<PAGE> 1
As filed with the Securities and Exchange Commission on February 10, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ICARUS INTERNATIONAL, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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MARYLAND 7372 52-2069941
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION) INDUSTRIAL CLASSIFICATION CODE NUMBER)
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ONE CENTRAL PLAZA
11300 ROCKVILLE PIKE
ROCKVILLE, MARYLAND 20852
(301) 881-9350
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL
EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS)
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COPIES TO: COPIES TO:
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JEFFREY A. KOEPPEL, ESQ. HERBERT G. BLECKER, President HARLAN P. COHEN, ESQ.
FIORELLO J. VICENCIO, ESQ. ICARUS International, Inc. JOHN B. MCKNIGHT, ESQ.
ELIAS, MATZ, TIERNAN & HERRICK L.L.P. One Central Plaza LOCKE PURNELL RAIN HARRELL
734 15TH STREET, N.W. 11300 Rockville Pike (A PROFESSIONAL CORPORATION)
12TH FLOOR Rockville, Maryland 20852 2200 ROSS AVENUE
WASHINGTON, D.C. 20005 (301) 881-9350 SUITE 2200
(202) 347-0300 DALLAS, TEXAS 75201
(214) 740-8000
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(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
Approximate date of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following 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./ /
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CALCULATION OF REGISTRATION FEE
====================================================================================================================================
TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED SHARE (1) PRICE (1) REGISTRATION FEE
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Common Stock, $.01 par value 2,875,000 $9.00 $25,875,000 $7,635.00
====================================================================================================================================
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(1) Estimated solely for purposes for calculating the registration fee pursuant
to Rule 457(o).
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.
<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 FEBRUARY 10, 1998
PROSPECTUS
2,500,000 SHARES
ICARUS INTERNATIONAL, INC.
[LOGO]
COMMON STOCK
All of the 2,500,000 shares of common stock, $.01 par value per share
(the "Common Stock"), offered hereby (the "Offering"), are being sold by ICARUS
International, Inc. ("ICARUS" or the "Company"). Prior to the Offering, there
has been no public market for the Common Stock. It is currently estimated that
the initial public offering price per share of Common Stock will be between
$7.00 and $9.00. See "Underwriting" for a discussion of the factors considered
in determining the initial public offering price.
Application has been made to list the Common Stock on the Nasdaq
National Market under the symbol "ICRS."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC DISCOUNT(1) COMPANY(2)
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Per Share................ $ $ $
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Total(3)................. $ $ $
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(1) The Company has agreed to indemnify the Underwriters against certain
civil liabilities. See "Underwriting."
(2) Before deducting estimated expenses of $800,000 payable by the Company.
(3) The Company has granted the Underwriters a 30-day overallotment option
to purchase up to a total of 375,000 additional shares of Common Stock
on the same terms and conditions as set forth above. If all such
shares are purchased by the Underwriters, the total Price to Public
will be $_________, the total Underwriting Discount will be
$___________ and the Proceeds to the Company will be $___________ .
See "Underwriting."
The shares of Common Stock are offered by the several Underwriters
subject to prior sale, receipt and acceptance by them, and subject to the right
of the Underwriters to reject any order in whole or in part and to withdraw,
cancel or modify the offer without notice. It is expected that certificates for
the shares of Common Stock will be available for delivery on or about
__________, 1998, at the offices of Hoak Breedlove Wesneski & Co.
HOAK BREEDLOVE WESNESKI & CO.
________________, 1998
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[Front Inside Cover - Panel One]
[Circular flow chart graphic titled "Automated Desktop Engineering."
The flow chart depicts the general process by which the Company's
automated engineering software works. The chart begins as a long arrow at the
top, left corner with "BUSINESS QUESTION" and concludes at the bottom, right
corner with a "BUSINESS ANSWER" of either "GO" or "NO GO."
The beginning of the process is represented by a full-color photo of a
corporate executive with the phrases "Which market?," "How long?," "How much?,"
"Why?," and "Business Risk," reversed out of the photo in white, and is
positioned over the text that reads, "BUSINESS QUESTION."
The arrow continues around and through a spoke-like image that
represents the phases of the simplified process manufacturing plant lifecycle.
On each of the spokes are the names of each phase, including "Business
Development," "Process Engineering," Cost Engineering," "Detailed
Engineering/Procurement," "Construction Scheduling," and "Operations &
Maintenance." In the center of the image is the ICARUS Logo.
The spokes are encircled with the benefits of the ICARUS system which
include "Faster Time to Market," "Compressed Schedules," "Cost Reductions," and
"Engineering Process Automation." These benefits are represented in a different
color to indicate they are different elements in the process.
Below the text "BUSINESS ANSWER" is a full-color photo depicting an
"engineering team" with text reversed out to white that reads, "Confident
Decisions" and "Backed by Engineering."]
[Caption to graphic: ICARUS International, Inc. develops automated
desktop engineering ("AutoDE") software for the process manufacturing segments
of various industries. The Company's AutoDE software products enable customers
to analyze a proposed project more quickly, more thoroughly and less
expensively than they can using conventional methods.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK, INCLUDING THE ENTRY OF STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
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[Inside Front Cover - Panels Two and Three]
[Flow chart graphic depicts a header entitled "SIMPLIFIED
PROCESS MANUFACTURING PLANT LIFECYCLE." Under the header are six arrows
linked horizontally entitled (Arrow 1) "Business Development," (Arrow
2) "Process Engineering," (Arrow 3) "Cost Engineering," (Arrow 4)
"Detailed Engineering/Procurement," (Arrow 5) "Construction Scheduling"
and (Arrow 6) "Operations and Maintenance". Above arrows 1-3 there is a
line entitled "Decision Engineering" and above arrows 4-6 there is a
line entitled "Plant Engineering." On the top, left corner of the page
is the Company's logo with the caption "ICARUS Automated Desktop
Engineering Products." Below the Arrows, the page is horizontally
divided into two segment planes entitled (Segment 1) "Existing
Products" and (Segment 2) "Release Planned in FY 1998 or FY 1999."
Segment 1 runs horizontally under the linked arrows and contains
"ICARUS Process Evaluator" under Arrow 2, "ICARUS 2000" under Arrows 3
and 4, "ICARUS Project Manager" under Arrows 5 and 6, and "Questimate"
under Arrow 6. Segment 2 runs horizontally under Segment 1 and contains
"ICARUS Decision Engineering Analyzer," "ICARUS/SRIC Process
Model" and "ICARUS/SRIC Project Model" under Arrow 1, "ICARUS/HYPROTECH
Plant-Product" and "ICARUS/HYPROTECH Process-Product" under Arrow 2,
"ICARUS-RICHARDSON Estimating Modules" under Arrows 3 and 4, and
"ICARUS Project Object Database (IPOD)" under Arrows 1-6.]
[Caption to graphic: "ICARUS International, Inc.'s business strategy is
to expand its portfolio of integrated AutoDE products to meet customer
needs in every stage of the process manufacturing plant lifecycle."]
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and consolidated
financial statements and the notes thereto appearing elsewhere in this
Prospectus. Except as otherwise indicated herein, the information in this
Prospectus assumes (i) the completion of the recapitalization of the Company and
certain related entities (the "Recapitalization," as more specifically defined
under "Certain Transactions - Pending Recapitalization") to be effected
immediately prior to the closing of the Offering, (ii) an initial public
offering price of $8.00 per share, the midpoint of the range set forth on the
cover page of this Prospectus, and (iii) the 30-day over-allotment option
granted to the Underwriters is not exercised. Unless the context otherwise
requires, references in this Prospectus to "ICARUS" or the "Company" include
ICARUS International, Inc., a Maryland corporation, and its predecessors and
consolidated subsidiaries. INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION
SET FORTH UNDER THE HEADING "RISK FACTORS."
THE COMPANY
ICARUS International, Inc. develops automated desktop engineering
("AutoDE") software for the process manufacturing segments of the chemical,
petroleum refining, pulp and paper, food and other industries. Process
manufacturing plants make products in bulk quantities through various chemical,
physical, and other operations. The Company's 300-plus customers are primarily
large, multinational corporations that own and operate process manufacturing
plants or provide engineering and construction services to such
owner-operators. The Company's customers include such companies as Mitsubishi
Chemical Corporation, Shell Oil Company, The Mead Corporation, Campbell Soup
Company and Fluor Daniel, Inc.
Industry sources indicate that more than 15,000 process manufacturing
plants are now in operation worldwide and that global spending on process
manufacturing plant construction projects will exceed $160 billion in 1998--an
all-time high. The Company's current software products automate important steps
in the "decision engineering" process through which a customer's engineering
staff evaluates the technological and economic feasibility of the construction
or modification of a process manufacturing plant and senior executives determine
whether to proceed with a proposed project. Despite the importance of this
decision, which may involve a capital investment in excess of one billion
dollars, these executives usually have only a limited ability to manage the
conventional decision engineering process, which is time-consuming,
labor-intensive, imprecise and expensive.
The Company's current products directly address a number of the
deficiencies in the conventional decision engineering process by
"re-engineering" the process to take full advantage of today's desktop computing
technology. The Company's products enable engineers to simulate, model and
analyze the design, cost and time requirements of a proposed project more
quickly and less expensively than they can using conventional
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engineering methods. ICARUS products also enhance senior executives' ability to
focus the decision engineering process on business priorities. With more timely
and accurate information that integrates business considerations with
sophisticated engineering analysis, senior executives can make faster, better
informed and more confident decisions. Benefits arising from the use of the
Company's decision engineering software products include more effective
strategic planning, faster reaction to market developments and improved plant
operating efficiency, all of which enhance the customer's competitive position.
In addition to the Company's decision engineering products, other
AutoDE software products automate important steps in the "plant engineering"
process, which occurs after the decision to proceed with a project has been
made. These products also facilitate construction scheduling and cost estimation
for smaller projects at existing plants.
The Company's strategy is to expand its portfolio of integrated AutoDE
software products to meet customer needs in every stage of the process
manufacturing plant lifecycle--from the business development decision to
consider entering a process manufacturing segment, through the process and cost
engineering analysis of a specific proposed plant, to the detailed engineering,
construction scheduling and operations and maintenance activities that follow
the decision to proceed with a proposed plant. For the decision engineering
process, which encompasses business development, process engineering and cost
engineering, ICARUS currently offers process engineering and cost engineering
products. The Company plans to supplement these products and also to release a
new suite of business development products designed to enable senior executives
to analyze high-level, early-stage technological and economic feasibility
issues. This suite of products also will assist senior executives in ensuring
that their engineering staffs are focused on the business impact of their
engineering work. For the plant engineering process, which encompasses detailed
engineering/procurement, construction scheduling and operations and maintenance,
ICARUS currently offers construction scheduling and cost estimation products and
plans to release an object database product that will support plant engineering
applications such as computer-aided engineering ("CAE") or computer-aided design
("CAD") production of detailed construction drawings. A more detailed
enumeration of the elements of the Company's strategic plan is set forth under
the caption "Business-Strategy."
ICARUS markets its products on a world-wide basis through its direct
sales force operating from its home office in Rockville, Maryland and its other
offices in Houston, Texas, Altrincham, England, and Tokyo, Japan. The Company
also has independent sales representatives located in Argentina, Australia,
Brazil, Colombia, France, Germany, India, Saudi Arabia, South Africa, South
Korea, Venezuela and certain independent republics of the former Soviet Union,
and a sales representative that sells into the People's Republic of China. As
part of its marketing effort, ICARUS participates in domestic and international
trade shows, publishes a newsletter, advertises in engineering and other trade
magazines, and holds annual user conferences in the United States, Europe and
Japan.
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The primary source of the Company's revenues are single-year and
multi-year term license fees. At October 31, 1997, 57.5% of the Company's
licenses had a remaining life of one year or more. For the twelve-month period
ended October 31, 1997, 68.5% of licensed authorized users whose licenses
expired during such period elected to renew such licenses (including renewals
that involved the substitution of another ICARUS product) and 49.1% of all new
licenses sold to authorized users were for a term of two or more years. The
Company believes that its license renewal rates and ability to sell multi-year
term licenses are important historical financial strengths. ICARUS also derives
revenue from technical support and training for its customers' employees,
maintenance agreements and consulting services.
The name "ICARUS" is an acronym for Industrial Computer Application
Retrieval and Utility Systems, which was adopted when ICARUS commenced business
operations in 1969. The Company's principal offices are located at One Central
Plaza, 11300 Rockville Pike, Rockville, Maryland 20852; its telephone number is
(301) 881-9350.
"QUESTIMATE," "ICARUS 2000," ICARUS Mentor logo design, "ICARUS" and
design, "ICARUS PROCESS EVALUATOR," and "ICARUS" are registered trademarks of
the Company. "COST" and design, "ARCHES" and design, "Questimate," "ICARUS
2000," "ICARUS," "ICARUS PROCESS EVALUATOR," and "ICARUS" and design are
registered service marks of the Company. The Company has filed an application
for the federal trademark registration of, and claims a trademark in, "ICARUS
PROJECT MANAGER" and design. The Company claims a service mark in, and has filed
an application for the federal registration of, "ICARUS PROJECT MANAGER" and
design. The Company claims and has obtained a federal copyright registration for
the work entitled "ICARUS PROCESS SYSTEMS PIPING AND INSTRUMENTATION DRAWINGS."
All other trademarks or service marks referred to in this Prospectus are the
property of their respective owners.
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THE OFFERING
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Common Stock to be offered ...............................................2,500,000 shares
Common Stock to be outstanding after the Offering.........................5,500,000 shares (1)
Use of proceeds...........................................................To further the Company's
strategic goals by developing
complementary AutoDE
software products, expanding
its engineering and direct sales
and marketing force, possibly
funding strategic alliances, the
possible acquisition of
complementary technologies or
companies, and for general
corporate purposes. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol....................................ICRS
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(1) Excludes (i) 760,500 shares of Common Stock reserved for issuance under
the Company's 1998 Stock Option Plan (the "Stock Option Plan"), of
which options to purchase approximately 437,400 shares of Common Stock
are expected to be granted prior to the commencement of the Offering
with the exercise price to be set at the initial public offering price
set forth on the cover page of this Prospectus, (ii) 507,000 shares of
Common Stock reserved for issuance under the Company's Recognition and
Retention Plan and Trust (the "Recognition Plan"), of which no shares
of Common Stock are expected to be granted immediately following
consummation of the Offering. See "Management - Stock Plans - 1998
Stock Option Plan" and "- Recognition and Retention Plan and Trust."
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Year Ended Six Months Ended
April 30, October 31,
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1995 1996 1997 1996 1997
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CONSOLIDATED STATEMENT OF (Unaudited)
OPERATIONS DATA:
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Total revenue.............................. $5,058 $5,678 $7,339 $3,562 $4,260
Total operating expenses................... 4,554 5,395 6,309 2,993 3,751
Income from operations..................... 504 283 1,030 569 509
Net income ................................ 300 193 656 352 343
Net income per share....................... 0.10 0.06 0.22 0.12 0.11
Weighted average common
shares (1)............................... 3,000 3,000 3,000 3,000 3,000
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October 31, 1997
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Actual As Adjusted(2)
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(Unaudited)
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CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................ $1,078 $18,478
Total assets........................................... 5,271 22,671
Total liabilities...................................... 3,775 3,775
Total stockholders' equity............................. 1,496 18,896
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(1) Computed as described in Note A of Notes to Consolidated Financial
Statements.
(2) Adjusted to give effect to the sale of 2,500,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering
price of $8.00 per share, after deducting the estimated underwriting
discount and Offering expenses payable by the Company. See "Use of
Proceeds" and "Capitalization."
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RISK FACTORS
The shares offered hereby involve a high degree of risk. The following
risk factors should be considered carefully in addition to the other information
in this Prospectus before investing in shares of the Common Stock offered
hereby. The discussion in this Prospectus contains certain forward-looking
statements that involve risks and uncertainties, such as statements of the
Company's plans, goals, objectives, expectations and intentions. The cautionary
statements made in this Prospectus should be read as being applicable to all
related forward-looking statements wherever they appear in this Prospectus.
Prospective investors in the shares of Common Stock offered hereby are cautioned
that, while the forward-looking statements reflect the Company's good faith
beliefs, they are not guarantees of future performance and involve known and
unknown risks and uncertainties and that the Company's actual results could
differ materially from those discussed herein. Some of the factors that could
cause or contribute to such differences include those discussed below, as well
as those discussed elsewhere herein.
Market Acceptance of the Company's Products. The success of the Company
is dependent upon continued and increased use in the process manufacturing
segments of various industries of CAE software in general, and of the Company's
AutoDE software products in particular. Market acceptance of the Company's
existing and future products depends on several factors including the ease with
which the products can be implemented and used, the performance and reliability
of the products, the range of tasks that the products can perform, the degree to
which users achieve expected cost savings and productivity gains, and the extent
to which the Company's customers and prospective customers are able to implement
alternative approaches to meet their business development, engineering,
construction scheduling and operations and maintenance needs. Some of the above
factors are beyond the Company's control. There can be no assurance that the
Company's customers will realize the intended benefits of the Company's products
or that the Company's products will achieve continued or increased market
acceptance. Any significant or ongoing failure to achieve such benefits or to
maintain or increase market acceptance would substantially restrict the future
growth of the Company and could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business - The
Decision Engineering Process" and "- Competition."
Dependence on Contract Renewals. The Company derives a significant
portion of its total revenue from the renewal of license agreements with
existing customers. The Company expects contract renewals to account for an
increasing portion of the Company's total revenue in the future to the extent
that the Company increases the number of contracts for renewing customers. The
Company's license agreements generally have one to five year terms and do not
obligate customers to renew after the expiration of their licenses. The
Company's ability to secure renewals may be affected by, among other factors,
its ability to deliver consistent, high-quality and timely product enhancements
and support services; ownership, management or personnel changes within customer
organizations, including acquisitions of customers by other companies; the
general global investment climate for the process manufacturing segments of
various industries; customer capital budget constraints; the introduction of
competing products by third parties; political and economic stability in
customers' markets and other factors, many of which are beyond the control of
the Company. There can be no assurance that the Company will be able to maintain
its historical renewal rates and any significant or ongoing decline in renewal
rates would have a material adverse effect on the Company's business, operating
results and financial
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condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Overview."
Risks Associated with Continued Product Development; Rapid
Technological Change. The market for CAE software is characterized by rapid
technological change, quickly evolving industry standards and frequent changes
in customer requirements. As a result, new products or product features are
continually being introduced by CAE software companies. The Company's future
results of operations will depend in part upon the Company's ability to avoid
product obsolescence by anticipating and responding to the changes described
above in a timely manner. There can be no assurance that the Company will be
successful in developing and marketing new products and features or that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and sale of such new products and features
or that such new products and features will adequately meet the requirements of
the marketplace and achieve market acceptance. In particular, the Company may
face additional risks in the development of products which are intended to
address different stages of the process manufacturing lifecycle resulting from
the Company's limited knowledge and experience in developing products for such
stages. The Company may also face additional risks related to the process
manufacturing requirements of certain industries not currently addressed by the
Company's products, the Company's attempt to sell new or existing products into
new markets and its dependence upon the contractual performance of new strategic
alliance "partners." See "Business - Strategy."
