) is occupying and doing business from the
Premises at the time the Option to Renew
described in this Paragraph is exercised; and
(ii) is not in default under the Lease either at
the time of the exercise of the Option to
Renew described in this Paragraph or at the
time of the commencement of (each of) the
following described Option Period(s); and
(iii) has maintained a history of payments within
the applicable grace period, if any, provided
under the Lease;
Tenant is hereby granted an option to renew the Lease (the
"Option to Renew") for two (2) successive renewal term(s) (the
"Option Period(s)") after the expiration of the Renewal Term,
each commencing upon the day next following the expiration of
the then current Lease Term. The Option Period(s) shall
(each) be for a term of three (3) years. The terms of the
Lease during the Option Period(s) shall be the same as during
the current Lease period except as provided below. The Option
to Renew must be exercised no less than one hundred eighty
(180) days prior to the expiration of the Lease (note: where
applicable, instead of "Lease", recite... "the expiration of
the then current Lease Term") by written notice to Landlord
sent by registered or certified mail, return receipt
requested. In the event Tenant fails to notify Landlord, in
the manner herein specified, this Option to Renew shall be of
no further force and effect.
Base Rent for the Option Period(s) shall be ninety-five
percent (95%) of the then current fair market rate for the
Premises fixed as of
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<PAGE> 67
the date of commencement of the applicable Option Period.
Landlord's determination of the market rate shall be
conclusive on Tenant. This Option to Renew shall be deleted
from the Lease during the Option Period and no further options
to renew shall be in effect. Unless expressly set forth
herein, any tenant concessions initially provided for in the
Lease shall not be deemed applicable to any Option Period.
In no event shall the Base Rent during any Option Period
decrease below the Base Rent then paid by Tenant at the
expiration of the then current Lease Term. Further, this
Option to Renew is personal and unique to Tenant and is not
transferable to any assignee, sublessee or any other successor
in interest to the initial Tenant under the Lease."
11. EXTRAORDINARY SERVICES. As of July 1, 1995, Tenant acknowledges and
agrees that Landlord's actual cost for extraordinary services as
described in Section 6.2 of the Initial Lease shall be at the rate of
$30.00 per unit per hour, subject to change.
12. INCREASE OF BASE AMOUNT FOR COSTS COMPONENT. As of July 1, 1995,
Tenant acknowledges and agrees that the base amount of the Costs
Component of Base Rent set forth in Section 2.1 (a)(B)(ii)(i) of the
Lease is Seven and No/100ths Dollars ($7.00), per square foot in the
Premises.
13. AMENDMENT OF EXPANSION SPACE PROVISIONS. Section 22 of the Initial
Lease and Paragraph 5 of the Second Amendment to Lease are hereby
deleted in their entirety and the following is substituted therefore:
"RIGHT OF FIRST REFUSAL. So long as the Lease is in full
force and effect and Tenant:
(i) is occupying and doing business from
the Premises at the time the
election described in this Paragraph
is exercised;
(ii) is not in default under the Lease
either at the time of the election
described in this Paragraph or at
the effective date thereof; and
(iii) has maintained a history of payments
within the applicable grace period,
if any, provided under the Lease;
Subject to the rights of any current tenants in the Building,
or any of their assignees, sublessees, transferees or
successors-in-interest, which rights may supersede the rights
granted to Tenant pursuant to this Paragraph, Landlord agrees
that prior to renting any of Suites 410, 430 and 440 of the
Building (each of the foregoing suites is individually
referred to as, a "First Refusal Space") to any third party,
Landlord shall notify Tenant of the availability of such
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<PAGE> 68
space (the "Availability Notice"). On or before the
third (3rd) business day after Tenant's receipt of such
notice, Tenant will have the right (the "First Refusal Right")
to send Landlord a notice stating that Tenant elects to rent
the subject First Refusal Space upon the same terms and
conditions set forth in this Lease, except that the Expansion
Space Tenant Allowance with respect to each First Refusal
Space (the "First Refusal Space Tenant Improvements") will be:
(i) prorated over the remaining Lease Term (including the
Renewal Term) at the rate of Twenty-Seven ($0.27) cents per
rentable square foot of First Refusal Space for each month
then remaining on the Initial Lease Term and the Renewal Term
and (ii) construction of the Expansion Space Tenant
Improvements with respect to the subject First Refusal Space
will be governed by the terms of Paragraph 4 of this Fifth
Amendment. To be timely, such notice from Tenant must be
postmarked within the three (3) business day period.
If Tenant timely exercises the First Refusal Right, Landlord
and Tenant will promptly enter into a lease or lease amendment
agreement prepared by Landlord for the First Refusal Space
(the "New Lease") on the Lease terms. Except as expressly set
forth above, Tenant shall accept the First Refusal Space in
its then "as is" condition. If for any reason Tenant fails to
timely exercise the First Refusal Right, or if Tenant properly
exercises the First Refusal Right but thereafter for any
reason (except for delays caused by Landlord) does not enter
into the New Lease within five (5) business days after its
submission to Tenant, Landlord will be free to rent the
subject First Refusal Space to any other prospective tenant
and the First Refusal Right as to such space will be null and
void and without further force and effect throughout the
remainder of the term of the Lease (including the Renewal
Term) or any extensions, modifications or amendments thereof.
Notwithstanding any contrary provision hereof: (a) the New
Lease must (i) be guaranteed by the guarantor(s) of the Lease,
if any, upon a guaranty form which is tendered to Tenant by
Landlord, and (ii) stipulate that any default by Tenant under
the New Lease will be deemed to constitute a like default
under the Lease; (b) Tenant agrees that any default by it
under the Lease will be deemed to constitute a like default
under the New Lease; and (c) this First Refusal Right is
personal and unique to Tenant and is not transferable to any
assignee, sublessee or other successor in interest to the
initial Tenant under the Lease."
14. NO BROKER. Tenant hereby warrants and represents to Landlord that
Tenant has not dealt with any broker, agent or finder in connection
with this Fifth Amendment, and Tenant
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<PAGE> 69
covenants and agrees to indemnify and hold Landlord harmless from and
against any and all loss, liability, damage, claim, judgment, loss or
expense (including but not limited to, attorneys' fees and court
costs) that may be incurred or suffered by Landlord because of any
claim for any fee, commission or similar compensation with respect to
this Fifth Amendment made by any broker, agent or finder claiming to
have dealt with Tenant, whether or not such claim is meritorious.
15. CAPTIONS. The captions used herein are for convenience of reference
only and shall not be deemed to limit or affect the construction and
interpretation of the terms of this Fifth Amendment.
16. CONFLICT OF TERMS. Except as expressly amended herein, all terms and
conditions of the Lease shall remain unchanged and in full force and
effect.
In the event of any conflict between the terms and conditions of the
Lease and the terms and conditions of this Fifth Amendment, the terms
and conditions of this Fifth Amendment shall control.
LANDLORD: TENANT:
TYSON'S CORNER LIMITED DELTEK SYSTEMS, INC.
PARTNERSHIP, an Illinois
limited partnership,
By: Tyson's Corner Partners, Inc., By: /s/ Donald deLaski
an Illinois corporation, its Its: C.E.O.
general partner,
By: /s/ Tom Molina
Its: VP
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<PAGE> 70
SIXTH AMENDMENT TO LEASE
THIS SIXTH AMENDMENT TO LEASE (the "Agreement") is made and entered into this
2nd day of August, 1996, by and between Tysons Corner Limited Partnership, an
Illinois limited partnership ("Landlord"), and Deltek Systems, Inc., a Virginia
corporation ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have previously entered into a lease agreement
dated November 12, 1991, as amended by the First Amendment to Lease dated July
31, 1992, and by the Second Amendment to Lease dated July 1, 1994, and as
amended by the Third Amendment to Lease dated September 30, 1994, and by the
Fourth Amendment to Lease dated October 18, 1994, and as amended by the Fifth
Amendment to Lease dated June 30, 1995 (collectively, the "Lease") for the use
and occupancy of certain premises by Tenant commonly known as Suites 210, 220,
250, 300 and 600 (the "Initial Premises") located in the 8280 Greensboro Drive
Office Building in McLean, Virginia (the "Building"); and
WHEREAS, Landlord and Tenant do hereby intend to amend and modify the Lease as
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
1. Expansion Space. Effective on the date of substantial completion of
each of the referenced suites, Suites 410 (consisting of approximately
2,562 rentable square feet), 430 (consisting of approximately 508
rentable square feet), 440 (consisting of approximately 963 rentable
square feet), 710 (consisting of approximately 2,401 rentable square
feet), 750 (consisting of approximately 1,719 rentable square feet),
760 (consisting of approximately 3,959 rentable square feet), and
Suite 790 (consisting of approximately 1,279 rentable square feet)
comprising a total of approximately 13,391 rentable square feet in the
Building, on the area indicated on the site plan on Exhibit A, which
is attached hereto and incorporated herein, (collectively referred to
herein from time to time as the "Expansion Space") shall be added to
the Initial Premises so that as of the completion of the Expansion
Space, the "Premises" (as defined in the Lease) shall consist of
approximately 54,377 rentable square feet. "Substantial completion"
of the Tenant Improvements shall mean the date on which the Tenant
Improvements set forth in the Plan (as defined hereinafter) are
completed, and the individual suite of the Expansion Space is
available for Tenant's occupancy, subject only to the completion of
minor or insignificant details of finish construction, decoration or
mechanical adjustments which do not materially interfere with Tenant's
conduct of business. The date of substantial completion shall not be
extended by reason of Tenant's changes to the Plan or delays caused by
Tenant. The Term of the Lease for the Expansion Space shall be
coterminous with the Lease, such termination date being March 31,
1999, unless sooner terminated pursuant to the terms of the Lease.
Tenant shall execute Landlord's standard Confirmation of Commencement
Agreement, in the form attached hereto as Exhibit B, for each suite of
the Expansion Space to set forth the Commencement Date and term of the
Lease for each respective suite.
2. Delivery of Expansion Space. Tenant acknowledges that the suites
comprising the Expansion Space are currently occupied by other tenants
pursuant to lease agreements entered into between Landlord and such
tenants. Landlord shall use reasonable efforts to notify Tenant of
the delivery date of the suites in the Expansion Space once it obtains
such estimated dates of substantial completion from its contractors.
Notwithstanding the foregoing, it is understood that if and to the
extent that Landlord is unable to deliver possession of the suites of
the Expansion Space to Tenant due to delays caused by Tenant, then the
Base Rent reserved for the respective suites shall commence to accrue
on the date possession of the respective suites would have been
delivered to Tenant but for the delays of Tenant. As of the date of
this Agreement, no delays by Tenant currently exist. In the event
that Tenant
<PAGE> 71
occupies any portion of the Expansion Space prior to the date of
substantial completion of such suite, Tenant shall pay Landlord
prorated Base Rent for such suite during the period of occupancy
thereof prior to the date of substantial completion thereof.
3. Rental. Commencing upon the date of substantial completion for each
of the respective suites in the Expansion Space, Base Rent for the
suites shall be payable in advance, in accordance with the provisions
of the Lease, in equal monthly installments as follows:
<TABLE>
<CAPTION>
Monthly Base
Lease Period Rent Rate
------------ ------------
<S> <C>
Commencement Date for respective $20.80 per rentable
Expansion Space suite through square foot of space
March 31, 1998
April 1, 1998 through March 31, 1999 $21.37 per rentable
square foot of space
</TABLE>
Monthly Base Rent shall be prorated for any partial month of occupancy
of any of the suites in the Expansion Space.
Tenant's Prorata Share of Operating Expenses and Taxes, as set forth
in the Lease, shall be increased based on the square footage of each
suite as of the date of substantial completion of the respective
suites, as confirmed by the Confirmation of Commencement Agreement.
Tenant's occupancy of the Expansion Space shall be subject to all of
the general terms and conditions contained in the Lease, unless stated
otherwise herein.
4. Tenant Improvements. Landlord agrees to contribute an amount of money
(the "Tenant Allowance") calculated at $0.40 per rentable square foot
of the Expansion Space, multiplied by the number of months remaining
in the Lease Term as of the Commencement Date for each individual
suite therein. The Tenant Allowance shall be for the cost of
constructing certain tenant improvements (the "Tenant Improvements")
for the Expansion Space in accordance with the space plan (the "Plan")
to be approved by both Landlord and Tenant within fifteen (15) days of
the date of execution of this Agreement. It is understood and agreed
that Landlord's contractors shall perform the work in connection with
the Tenant Improvements. If the cost to construct the Tenant
Improvements pursuant to the Plan exceeds the Tenant Allowance, then
within ten (10) days of Tenant's receipt of an invoice from Landlord,
Tenant shall pay Landlord, as additional rent, by certified or
cashier's check, an amount equal to the difference between the cost to
construct the Tenant Improvements and the Tenant Allowance. Tenant
agrees it shall not make any changes to the Plan without obtaining the
prior written consent of Landlord. In the event Tenant shall make
changes to the Plan that are approved by Landlord and which result in
an additional cost to Landlord of completing the Tenant Improvements
in excess of the Tenant Allowance, Tenant shall pay to Landlord prior
to construction of such changes, as additional rent, any increase in
the cost of completing the Tenant Improvements in excess of the Tenant
Allowance resulting from such changes in the Plan.
In the event Tenant, its employees or agents, causes any delays or is
otherwise responsible, in whole or in part, for any additional costs
in excess of the Tenant Allowance incurred by Landlord in constructing
the Tenant Improvements (other than additional costs arising due to
changes to the Plan as described above), Tenant shall pay to Landlord
within ten (10) business days of receipt of written notice from
Landlord, as additional rent, any such additional costs in excess of
the Tenant Allowance incurred by Landlord. Tenant's failure to timely
pay any such amounts to be paid by Tenant as set forth in this
Article, at the time and in the manner set forth in this Article,
shall be an event of default.
2
<PAGE> 72
5. Brokers. Tenant warrants that it has had no dealings with any real
estate broker or agent in connection with the negotiation of this
Agreement other than Insignia Commercial Group, Inc. and that Tenant
knows of no other real estate broker or agent who is or might be
entitled to a commission in connection with this Agreement. Tenant
agrees to indemnify and hold Landlord harmless from and against all
claims made by any broker or finder for a commission in connection
with this Agreement provided that Landlord has not retained such
broker.