The Company in the past has experienced delays in the release of new
products and new product features due primarily to the lack of funding to
support product development, difficulties in the allocation and/or recruitment
of required personnel and delays in receipt of necessary technology and supplies
from third parties upon whom the Company was dependent. If any new significant
products or product features are materially delayed or if they fail to achieve
market acceptance, the Company's business, operating results and financial
condition would be materially adversely affected. In addition, the introduction
or announcement of new product offerings or new product features by the Company
or the Company's competitors may cause customers to defer or forgo purchases of
current versions of its products, which could, in turn, have a material adverse
effect on the Company's business, operating results and financial condition. See
"Business - Products and Product Development."
The success of the Company's products in the future will depend, in
part, on technological factors, including the evolution of desktop and network
operating systems and the migration of existing and potential customers from
centralized mainframe-based computing systems to distributed client-server
computing systems. There can be no assurance that the Company will successfully
develop new AutoDE software products (and updated versions of existing products)
that will respond adequately to changes in existing operating systems and the
potential introduction of new operating systems or that such development, even
if successful, will be completed on a timely basis. Neither can there be any
assurance that the Company's current efforts to develop client-server-compatible
products will be successful. A failure in either case could have a material
adverse effect on the Company's business, operating results and financial
condition.
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Fluctuations in Future Operating Results. The Company's operating
results have fluctuated in the past and will in the future likely fluctuate
significantly from quarter to quarter or on an annual basis as a result of a
number of factors, including, but not limited to, the size and timing of
customer orders, delays in renewals or failure of existing customers to renew
their licenses with the Company when their current licenses expire, the length
of the Company's sales cycle, changes in contract terms (including terms
affecting the timing of recognition of license revenue) and the rate at which
such changes are made, timing of new product announcements and introductions by
the Company and its competitors, the Company's ability to develop, introduce and
market new products and product enhancements, market acceptance of the Company's
products, deferrals of customer orders in anticipation of new products or
product enhancements, the Company's ability to control costs, (including the
hiring of new employees), political instability in, or trade embargoes with
respect to, foreign markets, changes in the Company's management team, and
fluctuating economic conditions. The Company's future operating results may
fluctuate as a result of these and other factors, which could have a material
adverse effect on the Company's business, operating results and financial
condition. It is possible that in some future quarter the Company's operating
results will be below the expectations of public market analysts and investors.
In such event, the price of the Company's Common Stock would likely be adversely
affected to a material degree. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Selected Quarterly Operating
Results."
The Company ships software products within a short period after receipt
of a new order and typically does not have a material backlog of unfilled
orders. Revenue in any quarter is substantially dependent on orders booked and
license renewals in that quarter and are not predictable with any degree of
certainty. The Company has recently incurred substantial expenses associated
with product development and increased staffing of its direct sales force with
no certainty that the incurrence of such expenses will result in future
revenues. In addition, because a large portion of the Company's expense levels
are fixed (i.e., relate to salaries, benefits and occupancy expenses), if
revenue is below expectations in any given quarter, then the adverse effect may
be magnified by the Company's inability to adjust spending in a timely manner to
compensate for any revenue shortfall. In addition, a customer's purchase of the
Company's products generally involves a significant commitment of capital with
possible attendant delays frequently associated with authorization procedures
for substantial capital expenditures within large organizations. Moreover, the
Company believes that because some customers are purchasing larger and more
complex AutoDE software products, the Company's average licensed user fees have
been increasing and purchases of the Company's products require approval at
higher executive levels. For these and other reasons, the sales cycles for the
Company's products can be lengthy and are subject to a number of significant
risks over which the Company has little or no control. As a result of the large
dollar amounts represented by a single order, the timing of the receipt of an
order can have a significant impact on the Company's revenues and earnings for a
particular period. Any significant or ongoing failure to reach definitive
agreements with customers, including renewals of current licensing agreements
upon their expiration, would have a material adverse effect on the Company's
business, operating results and financial condition.
Ability to Attract and Retain Required Personnel. The Company believes
that its future business results will depend in significant part upon its
ability to attract and retain highly
- 8 -
<PAGE> 13
skilled engineering, managerial and marketing personnel. Competition for such
personnel is intense, and any failure to attract and retain such personnel could
have a material adverse effect on the Company's business, operating results and
financial condition. In particular, the Company has found it difficult to
attract qualified engineering personnel in the past and no assurance can be
given that the Company will not have similar difficulties in the future.
Intense Competition. The market for CAE software used in the process
manufacturing segments of various industries is intensely competitive. The
Company experiences competition primarily from its customers and potential
customers, which have developed, or may decide to develop, and/or maintain their
own software internally rather than purchasing commercial software products such
as those offered by the Company. As a result, the Company must continuously
educate existing and prospective customers about the advantages of purchasing
the Company's AutoDE software products and services. There can be no assurance
that these customers or other potential customers will perceive sufficient value
in the Company's products and services to justify licensing them. In addition,
customers or potential customers could enter into strategic relationships with
one or more of the Company's competitors to develop, market and sell competing
products and services.
The Company has also experienced and expects to continue to experience
intense competition from current and future competitors, some of whom have
significantly greater financial, technical, marketing and other resources than
the Company. The Company's current direct third-party competitors include
Timberline Software Corporation and a number of smaller private companies. To a
lesser degree, ICARUS faces competition or potential competition from Aspen
Technology, Simulation Sciences Inc. and ChemStations, Inc. Many of the
Company's competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements or to devote greater resources
to the development, promotion and sale of their products than can the Company.
Also, several of the Company's current and potential competitors have greater
name recognition and larger installed bases that could be leveraged to increase
market share at the Company's expense. The Company expects to face increased
competition as other established and emerging companies enter the CAE software
market in the process manufacturing sector of various industries and new
products and technologies are introduced. Increased competition could result in
price reductions, fewer customer orders, reduction in license renewals and loss
of market share, any of which could materially adversely affect the Company's
business, operating results and financial condition. In addition, current and
potential competitors have in the recent past made, and may in the future make,
strategic acquisitions, merge or establish cooperative relationships among
themselves or with third parties, thereby increasing the ability of their
products to address the needs of the Company's current or prospective customers.
Such competition could materially adversely affect the Company's ability to sell
new or renewal licenses and support agreements on terms favorable to the
Company. There can be no assurance that the Company will be able to compete
successfully against current and future competitors, and the failure to do so
would have a material adverse effect upon the Company's business, operating
results and financial condition. See "Business - Competition."
Ability to Manage Growth. To the extent the Company experiences growth
in its business, it is expected that such growth would place a significant
strain on the Company's personnel and resources. The Company's ability to manage
future growth, if any, will depend on its ability to implement and improve
operational, financial and management
- 9 -
<PAGE> 14
information and control systems on a timely basis, together with maintaining
effective cost controls, and any failure to do so could have a material adverse
effect on the Company's business, operating results and financial condition. No
assurance can be given that the Company will not experience such difficulties in
the future.
Limited Line of Products and Services. The Company derives its revenues
from the licensing and sale of a limited number of products and services. The
Company currently offers four primary AutoDE software products, and the software
license revenue derived from such products constituted approximately 75.6% and
70.4% of the Company's total revenues for the six-month period ended October 31,
1997 and for fiscal 1997, respectively. As a consequence, in the event that the
Company were to experience a decline in the demand for one or more of its AutoDE
software products, such a decline could have a material adverse effect on the
Company's business, operating results and financial condition. See "Business -
Products and Product Development."
Concentration of Revenue in the Chemical and Petroleum Refining
Industries. For the six months ended October 31, 1997 and for fiscal 1997, the
Company has derived a significant amount of its total revenue from software
licenses and services to companies in the process manufacturing segments of the
chemical and petroleum refining industries, which are highly cyclical
industries. Accordingly, the Company's future success is dependent to a
substantial degree upon the continued demand for its AutoDE software by
companies in the chemical and petroleum refining industries. The Company
believes that economic downturns in the U.S., Europe and Asia at different
times, and pricing pressures experienced by chemical and petroleum refining
companies in connection with cost containment measures, have led to delays and
reductions in certain capital and operating expenditures by many of such
companies in the past, and such delays or reductions will likely recur in the
future. Any such delays or reductions could have a material adverse effect on
the Company's business, operating results and financial condition. Further, the
Company's revenue in the past has been, and in the future may be, subject to
substantial period-to-period fluctuations as a consequence of general domestic
and foreign economic conditions, political developments and other factors
affecting spending in the chemical and petroleum refining industries. The
Company has developed new products and product features for, and has increased
its marketing efforts of its current products to, companies in the process
manufacturing segments of other industries. However, no assurance can be given
that such efforts will decrease the Company's concentration of revenues from the
chemical and petroleum refining industries in the foreseeable future. See
"Business - Strategy."
Risks Associated with International Operations. A significant portion
of the Company's total revenue for the six months ended October 31, 1997 and for
fiscal 1997 was derived from customers whose licensed users are located outside
the United States. The Company's international operations are subject to risks
inherent in the conduct of international business, including unexpected changes
in regulatory requirements, exchange rates, export license requirements, tariffs
and other barriers, political and economic instability, limited intellectual
property protection, difficulties in collecting payments due from sales
representatives or customers, difficulties in managing its sales
representatives, difficulties in staffing and managing foreign subsidiary
operations, and potentially adverse tax consequences. Certain of the Company's
international sales are denominated in local currencies, and the impact of
future exchange rate fluctuations on the Company's operating results and
financial condition cannot be accurately predicted. The Company does not
- 10 -
<PAGE> 15
currently engage in currency exchange rate hedging transactions, but the Company
will occasionally buy and sell different currencies to protect itself against
currency exchange rate fluctuations. There can be no assurance that fluctuations
in currency exchange rates in the future will not have a material adverse impact
on revenue from international sales and thus the Company's business, operating
results and financial condition. The Company may engage in hedging in the
future; however, there can be no assurance that any currency hedging policies
implemented by the Company in the future will be successful. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business - Sales and Marketing."
Potential for Software Defects. Like other software products, the
Company's products have, on occasion, contained undetected errors, or "bugs,"
which become apparent through use of the product. Because the Company's new or
enhanced products are initially installed in a limited number of personal
computers and operated by a limited number of users, such errors may not be
detected for a number of months after delivery of the software. Significant
errors could result in the redeployment of Company personnel and funds to cure
the errors resulting in delays in product development and enhancements.
Moreover, software products with substantial errors could be rejected by
customers, which could have a material adverse effect on the Company's business,
results of operations or financial condition. Although the Company has not
experienced material adverse effects resulting from any such errors or defects
to date, there can be no assurance that errors or defects will not be discovered
in the future, potentially causing delays in product introduction and shipments
or requiring design modifications that could adversely affect the Company's
business, results of operations, or financial condition. It is also possible
that errors or defects in the Company's software products could give rise to
product liability or other liability claims. See "- Product Liability."
Risks Associated with Proprietary Rights. The Company relies primarily
upon trade secret and copyright laws to protect its proprietary technology. The
Company enters into trade secret and confidentiality agreements with its
employees and also enters into confidentiality agreements with its distributors
and customers. Such confidentiality agreements typically limit access to, and
seek to prohibit decompilation and reverse engineering of the object code
embedded in the Company's AutoDE software products and other proprietary
software. The Company also typically uses a proprietary physical security device
developed by the Company and proprietary software to control the identity,
number of users and term of use of its AutoDE software products. The Company has
historically declined to seek patent protection for its AutoDE software products
because patents on such products would result in the public disclosure of
proprietary ideas and structures associated with its software. Further, the
Company generally has declined to seek copyright registration of its
copyrightable software since the registration process requires the disclosure of
certain portions of its source code and therefore increases the risk that a
competitor could use such copyright registrations to obtain sensitive
information regarding the Company's AutoDE software products. The Company has
applied for, and received U.S. trademark and service mark registrations on many
of the trademarks and service marks used in marketing its products and services.
There can be no assurance, however, that the steps taken by the Company to
protect its products and services under applicable intellectual property laws
and with the Company's proprietary control device are adequate to prevent
misappropriation of its technology or that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's
- 11 -
<PAGE> 16
technology. Further, it is very difficult to police unauthorized use of the
Company's products due to the nature of software. Any such misappropriation of
the Company's technology or development of competitive technologies could have a
material adverse impact on the Company's business, operating results and
financial condition. In addition, the laws of certain countries in which the
Company's products are distributed do not protect the Company's intellectual
property rights to the same extent as the laws of the United States. For
example, the laws of many foreign jurisdictions in which the Company licenses
its software products protects trademarks solely on the basis of the first to
register. The Company currently does not possess any trademark registrations in
foreign jurisdictions, although it does have copyright protection of its
software products under the provisions of various international conventions.
Accordingly, intellectual property protection of its products and services may
be ineffective in many foreign countries. In summary, there can be no assurance
that the protection provided by the laws of the United States or foreign
jurisdictions will be sufficient to protect the Company's intellectual property.
The Company could incur substantial costs in protecting and enforcing
its intellectual property rights. Although there presently are no pending or
threatened intellectual property claims against the Company, third parties may,
in the future, assert patent, trademark, copyright and other intellectual
property right claims to technologies which are incorporated into the Company's
products. In such event, the Company may be required to incur significant costs
in reaching a resolution to the asserted claims. There can be no assurance that
such a resolution would not require that the Company pay damages or obtain a
license to the third party's intellectual property rights in order to continue
licensing the Company's products as currently offered or, if such a third party
license is required, that it would be available on terms acceptable to the
Company.
Certain technology used in the Company's current products and products
under development include technology licensed from third parties. These licenses
generally require the Company to pay royalties and to fulfill confidentiality
obligations. The termination of any such licenses, or the failure of the third
party licensors to adequately maintain or update their products, could result in
delays in the Company's ability to ship certain of its products or in delays in
the introduction of the Company's new or enhanced products while it searches for
similar technology from alternative sources, if any, which would prove costly.
Any need to implement alternative technology could prove to be very expensive
for the Company and any delay in product introduction or shipment could result
in a material adverse effect on the business, result of operations and financial
condition of the Company. It may also be necessary or desirable in the future to
obtain additional licenses for use of third party products in the Company's
products and there can be no assurance that the Company will be able to do so on
commercially reasonable terms, if at all. See "Business - Proprietary Rights."
Risks Attendant to Strategic Alliances or Acquisitions. The Company's
business strategy includes the possible acquisition of companies or technologies
or the entry into strategic alliances which will complement or supplement the
products and services sold by the Company. No assurance can be given that the
Company will be able to find attractive acquisition or strategic alliance
candidates, or that after completion of an acquisition or entry into an alliance
the Company will be able to effectively integrate the acquired operations or to
profitability manage such operations or strategic alliances. The failure to
- 12 -
<PAGE> 17
complete acquisitions or enter into strategic alliances could have a material
adverse effect on the Company's ability to grow its revenues in the future.
There are significant risks attendant to the Company's entry into
strategic alliances or the consummation of acquisitions. The Company has
recently entered into three strategic alliances and may enter into additional
strategic alliances in the future. Risks inherent in such current and any future
alliances include, among others, the inability to realize the intended benefits
of an alliance, the Company's increased reliance on third parties, the increased
payment of third party licensing fees or royalties for incorporation of third
party technology into the Company's products, the inadvertent transfer of the
Company's proprietary technology to a strategic "partner" and the opportunity
costs associated with entering into alliances. If any strategic alliance or
acquisition is consummated for cash and the Company borrows the required funds,
the Company may become highly leveraged, which could make it vulnerable to
increases in interest rates and extended economic downturns, limiting the
Company's flexibility in responding to changing economic and industry
conditions. If any strategic alliance or acquisition is financed by the issuance
of additional Common Stock or other convertible securities, such issuance may be
without stockholder approval and could dilute current stockholders and
stockholders who purchase shares of Common Stock in this Offering and may have a
negative impact on earnings per share and on the market price of the Common
Stock. There can be no assurance that the Company will be able to obtain
additional debt or equity financing on terms favorable to the Company, or at
all, or if obtained, there can be no assurance that such debt or equity
financing will be sufficient for the financing needs of the Company.
Dependence on Management Personnel. The Company's future business
results depend in significant part on Herbert G. Blecker, the Company's Chairman
of the Board, President and Chief Executive Officer ("Mr. Blecker"), William F.
Geritz, III, the Company's Executive Vice President ("Mr. Geritz") and other
senior management and key employees, including certain engineering, managerial
and marketing personnel. The loss of the services of any of these individuals,
or groups of individuals, could have a material adverse effect on the Company's
business, operating results and financial condition. The Company has employment
agreements with Messrs. Blecker and Geritz that include non-competition
covenants. See "Management - Employment Agreements."
Legal Proceedings. In 1979, the Company and Mr. Blecker were convicted
by a federal court for defrauding the General Services Administration ("GSA") by
making misstatements regarding Company employee qualifications in connection
with the performance of a subcontract for GSA, which resulted in overbilling the
GSA for such employees' services. The Company was fined $62,000 and Mr. Blecker
was sentenced to one year imprisonment, of which he served nine months. The GSA,
in 1983, sent a letter to the Company stating that the Company would be
permitted to continue to contract with the GSA. In addition, as a result of a
dispute with the Internal Revenue Service ("IRS") regarding a payment plan for
back taxes, the Company filed a voluntary petition under Chapter 11 of the U.S.
Bankruptcy Code in 1985 and emerged therefrom in 1988, making all payments
required pursuant to its plan of reorganization, the final payment being made in
1993. The Company believes that the foregoing described legal proceedings have
not had an adverse impact on the Company's recent business, financial condition
or results of operations. See "Business - Legal Proceedings - Prior Legal
Proceedings."
- 13 -
<PAGE> 18
Year 2000 Compliance. Many currently installed computer systems and
software products are coded to accept only two-digit entries in the date code
field. Beginning in the year 2000, these date code fields will need to accept
four-digit entries to distinguish 21st century dates from 20th century dates. As
a result, computer systems and/or software used by many companies may need to be
upgraded to comply with such "year 2000" requirements. Significant uncertainty
exists in the software industry concerning the potential effects associated with
such compliance. Although the Company currently offers software products that
are either designed to be year 2000 compliant or have been, or are being or will
be upgraded to be year 2000 compliant, there can be no assurance that the
Company's software products contain all necessary date code changes. In
addition, the Company has warranted, and may in the future warrant, to certain
customers that its products will be year 2000 compliant, and the failure of such
products to be year 2000 compliant could have a material adverse effect on the
Company's business, financial condition or results of operations. Any failure of
the Company's products to be year 2000 compliant could result in a material
adverse effect on the Company's business, financial condition or results of
operations.
Product Liability. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims arising from a customer's use of the
Company's products. The Company does not guarantee that any particular result
will be obtained through the use of its AutoDE software, because the customer's
input variables typically control the results of the product's calculations. It
is possible, however, that the limitation of liability provisions contained in
the Company's license agreements may not be effective as a result of existing or
future federal, state or local laws or ordinances or unfavorable judicial
decisions. Although the Company has not experienced any product liability claims
to date, the sale and support of its software may entail the risk of such
claims, which could be substantial in light of the applications in which the
Company's products are used. A successful product liability claim brought
against the Company could have a material adverse effect upon the Company's
business, operating results and financial condition.
Broad Management Discretion in Use of Proceeds. The net proceeds to the
Company from the sale of the Common Stock offered by the Company hereby at an
assumed initial public offering price of $8.00 per share (the midpoint of the
range as set forth on the cover page of this Prospectus) are estimated to be
$17.4 million, after deducting the estimated underwriting discount and Offering
expenses payable by the Company. Although the Company currently anticipates that
it will use a portion of such proceeds to further its strategic goals, the
remainder of such proceeds are currently allocated only for general corporate
purposes. Moreover, management will have the discretion to modify the use of net
proceeds, as described under the caption "Use of Proceeds." Consequently,
management will have broad discretion over the use of the net proceeds of the
Offering.
Control by Principal Stockholders. Upon completion of the Offering, Mr.
Blecker, the Chairman of the Board and Chief Executive Officer, and his wife,
Eunice E. Blecker, the Company's Treasurer and Secretary (collectively, the
"Principal Stockholders"), will, in the aggregate, beneficially own
approximately 54.5% of the issued and outstanding shares of Common Stock of the
Company, and will therefore have the ability to effectively control the outcome
of all matters (including the election of directors, any merger or
consolidation, or the sale of all or substantially all of the Company's assets)
submitted to the stockholders for approval. This concentration of ownership may
also have the effect of delaying, deferring
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<PAGE> 19
or preventing a change in control of the Company and making certain
transactions more difficult or impossible absent the support of such
stockholders, including proxy contests, mergers involving the Company, tender
offers, open-market purchase programs or other purchases of Common Stock that
could give public, minority stockholders of the Company the opportunity to
realize a premium over the then-prevailing market price for shares of Common
Stock. See "Principal Stockholders."
Anti-Takeover Effects of the Company's Articles of Incorporation and
Maryland Law. The Company's Board of Directors has the authority to issue up to
5,000,000 shares of preferred stock, $.01 par value per share, of the Company
(the "Preferred Stock"), of which 100 shares of Series A Preferred Stock will be
outstanding following consummation of the Recapitalization, and to determine the
price, rights, preferences, privileges and restrictions of the unissued shares
thereof, including voting rights, without any further vote or action by the
Company's stockholders within certain limitations as prescribed by the rules of
the Nasdaq National Market. See "Description of Capital Stock." Moreover, the
Articles of Incorporation ("Articles") of the Company contain certain provisions
which, among other things, maintain a "staggered" Board of Directors, limit the
personal liability of, and provide indemnification for, the directors of the
Company, require that stockholders comply with certain requirements before they
can nominate someone for director or submit a proposal before a meeting of
stockholders, limit the ability of stockholders to call special meetings of
stockholders, limit the ability of stockholders to act by written consent and
require a supermajority of stockholders in the event that a "related person" (as
defined) attempts to engage in a business combination with the Company. See
"Description of Capital Stock -- Maryland Anti-Takeover Law and Certain
Provisions of the Articles of Incorporation."
No Prior Public Trading Market. Prior to the Offering, there has been
no public trading market for shares of the Common Stock, and there can be no
assurance that an active public trading market will develop following
completion of the Offering or, if developed, that such market will be
sustained. The initial public offering price of the shares of Common Stock was
determined by negotiation between the Company and the Underwriters and will
not necessarily reflect the market price of the Common Stock following the
Offering. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price.
Possible Volatility of Stock Price. The market price for the Common
Stock following the Offering will be affected by a number of factors, including
the announcement of new products, product enhancements or services by the
Company or its competitors, quarterly variations in the Company's results of
operations or results of operations of the Company's competitors, changes in
earnings estimates or recommendations by securities analysts, developments in
the Company's industry and in the process manufacturing segments of various
industries, general market and economic conditions and other factors, including
factors unrelated to the operating performance of the Company or its
competitors. In addition, stock prices for many companies in the technology and
emerging growth sectors have experienced wide fluctuations which have often been
unrelated to the operating performance of such companies. Such factors and
fluctuations may adversely affect the market price of the Company's Common
Stock.
Shares Eligible for Future Sale. Sales of a substantial number of
shares of Common Stock in the public market following the Offering could
adversely affect the market price
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<PAGE> 20
of the Common Stock prevailing from time to time. Upon completion of this
Offering, the Company will have 5,500,000 shares of Common Stock outstanding. Of
these outstanding shares, the 2,500,000 shares sold in this Offering will be
freely transferable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), unless they are held
by "affiliates" of the Company within the meaning of Rule 144 promulgated under
the Securities Act ("Rule 144") as currently in effect. The remaining 3,000,000
shares held by existing stockholders will be "control shares" within the meaning
of Rule 144 and may not be sold in the absence of registration under the
Securities Act or pursuant to an exemption from registration under Rule 144
promulgated under the Securities Act.
The Company and each of the Principal Stockholders of the Company have
entered into lock-up agreements providing that neither the Company nor any
Principal Stockholder will offer, sell, pledge, grant an option for the sale of
or otherwise dispose of shares of Common Stock, or any interest therein, or any
securities exercisable for or convertible into shares of Common Stock, for a
period of 180 days after the effective date of the offering made hereby (until
______ __, 1998) without the prior written consent of Hoak Breedlove Wesneski &
Co. Any shares subject to these lock-up agreements may be released at any time
by Hoak Breedlove Wesneski & Co.
As of the date of this Prospectus, the Company has reserved an
aggregate of 760,500 shares of Common Stock for issuance pursuant to the Stock
Option Plan and options to purchase 437,400 shares will be outstanding under the
Stock Option Plan immediately prior to the commencement of the Offering. Such
options will vest at a rate of 20% per year on each annual anniversary of the
date on which the option was granted. The Company also has reserved 507,000
shares for issuance under the Recognition Plan, none of which are anticipated to
be granted immediately following the consummation of the Offering. As soon as
practicable following the Offering, the Company intends to file registration
statements on Form S-8 under the Securities Act to register shares of Common
Stock reserved for issuance under such plans. Such registration statements will
automatically become effective immediately upon filing. See "Shares Eligible for
Future Sale."
Substantial Dilution. Purchasers of Common Stock offered hereby will
suffer an immediate and substantial dilution of $4.56 per share in net tangible
book value per share of the Common Stock. See "Dilution."
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<PAGE> 21
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered by the Company hereby at an assumed initial public offering price
of $8.00 per share are estimated to be $17.4 million, after deducting the
estimated underwriting discount and Offering expenses payable by the Company
(or approximately $20.1 million if the Underwriters' over-allotment option is
exercised in full).
The Company intends to use the net proceeds to further its strategic
goals as described herein, and therefore expects to utilize a portion of the net
proceeds to accelerate its development of complementary AutoDE software
products, to expand its engineering and direct sales and marketing force, for
current or possible future strategic alliances, for the possible acquisition of
complementary technologies or companies, and for general corporate purposes. See
"Business - Strategy."
Company management continually evaluates the manner in which it can
most effectively bring new products or product enhancements to market and,
accordingly, reviews on a constant basis whether it is more efficacious to
develop internally or acquire (by purchase, license or alliance) certain
technologies. As a consequence, the amount of net proceeds to be devoted to
furthering a given element of the Company's strategic plan, such as internal
product development, may be re-directed towards furthering one or more other
elements of the Company's strategic plan, such as possibly entering into
strategic alliances or undertaking acquisitions. Accordingly, the net proceeds
which may be used for a particular purpose may be subject to change based on
future events which cannot be accurately predicted. Moreover, the Company
intends to maintain its flexibility to use the net proceeds to respond to other
business opportunities in the engineering software and software services
industry in the future. Consequently, management will have broad discretion over
the use of the proceeds in this Offering. See "Risk Factors - Broad Management
Discretion in Use of Proceeds."
The Company continues to evaluate potential strategic alliances and
potential acquisitions and to identify and have preliminary discussions with
potential strategic alliance and/or acquisition candidates, although there are,
as of the date of this Prospectus, no agreements, arrangements or understandings
between the Company and any party relating thereto. There can be no assurance
that any strategic alliance or acquisition can or will be consummated on terms
favorable to the Company, or at all. See "Risk Factors-Risks Attendant to
Strategic Alliances or Acquisitions" and "Business -Strategy."
Pending the uses described above, the Company will invest the net
proceeds from the sale of the Common Stock offered by it hereby in short-term,
investment grade, interest-bearing securities.
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<PAGE> 22
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on the Common
Stock and does not presently intend to pay cash dividends on the Common Stock in
the foreseeable future. Any payment of cash dividends on shares of Common Stock
will be within the discretion of the Company's Board of Directors and will
depend upon the earnings of the Company, the Company's capital requirements,
restrictions imposed by the Company's lenders, if any, applicable requirements
of the Maryland General Corporation Law ("MGCL") and other factors considered
relevant by the Company's Board of Directors.
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<PAGE> 23
CAPITALIZATION
The following table sets forth the (unaudited) capital lease obligation
and capitalization of the Company at October 31, 1997, and as adjusted to give
effect to the Offering and the application of the estimated net proceeds
therefrom. See "Use of Proceeds." This table should be read in conjunction with
the consolidated financial statements of the Company and the notes related
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
OCTOBER 31, 1997
--------------------------------------
ACTUAL AS ADJUSTED
--------------- -----------------
(In thousands)
<S> <C> <C>
Capital lease obligation, less current portion................................ $ 5 $ 5
---- ----
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares authorized, 100 shares
Series A Preferred Stock issued and outstanding actual; 100 shares Series A
Preferred Stock issued and outstanding as
adjusted(1).............................................................. -- --
Common Stock, $.01 par value, 20,000,000 shares authorized, 3,000,000 shares
issued and outstanding actual; 5,500,000 shares issued and
outstanding as adjusted(2)............................................... 30 55
Additional paid-in capital................................................. 10 17,385
Retained earnings.......................................................... 1,444 1,444
Cumulative foreign currency translation adjustment......................... 12 12
----- ------
Total stockholders' equity.............................................. 1,496 18,896
----- ------
Total capitalization................................................. $1,501 $18,901
===== ======
</TABLE>
- --------------------
(1) The Company will issue 100 shares of Series A Preferred Stock in
connection with the Recapitalization, which will be consummated
immediately prior to the closing of the Offering. See "Certain
Transactions - Pending Recapitalization."
(2) Excludes (i) 760,500 shares of Common Stock reserved for issuance under
the Stock Option Plan, of which options to purchase approximately
437,400 shares of Common Stock are expected to be granted prior to the
commencement of the Offering with the exercise price to be set at the
initial public offering price set forth on the cover page of this
Prospectus, and (ii) 507,000 shares of Common Stock reserved for
issuance under the Recognition Plan, of which no shares of Common Stock
are expected to be granted immediately following consummation of the
Offering. See "Management - Stock Plans - 1998 Stock Option Plan" and
"- Recognition and Retention Plan and Trust."
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<PAGE> 24
DILUTION
At October 31, 1997, the unaudited net tangible book value of the
Company was $994,000 or $0.33 per share of Common Stock outstanding. The net
tangible book value per share represents the amount of total assets (excluding
intangible assets) less total liabilities, divided by the total number of shares
of Common Stock outstanding. At October 31, 1997, after having given effect to
the sale of 2,500,000 shares of the Common Stock in the Offering by the Company
at an assumed initial public offering price of $8.00 per share and after
deduction of estimated underwriting discounts and Offering expenses payable by
the Company, the pro forma net tangible book value of the Company would have
been $18.9 million or $3.44 per share. This represents an immediate increase in
pro forma net tangible book value of $3.11 per share to existing stockholders
and an immediate dilution in pro forma net tangible book value of $4.56 per
share to the new investors purchasing shares of Common Stock in this Offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............................................. $8.00
----
Net tangible book value per share at October 31, 1997(1)..................................... $0.33
Increase in pro forma net tangible book value per share attributable
to new investors............................................................................ 3.11
----
Pro forma net tangible book value per share after the Offering............................... 3.44
----
Dilution per share to new investors.......................................................... $4.56
====
</TABLE>
- ----------
(1) Based upon 3,000,000 shares of Common Stock outstanding as of October
31, 1997. Does not include 1,267,500 shares of Common Stock reserved for
future issuance under the Company's Stock Option Plan and Recognition
Plan. See "Management - Stock Plans - 1998 Stock Option Plan" and "-
Recognition and Retention Plan and Trust."
- 20 -
<PAGE> 25
The following table summarizes, on a pro forma basis as of October 31,
1997, the number of shares of Common Stock purchased from the Company, the total
consideration paid for such shares and the average price per share paid for such
shares by existing stockholders and by the new investors purchasing shares of
Common Stock from the Company in this Offering (based on an assumed initial
public offering price of $8.00 per share and before deduction of estimated
underwriting discounts and Offering expenses payable by the Company):
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION AVERAGE
----------------------------- ---------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------------- ------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 3,000,000 54.5% $ 40,000 0.2% $0.01
New investors....................... 2,500,000 45.5 20,000,000 99.8 $8.00
--------- ----- ----------- -----
Total............................... 5,500,000 100.0% $20,040,000 100.0%
========= ===== =========== =====
</TABLE>
- ----------------------
(1) Assumes no exercise of stock options. As of the date of the consummation
of this Offering, there will be outstanding options to purchase 437,400
shares of Common Stock with an exercise price equal to the initial
public offering price, which options will vest and become exercisable at
the rate of 20% per year in 1999 through 2003. It is also anticipated
that options to purchase shares will be issued to non-employee directors
immediately after the Company's 1998 annual meeting of stockholders and
that no shares will be granted under the Recognition Plan immediately
following the Offering. See "Management - Stock Plans - 1998 Stock
Option Plan" and "- Recognition and Retention Plan and Trust."
- 21 -
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for the years
ended April 30, 1995, 1996 and 1997 are derived from the Company's audited
consolidated financial statements, which have been audited by Grant Thornton
LLP, independent accountants, whose report for the years ended April 30, 1996
and 1997 is included elsewhere in this Prospectus. The selected financial data
presented below for the six months ended October 31, 1996 and 1997 are derived
from the unaudited consolidated financial statements of the Company that have
been prepared on the same basis as the audited consolidated financial statements
and, in the opinion of management, include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the results
of operations for the periods presented. The operating results for the six
months ended October 31, 1997 are not necessarily indicative of the results to
be expected for any future period. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related
notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended April 30, October 31,
----------------------------------------------- --------------------------
1995 1996 1997 1996 1997
------------ ----------- ------------ ---------- -----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
DATA:
Revenue:
Software license revenue.................. $3,166 $3,812 $5,165 $2,472 $3,219
Maintenance fee and other revenue......... 1,892 1,866 2,174 1,090 1,041
----- ----- ----- ----- -----
Total revenue....................... 5,058 5,678 7,339 3,562 4,260
Expenses:
Cost of software license revenue.......... 507 562 871 419 607
Cost of maintenance fee and other
revenue.................................. 322 537 520 248 286
Selling and marketing..................... 1,663 2,172 2,473 1,185 1,429
Research and development.................. 841 850 904 400 511
General and administrative................ 1,221 1,274 1,541 741 918
----- ----- ----- ----- -----
Total operating expenses............. 4,554 5,395 6,309 2,993 3,751
----- ----- ----- ----- -----
Income from operations.................... 504 283 1,030 569 509
Interest income, net...................... 8 21 45 13 49
Other (expense) income.................... (9) -- -- -- --
------ ----- ------ ------ -----
Income before income taxes................ 503 304 1,075 582 558
Provision for income taxes................ 203 111 419 230 215
----- ----- ----- ----- -----
Net income........................... $ 300 $ 193 $ 656 $ 352 $ 343
===== ===== ===== ===== =====
Net income per share...................... $ 0.10 $ 0.06 $ 0.22 $ 0.12 $ 0.11
===== ===== ===== ===== =====
Weighted average common
shares................................... 3,000 3,000 3,000 3,000 3,000
</TABLE>
<TABLE>
<CAPTION>
April 30, October 31,
------------------------------------------------------
1995 1996 1997 1997
-------------- -------------- -------------- ----------------
(Unaudited)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................ $ 236 $ 496 $1,096 $1,078
Total assets............................... 2,043 2,859 4,554 5,271
Total liabilities.......................... 1,762 2,397 3,427 3,775
Total stockholders' equity................. 281 462 1,127 1,496
</TABLE>
- 22 -
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with "Selected Consolidated Financial Data" and the Company's consolidated
financial statements and notes thereto included elsewhere in this Prospectus.
The discussion in this Prospectus contains certain forward-looking statements
that involve risks and uncertainties, such as statements of the Company's plans,
objectives, expectations and intentions. The cautionary statements made in this
Prospectus should be read as being applicable to all related forward-looking
statements wherever they appear in this Prospectus. While the forward-looking
statements reflect the Company's good faith beliefs, they are not guarantees of
future performance and involve known and unknown risks and uncertainties. The
Company's actual results could differ materially from those discussed here. Some
of the factors that could cause or contribute to such differences include those
discussed in "Risk Factors," as well as those discussed elsewhere herein.
OVERVIEW
The Company was organized in 1969 to develop and market engineering
services to the process manufacturing segments of the chemical, petroleum
refining and other industries. During this period, the Company developed a cost
estimation software product to be run on the mainframe computers of certain of
its large customers. In 1970, the Company shipped its first commercial cost
estimation software program, the COST System. With the proliferation of powerful
desktop computers and easy-to-use operating systems like Windows in the early
1990s, the Company shifted direction to focus on the development of AutoDE
software products. In fiscal 1993, the Company released the first of a series of
Windows-based AutoDE products.
The Company derives its revenue primarily from the sale of licenses of
its AutoDE software products, and, to a lesser extent, from maintenance fee and
other revenue. Revenue from software licenses accounted for 75.6% and 70.4% of
the Company's total revenues for the six months ended October 31, 1997 and for
fiscal 1997, respectively. Maintenance fee, training, consulting and other
services accounted for 24.4% and 29.6% of the Company's revenues for the six
months ended October 31, 1997 and for fiscal 1997, respectively.
The Company typically licenses its AutoDE software to customers on a
per-authorized user basis for a one or multi-year term. The license fee for a
one-year license for a single U.S. user of one of the Company's core AutoDE
software products ranges from $7,900 to $31,500, depending on the product and
license term. The license fee charged by the Company per authorized user
declines as the customer increases the total number of authorized users and
increases the commitment term of the license.
Customers who license software products from the Company under
multi-year agreements have the option of paying the applicable license fee in
full at the beginning of the term of the license or making annual payments
throughout the term of the license. A substantial majority of customers who have
multi-year agreements elect the annual payment option. The Company believes that
this election is principally because the customers prefer to pay for the
Company's AutoDE software products out of their operating budgets. Customers who
elect to pay throughout the term of the license are required to pay
- 23 -
<PAGE> 28
additional annual charges based upon increases in the Consumer Price Index in
the United States, the Retail Price Index in the United Kingdom, the Consumer
Price Index in Japan, the United Kingdom Retail Price Index in the European
Union, and the United States Consumer Price Index elsewhere, depending upon the
location of the Company's billing office.