6. Release. Tenant expressly acknowledges that it has no, and hereby
releases Landlord from any cause of action, defense, claim or demand
of which Tenant has knowledge, in law or in equity, against Landlord
as of the date hereof, for, upon or by reason of any matter, cause or
thing whatsoever, from the beginning of time to this date, arising out
of, related to or in connection with the Lease, the Premises or the
Building.
7. Conflict of Terms. Except as expressly amended herein, all terms and
conditions in the Lease shall remain unchanged and in full force and
effect, and all capitalized terms not otherwise defined herein shall
have the meaning set forth in the Lease. In the event of any conflict
between the terms and conditions of the Lease and the terms and
conditions of this Agreement, the terms and conditions of this
Agreement shall control.
LANDLORD: TENANT:
TYSONS CORNER LIMITED PARTNERSHIP, DELTEK SYSTEMS, INC., a Virginia
an Illinois limited partnership corporation
By: Tysons Corner Partners, Inc.,
an Illinois corporation,
its general partner
By: /s/ Tom Molina By: /s/ Donald deLaski
Its: Vice President Its: Chairman
Witness: /s/ Chris Olezyk Witness: /s/ Babette J. Aller
Date: 8/5/96 Date: 7/30/96
3
<PAGE> 73
CONFIRMATION OF COMMENCEMENT AGREEMENT
THIS AGREEMENT is made and entered into this 30th day of September, 1994, by
and between Tysons Corner Limited Partnership having as its mailing address
8280 Greensboro Drive, Suite 130, McLean, Virginia, 22102 ("Landlord") and
Deltek Systems, Inc. having its address at 8280 Greensboro Drive, Suite 300,
McLean, Virginia, 22102 ("Tenant").
WITNESSETH:
WHEREAS, by Lease Agreement dated 12 November 1991, as amended by a certain
First Amendment To Lease dated 31 July 1992, and a Second Amendment to Lease
dated 1 July 1994 (together referred herein as the "Lease") Landlord demised
and leased unto Tenant certain premises consisting of offices having a rentable
floor area of approximately 2,648 square feet ("Demised Premises") and forming
a part of the 8280 Greensboro Drive Office Building which is situated in the
County of Fairfax, State of Virginia, said premises being more particularly
designated in the Lease; and
WHEREAS, the parties desire to evidence the date on which Tenant opened for
business in the Demised Premises and the commencement and expiration dates of
the term of the Lease as provided therein.
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. Tenant opened for business in the demised premises on
September 19, 1994.
2. The term of the Lease commenced on September 19, 1994 and
shall expire at midnight on March 31, 1998, unless sooner terminated
or extended as provided therein.
3. That the Landlord has satisfactorily fulfilled all of its
duties of an inducement nature, if any.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
WITNESS: LANDLORD: Tysons Corner Limited Partnership
/s/ Teri Ann Scheinrif By: Allegiance Realty Group, Inc.
as Agent for Landlord
By: /s/ Charles B. Pullar
Charles B. Pullar
Senior Vice President
<PAGE> 74
WITNESS: TENANT: Deltek Systems, Inc.
/s/ Babette J. Aller By: /s/ Donald deLaski
Donald deLaski
President
2
<PAGE> 75
CONFIRMATION OF COMMENCEMENT AGREEMENT
THIS AGREEMENT is made and entered into this 23rd day of February, 1996, by and
between Tysons Corner Limited Partnership having as its mailing address 8280
Greensboro Drive, Suite 130, McLean, Virginia, 22102 ("Landlord") and Deltek
Systems, Inc. having its address at 8280 Greensboro Drive, Suite 300, McLean,
Virginia, 22102 ("Tenant").
WITNESSETH:
WHEREAS, by Lease Agreement dated November 12, 1991, as amended by a certain
First Amendment To Lease dated July 31, 1992, and a Second Amendment to Lease
dated July 1, 1994, a Third Amendment to Lease dated September 30, 1994, a
Fourth Amendment to Lease dated October 18,1 994 and a Fifth Amendment to Lease
dated June 30, 1995 (together referred herein as the "Lease"), Landlord
demised and leased unto Tenant certain premises consisting of offices having a
rentable floor area of approximately 8,694 square feet (the "Demised Premises")
and forming a part of the 8280 Greensboro Drive Building which is situated in
the County of Fairfax, State of Virginia, said premises being more particularly
designated in the Lease; and
WHEREAS, the parties desire to evidence the date on which Tenant opened for
business in Suite 600 and the commencement and expiration dates of the Term of
the Lease as provided therein.
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. Tenant opened for business in the demised premises on February
6, 1996.
2. The Term of the Lease commenced on February 6, 1996 and shall
expire at midnight on March 31, 1998, unless sooner terminated
or extended as provided therein.
3. That the Landlord has satisfactorily fulfilled all of its
duties of an inducement nature, if any.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
LANDLORD: TENANT:
Tysons Corner Limited Partnership Deltek Systems, Inc.
an Illinois limited partnership
By: Tysons Corner Partners, Inc.
an Illinois corporation,
its general partner
By: /s/ Tom Molina By: /s/ Alan F. Stewart, CFO
Tom Molina, CSM CPM
Authorized Signatory
Witness: /s/ Cindy Asinsen Witness: /s/ Babette J. Aller
<PAGE> 76
CONFIRMATION OF COMMENCEMENT AGREEMENT
THIS AGREEMENT is made and entered into this 6th day of June, 1996, by and
between Tysons Corner Limited Partnership having as its mailing address 8280
Greensboro Drive, Suite 130, McLean, Virginia, 22102 ("Landlord") and Deltek
Systems, Inc. having its address at 8280 Greensboro Drive, Suite 300, McLean,
Virginia, 22102 ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have previously entered into a Lease Agreement
dated November 12, 1991, as amended by a certain First Amendment To Lease dated
July 31, 1992, a Second Amendment to Lease dated July 1, 1994, and a Third
Amendment to Lease dated September 30, 1994; and
WHEREAS, by a Fourth Amendment to Lease dated October 18, 1994 (The November
12, 1991 Lease Agreement and all amendments are collectively referred to herein
as the "Lease"), Landlord demised and leased unto Tenant certain premises
consisting of offices having a rentable floor area of approximately 1,402
square feet (the "Expansion Space") so that as of the Expansion Space
Commencement Date (as defined below), the Demised Premises under the Lease
consists of approximately 32,292 square feet and forming a part of the 8280
Greensboro Drive Building which is situated in the County of Fairfax, State of
Virginia, said Demised Premises being more particularly designated in the
Lease; and
WHEREAS, the parties desire to confirm the Expansion Space Commencement Date
and the Lease Termination Date:
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. The Expansion Space Commencement Date is May 3, 1995.
2. The Lease for the Demised Premises shall terminate as midnight
on March 31, 1998 (the "Termination Date"), unless sooner
terminated as provided therein.
3. Landlord has fulfilled and complied with all obligations of
required it pursuant to paragraph 3 of the Fourth Amendment to
Lease.
<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
LANDLORD: TENANT:
Tysons Corner Limited Partnership Deltek Systems, Inc.
an Illinois limited partnership
By: Tysons Corner Partners, Inc.
an Illinois corporation,
its general partner
By: /s/ Tom Molina By: /s/ Don de Laski
Tom Molina, CSM, CPM Don de Laski
Authorized Signatory President
WITNESS: /s/ WITNESS: /s/Babette J. Aller
2
<PAGE> 78
AMENDMENT TO CONFIRMATION OF
COMMENCEMENT AGREEMENT
THIS AGREEMENT is made and entered into this 30th day of July, 1996, by and
between Tysons Corner Limited Partnership ("Landlord") and Deltek Systems, Inc.
("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have previously entered into a Lease Agreement
dated November 12, 1991, as amended by the First Amendment to Lease dated July
31, 1992, and as amended by the Second Amendment to Lease dated July 1, 1994,
as amended by the Third Amendment to Lease dated September 30, 1994, and as
amended by the Fourth Amendment to Lease dated October 18, 1994 and as further
amended by the Fifth Amendment to Lease dated June 30, 1995 (together referred
to herein as the "Lease"), wherein Landlord demised and leased unto Tenant
certain premises comprising approximately 8,694 rentable square feet (the
"Demised Premises") in the building located at 8280 Greensboro Drive Building
which is situated in the County of Fairfax, State of Virginia, said premises
being more particularly described in the Lease; and
WHEREAS, the parties desire to amend the Confirmation of Commencement Agreement
dated February 27, 1996, which was executed by the parties in connection with
the Lease.
NOW, THEREFORE, the parties hereto mutually agree that notwithstanding the
Confirmation of Commencement Agreement to the contrary, the Term of the Lease
shall expire on March 31, 1999, unless sooner terminated or extended as
provided in the Lease.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
LANDLORD: TENANT:
TYSONS CORNER LIMITED PARTNERSHIP, DELTEK SYSTEMS, INC.
an Illinois limited partnership
By: Tysons Corner Partners, Inc., an
Illinois corporation,
its general partner
By: /s/ Tom Molina By: /s/ Donald deLaski
----------------------------------- ------------------------
Tom Molina, CSM, CPM
Authorized Signatory
Witness: /s/ Chris Olezyk Witness: /s/ Babette J. Aller
<PAGE> 1
EXHIBIT 10.9
AGREEMENT OF LEASE
by and between
Tysons Corner Limited Partnership
and
Deltek Systems, Inc.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Heading Page
------- ------- ----
<S> <C> <C>
Section 1. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. Use of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4. Insurance and Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5. Improvements to Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 6. Maintenance and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7. Landlord's Right of Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8. Fire and Other Casualties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10. Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11. Rules and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 12. Subordination; Attornment and Non-Disturbance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 13. Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 14. Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 15. Access to the Premises -- Security System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 16. Floor Load -- Heavy Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 17. Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 18. Signage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 19. Ouiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 20. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 21. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 22. Option to Terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 23. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
EXHIBITS
A Floor Plans of the Premises
B Tenant Improvement Plans
C Current Rules and Regulations
<PAGE> 3
AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE (hereinafter referred to as the "Lease"), made
this 11th day of November, 1992, by and between TYSONS CORNER LIMITED
PARTNERSHIP, an Illinois limited partnership, having an address at c/o Balcor
Property Management, Inc., 4849 Golf Road, Skokie, Illinois 60007 (hereinafter
referred to as "Landlord"), and DELTEK SYSTEMS, INC., a Virginia corporation,
having an address at 8280 Greensboro Drive, Suite 300, McLean, Virginia 22102
(hereinafter referred to as "Tenant").
RECITALS
A. Landlord and Tenant entered into that certain Agreement of Lease
(the "Original Lease") dated November 12, 1991, whereby Landlord leased to
Tenant and Tenant leased from Landlord certain space (the "Original Premises")
in Building, as hereafter defined.
B. Pursuant to Paragraph 22 (Additional Expansion Space) of the
Original Lease, Tenant has the option to lease certain additional space in the
Building under the terms and conditions set forth in the Original Lease.
C. Tenant now desires to lease from Landlord and Landlord now desires
to lease to Tenant certain additional space in the Building under the terms and
conditions as hereinafter set forth.
WITNESSETH, THAT FOR AND IN CONSIDERATION of the mutual entry into this
Lease by the parties hereto, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged by each party hereto,
Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, all
of that
<PAGE> 4
real property, situate and lying in Fairfax County, Virginia, which consists of
5,952 rentable square feet of space known as Suite 420, as more particularly
shown on Exhibit A attached hereto (hereinafter referred to as the "Premises")
and located in a building (hereinafter referred to as the "Building") having an
address of 8280 Greensboro Drive, McLean, Virginia 22102 [the Premises, the
remainder of the Building, the land ("Land") on which the Building is located
and any other buildings or improvements thereon being hereinafter referred to
collectively as the "Property"].
SUBJECT TO THE OPERATION AND EFFECT of any and all instruments and
matters of record or in fact,
UPON THE TERMS AND SUBJECT TO THE CONDITIONS which are here inafter set
forth:
Section 1. Term.
1.1. Commencement Date.
(a) This Lease shall be for a term (the "Term") commencing on
January 1, 1993 (the "Commencement Date"). If Landlord shall be unable to give
possession of the Premises to Tenant on the Commencement Date because of the
retention of possession by any occupant thereof, alteration or construction
work, or for any other reason, Landlord shall not be subject to any liability
for such failure. In such event, this Lease shall stay in full force and
effect, without extension of the Term. However, the monetary obligations of
Tenant hereunder shall not commence until such portion of the Premises are
available for Tenant as provided herein. If permission is given to Tenant to
occupy other premises prior to the Commencement Date, such occupancy shall be
deemed to be pursuant to the terms of this Lease, except that the parties shall
separately agree as to the
2
<PAGE> 5
obligation of Tenant to pay rent for such occupancy.
Pursuant to that certain undated Agreement of Lease (the "Knudson
Lease") by and between Landlord and Knudson International, Ltd. ("Knudson"), in
the event Knudson continues to occupy its premises, of which the Premises is a
part, beyond the expiration of the Knudson Lease, Knudson shall pay to Landlord
an amount equal to one hundred percent (100%) of the monthly base rent and
additional rent normally payable under the Knudson Lease, plus an additional
sum equal to one hundred percent (100%) of the monthly base rent and additional
rent normally payable under the Knudson Lease (the foregoing additional sum
representing 100% of the base and additional rent is hereinafter referred to as
the "Holdover Bonus"). Anything to the contrary herein notwithstanding, in the
event Landlord shall be unable to give possession of the Premises to Tenant on
the Commencement Date because of a holdover by Knudson, Landlord shall pay to
Tenant the Holdover Bonus Landlord actually receives from Knudson. Tenant
hereby expressly agrees that the foregoing provisions shall govern and control
in lieu of any law contrary to the provisions of this Section.
1.2 Termination Date. Provided not earlier terminated by default,
the Term of this Lease shall terminate concurrently with the expiration or
sooner termination of the Original Lease (the "Termination Date").
1.3 Surrender. Tenant shall at its expense, at the expiration of the
Term or any earlier termination of this Lease, (a) promptly surrender to
Landlord possession of the Premises (including any fixtures or other
improvements which, under the provisions of Section 5, are owned by Landlord)
in good order and repair (damage to the Premises reasonably beyond Tenant's
control and ordinary wear and tear excepted) and broom clean, (b) remove from
the Premises Tenant's signs, goods and effects and any machinery, trade
fixtures and equipment which are used in
3
<PAGE> 6
conducting Tenant's trade or business and are not owned by Landlord, and (c)
repair any damage to the Premises or the Building caused by such removal.
1.4 Holding Over. If Tenant continues to occupy the Premises after
the expiration of the Term or any earlier termination of this Lease without
having obtained Landlord's express written consent thereto, then without
altering or impairing any of Landlord's rights under this Lease or applicable
law, (i) Tenant hereby agrees to pay to Landlord as Rent for the Premises,
immediately on demand by Landlord, for each calendar month or portion thereof
after such expiration of the Term or such earlier termination of this Lease, as
aforesaid, until Tenant surrenders possession of the Premises to Landlord, an
amount equal to 150% of the monthly Base Rent and Additional Rent which would
have been due and payable under the provisions of Section 2 (calculated in
accordance with such provisions of Section 2 as if this Lease had been renewed
for a period of twelve full calendar months after the termination of the Term)
and (ii) Tenant shall surrender possession of the Premises to Landlord
immediately on Landlord's having demanded same. Nothing in the provisions of
this Lease shall be deemed in any way to give Tenant any right to remain in
possession of the Premises after such expiration or termination, regardless of
whether Tenant has paid any such Rent to Landlord.
Section 2. Rent.
2.1 Amount. As rent for the Premises (all of which is hereinafter
referred to collectively as "Rent"), Tenant shall pay to Landlord all of the
following:
(a) Base Rent. An annual rent (hereinafter referred to as the "Base
Rent") comprised of the aggregate of the following components:
4
<PAGE> 7
(i) Net Component. A net component (hereinafter referred to as the
"Net Component") which:
(A) for the first Lease Year during the Term, is (i) Fourteen
and No/100 Dollars ($14.00) per square foot in the Premises plus (ii) if the
Term commences on a day other than the first (1st) day of a calendar month, one
three-hundred sixty-fifth (1/365) of the Net Component for each day of such
calendar month falling within the Term; and
(B) for each Lease Year thereafter during the Term, is a sum
equaling the product obtained by multiplying (i) the Net Component for the
immediately preceding Lease Year by (ii) a fraction, whose numerator is the
total of (x) the Consumer Price Index for Urban Wage Earners and Clerical
Workers Revised (1982-84=100), Metropolitan Washington, D.C. Index, published
by the Bureau of Labor Statistics of the United States Department of Labor
("Consumer Price Index") for the calendar month containing the Commencement
Date ("Initial Consumer Price Index") plus (y) thirty percent (30%) of the
amount by which the Consumer Price Index for the calendar month immediately
preceding that during which such Lease Year commences ("Lease Year Consumer
Price Index") exceeds the Initial Consumer Price Index and whose denominator is
the Initial Consumer Price Index. In each case, if the Consumer Price Index is
not so published for such calendar month, then the Consumer Price Index for the
most recent calendar month or other period for which it is so published;
provided, that if the Lease Year Consumer Price Index has not been published by
the date on which the first installment of the Base Rent accrues for such Lease
Year, then until such Consumer Price Index is published for such calendar
month, Tenant shall pay on account of the Net Component for the calendar month
immediately preceding that during which the Lease Year commenced, and shall
thereafter pay to Landlord, promptly upon written demand by Landlord after such
Consumer Price Index is so published, the
5
<PAGE> 8
amount, if any, by which the installments of the Base Rent for such Lease Year,
when calculated by reference to such published Consumer Price Index, exceeds
the aggregate amount of such installments theretofore paid during such Lease
Year; provided, however, that the Net Component shall not increase by more than
three percent (3%) from any Lease Year to the next; and
(ii) Costs Component. An amount ("Costs Component")
representing the portion of Annual Operating Costs attributable to the
Premises, as further defined and described in subsection 2.2. The initial
Costs Components (based on Landlord's estimate on the date hereof of the cost
during the current calendar year of providing to or for the benefit of the
Premises all of the services or other items, the costs of which are included in
the Annual Operating Costs, excluding any of such services or other items to be
provided at Tenant's direct expense under the provisions of Section 6) is the
sum of (i) Seven and No/100 Dollars ($7.00), per square foot in the Premises
plus (ii) if the Term commences on a day other than the first (1st) day of a
calendar month, for the initial Lease Year, one three-hundred sixty-fifth
(1/365) of the Costs Component for each day of such calendar month falling
within the Term (but without impairing Tenant's liability for any Additional
Rent accruing under the provisions of subsection 2.2).
(b) Additional Rent. Additional rent (hereinafter referred to as
"Additional Rent") in the amount of any payment referred to as such in any
provision of this Lease which accrues while this Lease is in effect (which
Additional Rent shall include all charges or amounts which Tenant is obligated
to pay to Landlord under the provisions of this Lease, other than the Base
Rent).
(c) Lease Year. As used in the provisions of this Lease, the term
"Lease Year" means (i) the period commencing on the Commencement Date and
terminating on the first (1st) anniversary
6
<PAGE> 9
of the last day of the calendar month containing the Commencement Date, and
(ii) each successive period of twelve (12) calendar months thereafter during
the Term.
(d) Tenant Concessions Payment. "Tenant Concessions" shall mean the
total value of any rent abatement (including without limitation the rent
abatement described in Section 2.1 (e) below), cash allowances, tenant
improvements, and any other payments to or for the account of Tenant in
connection with, or for the purpose of inducing the entry by Tenant into this
Lease, including without limitation the Cash Allowance (as defined in Section
5.1 hereof). For purposes of this paragraph, Tenant Concessions shall be
amortized over a five (5) year period from the Commencement Date of the Term.
In the event of an early termination of this Lease for any reason (including,
without limitation, a termination if an Event of Default by Tenant occurs),
Tenant shall pay to Landlord the unamortized portion of the total value of
Tenant Concessions ("unamortized Tenant Concessions"). The unamortized Tenant
Concessions shall be the amount of Tenant Concessions so remaining at the time
of any such termination of this Lease.
(e) Rent Abatement. Anything in this Lease to the contrary
notwithstanding, Tenant shall be entitled to a rent abatement in an amount
equal to two (2) months Base Rent. The aforesaid rent abatement shall be
provided by Landlord as a credit against the Base Rent that would otherwise
fall due during the first two (2) months of the first Lease Year during the
initial Term.
2.2 Annual Operating Costs.
(a) Definition. As used herein, the term "Annual operating
Costs" means the actual costs incurred by Landlord in operating and maintaining
the Property during each calendar year falling wholly or partially within the
Term. Such costs shall
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include, by way of example rather than of limitation, (i) real property,
front-foot benefit, other metropolitan district or any other similar taxes or
assessments (whether regular or special) levied against any and all of the
Property; (ii) charges or fees for, and taxes on, the furnishing of water,
sewer service, gas, fuel, electricity or other utility services to the
Property; (iii) costs of providing elevator, janitorial and trash removal
service, and of maintaining grounds, common areas and mechanical systems of
buildings; (iv) all other costs of maintaining, repairing or replacing any or
all of the Building or the rest of the Property, (including, by way of example
rather than limitation, (1) the cost amortized in such calendar year of capital
improvements which are made by Landlord in its reasonable judgment in order to
reduce any of the costs of operating and maintaining the Building, or to cause
any or all of the Property to comply with any applicable law or regulation
which was not applicable to the same at the entry into this Lease by the
parties hereto, which cost shall be amortized over a period selected by
Landlord in its reasonable judgment, plus (2) interest on the unamortized
balance of such costs calculated at the rate actually paid by Landlord on debt
incurred for such capital improvements or if Landlord has not borrowed money
for such improvements at the rate which would be paid by Landlord on debt
incurred for working capital purposes); (v) charges or fees for any necessary
governmental permits; (vi) management fees, overhead and expenses; (vii)
premiums for hazard, liability, workmen's compensation, or similar insurance
upon any or all of the Property; (viii) costs arising under service contracts
with independent contractors; (ix) costs of any services not provided by
Landlord to the Property on the date hereof but hereafter provided by Landlord
in its prudent management of the Property; and (x) the cost of any other items
which, under generally accepted accounting principles consistently applied from
year to year with respect to the Property, constitute operating or maintenance
costs attributable to any or all of the Property.
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Such costs shall not include (i) the expense of principal and interest payments
made by Landlord pursuant to the provisions of any mortgage or deed of trust
covering the Property; (ii) any deduction for depreciation of the Property
taken on Landlord's income tax returns; or (iii) subject to subsection (iv) of
the preceding sentence, the cost of capital improvements made to the Property
if and to the extent not taken as a deduction on Landlord's federal income tax
returns.
(b) Computation. After the end of each calendar year during the
Term, Landlord shall compute the total of the Annual Operating Costs incurred
for all of the Property during such cal endar year, and shall allocate them to
the net rentable space within the Property by dividing such Annual Operating
Costs by the aggregate square footage of all of the net rentable space within
the Property, thereby deriving the cost of such categories of services and
items per square foot of such net rentable space; provided, that anything
contained in the foregoing provisions of this subsection 2.2 to the contrary
notwithstanding, wherever Tenant and/or any other tenant of space within the
Property has agreed in its lease or otherwise to provide any item of such
services partially or entirely at its own expense, or wherever in Landlord's
sole but reasonable judgment any such significant item of expense is not
incurred with respect to or for the benefit of all of the net rentable space
within the Property, in allocating the Annual Operating Costs pursuant to the
foregoing provisions of this subsection Landlord shall make an appropriate
adjustment, using generally acceptable accounting principles so as to avoid
allocating to Tenant or to such other tenant, (as the case may be) those Annual
Operating Costs covering such services already being provided by Tenant or by
such other tenant at its own expense, or to avoid allocating to all of the net
rentable space within the Property those Annual Operating Costs incurred only
with respect to a portion thereof.
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(c) Payment As Additional Rent. Tenant shall, within fifteen (15)
days after demand therefor by Landlord (with respect to each calendar year
during the Term), pay to Landlord as Additional Rent the amount by which (i)
the product obtained by multiplying (A) the rentable area of the Premises in
square feet (as set forth hereinabove) by (B) the amount of the Annual oper
ating Costs per square foot of rentable area for the preceding Lease Year for
such calendar year (as derived under the provisions of subsection 2.2(b))
exceeds (ii) the Costs Component of the Base Rent. This subsection survives
the termination or expiration of the Lease.
(d) Proration. If only part of any calendar year falls within the
Term, the amount computed as Additional Rent with respect to such calendar year
under the foregoing provisions of this subsection shall be pro-rated in
proportion to the portion of such calendar year falling within the Term (but
the expiration of the Term before the end of such calendar year shall not
impair Tenant's obligation hereunder to pay such pro-rated portion of such
Additional Rent with respect to that portion of such year falling within the
Term, which shall be paid on demand, as aforesaid).
(e) Landlord's Right to Estimate. Anything contained in the
foregoing provisions of this subsection to the contrary not withstanding,
Landlord may, at its discretion, (a) make from time to time during the Term a
reasonable estimate of the Additional Rent which may become due under the
provisions of this Lease with respect to any calendar year, (b) require Tenant
to pay to Landlord with respect to each calendar month during such year
one-twelfth (1/12) of such Additional Rent, at the time and in the manner that
Tenant is required hereunder to pay the monthly installment of the Base Rent
for such month, and (c) at Landlord's reasonable discretion, increase or
decrease from time
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to time during such calendar year the amount initially so estimated for such
calendar year, all by giving Tenant written notice thereof. In such event,
Landlord shall cause the actual amount of Additional Rent to be computed and
certified to Tenant within 120 days after the end of such calendar year, and
Tenant or Landlord, as the case may be, shall promptly thereafter pay to the
other the amount of any deficiency or overpayment therein, as the case may be.
This subsection survives termination or expiration of this Lease.
2.3 When Due and Payable.
(a) The Base Rent for any Lease Year shall be due and payable
in twelve (12) consecutive, equal monthly installments, in advance, on the
first (1st) day of each calendar month during such Lease Year; provided, that
the installment of the Base Rent payable for the first full calendar month of
the Term (and, if the Term commences on a day other than the first (1st) day of
a calendar month, that portion of the Base Rent which is payable for such
month) shall be due and payable on the full execution and delivery of this
Lease.
(b) Any Additional Rent accruing to Landlord under any
provision of this Lease shall, except as is otherwise set forth herein, be due
and payable when the installment of the Base Rent next falling due after such
Additional Rent accrues becomes due and payable, unless Landlord makes written
demand upon Tenant for payment thereof at any earlier time, in which event such
Additional Rent shall be due and payable at such time.
(c) Each such payment shall be made promptly when due, without
any deduction or setoff whatsoever, and without demand, failing which Tenant
shall pay to Landlord on demand as Additional Rent, a late payment service
charge (to cover Landlord's administrative and overhead expenses of processing
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late payment) equal to the greater of $100.00 or 5% of such unpaid sum for each
and every calendar month or part thereof after the due date that such sum has
not been paid to Landlord. Such payment shall be deemed liquidated damages and
not a penalty, but shall not excuse the untimely payment of Rent or Additional
Rent.
2.4 Where and How Payable. Tenant shall pay the Rent, in lawful
currency of the United States of America, to Landlord by delivering or mailing
it (postage prepaid) to Landlord's address which is set forth hereinabove, or
to such other address or in such other manner as Landlord from time to time
specifies by written notice to Tenant. Any payment made by Tenant to Landlord
on account of Rent may be credited by Landlord to the payment of any Rent when
past due before being credited to Rent currently falling due. Any such payment
which is less than the amount of Rent then due shall constitute a payment made
on account thereof, the parties hereto hereby agreeing that Landlord's
acceptance of such payment (whether or not with or accompanied by an
endorsement or statement that such lesser amount or Landlord's acceptance
thereof constitutes payment in full of the amount of Rent then due) shall not
alter or impair Landlord's rights hereunder to be paid all of such amount then
due, or in any other respect.
2.5 Tax on Lease. If federal, state or local law now or hereafter
imposes any tax, assessment, levy or other charge (other than any income tax)
directly or indirectly upon (a) Landlord with respect to this Lease or the
value thereof, (b) Tenant's use or occupancy of the Premises, (c) the Base
Rent, Additional Rent or any other sum payable under this Lease, or (d) this
transaction, except if and to the extent that such tax, assessment, levy or
other charge is included in the Annual Operating Costs, Tenant shall pay the
amount thereof as Additional Rent to Landlord upon demand, unless Tenant is
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prohibited by law from doing so, in which event Landlord may, at its election,
terminate this Lease by giving written notice thereof to Tenant.