The following table sets forth the license terms remaining at October
31, 1997 for all licenses in effect on that date:
<TABLE>
<CAPTION>
License Term No. of Users Percent of All
Remaining Licensed* Licensed Users
------------------- ------------ --------------
<S> <C> <C>
Less than 12 Months 524 42.5%
12-23 Months 107 8.7
24-35 Months 66 5.3
36-47 Months 224 18.2
48-59 Months 263 21.3
60 or More Months 50 4.0
</TABLE>
- ------------------
* Does not include 4 older licenses which permit an unlimited number of
users, nor does it include 7 multi-year term licenses that have been
prepaid.
The Company believes that its ability to sell a substantial number of
multi-year term licenses, as demonstrated by the above table, is an important
historical financial strength. For the twelve-month period ended October 31,
1997, 68.5% of licensed authorized users whose licenses expired during such
period elected to renew such licenses (including renewals that involved the
substitution of another ICARUS product), and 49.1% of all new licenses sold to
authorized users were for a term of two or more years. The Company is highly
dependent upon license renewal revenues. See "Risk Factors - Dependence on
Contract Renewals."
One of the Company's strategic alternatives is to enter into technology
licensing arrangements or strategic alliances to more quickly bring to market
new AutoDE software products or product enhancements by combining its technology
with the technology of its strategic "partners." Management of the Company
believes that any revenue generated as a result of such licensing or alliance
arrangements will be partially offset by increased costs of software license
revenue due to the more significant royalty or license fee obligations of the
Company arising out of such arrangements. In addition, the Company also expects
that it will have certain higher expenses in near-term future periods, as it
recently increased the level of its expenses associated with product development
and sales, with no certainty that the incurrence of such expenses will result in
future revenues.
The Company recognizes revenue from product licensing agreements in
accordance with the American Institute of Certified Public Accountants Statement
of Position No. 91-1, "Software Revenue Recognition" ("SOP 91-1"). Revenue from
software license agreements is recognized upon execution of a contract and
shipment of the software, provided that no significant vendor obligations remain
and collection is probable. Upon renewal of one-year licenses, revenue is
recognized on the contract renewal date. For multi-year agreements,
- 24 -
<PAGE> 29
revenue is recognized ratably over the multi-year period on each successive
anniversary date. Any amount billed in advance of satisfying the above revenue
recognition criteria is classified as current and long-term deferred revenue.
Maintenance revenue is recognized ratably over the support period, which is
generally one year. Such revenue includes amounts bundled with the initial
license fee arrangement for which separate prices have been derived for
financial reporting purposes based upon the Company's historical retail pricing
for separate arrangements. Consulting and training revenue is recognized as the
related services are performed. See Note A of Notes to Consolidated Financial
Statements.
The American Institute of Certified Public Accountants has released
Statement of Position No. 97-2 "Software Revenue Recognition" ("SOP 97-2"),
which supersedes SOP 91-1. The new SOP 97-2 will be effective for all
transactions entered into by the Company in fiscal year 1999. The new SOP 97-2
requires, among other things, that revenue should be recognized when there is
persuasive evidence of an existing arrangement, delivery has occurred, the fees
charged are fixed or determinable and collectibility is probable. Additionally,
SOP 97-2 provides that for those arrangements which consist of multiple elements
such as upgrades, enhancements and post-contract support, the fees charged must
be allocated to each element of the arrangement based upon vendor-specific
objective evidence of fair value, which is limited to a price charged when the
element is sold separately or the price for the element is established by
management. The Company currently recognizes revenue on license agreements when
all of the conditions described above have been met, and revenue on multi-year
license agreements typically is not recognized until such time that payments
from customers become due (i.e., the license anniversary date). Additionally,
the Company has allocated fees between elements of its arrangements based upon
established prices charged for those elements when sold separately. In
management's opinion, the impact of SOP 97-2 is not expected to be material.
Software development costs relating to new software products and
enhancements to existing software products are expensed as incurred until
technological feasibility has been established, after which additional costs are
capitalized in accordance with Financial Accounting Standards Board Statement
No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased or
Otherwise Marketed." Historically, the Company has not incurred material
software development costs following the establishment of technological
feasibility, and therefore no costs for software development have been
capitalized for the six months ended October 31, 1997 or for fiscal years 1997,
1996 or 1995.
- 25 -
<PAGE> 30
RESULTS OF OPERATIONS
The following table sets forth consolidated statement of operations
data as a percentage of total revenue for the periods indicated.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended April 30, October 31,
-------------------------------------- ------------------------------
1995 1996 1997 1996 1997
--------- --------- --------- ------------- ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue
Software license revenue........................ 62.6% 67.1% 70.4% 69.4% 75.6%
Maintenance fee and other revenue............... 37.4 32.9 29.6 30.6 24.4
----- ---- ----- ----- -----
Total revenue.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses
Cost of software license revenue................ 10.0 9.9 11.9 11.8 14.3
Cost of maintenance fee and other
revenue........................................ 6.4 9.4 7.1 7.0 6.7
Selling and marketing........................... 32.9 38.3 33.7 33.3 33.5
Research and development........................ 16.6 15.0 12.3 11.2 12.0
General and administrative...................... 24.1 22.4 21.0 20.7 21.6
----- ----- ----- ----- -----
Total operating expenses................... 90.0 95.0 86.0 84.0 88.1
----- ----- ----- ----- -----
Income from operations............................. 10.0 5.0 14.0 16.0 11.9
Interest income, net............................... .2 .4 .6 .4 1.2
Other (expense) income............................. (.2) -- -- -- --
----- ------ ------- ------ -----
Income before income taxes......................... 10.0 5.4 14.6 16.4 13.1
Provision for income taxes......................... 4.1 2.0 5.7 6.5 5.0
----- ----- ----- ----- -----
Net income......................................... 5.9% 3.4% 8.9% 9.9% 8.1%
===== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED OCTOBER 31, 1997 COMPARED TO SIX MONTHS ENDED OCTOBER 31, 1996
Total Revenue. Total revenue for the six months ended October 31, 1997
increased by $698,000 or 19.6% to $4.3 million from $3.6 million for the six
months ended October 31, 1996. Software license revenue consists of fees paid by
the Company's customers to license its AutoDE software under single or
multi-year arrangements. Software license revenue increased 30.2% from $2.5
million for the six months ended October 31, 1996 to $3.2 million for the six
months ended October 31, 1997. The increase in software license revenue for the
six-month period in fiscal 1998 as compared to the six-month period in fiscal
1997 was primarily due to renewals of software licenses, the addition of new
users by existing customers, the sale of new products developed in fiscal 1996
to existing customers and the sale of new and existing products to new
customers. Maintenance fee and other revenue consists of maintenance fee,
training, consulting services and other revenue. Maintenance fee and other
revenue decreased 4.5% from $1.1 million for the six months ended October 31,
1996 to $1.0 million for the six months ended October 31, 1997. The decrease was
primarily attributable to a reduction in the number of on-site training courses
conducted by the Company during this period due to a temporary reduction in the
Company's staff dedicated to training.
Cost of Software License Revenue. Cost of software license revenue
consists of costs related to delivery of software (including disk duplication
and system control device costs),
- 26 -
<PAGE> 31
printing of manuals and packaging, and commissions, royalties and license fees
paid to third parties. Cost of software license revenue was $607,000 and
$419,000 for the six months ended October 31, 1997 and 1996, respectively.
Expressed as a percentage of software license revenue, cost of software license
revenue was 18.9% and 17.0% in the six-month periods of fiscal years 1998 and
1997, respectively. The increase in the cost of software license revenue is
largely attributable to increased labor costs associated with product releases,
independent sales representatives' commission expenses as well as increased
duplication expenses.
Cost of Maintenance Fee and Other Revenue. Cost of maintenance fee and
other revenue consists primarily of technical support, training, consulting and
facility costs as well as other contract costs. Cost of maintenance fee and
other revenue was $286,000 and $248,000 for the six months ended October 31,
1997 and 1996, respectively. Expressed as a percentage of maintenance fee and
other revenue, the cost of maintenance fee and other revenue was 27.5% and 22.8%
for the six months ended October 31, 1997 and 1996, respectively.
Selling and Marketing. Selling and marketing expense consists primarily
of personnel costs related to sales and marketing, including occupancy, travel,
entertainment, telephone, promotional, trade show expenses and direct sales
force commissions. Selling and marketing expense was $1.4 million and $1.2
million in the six months ended October 31, 1997 and 1996, respectively. Selling
and marketing expense as a percentage of total revenue was 33.5% and 33.3% for
the six months ended October 31, 1997 and 1996, respectively. The increase in
selling and marketing expense during the six-month period in fiscal 1998, as
compared to the same period in fiscal 1997, was chiefly the result of the
expansion of the Company's direct sales force and increases in the Company's
participation in exhibitions and related expenses.
Research and Development. Research and development expense consists
principally of personnel, equipment and facility costs incurred in the research,
design, development and refinement of the Company's products. Research and
development expense was $511,000 in the first six months of fiscal 1998 as
compared to $400,000 for the same period in fiscal 1997. Research and
development expense as a percentage of total revenue was 12.0% and 11.2% for the
first six months of fiscal 1998 and 1997, respectively. The increase reflects
the Company's continued commitment and investment in the research and
development of new AutoDE software products.
General and Administrative. General and administrative expense consists
principally of personnel costs for corporate administration, in addition to
accounting and legal services, depreciation, equipment and facility costs, and
general management expenses of the Company. General and administrative costs
were $918,000 and $741,000 for the six months ended October 31, 1997 and 1996,
respectively. General and administrative expense as a percentage of total
revenue was 21.6% and 20.7% for the six months ended October 31, 1997 and 1996,
respectively. The increase in general and administrative expense was chiefly
attributable to the establishment of a reserve, totaling approximately $110,000,
for a potential claim against the Company by a former employee, the opening of
the Company's Houston, Texas office, the hiring of the Company's Chief Financial
Officer and an increase in administrative payroll and related expenses.
- 27 -
<PAGE> 32
Interest Income, net. Interest income, net increased $36,000 from
$13,000 for the six months ended October 31, 1996 to $49,000 for the same period
in 1997 because of larger cash balances on deposit.
Provision (Benefit) for Income Taxes. The Company's effective tax rate
was 38.5% and 39.5% for the six months ended October 31, 1997 and 1996,
respectively.
YEAR ENDED APRIL 30, 1997 COMPARED TO YEAR ENDED APRIL 30, 1996
Total Revenue. Total revenue increased $1.6 million or 29.2% from $5.7
million in fiscal 1996 to $7.3 million in fiscal 1997. Software license revenue
increased to $5.2 million in fiscal 1997 from $3.8 million in fiscal 1996,
representing an increase of 35.5%. The increase in software license revenue in
fiscal 1997 as compared to fiscal 1996 was primarily due to renewals of software
licenses, the addition of new users, and the sale of new products to existing
customers resulting from a promotional campaign which commenced late in the
third quarter of 1997 and continued through the fourth quarter of 1997, and to a
lesser extent, sales associated with the creation of the Company's Tokyo office
in December 1995. Maintenance fee and other revenue increased by $308,000 or
16.5% from $1.9 million in fiscal 1996 to $2.2 million in fiscal 1997. The
increase was largely the result of increases in training and maintenance fees
associated with increased license sales and increased training, partially offset
by reductions in consulting and other services.
Cost of Software License Revenue. Costs of software license revenue was
$871,000 and $562,000 in fiscal years 1997 and 1996, respectively. Expressed as
a percentage of software license revenue, cost of software license revenue was
16.9% and 14.7% in fiscal years 1997 and 1996, respectively.
Cost of Maintenance Fee and Other Revenue. Cost of maintenance fee and
other revenue was $520,000 and $537,000 in fiscal years 1997 and 1996,
respectively. Expressed as a percentage of maintenance fee and other revenue,
cost of maintenance fee and other revenue was 23.9% and 28.8% in fiscal years
1997 and 1996, respectively. Cost of maintenance fee and other revenue decreased
from fiscal years 1996 to 1997 due to a decrease in third party hardware
expenses.
Selling and Marketing. Selling and marketing expense was $2.5 million
and $2.2 million in fiscal years 1997 and 1996, respectively. However, as a
percentage of total revenues, selling and marketing expense was 33.7% and 38.3%
in fiscal years 1997 and 1996, respectively. The increase in actual expense in
fiscal 1997 from fiscal 1996 was primarily the result of new sales and marketing
activity associated with the opening of the Company's new Tokyo office in
December 1995, the expansion of the Company's direct sales force, both
nationally and internationally, and increases in telephone, travel and
commission expenses.
Research and Development. Research and development expense was $904,000
and $850,000 in fiscal years 1997 and 1996, respectively. However, research and
development expense as a percentage of revenue was 12.3% and 15.0% in fiscal
years 1997 and 1996, respectively. The increase in actual expense reflects the
Company's continued commitment and investment in the research and development of
new AutoDE software products.
- 28 -
<PAGE> 33
General and Administrative. General and administrative costs were $1.5
million and $1.3 million in fiscal years 1997 and 1996, respectively. However,
general and administrative expense as a percentage of revenue was 21.0% and
22.4% in fiscal years 1997 and 1996, respectively. The increase in actual
expense is largely attributable to the formation of the Company's Tokyo office
in December 1995, the hiring of the Company's Chief Financial Officer, and to a
lesser degree increases in legal, accounting and temporary staff in preparation
for the Offering, and foreign exchange losses, which were partially offset by a
decline in equipment costs.
Interest Income, net. Interest income, net increased $24,000 from
$21,000 in fiscal 1996 to $45,000 in fiscal 1997.
Provision (Benefit) for Income Taxes. The Company's effective tax rate
was 38.9% and 36.5% in fiscal years 1997 and 1996, respectively.
YEAR ENDED APRIL 30, 1996 COMPARED TO YEAR ENDED APRIL 30, 1995
Total Revenue. Total revenue increased 12.3% to $5.7 million in fiscal
1996 from fiscal 1995. Software license revenue increased 20.4% from fiscal 1995
to $3.8 million in fiscal 1996. The increase in software license revenue from
fiscal 1995 to fiscal 1996 was primarily due to the introduction of new products
in the first quarter of fiscal 1996, as well as the addition of new users by
existing customers, which was partially offset by a slight decline in the sales
of other products. Maintenance fee and other revenue remained constant at $1.9
million in fiscal 1996 and fiscal 1995.
Cost of Software License Revenue. Cost of software license revenue
increased 10.9% from fiscal 1995 to $562,000 in fiscal 1996 and represented
14.7% of software license revenue in fiscal 1996. Cost of software license
revenue increased over the prior year primarily due to higher third party
software and Control Device costs.
Cost of Maintenance Fee and Other Revenue. Cost of maintenance fee and
other revenue increased $215,000 or 66.8%, to $537,000 and represented 28.8% of
maintenance fee revenue in fiscal 1996. Of this increase, $125,000 was the
result of an increase in the cost of hardware sold to customers using ICARUS
products. Additionally, $76,000 of this increase was a result of the increased
staffing required to support additional training classes offered by the Company.
Selling and Marketing. Selling and marketing expense increased 30.6%
from fiscal 1995 to $2.2 million or 38.3% of revenue in fiscal 1996. The
increase in selling and marketing expense in fiscal 1996 from fiscal 1995 was
generally attributable to the expansion of the Company's marketing efforts.
Research and Development. Research and development expense increased
1.1% from fiscal 1995 to $850,000 or 15.0% of total revenue in fiscal 1996.
General and Administrative. General and administrative costs increased
4.3% from fiscal 1995 to $1.3 million or 22.4% of revenue in fiscal 1996. The
increase was generally attributable to increases in depreciation, insurance
expense and office supplies.
- 29 -
<PAGE> 34
Interest Income, net. Interest income, net increased $13,000 from
fiscal 1995 to $21,000 in fiscal 1996.
Provision (Benefit) for Income Taxes. The Company's effective tax rate
was 36.5% and 40.4% in fiscal years 1996 and 1995, respectively.
SELECTED QUARTERLY OPERATING RESULTS
The Company ships software products within a short period after receipt
of an order and typically does not have a material backlog of unfilled orders.
Total revenue in any quarter is dependent (and will become substantially
dependent to the extent the Company increases the number of contracts for new
and renewing customers that result in the recognition of license revenue upon
shipment) on orders booked and license renewals in that quarter and are not
predictable with any degree of certainty.
The Company's operating results have fluctuated in the past and may in
the future fluctuate significantly from quarter to quarter or on an annual basis
as a result of a number of factors, including, but not limited to: the size and
timing of customer orders; changes in license renewal rates, delays in renewals,
or failure of existing customers to renew their licenses with the Company when
their current licenses expire; the length of the Company's sales cycle; changes
in contract terms (including terms affecting the timing of recognition of
license revenue); success of the Company's service offerings; timing of new
product announcements and introductions by the Company and its competitors; the
Company's ability to develop, introduce and market new products and product
enhancements; market acceptance of the Company's products; deferrals of customer
orders in anticipation of new products or product features; the Company's
ability to control general and administrative costs; changes in the Company's
management team; and fluctuating economic conditions; and political instability
in, or trade embargoes with respect to, foreign markets. The Company's future
operating results may fluctuate as a result of these and other factors, which
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Risk Factors - Fluctuations in Future
Operating Results."
- 30 -
<PAGE> 35
The following tables set forth selected quarterly statement of
operations data in dollars and as a percent of total revenue for fiscal 1997 and
for the first two quarters of fiscal 1998. These data are unaudited but, in the
opinion of the Company's management, reflect all adjustments that the Company
considers necessary for a fair presentation of these data in accordance with
generally accepted accounting principles. The quarterly results are not
indicative of future results of operations.
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------------------------------------
Fiscal 1997 Fiscal 1998
------------------------------------------------------- ---------------------------
July 31, October 31, January 31, April 30, July 31, October 31,
1996 1996 1997 1997 1997 1997
----------- -------------- ------------- ---------- ---------- --------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Software license revenue......... $1,367 $1,105 $1,342 $1,351 $1,747 $1,472
Maintenance fee and other
revenue....................... 476 614 425 659 531 510
----- ----- ----- ----- ----- -----
Total revenue.................... 1,843 1,719 1,767 2,010 2,278 1,982
----- ----- ----- ----- ----- -----
Expenses
Cost of software license
revenue....................... 220 199 267 185 300 307
Cost of maintenance fee
and other revenue............. 115 133 142 130 125 161
Selling and marketing............ 645 540 651 637 686 743
Research and development......... 198 202 298 206 236 275
General and administrative....... 348 393 327 473 485 433
----- ----- ----- ----- ----- -----
Total operating expenses......... 1,526 1,467 1,685 1,631 1,832 1,919(1)
----- ----- ----- ----- ----- -----
Income from operations.............. 317 252 82 379 446 63
Interest income, net............. 5 8 22 10 21 28
Other (expense) income........... (7) 7 -- -- 1 (1)
----- ------ ----- ----- ----- -----
Income before income taxes.......... 315 267 104 389 468 90
Provision for income taxes.......... 119 111 45 144 176 39
----- ----- ----- ----- ----- ------
Net income.......................... $ 196 $ 156 $ 59 $ 245 $ 292 $ 51(1)
===== ===== ===== ===== ===== ======
</TABLE>
- 31 -
<PAGE> 36
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------------
Fiscal 1997 Fiscal 1998
------------------------------------------------------- ---------------------------
July 31, October 31, January 31, April 30, July 31, October 31,
1996 1996 1997 1997 1997 1997
---------- ------------ ------------ ---------- --------- -------------
(As a percentage of total revenue)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Software license revenue.......... 74.2% 64.3% 75.9% 67.2% 76.7% 74.3%
Maintenance fee and other
revenue......................... 25.8 35.7 24.1 32.8 23.3 25.7
----- ----- ----- ----- ----- -----
Total revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- ----- -----
Expenses
Cost of software license
revenue.......................... 11.9 11.6 15.1 9.2 13.2 15.5
Cost of maintenance fee
and other revenue............... 6.3 7.7 8.0 6.5 5.5 8.1
Selling and marketing............. 35.0 31.4 36.8 31.7 30.1 37.5
Research and development.......... 10.7 11.8 16.9 10.2 10.4 13.9
General and administrative........ 18.9 22.8 18.6 23.5 21.2 21.8
----- ----- ----- ----- ----- -----
Total operating expenses.......... 82.8 85.3 95.4 81.1 80.4 96.8(1)
----- ----- ----- ----- ----- -----
Income from operations............... 17.2 14.7 4.6 18.9 19.6 3.2
Interest income, net.............. 0.3 0.5 1.2 0.5 0.9 1.4
Other (expense) income............ (0.4) 0.4 -- -- -- --
----- ----- ----- ----- ----- -----
Income before income taxes........... 17.1 15.6 5.8 19.4 20.5 4.6
Provision for income taxes........... 6.5 6.5 2.5 7.2 7.7 2.0
----- ----- ----- ----- ----- -----
Net income........................... 10.6% 9.1% 3.3% 12.2% 12.8% 2.6%(1)
==== ===== ===== ===== ===== =====
</TABLE>
- -----------------
(1) Total operating expenses were higher on an absolute basis and as a
percentage of total revenue during the second quarter of fiscal 1998 on
a comparative basis to the other quarters presented due primarily to
increased personnel and related benefit costs. During the second
quarter of fiscal 1998, increased selling and marketing expenses
reflect the hiring of additional sales and marketing personnel and an
increase in overall marketing and business development efforts. Also,
during this quarter, increased research and development expenses
reflect the addition of five new research and development employees,
one new technical support employee and related recruitment fees.
LIQUIDITY AND CAPITAL RESOURCES
During the six-month period ended October 31, 1997 and fiscal years
1997 and 1996, the Company satisfied its cash needs through cash provided by
operations. Cash provided by operating activities during the six months ended
October 31, 1997 and fiscal years 1997 and 1996 was approximately $648,000, $1.2
million and $519,000, respectively. At October 31, 1997 and at April 30, 1997
and 1996, the Company had working capital of $1.1 million, $1.1 million and
$496,000, respectively. The ratio of current assets to current liabilities at
October 31, 1997 and at April 30, 1997 and 1996 was 1.34 to 1, 1.39 to 1 and
1.25 to 1, respectively. The Company currently does not maintain a credit
facility.
- 32 -
<PAGE> 37
Cash used in investing activities has been for the purchase of property
and equipment which amounted to $158,000, $250,000 and $215,000 for the six
months ended October 31, 1997 and in fiscal years 1997 and 1996, respectively.
Cash used in financing activities for the six months ended October 31,
1997 and during fiscal years 1997 and 1996 was $1,000, $107,000 and $0,
respectively. Cash used in financing activities for the six months ended October
31, 1997 was for payments on a capital lease obligation. Cash used in financing
activities for fiscal 1997 was primarily for the repayment of two shareholder
notes that were issued in April 1992, in the aggregate amount of $125,000, with
interest at 6.5% annually. Such notes were repaid in full in January 1997.
The Company believes that the net proceeds from this Offering, existing
cash resources and cash flow from operations will be sufficient to fund the
Company's operations for at least the next twelve months. See "Use of Proceeds"
for more information regarding possible capital requirements with respect to the
Company's strategic goals.
INFLATION
Because many license agreements require an adjustment tied to certain
consumer or retail price indices, inflation has not had a significant impact on
the Company's operating results to date. The Company does not expect inflation
to have a significant impact on its results of operations during fiscal 1998.
- 33 -
<PAGE> 38
BUSINESS
THE COMPANY
ICARUS develops automated desktop engineering software for the process
manufacturing segments of the chemical, petroleum refining, pulp and paper,
food and other industries. The Company's 300-plus customers are primarily
large, multinational corporations that own and operate process manufacturing
plants (the "owner-operators") or primarily multinational engineering and
construction companies that provide services to owner-operators (the "E&C
companies"). The Company's customers include such companies as Mitsubishi
Chemical Corporation, Shell Oil Company, The Mead Corporation, Campbell Soup
Company and Fluor Daniel, Inc.
The Company's integrated AutoDE software products are widely used in
the chemical and petroleum refining industries. One or more of the Company's
products are licensed to 18 of the top 20 chemical companies and 18 of the top
20 petroleum refining companies, as such companies are listed in the "1997
Fortune 500 List," and 8 of the top 10 chemical plant contractors listed in
Engineering News Record's "Top 400 Contractors." Near-term growth opportunities
for the Company include the introduction of new AutoDE products to the
Company's current customers and to potential customers in the chemical and
petroleum refining industries, further penetration by existing and new products
in other industries, including the pharmaceutical, paper and pulp, food and
power industries, and continued expansion in international markets.
The Company's current software products automate important steps in the
"decision engineering" process through which a customer's engineering staff
evaluates the technological and economic feasibility of the construction or
modification of a process manufacturing plant and senior executives determine
whether to proceed with a proposed project. Despite the importance of this
decision, which may involve a capital investment in excess of one billion
dollars, these executives usually have only a limited ability to manage the
conventional decision engineering process, which is time-consuming,
labor-intensive, imprecise and expensive.
The Company's current products directly address a number of the
deficiencies in the conventional decision engineering process by
"re-engineering" the process to take full advantage of today's desktop computing
technology. The Company's products enable engineers to simulate, model and
analyze the design, cost and time requirements of a proposed project more
quickly and less expensively than they can using conventional engineering
methods. ICARUS products also enhance senior executives' ability to focus the
decision engineering process on business priorities. With more timely and
accurate information that integrates business considerations with sophisticated
engineering analysis, senior executives can make faster, better informed and
more confident decisions. Benefits arising from the use of the Company's
decision engineering software products include more effective strategic
planning, faster reaction to market developments and improved plant operating
efficiency, all of which enhance the customer's competitive position.
In addition to the Company's decision engineering products, other
AutoDE software products automate important steps in the "plant engineering"
process, which occurs after the
- 34 -
<PAGE> 39
decision to proceed with a project has been made. These products also facilitate
construction scheduling and cost estimation for smaller projects at existing
plants.
THE PROCESS MANUFACTURING BUSINESS
Process manufacturing of products in bulk quantities is performed in
the chemical, petroleum refining, pharmaceutical, pulp and paper, metal and
mineral, food, consumer product, power and other industries. Through chemical
reaction, combustion, mixing, separation, heating, cooling and other operations,
process manufacturing plants process raw materials (e.g., separate oil and gas
from other substances), refine those materials (e.g., extract propylene from oil
and gas feedstocks), produce intermediate products (e.g., synthesize nylon from
propylene) and manufacture finished products. Using data provided by industry
sources, the Company estimates that total worldwide process manufacturing annual
revenues exceed $3 trillion. Industry sources also indicate that more than
15,000 process manufacturing plants are now in operation worldwide and that
global spending on process manufacturing plant construction projects will exceed
$160 billion in 1998--an all-time high.
On a regular basis, owner-operators consider proposals to build or
modify process manufacturing plants. The Company believes that hundreds of
proposed process manufacturing projects are evaluated for every project actually
built. In evaluating the potential return-on-investment of project proposals,
owner-operators face three basic facts: First, the construction or modification
of a plant requires a substantial capital investment. A world-class petroleum
refining complex, for example, can cost in excess of one billion dollars.
Second, heightened global competition has reduced both profit margins and the
acceptable margin for error in project evaluation. Third, increasingly efficient
global capital markets will penalize an owner-operator, particularly a public
owner-operator, for allocating capital to a project that does not produce
satisfactory returns.
An E&C company faces an equally challenging business environment.
First, the E&C company must expend thousands of engineering man-hours on
competitive bid proposals. If the company does not win the bid, the man-hours
invested are lost. Second, the E&C company is under increasing pressure to
prepare more bid proposals without expanding their engineering staffs. Third,
the increasing use of lump-sum, turnkey project contracts has shifted much of
the financial risk of cost overruns, construction delays and performance
shortfalls from the owner-operator to the E&C company. Inaccurate bids or
improperly prepared proposals can result in multi-million dollar losses and
seriously damage the reputation of the E&C company.
THE DECISION ENGINEERING PROCESS
The conventional decision engineering process typically begins with a
senior business development executive at a major owner-operator, who has been
assigned the task of determining which of several market opportunities the
owner-operator should pursue. Building a plant to pursue a given opportunity may
involve a commitment of hundreds of millions or more than one billion dollars,
and the full impact of that capital investment decision may not be apparent for
years. To answer business-critical questions on a proposed project's scope,
cost, timing and return, the executive turns to his internal engineering staff
for assistance.
- 35 -
<PAGE> 40
In response to the senior executive's request, process engineers first
perform process simulation and create conceptual mechanical process design
alternatives. With these alternatives in hand, they select the core process
equipment, (e.g., distillation towers, compressors, etc.) and produce CAD and
CAE drawings, such as block diagrams, process flow diagrams and piping and
instrumentation diagrams. With the assistance of engineers from various
disciplines (such as mechanical, structural, civil and electrical engineering),
a conceptual mechanical project design is completed.
Once this design is complete, engineers calculate the quantities of
pipe, steel, instrumentation, process control, electrical fixtures, wiring,
paint, insulation, etc., necessary to build the project. Then, they research
cost information for alternative geographical locations and determine the number
of construction man-hours that will be required to install, lift, weld, connect
and construct each component of the project. A team of engineers then takes this
information and creates a critical-path-method schedule that outlines the tasks
necessary to complete the project on time and within budget. Finally, after the
evaluation of several different scenarios, a detailed decision engineering
report incorporating the conceptual mechanical design of the proposed project
together with cost estimates, preliminary engineering drawings and a preliminary
construction schedule is presented to the executive for review.
At this stage, project specifications are often modified, and the
decision engineering process must be repeated. A single change in one aspect of
the project may affect a multitude of engineering calculations. For example,
enlarging a pump will require a larger electrical motor and larger diameter
piping and conduit, which in turn will require a larger pump foundation, etc.
An apparently minor modification can thus result in substantially greater costs,
and despite the expense and delay, the decision engineering process must attempt
to identify the full impact of such modifications. Otherwise, the risk of cost
overruns, construction delays and/or performance shortfalls may be greatly
increased.
If the project sustains the executive's initial review, internal
engineering and financial reports are sent to several E&C companies, which then
perform their own, albeit more detailed, decision engineering process to produce
engineering, procurement and construction proposals. Ultimately, they present
their proposals to the owner-operator, which will then compare its internally
developed return-on-investment analysis with the E&C companies' proposals. If
the owner-operator decides to proceed, it may ask the E&C companies to prepare
lump-sum ("cost not to exceed") or other types of bids. Then, the owner-operator
and certain selected E&C companies may engage in negotiations involving the
basis for the bid request and the bids. After the owner-operator selects a final
E&C company, further efforts are expended to fine-tune the decision engineering
analysis during the design phase of the project.
Even when significant resources are expended in conventional decision
engineering to develop detailed preliminary concepts to assist senior executive
decision-making, the final outcome may bear little resemblance to the initial
concept. This variance largely can be attributed to deficiencies in the
conventional process, which has not been comprehensively updated to take
advantage of new technology. These deficiencies include:
- - Coordination Between Business Development and Engineering Is Limited.
Senior business development executives in owner-operators and E&C
companies usually find
- 36 -
<PAGE> 41
it difficult to manage their internal engineering staffs to ensure that
business priorities are driving engineering considerations, rather than
the reverse. Senior executives generally do not have the management
tools needed to dynamically guide and direct the decision engineering
process. As a result, substantial time and resources can be wasted on
engineering issues that are not pertinent to a senior executive's
decision-making analysis, and pertinent issues can be overlooked or
under-analyzed.
- - Dependence on Unreliable, Inconsistent or Unavailable Data Sources.
Each engineering team usually develops its own specialized database of
design and cost data, which may be unreliable or involve the use of
assumptions. Developing and maintaining a specialized database
requires labor-intensive research using multiple internal and external
data sources of varying reliability that may be inconsistent with one
another or with data collected by other teams. In some situations,
reliable data is simply unavailable, and the team must make
assumptions to fill the gap in available data.
- - Time-Consuming, Calculation-Intensive Data Manipulation Is Required. In
addition to the laborious data entry efforts required to develop
specialized databases, each engineering team must perform
time-consuming, calculation-intensive data manipulation in its
simulation, modeling and analysis efforts. Industry sources indicate
that 50% to 80% of a process design engineer's time is spent moving and
organizing, rather than analyzing, data.
- - Engineering Decisions Are Interdependent. As previously noted, a change
in one aspect of a project by one engineering team often requires
changes in other aspects of the project by other teams. It is difficult
in the conventional decision engineering process to ensure that all
such interdependent changes are made and that the final engineering
product is internally consistent. One miscalculation can adversely
affect many aspects of the project.
- - Participants Must Work Sequentially. Engineering a complex project is
largely an iterative process. Engineering decision interdependence and
the capture of key information in separate, specialized databases
usually require engineering teams in the conventional decision
engineering process to work in a strictly sequential, rather than in a
concurrent, collaborative manner. A delay in the work of one team can
thus delay the work of many other teams.
- - Time and Cost Constraints Limit the Testing of Alternative Process
Design Solutions. Even with the large internal engineering staffs that
owner-operators and E&C companies have traditionally maintained, time
and cost constraints force internal staff engineers to make simplifying
assumptions that limit the accuracy of their analysis and require them
to evaluate only parts of the process design, rather than the whole, or
to consider fewer alternative process design solutions. This deficiency
is exacerbated by corporate downsizing/re-engineering, which has
resulted in substantial engineering staff cuts at major
owner-operators.
- - Owner-Operators and E&C Companies Find It Difficult To Communicate. The
transfer of data and analyses from the owner-operator to the E&C
company and back is
- 37 -
<PAGE> 42
complicated by the use of different methodologies and systems. The lack
of a common language increases expense and reduces the quality of the
decisions made.
The foregoing deficiencies reduce the ability of a senior executive in
an owner-operator to: (i) focus the overall project evaluation process on
business priorities, (ii) increase the efficiency of the process so that more
proposed projects can be evaluated in the same amount of time without increased
resources, (iii) respond in a timely fashion to changing market conditions, and
(iv) more effectively manage the owner-operator's relationship with the E&C
company that will ultimately perform the final plant engineering and
construction. A senior executive in an E&C company faces similar limitations.
Numerous efforts have been made to address the deficiencies of the
conventional decision engineering process through computerization. The earliest
software was mainframe based, performed only basic cost calculations and usually
supported the work of only specialized cost estimation teams. This software did
not (i) eliminate the need for engineers from other disciplines to develop
specialized databases or engage in calculation-intensive data manipulation, (ii)
provide all engineering teams with concurrent access to key information nor
(iii) more effectively address the interdependence of engineering decisions.
Despite efforts by owner-operators and E&C companies to mitigate these
continuing problems by custom designing engineering programs for specific
projects, mainframe-based computerization continued to produce imprecise results
that required thorough manual review and revision.
The deployment of powerful Windows-based desktop computers linked by
networks have provided a large number of engineers and project execution
professionals with access to computerized engineering tools for the first time.
Despite the progress demonstrated by some desktop CAE software products that
incorporate a standardized base of information for use in process simulation and
design and cost modeling, new and old users of computerized engineering tools
still face many challenges in completing their engineering simulation, modeling
and analysis.
First, users are still required in many instances to develop
specialized databases of design and cost information and to then laboriously
enter the data into spreadsheet-style programs, which perform only basic data
compilation and arithmetic functions. In most cases, users working on different
aspects of the same project still do not have concurrent access to key data and
expertise. Second, the results of one engineering team's work are not
concurrently integrated with the results of other teams, so users have to remain
constantly vigilant to ensure that engineering decisions in one aspect of a
project are reflected in all other aspects of the project. Third, users often
encounter software compatibility problems when using desktop CAE products from
different vendors, which often use different proprietary databases. Finally,
most CAE programs do little to enhance senior management's ability to control
and shape the decision engineering process.
In short, despite the desktop revolution in computing, which made
computerized engineering tools available to larger numbers of users, the CAE
software most engineers use today still fails to incorporate data, and also
fails to automate and integrate the decision engineering process in an effective
and efficient manner.
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<PAGE> 43
THE ICARUS SOLUTION
The Company's current line of AutoDE software products directly address
a number of the deficiencies of the conventional decision engineering process by
comprehensively automating and integrating important steps in the process, such
as process engineering and cost engineering. The Company's products reduce the
overall time and expense of the decision engineering process, while also
enabling participants--particularly senior executives--to take greater control
of the process so that business priorities drive engineering considerations,
rather than the reverse.
Developed with the input of on-staff engineers from many disciplines
(including chemical, mechanical, structural, civil and electrical engineers) the
Company's AutoDE products provide all process participants concurrent access to
automated process design simulation tools, automated design and cost models and
comprehensive, frequently updated design, cost and engineering databases. ICARUS
products anticipate the needs of engineering and project execution professionals
and senior executives, allowing them to (i) quickly and easily examine
alternative process designs through the use of realistic simulations, (ii)
rapidly create detailed design and cost models and (iii) prepare preliminary
engineering and construction schedules. Using the Company's products, different
engineering teams can work concurrently on the same project without having to
spend substantial amounts of time on repetitious data entry and manipulation.
The teams can share their data and expertise with the assurance that a change
made in one area, such as process design, will be automatically reflected in
other engineering areas, such as mechanical, electrical or civil engineering. In
this way, the overall commitment of resources to the project can be reduced even
as the teams jointly improve the quality of their project evaluation effort by
performing extensive alternative scenario analysis.
Customers have told ICARUS that the Company's products enable them to
reach a decision on whether or not to proceed with a project in approximately
one-fifth of the time previously required by conventional decision engineering
tools. Using the Company's products, owner-operators are also able to enhance
the quality of overall strategic decision-making, respond more quickly to market
changes and improve overall project design. E&C companies are able to reduce the
costs of preparing, and enhance the quality of, bids on projects, thus reducing
the risks they incur under turnkey, lump-sum project contracts. The Company
believes that a number of its customers have licensed ICARUS products because
they could not adequately address their decision engineering needs with
competing tools.