2.6 Security Deposit. [Intentionally Deleted.]
Section 3. Use of Premises.
3.1 Tenant shall, continuously and without interruption throughout
the Term, occupy and use the Premises for, and only for, general office
purposes, subject to and in accordance with all applicable zoning and other
governmental regulations.
3.2 Tenant will not, and will not permit its employees, agents,
contractors, guests or invitees to obstruct or interfere with the rights of
other tenants, or in any other way injure or annoy them or those having
business with them, or conflict with them, or conflict with the fire laws or
regulations now existing or subsequently enacted or established by the local,
state or federal governments. Nor will Tenant use or permit the Premises, or
any part thereof, to be used for any disorderly, unlawful or hazardous purpose,
and will not manufacture any commodity therein, without the prior written
consent of Landlord.
3.3 License.
3.3.1 Landlord hereby grants to Tenant a non- exclusive
license to use (and to permit its officers, directors, agents, employees and
invitees to use in the course of conducting business at the Premises),
throughout the Term,
(a) any and all elevators, common stairways, lobbies, common
hallways and other portions of the Building which, by their nature, are
manifestly designed and intended for common use by the occupants of the
Building, for pedestrian ingress and
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egress to and from the Premises and for any other such manifest purposes; and
(b) any and all portions of the Property on which the Building
is located (excluding that portion thereof which is improved by any other
building) which, by their nature, are mani festly designed and intended for
common use by the occupants of the Building and of any other improvements on
such Property, for pedestrian ingress and egress to and from the Premises and
for any other such manifest purposes; and
(c) any and all portions of the Property as from time to time are
designated (by striping or otherwise) by Landlord for such purpose, for the
parking of automobiles.
3.3.2 Such license shall be exercised in common with the exercise
thereof by Landlord, any tenant or owner of the building or any other building
located on the Property, and their respective officers, directors, agents,
employees and invitees, and in accordance with the Rules and Regulations
promulgated from time to time pursuant to the provisions of Section 11.
Section 4. Insurance and Indemnification.
4.1 Increase In Risk. Tenant
(a) shall not do or permit to be done any act or thing as a result
of which either (i) any policy of insurance of any kind covering any or all of
the Property or any liability of Landlord in connection therewith may become
void and suspended, or (ii) the insurance risk under any such policy would (in
the opinion of the insurer thereunder) be made greater; and
(b) shall pay as Additional Rent the amount of any increase
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in any premium for such insurance resulting from any breach of the covenant in
this subsection 4.1.
4.2 Insurance To Be Maintained by Tenant. Tenant shall maintain
at its expense, throughout the Term, insurance against loss or liability in
connection with bodily injury, death, property damage and destruction,
occurring within the Premises or arising out of the use thereof by Tenant or
its agents, employees, officers or invitees, visitors and guests under one or
more policies of general public liability insurance having such limits as to
each as are reasonably required by Landlord from time to time, but in any event
not less than (a) one Million and no/100 Dollars ($1,000,000.00) for injury to
or death of any one or more persons during any one occurrence, and (b) Two
Million and no/100 Dollars ($2,000,000.00) for property damage or destruction
during any one occurrence. Such policies shall name Landlord and Tenant (and,
at Landlord's request, any Mortgagee) as the insured parties, shall provide
that they shall not be cancelable or materially altered without at least thirty
(30) days' prior written notice to Landlord (and, at Landlord's request, any
such Mortgagee), and shall be issued by insurers of recognized responsibility
licensed to do business in the Commonwealth of Virginia.
4.3 Insurance To Be Maintained by Landlord. Landlord shall
maintain throughout the Term all-risk or fire and extended coverage insurance
upon the Building in such minimum amounts and having such forms of coverage as
are required from time to time by Landlord's lender. The cost of premiums for
such insurance and of each endorsement thereto shall be deemed, for purposes of
Section 2, to be part of the cost of operating and maintaining the Property.
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4.4 Waiver of Subrogation. If either party hereto is paid any
proceeds under any policy of insurance naming such party as an insured, on
account of any loss, damage or liability, then such party hereby releases the
other party hereto, to and only to the extent of the amount of such proceeds,
from any and all liability for such loss, damage or liability, notwithstanding
that such loss, damage or liability may arise out of the negligent or
intentionally tortious act or omission of the other party, its agents or
employees, invitees, visitors or guests; provided, that such release shall be
effective only with respect to loss or damage occurring during such time as the
appropriate policy of insurance of the releasing party provides that such
release shall not impair the effectiveness of such policy or the insured's
ability to recover thereunder. Each party hereto shall use reasonable efforts
to have a clause to such effect included in its said policies, and shall
promptly notify the other in writing if such clause cannot be included in any
such policy, in which event neither party hereto shall be required to have its
said insurance policies contain such a clause and the provisions of this
subsection 4.4 shall be of no further force or effect.
4.5 Liability of Parties. Except if and to the extent that such
party is released from liability to the other party hereto pursuant to the
provisions of subsection 4.4,
(a) Landlord (i) shall be responsible for, and shall indemnify
and hold harmless Tenant against and from any and all liability arising out of,
any injury to or death of any person or damage to any property, occurring
anywhere upon the Property, if, only if, and to the extent that such injury,
death or damage is proximately caused by the gross negligence of or
intentionally tortious act or omission of Landlord or its agents, officers or
employees, but (ii) shall not be responsible for or be obligated to indemnify
or hold harmless Tenant against or from any liability for any such injury,
death or damage occurring anywhere
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upon the Property (including the Premises), by reason of Tenant's occupancy or
use of the Premises or any other portion of the Property, or because of fire,
windstorm, act of God or other cause unless proximately caused by such gross
negligence or intentionally tortious act or omission, as aforesaid; and
(b) subject to the operation and effect of the foregoing
provisions of this subsection, Tenant shall be responsible for, and shall
indemnify and hold harmless Landlord against and from, any and all liability
arising out of any injury to or death of any person or damage to any property,
occurring within the Premises.
Section 5. Improvements to Premises.
5.1 Cash Allowance.
Landlord shall provide Tenant with a cash allowance of Fifteen
Dollars ($15.00) per rentable square foot of the Premises (the "Cash
Allowance") to be used toward the construction of improvements to the Premises
("Tenant Improvements") in accordance with the plans to be attached hereto as
Exhibit B, which plans have been or will be approved by both Landlord and
Tenant. In the event that Tenant desires Landlord to construct the Tenant
Improvements, Landlord agrees to construct the same at its sole cost and
expense, provided the cost of the Tenant Improvements does not exceed the Cash
Allowance. In the event that the estimated cost of the Tenant Improvements
exceeds the Cash Allowance, Landlord shall be obligated to construct the Tenant
Improvements only if Landlord and Tenant agree upon suitable arrangements for
Tenant to pay such excess to Landlord. In the event that Tenant desires a
contractor other than Landlord to construct the Tenant Improvements, Landlord
shall pay the Cash Allowance, at Tenant's request, to such contractor or to
Tenant within fifteen (15) days of receipt of reasonably detailed
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invoices for the costs of such construction. In the event that the cost of the
Tenant Improvements is less than the Cash Allowance, the balance of the Cash
Allowance shall be credited by Landlord against the next due installments) of
Base Rent until the Cash Allowance is depleted. It is expressly understood
that, in the event that Tenant elects not to cause the Tenant Improvements to
be constructed prior to the Commencement Date, Landlord shall continue to have
the obligation to provide Tenant with the Cash Allowance until such time as (i)
the full amount of the Cash Allowance has been credited by Landlord against the
installments of Base Rent due hereunder, or (ii) Tenant causes the Tenant
Improvements to be constructed and the full amount of the Cash Allowance is
paid as described above.
5.2 Landlord's Obligation to Repaint. Provided no Event of
Default has occurred and is then continuing and no event or condition exists
which with notice and/or time would constitute an Event of Default hereunder,
Landlord agrees that promptly upon Tenant's request (which request shall be
made by Tenant within one (1) month after the third anniversary of the
Commencement Date, Landlord shall repaint the Premises for Tenant at
Landlord's's sole cost and expense.
5.3 By Tenant. Tenant shall not make or permit to be made any
alteration, addition or improvement to the Premises without first obtaining
Landlord's written consent thereto (which, in the case of non-structural
alterations, additions and improvements only, shall not be unreasonably
withheld), which consent may be conditioned as Landlord in its discretion deems
necessary or appropriate, including without limitation requesting Tenant to
submit information concerning Tenant's contractor and approving same and
requiring Tenant to provide appropriate insurance (including builder' s risk on
an Inland Marine form) naming Landlord as an insured thereunder. If Landlord
consents to any such proposed alteration, addition or Improvement, it shall be
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made at Tenant's sole expense (and Tenant shall hold Landlord harmless from any
cost incurred on account thereof), and at such time and in such manner as not
unreasonably to interfere with the use and enjoyment of the remainder of the
Property by any tenant thereof or any other person. Tenant shall indemnify and
hold harmless Landlord from and against any and all costs, damages, liability,
claim of liability, or expense (including, without limitation, reasonable
attorney's fees) incurred by Landlord, caused by, arising out of, or related to
Tenant's alterations, additions, or improvements and the making thereof
(whether or not consented to as herein required).
5.4 Mechanics's Liens; indemnification. Tenant shall:
(a) bond or cause to be removed any mechanic's,
materialman's or other lien filed or claimed against any or all of the
Premises, the Property, or any other property owned or leased by Landlord, by
reason of labor or materials provided for or at the request of Tenant or any of
its contractors or subcontractors (other than labor or materials provided by
Landlord pursuant to the provisions of subsection 5.1), or otherwise arising
out of Tenant's use or occupancy of the Premises or any other portion of the
Property, and
(b) defend, indemnify and hold harmless Landlord against and from
any and all liability, claim of liability, damage or expense (including, by way
of example rather than of limitation, that of reasonable attorney's fees)
incurred by Landlord on account of any such lien or claim.
5.5 Fixtures. Any and all improvements, repairs, alterations and
all other property attached to, used in connection with, or otherwise installed
within the Premises by Landlord or Tenant shall, immediately on the completion
of their installation, become Landlord's property without payment therefor
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by Landlord, except that any machinery, equipment or fixtures installed by
Tenant and used in the conduct of Tenant's trade or business (rather than to
service the Premises or any of the remainder of the Building or the Property
generally) shall remain Tenant's property, and shall be removed by Tenant, at
Tenant's expense, at the end of the Term (and any damage to the Premises caused
by such removal shall be repaired at Tenant's expense).
Section 6. Maintenance and Services.
6.1 Ordinary Services. Landlord shall furnish the Premises with
(a) electricity suitable for general office use, (b) heating and air
conditioning for the comfortable use and occupancy of the Premises between 8:00
A.M. and 7:00 P.M., Monday through Friday, and 8:00 A.M. and 1:00 P.M. on
Saturday (in each case, except for legal holidays) of each week during the
Term, (c) janitorial service, and (d) trash removal from the Premises. Such
services shall be furnished at Landlord's expense (subject to the operation and
effect of the provisions of Section 2.2). For purposes hereof, "legal holidays"
shall mean the days on which the following holidays are observed in the
Commonwealth of Virginia:
New Year's Day
Washington-Lincoln Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Christmas Day
6.2 Extraordinary Services. If Tenant
(a) requires electrical current or installs electrical
equipment (including, by way of example rather than of limitation, any
electrical heating or refrigeration equipment, electronic data processing
machine, punch-card machine, or machinery or equipment using current in excess
of 110 volts which in any way increases the amount of electricity which would
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normally be consumed upon the Premises when used for general office space), or
(b) intends to use the Premises in such a manner that the
services to be furnished by Landlord hereunder would be required during periods
other than or in addition to the business hours specified in subsection 6.1,
then in either case Tenant shall not do so without first obtaining Landlord's
written approval thereof, and shall pay periodically as Additional Rent the
additional direct expense resulting therefrom, including that resulting from
any installation of such equipment. Landlord's standard charges for services
during non-business hours (which standard charges are subject to change without
prior notice to Tenant) are currently $30.00 per unit per hour each for heat or
air conditioning. Notwithstanding the foregoing, Landlord agrees to provide
heat or air conditioning services to Tenant on any of the legal holidays listed
in Section 6.1 at Landlord's actual cost for such services. Landlord's actual
cost for such services during non-business hours (which actual cost is subject
to change without prior notice to Tenant) is currently $15.00 per unit per hour
each for heat or air conditioning.
6.3 Interruption. Landlord shall not be liable to Tenant for any
failure, modification or interruption of any service which either (a) arises
out of (i) strike, lock-out or other labor -troubles, (ii) government
restrictions or limitations, (iii) failure or shortage of electrical power,
gas, water, fuel oil, or other utility or service, (iv) riot, war, insurrection
or other national or local emergency, (v) accident, flood, fire or other
casualty, (vi) adverse weather conditions, (vii) other act of God, or (viii)
other causes similar or dissimilar to any of the foregoing and beyond
Landlord's reasonable control or (b) is required by applicable law (including,
by way of example rather than of limitation, any federal law or regulation
relating to the furnishing or consumption of energy or the temperature of
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buildings).
6.4 Maintenance by Tenant. Tenant shall maintain the
nonstructural parts of the interior of the Premises in good repair and
condition, damage by causes reasonably beyond Tenant's control and ordinary
wear and tear excepted.
6.5 Maintenance by Landlord. Landlord shall furnish, supply and
maintain in good order and repair (a) the roof, the structure and the remainder
of the exterior of the Building, and (b) any and all hallways, stairways,
lobbies, elevators, heating and air conditioning facilities, electrical,
sanitary sewer and water lines and facilities, restroom facilities, grounds and
parking areas (including the removal of snow from such sidewalks and parking
areas) and other common areas, all if located within the Building or the rest
of the Property but not within the Premises, all at Landlord's expense except
as is set forth and subject to the provisions of Section 2 or any other
provision of this Lease.
Section 7. Landlord's Right of Entry. Landlord and its agents shall be
entitled to enter the Premises at any reasonable time: (a) to inspect the
Premises, (b) to exhibit the Premises to any existing or prospective purchaser
or Mortgagee thereof or any prospective tenant thereof, (c) to make any
alteration, improvement or repair to the Building or the Premises, or (d) for
any other purpose relating to the operation or maintenance of the Property;
provided, that Landlord shall (i) (unless doing so is impractical or
unreasonable because of emergency) give Tenant at least twenty-four (24) hours
prior notice of its intention to enter the Premises, and (ii) use reasonable
efforts to avoid interfering any more than is reasonably necessary with
Tenant's use and enjoyment thereof.