The Company believes that it currently provides the only commercial
integrated process manufacturing CAE product line. The Company's products
utilize common proprietary elements, including automated models, expert system
modules and databases, and can be integrated with CAE and other software
engineering products developed by other vendors. By enabling users to use the
results generated by one product as the starting point for another product, this
integration eliminates many of the labor-intensive steps associated with
information transfer and manipulation in the conventional decision engineering
process and allows engineers from different disciplines to communicate and
collaborate more effectively. For example, using the Company's process
engineering product, ICARUS Process Evaluator, a customer can take the output
of a process
- 39 -
<PAGE> 44
simulation program developed by another vendor, specify additional basic
premises and then rapidly simulate a manufacturing process plant design. The
customer can then electronically transfer a file to the Company's design and
cost engineering product, ICARUS 2000, which will quickly develop detailed
preliminary design and cost models of that process plant design under varying
conditions. These steps can be repeated many times to identify the optimal
process plant design.
The data and analyses produced by the Company's products can also be
used to "jump start" the plant engineering process that follows decision
engineering. For example, such data and analyses can be used to help populate
downstream CAD/CAE applications that will generate the detailed drawings to be
used in actual construction. Additionally, certain ICARUS products directly
address steps in the plant engineering process, such as construction scheduling
and cost estimation for smaller construction projects at existing plants.
STRATEGY
The Company's strategy is to expand its portfolio of integrated AutoDE
software products to meet customer needs in every stage of the process
manufacturing plant lifecycle--from the business development decision to
consider entering a process manufacturing segment, through the process and cost
engineering analysis of a specific proposed plant, to the detailed engineering,
construction scheduling and operations and maintenance activities that follow
the decision to proceed with a proposed plant. For the decision engineering
process, which encompasses business development, process engineering and cost
engineering, ICARUS currently offers process engineering and cost engineering
products. The Company plans to supplement these products and also to release a
new suite of business development products designed to enable senior executives
to analyze high-level, early-stage technological and economic feasibility
issues. This suite of products also will assist senior executives in ensuring
that their engineering staffs are focused on the business impact of their
engineering work. For the plant engineering process, which encompasses detailed
engineering/procurement, construction scheduling and operations and maintenance,
ICARUS currently offers construction scheduling and cost estimation products and
plans to release an object database product that will support plant engineering
applications such as CAD/CAE production of detailed construction drawings.
The Company believes that developing and marketing a comprehensive
portfolio of products that provides users throughout a customer's organization
with common AutoDE software tools that operate with one another and with CAE
software products supplied by other companies will substantially enhance its
competitive position. A comprehensive portfolio of products will also provide
customers with a "migration path" to buy other Company products as their need to
automate additional engineering functions grows. See "- Products and Product
Development."
The key elements of the Company's business strategy are as follows:
Leverage the Company's Existing Customer Base to Introduce New
Integrated AutoDE Products. Because of its consistent delivery of quality
products, product updates, training and user conferences, the Company enjoys
strong relationships with many of its customers. The Company believes that these
relationships can be leveraged to market and sell new,
- 40 -
<PAGE> 45
integrated products to such customers. The Company also believes that it can
leverage its reputation in the chemical and petroleum refining industries to
market and sell such products to new customers in those industries. The Company
intends to recruit additional senior sales and technical personnel to capitalize
on this opportunity. See "- Customers."
Continue to Maintain Technology Leadership by Developing Innovative
AutoDE Software. The Company will continue to expend significant resources to
build on its core technology and develop new technology to create innovative,
integrated AutoDE products and maintain the Company's technology leadership
position within the market it serves. During calendar 1998, the Company plans to
nearly double the number of its product offerings. See "Products and Product
Development."
Increase the Penetration of the Company's Products in the Pulp and
Paper, Pharmaceutical, Power and Food Industries. The Company has a solid
customer base in the chemical and petroleum refining industries. The Company
intends to increase its efforts to expand its customer base in the paper and
pulp, pharmaceutical, power and food industries. Because the decision
engineering analysis related to process manufacturing in different industries
involves many of the same concepts, the Company's AutoDE products may be
utilized in different industries with relatively few adjustments.
Increase Its Consulting Efforts to Provide Integrated Turnkey
Engineering Solutions. A number of the Company's customers currently seek, on a
limited basis, the Company's assistance in integrating their proprietary
technology with the Company's software, reviewing work performed by the
customers' internal staffs or performing front-end design and cost studies. The
Company believes that many of its customers would respond favorably if the
Company offered comprehensive consulting and training services. The Company
intends to dedicate substantial resources to develop such integrated turnkey
engineering solutions.
Enter into Strategic Alliances That Accelerate Product Development and
Enhance Marketing and Sales Opportunities. The Company has recently entered into
three strategic alliances with leading technology and research companies that
will provide access to valuable process design and cost data and accelerate the
development of new products, including products that address stages in the
process manufacturing plant lifecycle not currently covered by the Company's
products. The Company believes that these and possible future strategic
alliances may provide the best opportunity to introduce certain products and
open new marketing and sales opportunities. See "- Strategic Alliances."
Pursue Acquisitions to Further Product Development, Sales and Marketing
and Consulting Services. The Company intends to pursue acquisitions that will
expand its product line, increase its customer base and enhance its ability to
offer comprehensive consulting services. ICARUS believes that it can effectively
compete for acquisition opportunities because of its leadership position in
process manufacturing CAE software and its knowledge of the market and potential
acquisition targets.
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<PAGE> 46
PROPRIETARY TECHNOLOGY AND DATABASES
The Company's core proprietary technology includes, but is not limited
to, its automated design and cost models, the expert (or knowledge-based)
systems incorporated into its artificial intelligence modules, its
object-oriented project databases and other proprietary databases.
Design and Cost Models. The Company has developed automated design and
cost models for most standard process manufacturing plant equipment types,
including the process and solids handling equipment used for heat transfer,
distillation, chemical reaction, pumping, compressing and other functions. These
models also cover the materials needed to install such equipment in a process
manufacturing plant, such as piping, steel, instrumentation, electrical,
insulation and paint. Drawing on fundamental laws of chemistry and physics and
proprietary databases, the Company's design and cost models automate and
integrate the following engineering elements: (i) "best practices" expertise
from expert engineers in many different engineering disciplines (including
process, mechanical, structural, civil and electrical engineering); (ii)
engineering design standards and codes for many countries; (iii) construction
methodology for determining the equipment, material, fabrication, labor, expense
and time requirements for a given project; (iv) volumetric calculations used to
determine the change in material requirements when a project is scaled up or
down; (v) costing the various inputs such as labor and materials needed to
complete a project; and (vi) critical-path-method construction scheduling.
Expert Systems. An expert system is a computer program designed to
emulate a human expert in a particular limited field of knowledge. Expert
systems improve productivity by helping users make decisions when a human expert
is unavailable or too expensive. These expert systems automatically calculate
the design and cost impact of changes made by multiple engineering teams working
on the same project and help to solve problems associated with the
interdependence of engineering decisions. ICARUS Mentor is an expert system
software development tool that the Company has used to develop expert system
modules that are included in the Company's current line of products to enhance
the performance of the automated design and cost models. These modules can be
customized by users to incorporate customer-developed expertise.
Object-Oriented Project Database. The Company has developed an
object-oriented project database designed to serve as the central repository of
information pertaining to a particular project throughout the decision
engineering and plant engineering processes. Information contained in such a
database may include, but is not limited to, process solution results, plant
components, design data, capital costs and schedules, operating costs and
investment analysis results and graphical data relating to process flow
diagrams, piping and instrumentation diagrams and plot plan drawings.
Proprietary Databases. Finally, the Company has developed extensive
proprietary databases that include engineering design and cost information from
a variety of public and private sources, including information from customers.
These databases are embedded in the Company's products and are updated regularly
to provide customers with current cost and other data. The databases can be
customized by users to incorporate customer-developed information.
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<PAGE> 47
STRATEGIC ALLIANCES
In 1994, ICARUS entered into a strategic alliance with Primavera
Systems Inc. ("Primavera"), a leading provider of scheduling software. Pursuant
to a multiple-year renewable marketing and product development agreement, the
two companies have combined the Company's design and cost modeling and
engineering automation expertise with Primavera's scheduling expertise. The
resulting integrated design estimating and scheduling product, ICARUS Project
Manager, has been marketed by the Company to hundreds of authorized users in 22
countries since fiscal 1995.
ICARUS entered into three new strategic alliances for product
development and marketing in 1997. The Company expects that these strategic
alliances will enable it to integrate complementary technology and data into its
core products in a time- and cost- efficient manner; to create new products that
will be attractive to the customer base of both the Company and the other
participant in the alliance; to immediately add complementary products to its
product line; and generally to expand its revenue opportunities without a
significant up-front investment. The Company's current strategic alliances are
with SRI Consulting, Inc. ("SRIC"), Hyprotech, Ltd. ("Hyprotech") and Richardson
Engineering Services, Inc. ("Richardson"). See "- Strategy."
Alliance With SRIC. In August 1997, the Company signed a multiple-year
renewable marketing and product development agreement with SRIC, a subsidiary
of SRI International, headquartered in Menlo Park, California, to
develop and market at least two new products based on the Company's current
process design and design and cost modeling products and its general decision
engineering expertise and SRIC's Process Economics Program ("PEP"), which
provides in-depth reports of process technology and economics for more than 800
chemical and refinery processes. The new products will be jointly marketed by
ICARUS and SRIC. See "- Products and Product Development."
Alliance With Hyprotech. In July 1997, the Company, through a wholly
owned subsidiary, executed a multiple-year marketing and development agreement
with Hyprotech, a company headquartered in Calgary, Canada that supplies process
simulation solutions to an international customer base in the chemical and
petroleum refining industries. The companies agreed to jointly develop at least
two new products based on certain of the Company's existing products and
expertise and Hyprotech's technology. These products will be jointly marketed
and licensed by ICARUS and Hyprotech. See "Products and Product Development."
Alliance With Richardson. In May 1997, the Company entered into a
multiple-year renewable technology licensing and marketing agreement with
Phoenix-based Richardson, which is a leading publisher of global process
manufacturing plant construction estimating standards. Under the agreement,
ICARUS has the right to use Richardson's unit cost construction database to
extend the capabilities of the Company's AutoDE software products in plant
engineering. Under the agreement, the Company will market this technology and is
also authorized to resell Richardson's winRace software and database products to
the chemical industry.
The Company may use a portion of the net proceeds of the Offering to
develop the products contemplated by these or future strategic alliances. See
"Use of Proceeds."
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<PAGE> 48
PRODUCTS AND PRODUCT DEVELOPMENT
The Company's current AutoDE software products are designed to run on
standard PC hardware and operating platforms, including Windows 95, Windows NT
and UNIX. They incorporate an easy-to-use graphical user interface, automated
design and cost models, artificial intelligence modules, and embedded databases.
The Company works continually to enhance its products to operate on new
operating systems, updates of existing operating systems and new network
topologies, including the client-server environment.
A common feature of the Company's existing products is a proprietary
electronic hardware device called the "Control Device." The Control Device is
independent of the customer's computer hardware platform and is designed to
prevent unauthorized and unlicensed use of the Company's products. The Company's
products are designed so that they cannot be operated without the Control
Device, which resembles an external modem and plugs into the desktop computer's
serial port. Every time a Company product is used, the Control Device verifies
the licensed user's identifier to permit entry. When the license period ends,
the Control Device is designed to prevent further entry into the product. The
Control Device has been used by the Company on a wide variety of hardware and
operating system platforms since 1992.
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The following table provides an overview of the Company's current
product line, which addresses the process engineering, cost engineering,
construction scheduling, and operations and maintenance stages of the process
manufacturing plant lifecycle.
<TABLE>
<CAPTION>
PRODUCT Plant Lifecycle Description Original Current Release
NAME Stage of Product Release (DATE/VERSION)
Date OPERATING SYSTEM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ICARUS Process Enables process engineers June 1995 (October 1997/Version
Process Engineering to rapidly screen 4.0)
Evaluator alternative chemical Microsoft Windows 95
("IPE") process designs for a & NT
proposed major process
manufacturing project.
- ------------------------------------------------------------------------------------------------------------------------------------
ICARUS Cost Enables engineering teams December (July 1997/Version 6.0)
2000 Engineering in owner-operators and 1992 UNIX
E&C companies to quickly (August 1997/Version
prepare engineering, 6.0)
procurement and Microsoft Windows NT
construction estimates for
a proposed major project.
- ------------------------------------------------------------------------------------------------------------------------------------
ICARUS Construction Enables project managers May 1995 (June 1997/Version
Project Scheduling to create cost estimates 3.0)
Manager and automatically develop Microsoft Windows 3.1,
planning and construction 95 and NT
schedules for small
projects, revamps and
renovations.
- ------------------------------------------------------------------------------------------------------------------------------------
Questimate Operations Enables cost estimators at November (May 1997/Version
and operating plants to quickly 1986 12.0)
Maintenance evaluate the cost impact of Microsoft Windows 3.1,
proposed plant 95 and NT
modifications and
maintenance.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 50
The Company's business strategy is to expand through internal
development, acquisitions, and strategic alliances its portfolio of integrated
AutoDE software products to meet customer needs at every stage of the process
manufacturing lifecycle--from the business development decision to enter a
process manufacturing niche, through the process and cost engineering of a
specific proposed project, to the detailed engineering and procurement,
construction scheduling and operations and maintenance activities that follow
the decision to proceed with the proposed project. These products are designed
to respond to the different skills and decision criteria applied by engineers
from different disciplines and by decision-makers that do not have substantial
engineering knowledge. Consistent with this strategy, ICARUS entered into three
strategic alliances in calendar 1997. See "- Strategic Alliances."
During fiscal years 1998 and 1999, ICARUS plans to release the
following products, most of which will focus on the business development and
process engineering stages of the plant lifecycle:
ICARUS Decision Engineering Analyzer. Designed for use by senior
executives as well as by engineers, ICARUS Decision Engineering Analyzer
("Analyzer") will enable a user to enter basic information on the scope and
features, such as product and product capacity, of a proposed major project.
This basic information can be derived from ICARUS/SRIC products discussed below
or from proprietary data developed by a customer. Using this basic project scope
definition, Analyzer will automatically develop a detailed early conceptual
design. Analyzer will also produce estimates of design quantities, engineering
tasks and associated effort, procurement and construction work products and
tasks, field manpower, costs of project components, engineering and construction
schedules, investment and operating costs, and economic and financial reports.
The product's reporting modules will produce graphic and text reports, such as
block diagrams, linked process flow diagrams and piping and instrumentation
diagrams, data sheets, and line lists. Additionally, Analyzer will produce input
files for key CAE applications used by the customer's internal engineering staff
so that a senior executive or staff user can perform value-added engineering on
an interactive, dynamic basis.
ICARUS-SRIC Process Model and Project Model. ICARUS and SRIC plan to
develop a Process Model and a Project Model for each of SRIC's more than 800
chemical and refinery processes. Process Model will be an interactive
multimedia software containing SRIC's PEP technical content and the results of
the Company's project evaluation technology applied to a specific process, such
as the production of gasoline. This multimedia document will be used to
evaluate major issues relating to a customer's potential entry into a
particular product line. By extracting process intelligence input data from a
specific PEP report, Project Model will automatically create for a user of
ICARUS 2000 or ICARUS Process Evaluator detailed conceptual designs and
estimates for a proposed process manufacturing plant. Using this information,
the user can easily produce cost analyses and other specialized project
information.
ICARUS plans to sell Process Model and Product Model separately or as
part of an integrated software bundle called the Decision Engineering Tool Suite
that will include the ICARUS Decision Engineering Analyzer. The Company expects
that this product suite will be used for a variety of business development
purposes, including front-end analysis by
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<PAGE> 51
senior executives of whether an owner-operator should enter a specific process
manufacturing niche.
Hyprotech-ICARUS Products. ICARUS and Hyprotech are developing two
products that combine Hyprotech's process evaluation expertise in chemical
process design with the Company's design and cost engineering expertise.
Plant-Product is intended to be marketed primarily to process engineers that
use Hyprotech's products but have little or no prior cost engineering
experience or responsibility. They will enter static design data to generate
detailed cost estimates. Process-Product will be marketed primarily to process
engineers that use Hyprotech's products to help them produce cost estimates and
schedules of engineering and construction.
ICARUS Project Object Database ("IPOD"). ICARUS is developing an
object-oriented database product that will serve as the central repository of
information (such as process simulation results, plant components, design data,
capital costs and schedules, operating costs and investment analysis results and
graphical data pertaining to a specific process manufacturing project throughout
the decision engineering and plant engineering processes. A customer can use
IPOD, which will be implemented on a client-server platform, to automatically
populate numerous other CAD/CAE software applications (from a variety of
vendors) relating to the engineering, construction, operations and maintenance
and financial reporting of a specific plant.
ICARUS-Richardson Construction Estimating Modules. ICARUS is in the
early stages of developing a product that integrates the Company's design and
cost modeling technology with Richardson's unit cost estimating technology to
provide customers with enhanced cost estimating capability during the detailed
engineering/procurement and construction stages of a project.
As of October 31, 1997, 19 of the Company's employees were directly
involved in internal product development. The Company's product development
expenditures for the six months ended October 31, 1997 and for the year ended
April 30, 1997 were $511,000 and $904,000, representing 12.0% and 12.3% of total
revenue, respectively. The Company has made substantial investments in, and
intends to use a portion of the net proceeds from this Offering for, product
development. See "Use of Proceeds," and also see "Management's Discussion and
Analysis of Financial Condition and Result of Operations - Overview" for
information relating to the expensing of the Company's research and development
costs.
ICARUS believes that its future performance will depend in large part
on its ability to maintain and enhance its current product line, develop new
products that achieve market acceptance, maintain technological competitiveness
and meet new customer requirements. The Company's product development efforts
are subject to numerous risks and no assurance can be given that the Company's
product development goals will be realized. See "Risk Factors - Risks Associated
with Continued Product Development; Rapid Technological Change" and "- Market
Acceptance of the Company's Products."
COMPANY SERVICES
The Company believes that the services it offers help to maintain
customer loyalty and increase potential license renewals and the number of
licensed users in a particular
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<PAGE> 52
customer's organization. The Company believes that strong customer support is
crucial, both to the initial marketing of its AutoDE software products and to
ensure that its customers successfully apply its AutoDE software products to
their engineering automation needs so that they will be encouraged to renew and
expand their license arrangements with the Company. In addition, the Company
believes that every customer support contact creates a marketing opportunity to
license its AutoDE software products to additional users at a customer's
location and to license additional AutoDE software product to users at other
customer locations.
Training. The Company offers introductory and advanced training courses
at its Rockville, Maryland; Houston, Texas; Altrincham, England; and Tokyo,
Japan offices and, from time to time, at the offices of its customers to train
licensed users of its AutoDE software products. These seminars generally run
between one and four full days, depending upon the product and/or platform being
taught. The Company typically charges licensed users for such training. Product
training is not mandatory, but the Company believes that such training enhances
the value of the licenses purchased by the customer and is highly recommended.