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Section 8. Fire and Other Casualties.
8.1 General. If the Premises are damaged by fire or any other
casualty during the Term:
(a) Landlord shall restore the Premises with reasonable
promptness (taking into account the time required by Landlord to effect a
settlement with, and to procure any insurance proceeds from, any insurer
against such casualty, but in any event within one hundred eighty (180) days
after the date of such casualty) to substantially their condition immediately
prior to such casualty, and may temporarily enter and possess any or all of the
Premises for such purpose (provided, that Landlord shall not be obligated to
repair, restore or replace any fixture, improvement, alteration, furniture or
other property owned, installed or made by Tenant); but
(b) the times for commencement and completion of any such
restoration shall be extended for the period (not longer than sixty (60) days)
of any delay occasioned by Landlord in doing so arising out of any of the
causes enumerated in the provisions of subsection 6.3. If Landlord undertakes
to restore the Premises and such restoration is not accomplished within the
said period of one hundred eighty (180) days plus the period of any extension
thereof, as aforesaid, Tenant may terminate this Lease by giving written notice
thereof to Landlord within thirty (30) days after the expiration of such
period, as so extended;
(c) for so long as Tenant is deprived of the use of any or
all of the Premises on account of such casualty, the Base Rent and any
Additional Rent payable under the provisions of subsection 2.2 shall be abated
in proportion to the number of square feet of the Premises rendered
substantially unfit for occupancy by such casualty, unless, because of any such
damage, the undamaged portion of the Premises is made materially
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unsuitable for use by Tenant for the purposes set forth in the provisions of
Section 3, in which event the Base Rent and any such Additional Rent shall be
abated entirely during such period of deprivation; and
(d) Landlord shall have no liability to Tenant on account
of any (a) interruption of Tenant's business upon the Premises, (b) diminution
in Tenant's ability to use the Premises, or (c) other injury or damage
sustained by Tenant as a result of a casualty.
8.2 Substantial Destruction. Anything contained in the foregoing
provisions of this Section to the contrary notwithstanding,
(a) if during the Term the Building is so damaged by fire
or any other casualty that (i) either the Premises or (whether or not the
Premises are damaged) the Building is rendered substantially unfit for
occupancy, as reasonably determined by Landlord, or (ii) the Building is
damaged to the extent that Landlord reasonably elects to demolish, abandon or
otherwise not to restore the Building, then, in either case, Landlord may elect
to terminate this Lease as of the date of occurrence of such damage, by giving
written notice thereof to Tenant within ninety (90) days after such date; and
(b) in such event, (i) Tenant shall pay to Landlord the Base Rent
and any Additional Rent (apportioned, where applicable) to the time of such
termination, (ii) Landlord shall repay to Tenant any and all prepaid Rent for
periods beyond such termination, and (iii) Landlord may enter upon and
repossess the Premises without further notice.
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8.3 Tenant's Negligence. Anything contained in any provision of
this Lease to the contrary notwithstanding, if any damage to the Premises, the
Building and/or the Property is caused by or results from the negligent or
intentionally tortious act or omission of Tenant, those claiming under Tenant
or any of their respective officers, employees, agents or invitees,
(a) the Rent shall not be suspended or apportioned as aforesaid,
and
(b) except if and to the extent that Tenant is released from
liability therefor pursuant to the provisions of subsection 4.4, Tenant shall
pay to Landlord upon demand, as Additional Rent, the cost of (i) any repairs
and restoration made or to be made as a result of such damage, or (ii) (if
Landlord elects not to restore the Building) any damage, expense or loss which
Landlord may incur as a result of such damage.
Section 9. Condemnation.
9.1 Right to Award.
(a) If any or all of the Premises are taken by the
exercise of any power of eminent domain or are conveyed to or at the direction
of any governmental entity under a threat of any such taking (each of which is
hereinafter referred to as a "Condemnation"), Landlord shall be entitled to
collect from the condemning authority thereunder the entire amount of any award
made in any such proceeding or as consideration for such deed, without
deduction therefrom for any leasehold or other estate held by Tenant by virtue
of this Lease.
(b) Tenant hereby (i) assigns to Landlord all of Tenant's right,
title and interest, if any, in and to any such award; (ii) waives any right
which it may otherwise have in connection with
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such Condemnation, against Landlord or such condemning authority, to any
payment for (A) the value of the then unexpired portion of the Term, (B)
leasehold damages, and (C) any damage to or diminution of the value of Tenant's
leasehold interest hereunder or any portion of the Premises not covered by such
Condemnation; and (iii) agrees to execute any and all further documents which
may be required in order to facilitate Landlord's collection of any and all
such awards.
(c) Subject to the operation and effect of the foregoing
provisions of this Section, Tenant may seek, in a separate proceeding, a
separate award on account of any damages or costs incurred by Tenant as a
result of such Condemnation, so long as such separate award in no way
diminishes any award or payment which Landlord would otherwise receive as a
result of such Condemnation.
9.2 Effect of Condemnation.
(a) If (i) all of the Premises are covered by a Con
demnation, or (ii) if any part of the Premises is covered by a Condemnation and
the remainder thereof is insufficient for the reasonable operation therein of
Tenant's business, or (iii) if in Landlord's reasonable opinion, it would be
impractical to restore the remainder thereof, then in any such event, the Term
shall terminate on the date upon which possession of so much of the Premises or
the Building, as the case may be, as is covered by such Condemnation is taken
by the condemning authority thereunder, and all Rent and other charges payable
hereunder shall be prorated and paid to such date.
(b) If there is a Condemnation and the Term does not
terminate pursuant to the foregoing provisions of this subsection, the
operation and effect of this Lease shall be unaffected by such Condemnation,
except that the Base Rent and
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the Additional Rent payable under the provisions of subsection 2.2 shall be
reduced proportionate to the amount of rentable area, if any, of the Premises
covered by such Condemnation.
9.3 If there is a Condemnation, Landlord shall have no liability
to Tenant on account of any (a) interruption of Tenant's business upon the
Premises, (b) diminution in Tenant's ability to use the Premises, or (c) other
injury or damage sustained by Tenant as a result of such Condemnation.
9.4 Except for any separate proceeding brought by Tenant under the
provisions of subsection 9.1(c), Landlord shall be entitled to conduct any such
Condemnation proceeding and any settlement thereof free of interference from
Tenant, and Tenant hereby waives any right which it might otherwise have to
participate therein.
Section 10. Assignment and Subletting.
10.1 Tenant acknowledges that Landlord has entered into this Lease
because of Tenant's financial strength, goodwill, ability and expertise and
that accordingly, this Lease is one which is personal to Tenant, and Tenant
agrees for itself and its successors and assigns in interest hereunder that it
will not (a) assign any of its rights under this Lease, or (b) make or permit
any total or partial sale, lease, sublease, assignment, conveyance, license,
mortgage, pledge, encumbrance or other transfer of any or all of the Premises
or the occupancy or use thereof voluntarily or involuntarily (including, by way
of example rather than of limitation, any sale at foreclosure or by the
execution of any judgment, of any or all of Tenant's rights hereunder) (each of
which is hereinafter sometimes referred to as a "Transfer), without first
obtaining Landlord's written consent thereto, which consent shall not be
unreasonably withheld, conditioned or delayed by Landlord. If such consent is
given, it
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shall not constitute a consent to any subsequent such Transfer, whether by the
person hereinabove named as the "Tenant" or by any such transferee. If Tenant
proposes to make a Transfer, Tenant shall notify Landlord, in writing, of the
proposed Transfer, at least ninety (90) days prior to the effective date of
such proposed Transfer. The notice must include a copy of the proposed
Transfer documents and an audited copy of the proposed transferee's most recent
financial statement, prepared by a certified public accountant; the proposed
transferee must have a credit rating satisfactory to Landlord (in Landlord's
sole judgment); and Tenant must not be in default of this Lease, or have
committed two (2) Events of Default hereunder during the previous twelve (12)
months, whether cured or not. Landlord shall be entitled, at its sole
discretion, to condition any such consent upon the entry by such transferee
into an agreement with (and in form and substance satisfactory to) Landlord, by
which it assumes all of Tenant's obligations hereunder. Any person to whom any
Transfer is attempted without such consent shall have no claim, right or remedy
whatsoever hereunder against Landlord, and Landlord shall have no duty to
recognize any person claiming under or through the same. No Transfer made with
or without Landlord's consent shall alter or impair the obligations hereunder
of any person constituting, or liable as a guarantor for the obligations of,
Tenant before such Transfer, or of any other person holding any interest or
obligation hereunder before such Transfer. For purposes of the foregoing
provisions of this subsection, a Transfer, by any person or persons controlling
Tenant on the date hereof, of such control to a person or persons not
controlling Tenant on the date hereof shall be deemed a Transfer of this Lease.
Landlord shall be entitled to be paid by Tenant any Profit derived by Tenant
from any Transfer, whether or not with Landlord's consent, as aforesaid.
"Profit" is defined to mean excess of the rent and all other payments received
by Tenant (whether or not denominated as Rent, Additional Rent, or any
comparable term) over the Rent plus Additional Rent due at
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the time or from time to time due and payable by Tenant to Landlord pursuant to
this Lease.
10.2 Landlord's Right of First Refusal. Landlord shall have the
right, within sixty (60) days after receipt of the notice of the proposed
Transfer from Tenant, to elect (i) to sublet the Premises from Tenant at the
Rent then being paid by Tenant for the Premises under Section 2 hereof (or to
sublet that portion of the Premises which Tenant proposes to sublease with a
proportionate reduction in the Rent), or (ii) to terminate this Lease in its
entirety if Tenant intends to Transfer all, or substantially all of the
Premises or, if Tenant proposes to Transfer a portion of the Premises, to
terminate this Lease only with respect to such portion of the Premises. Upon
exercise by Landlord of either of the options set forth in this subsection,
Tenant shall surrender the Premises or such portion of the Premises, as the
case may be, to Landlord and thereafter the Rent to be paid by Tenant pursuant
to Section 2 above shall be that portion of the total Rent which the amount of
rentable area remaining in the possession of Tenant bears to the total rentable
area of the Premises. In the event that Landlord does not exercise its right
to sublet the Premises, or such portion of the Premises, as the case may be, or
to terminate this Lease, within said sixty (60) day period, Tenant shall have
the right to sublet the Premises or a portion thereof after first obtaining the
written consent of Landlord as provided in subsection 10.1.
10.3 No Waiver or Release. The consent by Landlord to any Transfer
shall not be construed as a waiver or release of Tenant from the terms of any
covenant or obligation under this Lease, nor shall the collection or acceptance
of rent from any transferee constitute a waiver or release of Tenant of any
covenant or obligation contained in this Lease, nor shall any such Transfer be
construed to relieve Tenant from obtaining the consent in writing of Landlord
to any further Transfer. Tenant
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hereby assigns to Landlord the rent due from any transferee of Tenant and
hereby authorizes each such transferee to pay said rent directly to Landlord,
at Landlord's option, in the event of any default by Tenant under the terms of
this Lease.
10.4 Anything contained in the foregoing provisions of this Section
to the contrary notwithstanding, neither Tenant nor any other person having an
interest in the possession, use or occupancy of the Premises or any other
portion of the Property shall enter into any lease, sublease, license,
concession or other agreement for the possession, use or occupancy of space in
the Premises or any other portion of the Property which provides for any rental
or other payment for such use, occupancy or utilization based in whole or in
part upon the net income or profits derived by any person from the space in the
Premises or other portion of the Property so leased, used or occupied (other
than any amount based on a fixed percentage or percentages of receipts or
sales).
Section 11. Rules and Regulations. Landlord hereby reserves the right
to prescribe, at its sole discretion, reasonable rules and regulations
(hereinafter referred to as the "Rules and Regulations"), having uniform
applicability to all tenants of the Building and governing the use and
enjoyment of the Building and the remainder of the Property; provided, that the
Rules and Regulations shall not materially interfere with Tenant's use and
enjoyment of the Premises, in accordance with the provisions of this Lease, for
the purposes enumerated in Section 3. Tenant shall adhere to the Rules and
Regulations and shall cause its agents, employees, invitees, visitors and
guests to do so. A copy of the Rules and Regulations in effect on the date
hereof is attached hereto as Exhibit C.
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Section 12. Subordination; Attornment and Non-Disturbance.
12.1 Subordination. This Lease shall be subject and subordinate at
all times to the lien of any first mortgage, first deed of trust, ground lease,
and/or other instrument of encumbrance (together with each renewal,
modification, consolidation, replacement or extension thereof, herein referred
to as a "Mortgage") heretofore or hereafter placed by Landlord upon any or all
of the Premises or the remainder of the Property, all automatically and without
the necessity of any further action on the part of Tenant to effectuate such
subordination.
12.2 Attornment and Non-Disturbance. Tenant shall, promptly at the
request of Landlord or the holder of any Mortgage (herein referred to as a
"Mortgagee"), execute, enseal, acknowledge and deliver such further instrument
or instruments,
(a) evidencing such subordination as Landlord or such Mortgagee
deems necessary or desirable, and
(b) (at such Mortgagee's request) attorn to such Mortgagee,
provided that such Mortgagee agrees with Tenant that such Mortgagee will, in
the event of a foreclosure of any such Mortgage, take no action to interfere
with Tenant's rights hereunder, except on the occurrence of an Event of
Default.
12.3 Mortgage Subordination. Anything contained in the provisions
of this Section to the contrary notwithstanding, any Mortgagee may at any time
subordinate the lien of its Mortgage to the operation and effect of this Lease
without obtaining Tenant's consent thereto, by giving Tenant written notice
thereof, in which event this Lease shall be deemed to be senior to such
Mortgage without regard to their respective dates of execution, delivery and/or
recordation among the Land Records of Fairfax County, Virginia, and thereafter
such Mortgagee shall have the
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same rights as to this Lease as it would have had, were this Lease executed and
delivered before the execution and recordation of such Mortgage.