The Company believes that continuing product training helps build product
loyalty and reinforces the value of the Company's product to the customer.
Post-Contract Support. The Company also offers free technical support
to its licensed users by telephone from a help-desk located in its Rockville,
Maryland offices. The help-desk is available during business hours Monday
through Friday. In addition, the Company typically provides to its licensed
users and to customers having annual maintenance plans a "cost update" for
materials, equipment and labor, the data for which is obtained from publicly
available cost information received from the Company's customers, vendors,
published data sources and from the Company's proprietary pricing models. This
update typically is released in early summer. From time to time and on an "as
available" basis, the Company may issue an update that contains one or more new
features for the AutoDE software product, such as new report types, new screens
for data input, new equipment models and the resolution of software problems or
"bugs."
Consulting Services. A number of the Company's customers currently
seek, on a limited basis, the Company's assistance in integrating their
proprietary technology with the Company's software, reviewing work performed by
the customers' internal staff or performing front-end design and cost studies.
The Company believes that these services leverage software sales because the
customer must have a license to its AutoDE software products in most instances
in order to use the cost model, application or customization delivered by the
consulting team. Application projects enable the Company to provide turnkey
solutions to customers who do not have the resources to build their own design
and cost models. These projects provide an important mechanism for the Company
to extend the range of applications that its technology can model. Although the
Company enters into agreements to protect the customer's proprietary information
in these consulting projects, the Company typically retains the right to use the
generic design and cost modeling methods, expert systems and know-how developed
as a result of the project in other Company AutoDE software products. The
Company expects to increase the scope and depth of its consulting services in
the future. See "Business - Strategy."
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<PAGE> 53
The provision of services by the Company to its customers for the six
months ended October 31, 1997 and the year ended April 30, 1997 represented
approximately 6.2% and 7.1% of total revenues, respectively.
CUSTOMERS
The Company currently has over 300 customers worldwide who represent
all segments of the process manufacturing industry and the engineering and
construction firms that serve them. One or more of the Company's products are
licensed to 18 of the top 20 chemical companies and 18 of the top 20 petroleum
refining companies, as such companies are listed in the "1997 Fortune 500 List,"
and 8 of the top 10 chemical plant contractors listed in Engineering News
Record's "Top 400 Contractors."
The following is a representative list of the Company's larger
customers.
Agrium, Inc. Campbell Soup Company
Air Products and Chemicals, Inc. Kvaerner Metals
ARCO Chemical Company ARCO Products Company
Bayer Corporation Chevron U.S.A., Inc.
BOC Process Plants Ecopetrol
Chevron Chemical Company Marathon Oil Company
Cytec Industries, Inc. Mobil Technology Company
Dow North America Pennzoil Products Company
Eastman Chemical Company Phillips Petroleum Company
Elf Atochem North America, Inc. Qatar General Petroleum Corp.
FMC Corporation Saudi Arabian Oil Company
GE Plastics Shell Oil Company
Hercules Incorporated Texaco Refining & Marketing, Inc.
Hoechst Celanese Corporation The Mead Corporation
Millennium Inorganic Chemicals
Mitsubishi Chemical Corporation
NOVA Chemicals, Inc.
Occidental Chemical Corp.
PPG Industries, Inc.
Praxair, Inc.
Rhone-Poulenc North America
Rohm and Haas Company
SABIC Americas, Inc.
Solutia Inc.
Solvay Polymers, Inc.
The Lubrizol Corporation
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<PAGE> 54
ABB Lummus Global, Inc.
Bateman Engineering, Inc.
Bechtel Corporation
Brown & Root, Inc.
Delta Hudson Engineering Ltd.
Fluor Daniel, Inc.
Foster Wheeler USA Corporation
Jacobs Engineering Group, Inc.
Kvaerner Process
LG Engineering Company, Ltd.
Parsons Process Group, Inc.
S&B Engineers and Constructors, Ltd.
SNC LAVALIN, Inc.
Stone & Webster Engineering Corporation
Sverdrup Facilities, Inc.
Techint International Construction Corp.
The M.W. Kellogg Company
The Company derives a significant portion of its total revenue from
software licenses to companies in the chemical and petroleum refining
industries, which are highly cyclical. See "Risk Factors - Concentration of
Revenue in the Chemical and Petroleum Refining Industries." As a consequence,
the Company is focusing greater resources on developing products and marketing
efforts directed at companies in process manufacturing segments of other
industries. No individual customer accounted for 10.0% or more of the Company's
total revenues for the six months ended October 31, 1997 or fiscal 1997.
Although all of the customers listed above are current licensees of the
Company's AutoDE software, there can be no assurance that any of them will
continue to license any of such products beyond the term of the existing
license.
The Company believes that its ability to maintain and grow its customer
and revenue bases will depend, in part, on its ability to maintain a high level
of customer satisfaction. The Company believes that its customers typically
purchase AutoDE software products only when they are convinced that such
products will provide them with quicker and more reliable results than the
software they are currently utilizing (which is typically developed "in-house"
by the customer). The Company believes that its customers are its best sales
representatives and finds that sales within an organization are easier once
there is a licensed user in that organization.
SALES AND MARKETING
The Company markets its products and services in more than 25 countries
around the world through its direct sales force, which as of October 31, 1997,
consisted of 12 full time Company sales personnel based at the Company's
Rockville, Maryland office, its United Kingdom offices located in Altrincham,
England and its Asian offices located in Tokyo, Japan, and through its
independent sales representatives located in Argentina, Australia, Brazil,
Colombia, France, Germany, India, Saudi Arabia, South Africa, South Korea,
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<PAGE> 55
Venezuela and certain independent republics of the former Soviet Union, and an
independent sales representative that markets the Company's products in the
People's Republic of China. The Company relies on its direct sales force to
initiate sales contacts, follow-up on leads provided by the Company's marketing
department and to engage in face-to-face contact with its customers to solicit
orders. The Company believes its Company sales personnel have a number of strong
relationships with existing customers which assists the sales personnel in
obtaining additional users of Company products currently licensed by its
customers and in obtaining licenses of additional AutoDE software products. As
of October 31, 1997, the Company had agreements with 13 independent,
non-exclusive sales representatives in 14 countries worldwide. These agreements
are for a term of one year, automatically renewable for an additional one year
term unless sooner terminated. Such international sales typically are priced in
United States dollars, English pounds or Japanese yen; product is generally
shipped with thirty day payment terms. Sales by the Company's independent sales
representatives were $317,000 for the six months ended October 31, 1997 and
$499,000 for fiscal 1997.
The Company also has an in-house marketing department that designs and
updates the Company's home page on the World Wide Web and its sales materials
and performs demographic studies of new sales territories to identify potential
customers. The marketing department also works with the sales force on direct
mail, e-mail and facsimile and other marketing campaigns to gauge and generate
the interest of potential customers.
The Company sells primarily through direct contact with customers and
does not conduct significant mass market advertising due to the expense involved
and the inability to target the Company's particular customer base through such
advertising. It does, however, publish articles and advertise selectively in
professional trade publications, such as Chemical Engineering and Chemputers
magazines. The Company also publishes the SUN (its System User Newsletter) three
times per year to keep industry participants informed about news of interest
regarding ICARUS technology. The SUN is in its ninth year of publication. The
ICARUS Internet site on the World Wide Web is also used to keep its current and
potential customers informed about the latest information and developments in
process and project evaluation. In conjunction with licensed users of its
technology, the Company sponsors User Group meetings in various locations having
a concentration of Company customers to increase the proficiency of its user
community in the effective use of its products. In recent years, the Company has
also sponsored the ICARUS International User's Conference, at which customers
had the opportunity to review major industry trends, learn about the Company's
development plans and meet with industry experts. The Company believes that the
ICARUS International User Conference provides a valuable service to its
customers and assists in enhancing the Company's reputation as a leading
provider of AutoDE software to the process manufacturing industry. Moreover, the
Company actively participates in trade shows such as the Chemputers Show in the
United States and Europe each year, the Chem Show, TAPPI (Technical Association
of Pulp and Paper Industry), the Petro Expo and Daratech, as well as
international trade fairs.
COMPETITION
The growing market for CAE software used in process manufacturing is
intensely competitive and the Company's competitors include several companies
that possess significantly greater financial, technical, marketing and other
resources than ICARUS. The
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<PAGE> 56
Company's primary competition currently comes from customers and potential
customers that have developed, or have the resources and capabilities to
develop, their own process engineering, cost engineering and construction
scheduling software solutions. The Company's direct third-party competitors
include Timberline Software Corporation and a number of smaller private
companies. To a lesser degree, ICARUS faces competition or potential competition
from Aspen Technology, Simulation Sciences Inc. and ChemStations, Inc. The
Company expects to face additional competition as other established and new
companies enter the computer-aided engineering simulation and analysis software
market and new products and technologies are introduced. Increased competition
could result in price reductions, fewer customer orders, reduced gross margins
and loss of market share, any of which could materially adversely affect the
Company's business, operating results and financial condition.
In order to compete in the marketplace, ICARUS must persuade a customer
or potential customer that the Company's AutoDE software products offer a
superior solution to internally developed software or CAE products supplied by
other vendors. In doing so, ICARUS emphasizes the quality and sophistication of
its products, the technological expertise and creativity of its personnel, the
frequency with which it releases AutoDE software enhancements and updates the
quality of its technical support and training courses. Increasingly,
owner-operators and E&C companies that have for years developed and maintained
their own CAE simulation and analysis software are recognizing the efficiency
and economic gains they can achieve by deploying commercially developed CAE
software, including the Company's AutoDE software products.
PROPRIETARY RIGHTS
The Company relies primarily upon trade secret and copyright laws,
including the use of invention assignment and confidentiality agreements with
employees and confidentiality agreements with third parties, and physical
security devices such as its Control Device to protect its proprietary
technology. The Company presently relies upon its registered trademarks and
service marks as well as common law rights in its trademarks and service marks
to protect the use of its name and brands. The Company maintains United States
registrations of certain trademarks and service marks and has filed applications
for United States registrations on additional trademarks and service marks. The
Company's ability to protect its products in foreign jurisdictions, however, is
limited in that the laws of certain foreign jurisdictions in which the Company's
products are distributed do not protect the Company's intellectual property
rights to the same extent as the laws of the United States. Therefore, there can
be no assurance that the protection provided by the laws of either the United
States or of foreign jurisdictions will be sufficient to protect the Company's
proprietary rights in its products and technology.
The Company presently enters into invention assignment and
confidentiality agreements with its employees and confidentiality agreements
with certain customers. The Company also limits access to the source code to its
AutoDE software and other proprietary information. The Control Device is
designed to prevent unauthorized users from utilizing the Company's AutoDE
software products and shuts down the product after the license period expires.
The Company's AutoDE software also will not operate on a computer which is not
connected to the Control Device. It is difficult, however, to totally prevent
unauthorized use. There can be no assurance that the steps taken by the Company
in this
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<PAGE> 57
regard will be adequate to prevent misappropriation of its technology or
infringement of its copyrights or that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technology. The Company believes, however, that due to the
rapid pace of innovation within the software industry, factors such as the
technological and creative expertise of its personnel, the quality of its
products, the quality of its technical support and training services, and the
frequency of release of software product enhancements are more important to
establishing and maintaining a technology leadership position than the various
legal protections available for the Company's products and technology.
Certain technology used in the Company's AutoDE software products, such
as the Primavera Project Planner, Empress SQL and Hummingbird XCEED, are
currently licensed from third parties. These licenses generally require the
Company to pay royalties and/or license fees and to maintain the confidentiality
of certain matters. The Company believes that there are alternative sources for
each of the material components of the technology licensed by the Company from
third parties. However, the termination of any of such licenses, or the failure
of the third party licensors to adequately maintain or update their products,
could result in delay in the Company's ability to ship certain of its products
or in a delay of the introduction of its new or enhanced products while it
searches for similar technology from alternative sources. See "Risk Factors -
Risks Associated with Proprietary Rights."
EMPLOYEES
As of October 31, 1997, the Company had a total of 58 full-time and 4
part-time employees, including 33 in sales, marketing and technical support and
training, 19 in product development and 10 in finance and administration. Of
these employees, 6 work in the Company's United Kingdom office and 2 work in the
Company's Tokyo, Japan office. None of these employees is engaged pursuant to a
collective bargaining agreement, nor has the Company experienced any labor
actions such as a work stoppage. The Company believes that its relations with
its employees are good.
LEGAL PROCEEDINGS
Prior Legal Proceedings. In 1985, the Company settled a dispute with
the IRS regarding the Company's income taxes for the fiscal years 1977 through
1982. It was the Company's understanding that the IRS would accept a payment
plan, including interest, for the disputed amount. After the settlement papers
were signed, and the IRS obtained financial information from the Company
relating to developing such a payment plan, it appeared that the IRS believed
that the Company had sufficient cash reserves to permit an immediate payment.
The Company contended that these funds represented working capital which was
needed for corporate expansion and other operations. Negotiations to arrive at a
mutually satisfactory payment plan with the IRS could not be satisfactorily
concluded. Consequently, the Company thereafter filed a petition under Chapter
11 of the U.S. Bankruptcy Code in 1985 to allow the Company and the IRS to work
out a payment plan satisfactory to both parties. The Company emerged from
Chapter 11 when its Plan of Reorganization was confirmed by the Court in 1988.
All payments required under the Plan of Reorganization were made, the final
payment being made in December 1993 and the case
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<PAGE> 58
was subsequently closed. The Company believes that these proceedings have had no
adverse effect on the Company's current business, financial condition or
reputation.
In 1979, a federal grand jury for the Eastern District of Virginia
returned a criminal indictment against the Company, Herbert G. Blecker, Chairman
of the Board, President and Chief Executive Officer of the Company, and an
employee of Computer Sciences Corporation ("CSC"), a company the shares of which
were and are traded on the New York Stock Exchange. The indictment arose out of
events relating to a contract between the GSA and CSC and a subcontract between
CSC and the Company. In 1972, CSC was awarded a multi-million dollar contract by
the GSA to provide federal agencies with computer and data processing services
(the "GSA/CSC contract"). That contract authorized CSC to subcontract for
consulting services. In 1972, CSC subcontracted with the Company for those
services. Under the GSA/CSC contract, the rates charged for consultant services
were to be based upon the education and experience of the consultants who
performed services. The prosecution contended that Mr. Blecker instructed a
number of employees of the Company to embellish their resumes with additional
degrees and experience which they did not have and, further, that he caused the
resumes of other employees to be enhanced without their knowledge. The 37 count
indictment alleged that the Company and Mr. Blecker submitted to the CSC
invoices for fees based on the false resumes. Further, the indictment asserted
that the Company and Mr. Blecker knew that CSC, in turn, would present to the
GSA claims for payment based upon the invoices. The case was tried before a
jury. The Company and Mr. Blecker were convicted on six counts of presenting
false claims to an agency of the United States and, in addition, the Company was
convicted on two counts of mail fraud. The Company was fined $62,000 and Mr.
Blecker received a one-year sentence of confinement, of which he served nine
months.
Following this conviction, the GSA issued a debarment order which
prevented the Company from entering into a contract or subcontract for the
performance of work for the government. The debarment was terminated as of April
22, 1983, thereby eliminating any restrictions on the ability of the Company to
perform services for the government.
In October 1980, a grand jury in the Eastern District of Virginia
returned a criminal indictment against Mr. Blecker, CSC, and five current or
former officers and employees of CSC. The charges in this indictment also arose
out of the GSA/CSC contract referred to above. The charges involved alleged
improper billing for computer services and for computer software packages. Mr.
Blecker was charged with one count of conspiracy, one count of violating the
Racketeer Influenced Corrupt Organizations Act (RICO), six counts of mail fraud,
and two counts involving alleged false claims against the government. This case
was tried by a jury in May 1983, and all of the defendants were acquitted.
The Company believes that the matters described above have had no
adverse effect on the Company's recent business, financial condition or results
of operations.
Current Legal Proceedings. On October 7, 1997, a former employee of
the Company's U.K. subsidiary, ICARUS Services Limited ("ISL"), filed suit
against ISL in the High Court of Justice, Manchester District, United Kingdom.
The suit seeks approximately 75,000 pound sterling (approximately U.S.
$125,000) for compensation relating to the former employee's termination of
employment in early 1997, pursuant to an employment contract between ISL and
the former employee. ISL has filed a defense with the High Court denying
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<PAGE> 59
indebtedness to the former employee; however, as of the date of this Prospectus,
a hearing date has not been set. The Company intends to vigorously defend itself
against this action. It has established a reserve of approximately $110,000 as a
result of the foregoing claim and believes that any liability exceeding such
amount would not have a material adverse effect on the Company's business,
financial condition or results of operations.
The Company is also a party from time to time to certain legal
proceedings arising in the ordinary course of its business, none of which is
expected to have a material adverse effect on the Company's business, financial
condition or results of operations.
FACILITIES
The Company's principal administrative, sales, marketing and product
development facility occupies approximately 17,500 square feet in Rockville,
Maryland pursuant to a lease which requires annual rent of $382,800 and expires
on March 31, 1998. The Company anticipates relocating to larger quarters located
at 600 Jefferson Plaza, Rockville, Maryland, by April 1, 1998, pursuant to a new
ten (10) year lease dated December 31, 1997, for approximately 28,900 square
feet at an annual base rent of $571,210 plus increases in operating expenses.
The Company also leases 4,535 square feet of office space in Houston, Texas
which lease requires an annual rent of $91,585, plus all operating expenses of
the leased premises as such costs may increase from time to time and expires on
April 1, 2002, and leases approximately 1,921 square feet in Altrincham, England
which lease requires annual rent of 20,275 pound sterling (approximately US
$34,000) and expires on May 8, 2002, and leases approximately 1,070 square feet
of office space in Tokyo, Japan, which lease requires an annual rent of 3.6
million Japanese Yen plus 720,000 Japanese Yen (approximately US $36,000) for
utilities and expires on January 19, 2000. The Company believes that its
existing facilities are adequate for its current needs and that suitable
additional or alternative space will be available in the future on commercially
reasonable terms as needed.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors, executive officers and key employees of the Company are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Herbert G. Blecker 62 Chairman of the Board of Directors,
President and Chief Executive
Officer
William F. Geritz, III 33 Director and Executive
Vice President
Mark S. Kingsley 48 Chief Financial Officer and
Controller
Eunice E. Blecker 61 Director, Treasurer and Secretary
Motoo Iso 33 General Manager and member of the Board of
Directors of ICARUS Nippon K.K.