12.4 Default Notice to Mortgagee. Tenant agrees to give any
mortgagee under any mortgage or beneficiary under any deed of trust affecting
the Premises ("Mortgagee"), by Registered Mail, a copy of any Notice of Default
served upon Landlord, provided that prior to such notice Tenant has been
notified in writing, (by way of Notice of Assignment of Rents and Leases, or
otherwise) of the address of such Mortgagee. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
this Lease, then the Mortgagee shall have an additional sixty (60) days within
which to cure such default or if such default cannot be cured within that time,
then such additional time as may be necessary to cure such default shall be
granted if within such sixty (60) days, any Mortgagee has commenced and is
diligently pursuing the remedies necessary to cure such default, (including but
not limited to commencement of foreclosure proceedings, if necessary to effect
such cure), in which event this Lease shall not be terminated while such
remedies are being so diligently pursued.
Section 13. Estoppel Certificate. Tenant shall from time to time,
within five (5) days after being requested to do so by Landlord or any
Mortgagee, execute, enseal, acknowledge and deliver to Landlord an instrument
in recordable form,
(a) certifying,
(i)that this Lease is unmodified and in full force and
effect (or, if there has been any modification thereof, that it is in full
force and effect as so modified, stating therein the nature of such
modification);
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(ii) as to the date on which the Term commenced, and
that Tenant has accepted possession of the Premises, and that any improvements
to the Premises required by the provisions of this Lease to be made by Landlord
have been completed to Tenant's satisfaction (except as Tenant may otherwise
expressly state in such certificate);
(iii) that Tenant has not made any payment of the Base
Rent, any Additional Rent or any other charge arising under the provisions of
this Lease in advance of the date on which it becomes due, except as set forth
in subsection 2.3(a) and subsection 2.5, if applicable;
(iv) that, as of the date of such certification,
Tenant has no charge, lien or claim of setoff under the provisions of this
Lease or otherwise, against any Rent or other charge due or hereinafter
becoming due hereunder;
(v) that, to the best of Tenant's knowledge,
information and belief whether Landlord is then in default in the performance
of any of its obligations hereunder (and, if so, specifying the nature of each
such default); and
(vi) as to any other fact or condition reasonably
requested by Landlord, any first Mortgagee, or prospective first Mortgagee or
purchaser of any or all of the Premises, the Property or any interest therein,
or any assignee or prospective assignee of any interest of Landlord under this
Lease; and
(b) acknowledging and agreeing that any statement contained
in any such certificate may be relied upon by Landlord and any such other
person.
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Section 14. Parking. During the Term, Tenant shall have the right to
utilize seventeen (17) non-reserved parking spaces in or on the garage
structure of the Building, as well as four (4) reserved spaces (two (2) on the
outside parking lot in front of the Building and two (2) on parking level "B"),
which four (4) spaces shall be marked "Reserved, Deltek Systems, Inc.". All
such parking spaces shall be available to Tenant, its employees and invitees at
no additional charge.
Section 15. Access to the Premises -- Security System. Tenant shall
have access to the Property, the Building, and the Premises twenty-four (24)
hours a day, seven (7) days a week. Landlord shall install, at its cost, a card
reader security entry system to enable Tenant's employees and staff to gain
entry into the Building during non-business hours while maintaining security
for the Premises. After its initial installation, all maintenance and repair
costs associated with such entry system shall be included in the Annual
operating Costs of the Building. Not less than one elevator shall remain in
operation for service to the Premises and the remainder of the Building during
non-business hours. For the purposes of the section, the term "non-business
hours" means days and times other than Monday through Friday (except holidays),
8:00 a.m. to 7:00 p.m., and Saturdays (except holidays), 8:00 a.m. to 1:00 p.m.
Landlord reserves the right to charge a reasonable amount for each security
system access card or other device provided to Tenant.
Section 16. Floor Load -- Heavy Machinery. Tenant shall not place a
load upon any floor of the Premises exceeding a floor load of 100 pounds per
square foot of area. Landlord reserves the right to prescribe the weight and
position of all business machines and mechanical equipment, including safes,
located in the Premises. Business machines and mechanical equipment shall be
placed and maintained by Tenant at Tenant's expense in settings sufficient In
Landlord's reasonable judgment to absorb
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and prevent vibration, noise and annoyance. Tenant shall not move any safe,
heavy machinery, equipment, freight, bulky matter or fixtures Into or out of
the Building without Landlord's prior written consent, which shall not be
unreasonably withheld. If such safe, machinery, equipment, freight, bulky
matter or fixtures require special handling, Tenant agrees to employ only
persons holding a Master Rigger's License to do said work, and that all work in
connection therewith shall comply with applicable laws and regulations. Any
such moving shall be at the sole risk and hazard of Tenant and Tenant will
defend, indemnify and save Landlord harmless against and from any liability,
loss, injury, claim or suit resulting directly or indirectly from such moving.
Proper placement of all such business machines in the Premises shall be
Tenant's responsibility.
Section 17. Fixtures. All fixtures attached to or built into the
Premises prior to or during the Term, whether by Landlord or by Tenant and
whether at the expense of Landlord or Tenant (or both), shall be, and remain,
part of the Premises and shall not be removed by Tenant during or at the end of
the Term unless otherwise expressly provided in this Lease. The term fixture
shall include but not be limited to all plumbing, heating and sprinkling
systems, outlets, vaults, paneling, molding, floors, and ventilating, air
conditioning and cooling equipment installed in the Premises. If this Lease
shall be terminated by reason of an Event of Default by Tenant, then,
notwithstanding anything to the contrary in this Lease contained, Landlord
shall have a lien against all Tenant's property in the Premises or elsewhere in
the Building at the time of such termination to secure Landlord's rights
hereunder.
Section 18. Signage. Tenant shall not erect or install any signs of
any nature which are visible from the exterior of the Premises, without first
obtaining Landlord's specific written consent, which shall not be unreasonably
withheld, conditioned or
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delayed. The scope of Landlord's consent includes without limi tation the
location, type, kind, character, dimensions, materials, colors, and all other
particulars of each and every sign, and the method of installation,
maintenance, operation and removal of each and every sign. For all Landlord
approved signs, Tenant shall (i) pay all costs associated with the signs,
including without limitation, the costs associated with the installation,
operation, maintenance and removal of the signs, (ii) pay the premium of any
insurance Landlord may reasonably deem appropriate and obtain which relates to
the signs, (iii) maintain and operate the signs in a first class manner, (iv)
be responsible for the prompt removal of the signs upon expiration or
termination of this Lease, or upon vacatur or abandonment of the Premises, or
upon an Event of Default (in the event Tenant fails to promptly remove the
signs in such cases, Landlord may remove the signs without liability to Tenant
and at the cost of Tenant), and (v) be fully responsible for, and shall repair
all damage caused to the Building by installation, maintenance, operation and
removal of the signs.
Section 19. Ouiet Enjoyment. Landlord hereby covenants that Tenant, on
paying the Rent and performing the covenants set forth herein, shall peaceably
and quietly hold and enjoy, throughout the Term, (a) the Premises, and (b) such
rights as Tenant may hold hereunder with respect to the remainder of the
Property (including, by way of example rather than of limitation, any such
right to use any parking lot within the Property).
Section 20. Events of Default.
20.1 Definition. As used in the provisions of this Lease, each of
the following events shall constitute, and is hereinafter referred to as, an
"Event of Default":
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(a) If Tenant fails to (i) pay the Rent or any other sum
which Tenant is obligated to pay by any provision of this Lease, when and as it
is due and payable hereunder and without demand therefor, (ii) perform any of
its other obligations under the provisions of this Lease or any agreement
referred to herein, or (iii) perform any of its obligations under the
provisions of any other agreement with Landlord; or,
(b) if Tenant (i) applies for or consents to the
appointment of a receiver, trustee or liquidator of Tenant or of all or a
substantial part of its assets, (ii) files a voluntary petition in bankruptcy
or admits in writing its inability to pay its debts as they come due, (iii)
makes an assignment for the benefit of its creditors, (iv) files a petition or
an answer seeking a reorganization or an arrangement with creditors, or seeks
to take advantage of any insolvency law, (v) performs any other act of
bankruptcy, or (vi) files an answer admitting the material allegations of a
petition filed against Tenant in any bankruptcy, reorganization or insolvency
proceeding; or,
(c) if (i) an order, judgment or decree is entered by any
court of competent jurisdiction adjudicating Tenant a bankrupt or an insolvent,
approving a petition seeking such a reorganization, or appointing a receiver,
trustee or liquidator of Tenant or of all or a substantial part of its assets,
or (ii) there otherwise commences with respect to Tenant or any of its assets
any proceeding under any bankruptcy, reorganization, arrangement, insolvency,
readjustment, receivership or similar law, and if such order, judgment, decree
or proceeding continues unstayed for more than sixty (60) consecutive days
after any stay thereof expires; or,
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(d) if Tenant fails to occupy and assume possession of the
Premises within fifteen (15) days after the Commencement Date, or,
(e) if Tenant substantially ceases to conduct its business
at the Premises during normal business hours, for a period of ten (10) business
days or more, without the prior written consent of Landlord.
20.2 Notice to Tenant; Grace Period. Anything contained in the
provisions of this Section to the contrary notwithstanding, on the occurrence
of an Event of Default, which does not involve a payment hereunder or
contemplated hereby, Landlord shall not exercise any right or remedy which it
holds under any provision of this Lease or under applicable law unless and
until:
(a) Landlord has given written notice thereof to Tenant,
and,
(b) Tenant has failed within twenty (20) days thereafter to
cure such Event of Default (or, if and only if such Event of Default is not
reasonably curable within such period of twenty (20) days, to proceed within
such period actively, diligently and in good faith to cure such Event of
Default and to continue to do so thereafter until it is fully cured); provided
that no such notice shall be required, and Tenant shall be entitled to no such
grace period, (i) more than twice during any twelve (12) month period, or (ii)
if Tenant has substantially terminated or is in the process of substantially
terminating its continuous occupancy and use of the Premises for the purpose
set forth in section 3, or (iii) if any Event of Default enumerated in
subsections 20.1(b), 20.1(c), or 20.1(e) has occurred.
20.3 Landlord's Rights on Event of Default. On the occurrence of
an Event of Default, Landlord may (subject to the
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operation and effect of the provisions of subsection 20.2) take any or all of
the following actions:
(a) re-enter and repossess the Premises and any and all
improvements thereon and additions thereto;
(b) declare the entire balance of the Rent including
unamortized Tenant Concessions for the remainder of the Term to be due and
payable, and collect such balance in any manner not inconsistent with
applicable law;
(c) terminate this Lease;
(d) enter the Premises and relet the same or any part
thereof without terminating this Lease, as Tenant's agent, in the name of
Landlord, or otherwise, for a term shorter or longer than the balance of the
Term, and may grant tenant concessions (including, without limitation, free
rent), but Tenant shall remain liable for, and covenants and agrees to pay, any
deficiency after Tenant is credited with the rent thereby obtained, less all
repairs and expenses (including, but not limited to, the expenses of obtaining
possession, brokerage expenses, tenant concessions, tenant work modifications,
legal fees and decorating expenses), and less the unamortized Tenant
Concessions, first referred to in subsection 2.1(d) hereof which shall be due
and payable immediately upon Tenant vacating or abandoning the Premises. Any
deficiency shall become due and payable monthly, as it is determined. Landlord
shall have no obligation to relet the Premises, and its failure to do so, or
failure to collect rent on reletting, shall not affect Tenant's liability
hereunder. In no event shall Tenant be entitled to a credit or repayment for
income from reletting which is payable by Tenant hereunder or which covers a
period after the original term of this Lease. Tenant hereby expressly waives
any right of redemption granted by any present or future law. Any entry or
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re-entry by Landlord, whether had or taken under summary proceedings or
otherwise, shall not absolve or discharge Tenant from liability hereunder.
"Re-enter" and "re-entry" as used in this Lease are not restricted to their
technical legal meaning. In the event of a breach or threatened breach of any
of the covenants or provisions hereof, Landlord shall have the right of
injunction. Landlord may resort to any two or more of such remedies or rights,
and adoption of one or more such remedies or rights shall not necessarily
prevent the enforcement of others concurrently or thereafter. If Tenant shall
default in the performance of any provision of this Lease or if Landlord is
required to take any action to enforce this Lease or defend the validity or
interpretation of this Lease, then Landlord shall be entitled to recover all
costs and expenses incurred thereby, including court costs and reasonable
attorney's fees at every level of litigation. Such fees and expenses shall
become immediately due and owing to Landlord as Additional Rent;
(e) cure such Event of Default in any other manner (after
giving Tenant written notice of Landlord's intention to do so except as
provided in subsection 20.2), in which event Tenant shall reimburse Landlord
for all expenses incurred by Landlord in doing so, plus interest thereon at the
lesser of the rate of twenty percent (20%) per annum or the highest rate then
permitted on account thereof by applicable law, which expenses and interest
shall be Additional Rent and shall be payable to Landlord by Tenant immediately
on demand therefor by Landlord; and/or
(f) pursue any combination of such remedies and/or any other
right or remedy available to Landlord on account of such Event of Default at
law or in equity. Tenant hereby waives any right which it may otherwise have
to a trial by jury, whether at law or in equity, in connection with any suit or
proceeding at law or in equity brought by Landlord against Tenant or otherwise
in connection with this Lease as a result of an Event of Default.
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20.4 No Waiver. No action taken by Landlord under the provisions
of this Section or any other provision of this Lease (including, by way of
example rather than of limitation, Landlord's acceptance of the payment of Rent
after the occurrence of any Event of Default) shall operate as a waiver of any
right which Landlord would otherwise have against Tenant for the Rent hereby
reserved or of any other right provided to Landlord under this Lease or
applicable law, and Tenant shall remain responsible to Landlord for any loss
and/or damage suffered by Landlord by reason of any Event of Default,
regardless of any action by Landlord.
Section 21. Notices. Any notice, demand, consent, approval, request or
other communication or document to be provided hereunder to a party hereto
shall be (a) given in writing; and (b) deemed to have been given (i)
forty-eight (48) hours after being sent as certified or registered mail in the
United States mails, postage prepaid, return receipt requested, or the day
after being delivered to an overnight courier service, in each case to the
address of such party set forth hereinabove or to such other address in the
United States of America as such party may designate from time to time by
notice to the other, or (ii) (if such party's receipt thereof is acknowledged
in writing) upon its hand or other delivery to such party.
Section 22. Option to Terminate. In the event that Tenant validly
exercises its option to terminate the Original Lease pursuant to Section
22.3(c) thereof, Tenant shall also have the option, upon written notice to
Landlord, to terminate this lease, such termination to be effective as of the
effective date of the Original Lease termination date. Subject to Section
2.1(d) hereof, if Tenant exercises its option to terminate this Lease, Tenant
shall pay to Landlord, in addition to those sums required pursuant to Section
22.3(c) of the Original Lease, the unamortized portion of all Tenant
Concessions provided to Tenant
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under the terms of this Lease. Landlord and Tenant hereby agree that the Cash
Allowance is part of the Tenant Concessions and shall be amortized over a
period of five (5) years from the Commencement Date of this Lease.
Accordingly, if this Lease is terminated pursuant to the terms of this Lease,
Tenant shall be obligated to pay Landlord, at Lease termination, an amount
equal to the unamortized portion of the Cash Allowance, and all other sums due
Landlord hereunder in connection with such termination.
Section 23. General.
23.1 Effectiveness. This Lease shall become effective upon and
only on its execution and delivery by each party hereto.
23.2 Complete Understanding. This Lease represents the complete
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior negotiations, representations, warranties, statements or
agreements, either written or oral, between the parties hereto as to the same.
No inducements, representations, understandings or agreements have been made or
relied upon in the making of this Lease, except those specifically set forth in
the provisions of this Lease. Neither party hereto has any right to rely on any
other prior or contemporaneous representations made by anyone concerning this
Lease which are not set forth herein.
23.3 Amendment. This Lease may be amended by and only by an
instrument executed and delivered by each party hereto.
23.4 Applicable Law. THIS LEASE SHALL BE GIVEN EFFECT AND
CONSTRUED BY APPLICATION OF THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT
REGARD TO CHOICE OF LAW PROVISIONS.
23.5 Waiver. Landlord shall not be deemed to have waived the
exercise of any right which it holds at law, in equity, or
42
<PAGE> 45
under this Lease unless such waiver is made expressly and in writing (and no
delay or omission by Landlord in exercising any such right shall be deemed to
be a waiver of the future exercise). No such waiver made to any instance
involving the exercise of any such right shall be deemed a waiver as to any
other such instance, or any other such right.
23.6 Waiver of Jury Trial. Landlord and Tenant each hereby waive
jury trial in any action, proceeding or counterclaim brought by either of the
parties hereto against the other with respect to any matter whatsoever arising
out of or in any way connected with this Lease, the relationship of Landlord
and Tenant hereunder, Tenant's use or occupancy of the Premises, any claim of
breach, injury or damage, and/or in connection with an Event of Default.
23.7 Time of Essence. Time shall be of the essence of this Lease.
23.8 Headings. The headings of the Sections, subsections,
paragraphs and subparagraphs hereof are provided herein for and only for
convenience of reference, and shall not be considered in construing their
contents.
23.9 Construction. As used herein:
(a) the term "person" means a natural person, a trustee, a
corporation, a partnership and any other form of legal entity;
(b) all references made (i) in the neuter, masculine or
feminine gender shall be deemed to have been made in all such genders, (ii) in
the singular or plural number shall be deemed to have been made, respectively,
in the plural or singular number as well, and (iii) to any Section, subsection,
paragraph or subpara-
43
<PAGE> 46
graph shall, unless therein expressly indicated to the contrary, be deemed to
have been made to such Section, subsection, paragraph or subparagraph of this
Lease; and
(c) all reference to "attorney's fees" shall mean all
reasonable attorney's fees, court costs and related expenses incurred in
connection with Tenant's breach of any provision of this Lease, whether suit is
brought or not, and if suit is brought shall include all reasonable costs and
expenses relating to any and all legal and/or equitable trial and appellate
court proceedings.
23.10 Exhibits. Each writing or plat referred to herein as being
attached hereto as an exhibit or otherwise designated herein as an exhibit
hereto is hereby made a part hereof.
23.11 Severability. No determination by any court, governmental
body or otherwise that any provision of this Lease or any amendment hereof is
invalid or unenforceable in any instance, shall affect the validity or
enforceability of (a) any other such provision, or (b) such provision in any
circumstance not controlled by such determination. Each such provision shall
be valid and enforceable to the fullest extent allowed by, and shall be
construed wherever possible as being consistent with, applicable law.
23.12 Definition of "Landlord".
23.12.1 As used herein, the term "Landlord" means the
entity hereinabove named as such, and its heirs, personal repre sentatives,
successors and assigns (each of whom shall have the same rights, remedies,
powers, authorities and privileges as it would have had, had it originally
signed this Lease as Landlord).
23.12.2 No person holding Landlord's interest
44
<PAGE> 47
hereunder (whether or not such person is named as the "Landlord" herein) shall
have any liability hereunder after such person ceases to hold such interest,
except for any such liability accruing while such person holds such interest.
23.12.3 No Mortgagee not in possession of the Premises or
the Building shall have any liability hereunder.
23.12.4 Neither Landlord nor any principal or parties of
Landlord, whether disclosed or undisclosed, shall have any personal liability
under any provision of this Lease. If Landlord defaults in the performance of
any of its obligations hereunder or otherwise, Tenant shall look solely to
Landlord's equity, interest and rights in the Property for satisfaction of
Tenant's remedies on account thereof.
23.13 Definition of "Tenant". As used herein, the term
"Tenant" means each person or entity hereinabove named as such and such
person's or entity's heirs, personal representatives, successors and assigns,
each of whom shall have the same obligations, liabilities, rights and
privileges as it would have possessed had it originally executed this Lease as
Tenant; provided, that no such right or privilege shall inure to the benefit of
any transferee of Tenant, immediate or remote, unless the Transfer to such
person or entity is made in accordance with the provisions of Section 10.
Whenever two or more persons constitute Tenant, all such persons shall be
jointly and severally liable for the performance of Tenant's obligations
hereunder.
23.14 Brokers. The parties acknowledge that they have not directly
or indirectly dealt with any broker concerning this Lease except for Menard
Doswell & Co., whose brokerage commissions shall be paid by Landlord. Each
party agrees to defend, exonerate, indemnify and hold the other harmless from
and
45
<PAGE> 48
against all other claims for commissions relating to the execution and delivery
of this Lease (or out of negotiations between Landlord and Tenant In respect to
leasing the Premises), which arise directly out of its conduct, acts,
omissions, or agreements.
IN WITNESS WHEREOF, each party hereto has executed and ensealed this
Lease, or has caused it to be executed and ensealed on its behalf by its duly
authorized representatives, as of the day and year first above written.
Landlord:
---------
TYSONS CORNER LIMITED PARTNERSHIP,
an Illinois Limited partnership
By: Balcor Property Management,
Inc., Landlord's authorized agent
By:/s/ Charles B. Pullar
----------------------
Name: Charles B. Pullar
Title: Senior Vice President
Tenant:
------
WITNESS OR ATTEST: DELTEK SYSTEMS, INC.,
a Virginia corporation
/s/ Babette J. Aller By: /s/ Donald deLaski (SEAL)
- --------------------- -------------------------------
Name: Donald deLaski
46
<PAGE> 49
EXHIBIT A
FLOOR PLANS OF THE PREMISES
47
<PAGE> 50
EXHIBIT B
[Tenant Improvement Plans]
48
<PAGE> 51
EXHIBIT C
CURRENT RULES AND REGULATIONS
1. The sidewalks, lobbies, passages, elevators and stairways shall not
be obstructed by the Tenant or used by the Tenant for any purpose other than
ingress and egress from and to the Tenant's offices. The Landlord shall in all
cases retain the right to control or prevent access thereto by any person whose
presence, in the Landlord's judgment, would be prejudicial to the safety,
peace, character or reputation of the Building or of any tenant of the
Property.
2. The toilet rooms, water closets, sinks, faucets, plumbing and other
service apparatus of any kind shall not be used by the Tenant for any purpose
other than those for which they were installed, and no sweepings, rubbish,
rags, ashes, chemicals or other refuse or injurious substances shall be placed
therein or used on connection therewith by the Tenant, or left by the Tenant in
the lobbies, passages, elevators or stairways of the Building.
3. No skylight, window, door or transom of the Building shall be
covered or obstructed by the Tenant, and no window shade, blind, curtain,
screen, storm window, awning or other material shall be installed or placed on
any window or in any window space, except as approved in writing by the
Landlord. If the Landlord has installed or hereafter installs any shade, blind
or curtain in the Premises, the Tenant shall not remove it without first
obtaining the Landlord's written consent thereto.
4. No sign, lettering, insignia, advertisement, notice or other thing
shall be inscribed, painted, installed, erected or placed in any portion of the
Premises which may be seen from outside the Building, or on any window, window
space or other part of the exterior or interior of the Building, unless first
approved in writing by the Landlord. Names on suite entrances shall be
provided by and only by the Landlord and at the Tenant's expense, using in each
instance lettering of a design and in a form consistent with the other
lettering in the Building, and first approved in writing by the Landlord. The
Tenant shall not erect any stand, booth or showcase or other article or matter
in or upon the Premises and/or the Building without first obtaining the
Landlord's written consent thereto.
5. The Tenant shall not place any additional lock upon any door within
the Premises or elsewhere upon the Property, and shall surrender all keys for
all such locks at the end of the Term. The Landlord shall provide the Tenant
with one set of keys to the Premises when the Tenant assumes possession
thereof.
6. The delivery of towels, ice, water, food, beverages, newspapers and
other supplies, equipment and furniture will be permitted only under the
Landlord's direction and control.
7. The Tenant shall not do or permit to be done anything which
obstructs or interferes with the rights of any other tenant of the Property.
The Tenant shall not keep anywhere within the Property any matter having an
offensive odor, or any kerosene, gasoline, benzine, camphene, fuel or other
explosive or highly flammable material. The Tenant shall comply with all
federal, state and local laws and regulations pertaining to hazardous materials
and toxic substances. The Tenant will provide the Landlord with copies of any
and all environmental audits and/or similar reports for the Premises which are
obtained by the Tenant during the Term. In addition, the Tenant will provide
the Landlord with prompt written notice of: (A) any proceeding or inquiry by,
notice from, or order of any governmental authority
<PAGE> 52
with respect to the presence of any hazardous materials or toxic substances on,
under or about the Premises, and (B) all claims made or threatened by any third
party against the Tenant or the Premises related to any damage, contribution,
cost recovery, compensation, loss or injury resulting from any hazardous
materials or toxic substances.
8. So that the Premises may be kept in a good state of preservation and
cleanliness, the Tenant shall, while in possession of the Premises, permit only
the Landlord's employees and contractors to clean the Premises unless prior
thereto the Landlord otherwise consents in writing. The Landlord shall not be
responsible to the Tenant for any damage done to any furniture or other
property of the Tenant or any other person caused by any of the Landlord's
employees or any other person, for any loss sustained by any of the Tenant's
employees, or for any loss of property of any kind in or from the Premises,
however occurring. The Tenant shall see each day that the windows are closed
and the doors securely locked before leaving the Premises, and that all lights
and standard office equipment within the Premises are turned off.
9. If the Tenant desires to install signalling, telegraphic,
telephonic, protective alarm or other wires, apparatus or devices within the
Premises, the Landlord shall direct where and how they are to be installed and,
except as so directed, no installation, boring or cutting shall be permitted.
The Landlord shall have the right (a) to prevent or interrupt the transmission
of excessive, dangerous or annoying current of electricity or otherwise into or
through the Building or the Premises, (b) to require the changing of wiring
connections or layout at the Tenant's expense, to the extent that landlord may
deem necessary, (c) to require compliance with such reasonable rules as the
Landlord may establish relating thereto, and (d) in the event of noncompliance
with such requirements or rules, immediately to cut wiring or do whatever else
it considers necessary to remove the danger, annoyance or electrical
interference with apparatus in any part of the Building. Each wire installed
by the Tenant must be clearly tagged at each distributing board and junction
box and elsewhere required by the Landlord, with the number of the office to
which such wire leads and the purpose for which it is used, together with the
name of the Tenant or other concern, if any, operating or using it.
10. A directory will be provided by the Landlord on the ground floor of
the Building, on which the Tenant's name may be placed.
11. No furniture, package, equipment, supplies or merchandise may be
received in the Building, or carried up or down in the elevators or stairways,
except during such hours as are designated for such purpose by the landlord,
and only after the Tenant gives notice thereof to the landlord. The Landlord
shall have the exclusive right to prescribe the method and manner in which any
of the same is brought into or taken out of the Building, and the right to
exclude from the Building any heavy furniture, safe or other article which may
create a hazard and to require it to be located at a designated place in the
Premises. The Tenant shall not place any weight anywhere beyond the safe
carrying capacity of the Building. The cost of repairing any damage to the
Building or any other part of the Property caused by taking any of the same in
or out of the Premises, or any damage caused while it is in the Premises or the
rest of the Building, shall be borne by the Tenant.
12. Without the Landlord's prior written consent, (a) nothing shall be
fastened to (and no hole shall be drilled, or nail or screw driven into) any
wall or partition, (b) no wall or partition shall be painted, papered or
otherwise covered or moved
2
<PAGE> 53
in any way or marked or broken, (c) no connection shall be made to any
electrical wire for running any fan, motor or other apparatus, device or
equipment, (d) no machinery of any kind other than customary small business
machinery shall be allowed in the Premises, (e) no switchboard or telephone
wiring equipment shall be placed anywhere other than where designated by the
Landlord, and (f) no mechanic shall be allowed to work in or about the building
other than one employed by the Landlord.
13. The Tenant shall have access to the Premises at all reasonable time.
The Landlord shall in no event be responsible for admitting or excluding any
person from the Premises. In case of invasion, hostile attack, insurrection,
mob violence, riot, public excitement or other commotion, explosion, fire or
any casualty, the Landlord shall have the right to bar or limit access to the
Building to protect the safety of occupants of the Property, or any property
within the Property.
14. The Landlord shall have the right to rescind, suspend or modify the
Rules and Regulations and to promulgate such other Rules or Regulations as, in
the Landlord's reasonable judgment, are from time to time needed for the
safety, care, maintenance, operation and cleanliness of the Building, or for
the preservation of good order therein. Upon the Tenant's having been given
notice of the taking of any such action, the Rules and Regulations as so
rescinded, suspended, modified or promulgated shall have the same force and
effect as if in effect at the time at which the Tenant's lease was entered into
(except that nothing in the Rules and Regulations shall be deemed in any way to
alter or impair any provision of such lease).
15. The use of any room within the Building as sleeping quarters is
strictly prohibited at all times.
16. The Tenant shall keep the windows and doors of the Premises
(including those opening on corridors and all doors between rooms entitled to
receive heating or air conditioning service and rooms not entitled to receive
such service), closed while the heating or air conditioning system is
operating, in order to minimize the energy used by, and to conserve the
effectiveness of, such systems. The Tenant shall comply with all reasonable
Rules and Regulations from time to time promulgated by the Landlord with
respect to such systems or their use.
17. The Tenant shall not during any period of time use or permit to be
used the Premises on a regular basis by more than one (1) person for each one
hundred fifty (150) square feet of floor area within the Premises.
l8. Nothing in these Rules and Regulations shall give any Tenant any
right or claim against the Landlord or any other person if the Landlord does
not enforce any of them against any other tenant or person (whether or not the
landlord has the right to enforce them against such tenant or person), and no
such nonenforcement with respect to any tenant shall constitute a waiver of the
right to enforce them as to the Tenant or any other tenant or person.
3
<PAGE> 54
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE is made and entered into this 30th day of
June, 1995 by and between TYSONS CORNER LIMITED PARTNERSHIP ("Landlord") and
DELTEK SYSTEMS, INC. ("Tenant").
WITNESSETH
WHEREAS, Tenant and Landlord have previously entered into a Agreement
dated November 11, 1992 (the "Initial Lease") for the premises commonly known
as Suite 420, 8280 Greensboro Drive, McLean, Virginia 22102 (the "Premises")
(consisting of 5,952 square feet); and
WHEREAS, Landlord and Tenant desire to further amend the Lease Agreement
pursuant to this First Amendment;
NOW THEREFORE, in consideration of the mutual covenants and promises
herein contained, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Landlord and Tenant agree as
follows:
1. DEFINITIONS. Unless otherwise herein defined, all capitalized terms
in this First Amendment shall have the meaning given to them in the
Initial Lease.
2. LEASE TERM. The Initial Lease Term (January 1, 1993 to March 31,
1998) is hereby extended for an additional period of one year so
that the Renewal Term will commence on April 1, 1998 (the "Renewal
Term Commencement Date") and terminate on March 31, 1999 (the
"Termination Date").
3. BASE RENT. Effective July 1, 1995, Tenant shall pay as Base Rent
for the remainder of the Initial Lease Term a total amount of Three
Hundred Ten Thousand Nine Hundred Ninety Two Dollars ($310,992.00),
payable in installments, in advance, on the first day of each month
during the Initial Lease Term, in the amount of Nine Thousand Four
Hundred Twenty Four Dollars ($9,424.00) each.
As of the Renewal Term Commencement Date, Tenant shall pay as Base
Rent for the Renewal Term a total amount of One Hundred Sixteen
Thousand Four Hundred Eighty and 64/100ths Dollars ($116,480.64),
payable in installments, in advance, on the first day of each month
during the Renewal Term, in the amount of Nine Thousand Seven
Hundred Six and 72/100ths Dollars ($9,706.72) each.
Tenant shall also pay Additional Rent on the Premises during the
Initial Lease Term and the Renewal Term in the same manner as set
forth in the Initial Lease.
4. TENANT IMPROVEMENTS. Section 5.2 of the Initial Lease is hereby
deleted in its entirety and the following is substituted therefore:
"Landlord agrees to contribute Two Dollars ($2.00) per rentable
square foot of the Premises totaling $11,904.00 (the "Tenant
Allowance") towards the cost of making minor drywall repairs and
repainting the Premises (the "Tenant Improvements") at a time to be
mutually agreed-upon but, in any event, prior to the start of the
Renewal Term. It is understood and agreed that Landlord's
contractors shall perform the work in
<PAGE> 55
connection with the Tenant Improvements. If the cost of the Tenant
Improvements exceeds the Tenant Allowance, then such additional
amounts in excess of the Tenant Allowance shall be amortized over
the remaining Lease Term (including the Renewal Term) at an interest
rate of ten percent (10%) per annum and payable in monthly
installments by Tenant as Additional Rent under the Lease. In the
event the cost of the Tenant Improvements are in excess of the
Tenant Allowance, Landlord and Tenant will promptly enter into a
lease amendment prepared by Landlord to reflect the adjustments to
Additional Rent as set forth above. Tenant's failure to timely pay
any such amounts to be paid by Tenant as set forth in this
Paragraph, at the time and in the manner set forth in this Paragraph
or to sign any such lease amendment within five (5) business days
after submission to Tenant (except for delays caused by Landlord),
shall constitute an event of default under the Lease."
5. DEFAULT. In the event Tenant shall default under the Original Lease
(as such term is defined in the Initial Lease), which default is not
timely cured, such default shall be deemed an event of default under
the Initial Lease and Landlord shall be entitled to enforce any and
all rights and remedies against Tenant as provided for a default
therein.
6. OPTION TO RENEW. So long as the Lease is in full force and effect
and Tenant both at the time of exercising the Option to Renew
described in this Paragraph and at the time of the commencement of
the following described Option Period:
(i) is occupying and doing business from the Premises at the time
the Option to Renew described in this Paragraph is exercised;
and
(ii) is not in default under the Lease either at the time of the
exercise of the Option to Renew described in this Paragraph or
at the time of the commencement of (each of) the following
described Option Period(s); and
(iii) has maintained a history of payments within the applicable
grace period, if any, provided under the Lease;
Tenant is hereby granted an option to renew the Lease (the "Option
to Renew") for two (2) successive renewal term(s) (the "Option
Period(s)") after the expiration of the Renewal Term, each
commencing upon the day next following the expiration of the then
current Lease Term. The Option Period(s) shall (each) be for a term
of three (3) years. The terms of the Lease during the Option
Period(s) shall be the same as during the current Lease period
except as provided below. The Option to Renew must be exercised no
less than one hundred eighty (180) days prior to the expiration of
the then current Lease Term" by written notice to Landlord sent by
registered or certified mail, return receipt requested. In the
event Tenant fails to notify Landlord, in the manner herein
specified, this Option to Renew shall be of no further force and
effect.
The Base Rent for the Option Period(s) shall be ninety-five percent
(95%) of the then current fair market rate for the Premises fixed as
of the date of commencement of the applicable Option Period.
Landlord's
2
<PAGE> 56
determination of the market rate shall be conclusive on Tenant.
This Option to Renew shall be deleted from the Lease during the
Option Period and no further options to renew shall be in effect.
Unless expressly set forth herein, any tenant concessions initially
provided for in the Lease shall not be deemed applicable to any
Option Period.
In no event shall the Base Rent during any Option Period decrease
below the Base Rent then paid by Tenant at the expiration of the
then current Lease Term. Further, this Option to Renew is personal
and unique to Tenant and is not transferable to any assignee,
sublessee or any other successor in interest to the initial Tenant
under the Lease.
7. EXTRAORDINARY SERVICES. As of July 1, 1995, Tenant acknowledges and
agrees that Landlord's actual cost for extraordinary services as
described in Section 6.2 of the Initial Lease shall be at the rate
of $30.00 per unit per hour, subject to change.
8. NO BROKER. Tenant hereby warrants and represents to Landlord that
Tenant has not dealt with any broker, agent or finder in connection
with this First Amendment, and Tenant covenants and agrees to
indemnify and hold Landlord harmless from and against any and all
loss, liability, damage, claim, judgment, loss or expense (including
but not limited to, attorneys' fees and court costs) that may be
incurred or suffered by Landlord because of any claim for any fee,
commission or similar compensation with respect to this First
Amendment made by any broker, agent or finder claiming to have dealt
with Tenant, whether or not such claim is meritorious.
9. CAPTIONS. The captions used herein are for convenience of reference
only and shall not be deemed to limit or affect the construction and
interpretation of the terms of this First Amendment.
10. CONFLICT OF TERMS. Except as expressly amended herein, all terms
and conditions of the Lease shall remain unchanged and in full force
and effect. In the event of any conflict between the terms and
conditions of the Lease and the terms and conditions of this First
Amendment, the terms and conditions of this First Amendment shall
control.
LANDLORD: TENANT:
TYSON'S CORNER LIMITED DELTEK SYSTEMS, INC.
PARTNERSHIP, an Illinois
limited partnership,
By: Tyson's Corner Partners, Inc. By: /s/ Donald deLaski
an Illinois corporation, Its: C.E.O.
general partner,
By: /s/ Tom Molina
Its: VP
3
<PAGE> 1
EXHIBIT 11.1
DELTEK SYSTEMS, INC.
EARNINGS PER SHARE
CALCULATION OF SHARES USED IN COMPUTING
PRO FORMA NET INCOME PER SHARE
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
Weighted average common shares outstanding 15,037,326 15,059,319
Incremental effect of 1,036,500 options
to acquire common stock using assumed
IPO price of $12.00. 515,034 495,279
------------ -------------
Shares used in computing pro forma net
income per share (unaudited) 15,552,360 15,554,598
============ =============
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Washington, D.C.
December 17, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF DARRELL J. OYER
I consent to the use of my name in this Registration Statement of
Deltek Systems, Inc. on Form S-1. I also consent to the references to me
throughout the Registration Statement.
By: /s/ Darrell J. Oyer
----------------------
Darrell J. Oyer
Gaithersburg, Maryland
December 16, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DELTEK
SYSTEMS, INC. FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S REGISTRATION
STATEMENT ON FORM S-1 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS YEAR YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1995 DEC-31-1995 DEC-31-1994 DEC-31-1993
<PERIOD-START> JAN-01-1996 JAN-01-1995 JAN-01-1995 JAN-01-1994 JAN-01-1993
<PERIOD-END> SEP-30-1996 SEP-30-1995 DEC-31-1995 DEC-31-1994 DEC-31-1993
<EXCHANGE-RATE> 1 1 1 1 1
<CASH> 4,698 0<F5> 4,393 1,866 0<F16>
<SECURITIES> 0 0<F5> 3,128 2,049 0<F16>
<RECEIVABLES> 8,644 0<F5> 6,385 4,409 0<F16>
<ALLOWANCES> (207) 0<F5> (343) (256) 0<F16>
<INVENTORY> 241 0<F5> 100 140 0<F16>
<CURRENT-ASSETS> 13,976<F1> 0<F5> 14,237<F8> 8,727<F12> 0<F16>
<PP&E> 3,715 0<F5> 2,929 2,308 0<F16>
<DEPRECIATION> (2007) 0<F5> (1,630) (1,247) 0<F16>
<TOTAL-ASSETS> 18,378<F2> 0<F5> 18,083<F9> 11,506<F13> 0<F16>
<CURRENT-LIABILITIES> 11,191 0<F5> 9,234 4,703 0<F16>
<BONDS> 0 0<F5> 0 0 0<F16>
0 0<F5> 0 0 0<F16>
0 0<F5> 0 0 0<F16>
<COMMON> 15 0<F5> 15 15 0<F16>
<OTHER-SE> 7,172 0<F5> 8,834 6,788 0<F16>
<TOTAL-LIABILITY-AND-EQUITY> 18,378 0<F5> 18,083 11,506 0<F16>
<SALES> 24,371 18,518 26,849 21,356 19,417
<TOTAL-REVENUES> 24,371 18,518 26,849 21,356 19,417
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 18,296 12,069 17,176 13,313 12,328
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 0 0
<INCOME-PRETAX> 6,362<F3> 6,744<F6> 10,066<F10> 8,300<F14> 7,331<F17>
<INCOME-TAX> 75 34 45 65 51
<INCOME-CONTINUING> 6,075 6,449 9,673 8,043 7,089
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 6,287 6,710 10,021 8,235 7,280
<EPS-PRIMARY> 0<F4> 0<F7> 0<F11> 0<F15> 0<F18>
<EPS-DILUTED> 0 0 0 0 0
<FN>
<F1>EXCLUDES PREPAID EXPENSES AND OTHER CURRENT ASSETS OF 600
<F2>EXCLUDES COMPUTER SOFTWARE DEVELOPMENT COSTS - NET OF 2,564. ALSO EXCLUDES
OTHER ASSETS OF 130.
<F3>EXCLUDES INTEREST INCOME OF 287.
<F4>AS A SUBCHAPTER "S" CORPORATION, THE PROFORMA INCOME TAX PROVISION, PROFORMA
NET INCOME AND PROFORMA NET INCOME PER SHARE WAS 2,483, 3,879 AND $0.25 PER
SHARE
<F5>THE BALANCE SHEET WAS NOT REQUIRED FOR THE NINE MONTHS ENDED SEPT. 30, 1995.
<F6>EXCLUDES INTEREST INCOME OF 295.
<F7>AS A SUBCHAPTER "S" CORPORATION ONLY PROFORMA INCOME TAX, PROFORMA NET INCOME
AND PROFORMA NET INCOME PER SHARE IS REQUIRED FOR ONLY THE MOST RECENT AUDITED
YEAR AND INTERIM STUB PRESENTED.
<F8>EXCLUDES PREPAID EXPENSES AND OTHER CURRENT ASSETS OF 574
<F9>EXCLUDES COMPUTER SOFTWARE DEVELOPMENT COSTS - NET OF 2,547
<F10>EXCLUDES INTEREST INCOME OF 393
<F11>AS A SUBCHAPTER "S" CORPORATION, THE PROFORMA INCOME TAX PROVISION, PROFORMA
NET INCOME AND PROFORMA NET INCOME PER SHARE WAS 3,827, 6,239 AND $0.40 PER
SHARE FOR THE YEAR ENDED 12/31/95
<F12>EXCLUDES PREPAID EXPENSES AND OTHER CURRENT ASSETS OF 519.
<F13>EXCLUDES COMPUTER SOFTWARE DEVELOPMENT COSTS, NET OF 1,718.
<F14>EXCLUDES INTEREST INCOME OF 257.
<F15>AS A SUBCHAPTER "S" CORPORATION ONLY PROFORMA INCOME TAXES, PROFORMA NET
INCOME AND PROFORMA NET INCOME PER SHARE IS REQUIRED FOR ONLY MOST RECENT AUDITED
YEAR AND INTERIM STUB PRESENTED.
<F16>BALANCE SHEET DATA NOT REQUIRED.
AND PROFORMA NET INCOME PER SHARE IS REQUIRED FOR ONLY THE MOST RECENT AUDITED
YEAR AND INTERIM STUB PRESENTED.
<F17>EXCLUDES INTEREST INCOME OF 242.
<F18>AS A SUBCHAPTER "S" CORPORATION ONLY PROFORMA INCOME TAXES, PROFORMA NET INCOME
</FN>
</TABLE>