(an indirect wholly-owned subsidiary of the
Company)
Dennis E. Leister, Ph.D. 51 Director of Client Services
Daniel M. McCarthy 49 Director of Systems Integration
Bahram Meyssami, Ph.D. 36 Director of Process Technology
Martin D. Ryan 50 Director of Cost Engineering
Dr. Robert L. Steinberger 68 Director of Decision Engineering
Tyler T. Winkler 32 Director of Sales
James J. Byrne 62 Vice Chairman of the Board of
Directors
J. Edward Beck, Jr. 49 Director
Gary M. Roush 51 Director
</TABLE>
HERBERT G. BLECKER. Mr. Blecker founded the Company in 1969 and has served
as Chairman of the Board of Directors, Chief Executive Officer and President of
the Company since that time. From 1969 to 1996, Mr. Blecker also served as Chief
Financial Officer of the Company. Prior to founding the Company, Mr. Blecker
held various positions with Allied Chemical Corporation, the National
Aeronautics and Space Administration and the U.S. Department of the Interior.
Mr. Blecker received his Bachelor of Chemical Engineering degree from the
College of the City of New York. Mr. Blecker is the husband of Mrs. Blecker.
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WILLIAM F. GERITZ III. Mr. Geritz has served as a director of the Company
since May 1997 and Executive Vice President of the Company since January 1998.
Mr. Geritz has held various positions with the Company since 1988, including
Vice President from May 1997 to January 1998, Director of Sales from 1993 to
1997, Sales Manager from 1992 to 1993, and Account Executive from 1988 to 1992.
Prior to 1988, Mr. Geritz held the position of Account Executive with Mentor
Systems, Inc., a software and hardware integration company. Mr. Geritz received
his B.A. degree in economics from St. Mary's College, St. Mary's City, Maryland.
MARK S. KINGSLEY. Mr. Kingsley has served as Controller and Chief
Financial Officer of the Company since October 1996 and January 1998,
respectively. From March 1990 to October 1996, Mr. Kingsley held the position of
Controller and Director of Human Resources of Allstate Financial Corporation, an
Arlington, Virginia multi-company financing and asset-based lending organization
listed on the Nasdaq National Market. Mr. Kingsley received his B.S. degree in
accounting and a B.A. degree in Russian Area Studies from the University of
Maryland, College Park, Maryland.
EUNICE E. BLECKER. Mrs. Blecker is a co-founder of the Company and has
served as a director, Treasurer and Secretary of the Company since April 1969.
Mrs. Blecker is the wife of Mr. Blecker.
MOTOO ISO. Mr. Iso has served as General Manager and Director of ICARUS
Nippon K.K. since December 1995. From October 1995 to December 1995, Mr. Iso
served as a consultant to ISL. From August 1992 to October 1995, Mr. Iso was
employed by Dodwell Marketing Services Ltd., where he sold, marketed and
provided technical support for the Company's products in Japan. Mr. Iso received
his B.S. degree in industrial science from Nihon University, Tokyo, Japan, in
1987.
DENNIS E. LEISTER, PH.D. Dr. Leister has served as Director of Client
Services of the Company since November 1997. From May 1993 to December 1997, Dr.
Leister was Manager of Client Services of the Company, and from May 1989 to May
1993, was the Company's Product Marketing Manager. Dr. Leister received his B.S.
degree in Biology from Yale University in 1968, his Ph.D. in cell and
developmental biology from The Johns Hopkins University, Baltimore, Maryland, in
1973, completed three years of post-doctoral training at the
Max-Planck-Institute fuer experimentelle Medizin in Goettingen, W. Germany, in
1976 and completed a second post- doctorate and visiting assistant professorship
at Indiana University, Bloomington, Indiana, in 1978.
DANIEL M. MCCARTHY. Mr. McCarthy has served as Director of Systems
Integration of the Company since November 1997. Mr. McCarthy has been employed
by the Company since 1974 in various capacities and prior to November 1997
served most recently as Manager of Computer Operations, from 1984 to 1997. Mr.
McCarthy received his B.S. degree in chemical engineering from the University of
Notre Dame, Notre Dame, Indiana, in 1970.
BAHRAM MEYSSAMI, PH.D. Dr. Meyssami has served as Director of Process
Technology since November 1997. From December 1993 to November 1997, Dr.
Meyssami held the position of Manager of Expert Systems Technology in the
Company. Prior to that, Dr. Meyssami was an Applications Consultant for the
Company from December 1990 to
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December 1993. Dr. Meyssami received his B.S., M.S. and Ph.D. degrees in
chemical engineering from the University of Maryland, College Park, Maryland.
MARTIN D. RYAN. Mr. Ryan has served as Director of Cost Engineering of the
Company since November 1997. From November 1996 to November 1997 and from August
1984 to November 1996, Mr. Ryan held the positions of Manager of Technology
Services and Manager of Product Development, respectively, of the Company. Mr.
Ryan received a Diploma in Quantity Surveying from Liverpool College of
Building, United Kingdom, and is an Associate of the Royal Institute of
Chartered Surveyors.
DR. ROBERT L. STEINBERGER. Dr. Steinberger has served as the Company's
Director of Decision Engineering since February 1998. Prior to that, Dr.
Steinberger held the positions of Director of Integrated Systems, Director of
Business Development and Director of Marketing of the Company, from April 1993
to February 1998, from 1993 to 1997 and from 1986 to 1993, respectively. Dr.
Steinberger obtained his doctorate in engineering science and master's degree
in chemical engineering from New York University, and his bachelor's degree in
chemical engineering from The City College of New York.
TYLER T. WINKLER. Mr. Winkler has served as Director of Sales of the
Company since January 1998. From July 1996 to January 1998, Mr. Winkler held
the position of Sales Manager, North and South America of the Company. From
October 1992 to June 1996, Mr. Winkler was an Account Executive with the
Company. Mr. Winkler received his B.S. degree in management from Towson
University in Towson, Maryland.
JAMES J. BYRNE. Mr. Byrne has served as Vice-Chairman of the Board of the
Company since January 1998. Mr. Byrne has served as Managing Partner of Byrne
Technology Partners, Ltd. since January 1996. The firm provides professional
services for strategic alliances and mergers within the computer industry and
offers technology consulting services for corporate re-engineering. From April
1990 to its sale in March 1995, Mr. Byrne served as President of Harris Adacom
Corporation, a company formed from the merger of the data communications
division of Harris Corp. and Adacom Inc., which was engaged in network systems
and services. From December 1986 to April 1990, Mr. Byrne was the Vice President
and General Manager of the data communications division of Harris Corp. Mr.
Byrne serves on the boards of directors of STB Systems, Inc., a publicly traded
company listed on the Nasdaq National Market that designs, manufactures and
sells various multimedia subsystems, and Lennox International, Inc., a
manufacturer of heating, ventilation and air conditioning systems. Mr. Byrne is
also a member of the national board of directors of the American Electronics
Association (AEA), and a member of the Advisory Council of the University of
Texas School of Engineering and Computer Science. Mr. Byrne completed the
Stanford Executive Institute program at Stanford University, Palo Alto,
California, and received his B.S. degree in business administration from
Duquesne University, Pittsburgh, Pennsylvania.
J. EDWARD BECK, JR. Mr. Beck has served as a director of the Company since
January 1998. Since 1985, Mr. Beck has been the President and Chief Executive
Officer of Bitrek Corporation, a privately held manufacturer of pipe fittings.
Mr. Beck also is a director of Dauphin Deposit Bank and Trust Company, a banking
subsidiary of First Maryland Bancorp, Chairman of the Board of Wilson College, a
private liberal arts college located in Pennsylvania, and Vice Chairman of the
Board for Summit Health, a non-profit healthcare
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provider in south-central Pennsylvania. Over the past eight years, Mr.
Beck also has served on the Boards of Directors of Dauphin Deposit Corporation,
a financial services holding company which traded on the Nasdaq National
Market, and ValleyBank Corporation, which traded on the Nasdaq SmallCap Market
until its acquisition by Dauphin Deposit Corporation in December 1993. Prior to
1985, Mr. Beck served as the Senior Adviser to the Assistant Secretary for
Electronic Systems and Information Technology at the U.S. Department of
Treasury from 1982 to 1984. Mr. Beck received his J.D. degree from Dickinson
School of Law, Carlisle, Pennsylvania (now known as Dickinson School of Law of
the Pennsylvania State University), his M.B.A. degree from Mt. St. Mary's
College, Emmitsburg, Maryland and his B.A. degree from Dickinson College,
Carlisle, Pennsylvania.
GARY M. ROUSH. Mr. Roush has served as a director of the Company since
January 1998. Since February 1996, Mr. Roush has been the President of Capital
Accounting, a financial consulting firm based in Washington, D.C., and prior to
that date served as its Vice President since May 1994. From August 1988 to May
1994, Mr. Roush was an accountant with Friedman & Fuller, P.C., in Rockville,
Maryland. Mr. Roush is licensed as a certified public accountant by the
Commonwealth of Virginia and the State of Colorado, and is a member of the
American Institute of Certified Public Accountants. Mr. Roush received his
B.S.B.A. degree in accounting from the University of Denver, Denver, Colorado.
The Company's Articles of Incorporation and Bylaws provide that the
Company's Board of Directors be divided into three classes. Class I, which will
consist of Messrs. Blecker and Byrne, will expire at the Annual Meeting of
Stockholders to be held in 2000; Class II, which will consist of Messrs. Geritz
and Beck, will expire at the Annual Meeting of Stockholders to be held in 1999;
and Class III, which will consist of Mrs. Blecker and Mr. Roush, will expire at
the Annual Meeting of Stockholders to be held in 1998. At each annual meeting of
stockholders, one class of directors will be elected for a full term of three
years to succeed those directors whose terms are expiring.
The Board of Directors has appointed an Executive Committee, an Audit
Committee and a Compensation Committee. The Executive Committee performs the
functions of the Board, with certain exceptions, when the Board is not in
session. The members of the Executive Committee are Mr. Blecker, Chairman and
Messrs. Geritz, Roush and Byrne. The Audit Committee reviews the scope and
results of the annual audit of the Company's consolidated financial statements
conducted by the Company's independent accountants, the scope of other services
provided by the Company's independent accountants, proposed changes in the
Company's financial and accounting standards and principles, and the Company's
policies and procedures with respect to its internal accounting, auditing and
financial controls, and makes recommendations to the Board of Directors on the
engagement of the independent accountants as well as other matters which may
come before it or as directed by the Board of Directors. The members of the
Audit Committee are Messrs. Beck, Byrne and Roush, Chairman. The Compensation
Committee administers the Company's compensation programs, including the 1998
Stock Option Plan, the Recognition Plan and the 401(k) Plan, and performs such
other duties as may from time to time be determined by the Board of Directors.
The members of the Compensation Committee are Messrs. Byrne and Roush,
Chairman.
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<PAGE> 64
DIRECTOR COMPENSATION
The Board of Directors is currently required to meet not less than
quarterly. Directors who are not full-time employees of the Company receive a
quarterly fee of $1,250 for their services, plus $500 for each meeting attended
and $500 for each committee meeting attended and are reimbursed for their
out-of-pocket expenses arising from attendance at a Board or committee meeting.
Directors who are also employees receive no compensation for attending such
meetings other than their base salaries. It is anticipated that options to
purchase shares of Common Stock will be issued to the Company's non-employee
directors immediately following the Annual Meeting of Stockholders to be held in
1998, and that such directors will thereafter be entitled to receive additional
stock options under the Company's Stock Option Plan. See "- Stock Plans - 1998
Stock Option Plan."
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the two other most highly compensated executive
officers of the Company (collectively, the "Named Executive Officers") for the
fiscal year ended April 30, 1997.
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<PAGE> 65
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
-------------------------------------- COMPENSATION
AWARDS
------------
OTHER All
ANNUAL Securities Other
COMPEN- Underlying Compen-
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) SATION(3) Options(#) sation
- --------------------------- ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Herbert G. Blecker(1) $144,000 $-- $-- -- $--
Chairman of the Board,
President and Chief
Executive Officer
William F. Geritz, III(2) 100,000 50,000 -- -- --
Executive Vice President
</TABLE>
- --------------------
(1) The Company anticipates granting Mr. Blecker 63,600 options to purchase
Common Stock pursuant to the Company's Stock Option Plan. See "- Stock Plans -
1998 Stock Option Plan."
(2) The Company anticipates granting Mr. Geritz 106,000 options to purchase
Common Stock pursuant to the Stock Option Plan. See "- Stock Plans - 1998 Stock
Option Plan."
(3) Other Annual Compensation includes accrued but unpaid vacation and sick pay,
the lease and maintenance payments for an automobile, payment of personal
telephone charges and the payment for a home security system. Such amounts did
not exceed the lesser of $50,000 or 10% of the total amount of salary and bonus
reported for Mr. Blecker for the year ended April 30, 1997.
EMPLOYMENT AGREEMENTS
Effective January 22, 1998, the Company entered into an employment
agreement with Mr. Blecker which superseded his employment agreement dated
August 1, 1981, and negotiated a new employment agreement with Mr. Geritz
(Messrs. Blecker and Geritz being referred to collectively as the "Executives").
Except for base salary amounts, terms of the employment agreements are
substantially similar. Each of the Executives are engaged for five year terms;
which terms will be automatically extended for an additional year upon each
anniversary date of the respective employment agreement. The aggregate base
salaries for the Executives in each of the calendar years 1998, 1999, 2000 and
2001 will be $250,000 and $125,000 for Mr. Blecker and Mr. Geritz, respectively.
The base salaries will be supplemented by a cash bonus as may be determined by
the Board of Directors with respect to Mr. Blecker and a cash bonus of $125,000
with respect to Mr. Geritz for his performance in fiscal 1998, payable in May
1998, as well as a cash bonus for fiscal years 1999, 2000 and 2001 to be based
on performance goals to be agreed upon by him and the Board of Directors, to be
payable quarterly in fiscal years 1999, 2000 and 2001.
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The base salary amounts shall automatically be increased by the amount of the
prior year's increase in the consumer price index ("CPI"). The Executives are
entitled to participate in all employee benefit plans of the Company and will
be reimbursed for expenses relating to Company business. An automobile, the
lease payments and operating expenses of which will be paid by the Company,
will be provided to Mr. Blecker. Each Executive is entitled to four weeks paid
vacation, all Company holidays and sick leave in accordance with Company
policy. The employment agreements are terminable by the Company with or without
"cause" and upon the Executive's death, disability or retirement, or by the
Executives for "Good Reason." If the Company terminates the employment
agreement for cause or if the Executive terminates his employment for other
than Good Reason, the Executive will have no right to further compensation or
benefits under the employment agreement. If the Executive's employment is
terminated by the Company for other than cause, or for disability, retirement
or death or if the employment agreement is terminated by the Executive because
the Company has breached the employment agreement, the Executive will be
entitled to receive severance pay equal to three times the Executive's average
annual compensation. The Executive would also be entitled to maintain, at no
cost to him, the Company benefits he was then receiving (other than
participation in stock option or restricted stock plans) until he obtains
full-time employment with another employer or the expiration of the remaining
term of the employment agreement, whichever is earlier.
With respect to the employment agreements, "Good Reason" is defined to
mean termination of employment following a change in control of the Company
(defined by his employment agreement to be an event that would be required to be
reported under Regulation 14A of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or the acquisition by any person of 25% or more of the
voting power of the Company or a change in the individuals constituting the
Board of Directors during any two consecutive years) based on: (i) failure to
elect, re-elect, or appoint or to re-appoint the Executives to their respective
offices or a material adverse change in their respective functions, duties or
responsibilities; (ii) a material reduction in their base salary; (iii) the
relocation of the Company's executive offices; (iv) any purported termination of
their respective employment without proper notice; or (v) the failure by any
successor to the Company to assume their respective employment agreements. If
the employment agreement is terminated for "Good Reason" subsequent to a Change
in Control, the Executive will be entitled to receive a lump sum cash severance
amount equal to five times his current base salary. The Executive would also be
entitled to maintain, at no cost to him, the Company benefits he was then
receiving (other than participation in stock options or restricted stock plans)
until he obtains full time employment with another employer or the expiration of
the remaining term of the employment agreement, whichever is earlier. The
Company has agreed to pay any excise tax attributable to any severance payment,
if necessary, pursuant to Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code").
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<PAGE> 67
The Executives have agreed not to disclose any proprietary information of
the Company and not to compete with the Company for two years after the
termination or expiration of their respective employment agreement.
Mr. Kingsley was hired in October 1996 at a base salary of $85,000 per
annum with a bonus of $10,000 based upon the performance and continued
profitability of the Company, which was paid on April 30, 1997. His current base
salary is $92,000.
STOCK PLANS
1998 Stock Option Plan. Effective January 22, 1998, the Board of Directors
of the Company adopted the Stock Option Plan, which was approved by the
stockholders of the Company by unanimous written consent on January 22, 1998.
The Stock Option Plan is designed to attract and retain qualified
personnel in key positions, provide officers and key employees with a
proprietary interest in the Company as an incentive to contribute to the success
of the Company and reward key employees for outstanding performance and the
attainment of targeted goals. The Stock Option Plan is also designed to attract
and retain qualified directors, consultants, agents and advisors to the Company.
The Stock Option Plan provides for the grant of incentive stock options intended
to comply with the requirements of Section 422 of the Code ("incentive stock
options") and non-incentive or compensatory stock options which may be granted
to non-employee directors or other persons who may not be employed by, or be
directors of, the Company (collectively "Awards"). Awards will be available for
grant to directors and key employees of the Company and its subsidiaries, except
that non-employee directors will not be eligible to receive incentive stock
options.
The Stock Option Plan is administered and interpreted by the Compensation
Committee of the Board of Directors consisting of two or more non-employee
directors. Unless sooner terminated, the Stock Option Plan will be in effect for
a period of ten years or until January 21, 2008.
Under the Stock Option Plan, the Compensation Committee will determine
which officers and key employees will be granted options, whether such options
will be incentive or compensatory options, the number of shares subject to each
option, whether such options may be exercised by delivering other shares of
Common Stock and when such options become exercisable. The Stock Option Plan,
however, provides that non-employee directors automatically will be granted
compensatory stock options to purchase a specified number of shares of Common
Stock annually.
Pursuant to the Stock Option Plan, the per share exercise price of an
incentive stock option is required to be at least equal to the fair market value
of a share of Common Stock on the date the option is granted. The Code also
requires that the aggregate fair market value of the Common Stock with respect
to which the incentive stock options are exercisable for the first time by the
optionee during any calendar year cannot exceed $100,000. Moreover, any person
who owns 10% or more of the voting power of the Common Stock
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may not receive incentive stock options whose exercise price is less than 110%
of the fair market value of a share of Common Stock of the Company on the date
of grant. The Stock Option Plan requires that the per share exercise price of a
compensatory stock option be no less than 85% of the fair market value of a
share of Common Stock on the date the option is granted.
Stock options will become vested and exercisable at the rate of 20% per
year on each annual anniversary of the date on which the option was granted or
as otherwise specified by the Compensation Committee, and the right to exercise
stock options shall be cumulative. Each stock option or portion thereof will be
exercisable at any time on or after its vesting date and will remain exercisable
until ten years after its date of grant or three months after the date on which
the optionee's employment terminates, unless the Compensation Committee, in its
discretion, decides at the time of grant or thereafter to extend such period of
exercise for a period of three months to five years. Unless the Compensation
Committee, in its discretion, shall specifically state otherwise at the time of
grant, all options will become immediately vested and exercisable in full on the
date an optionee terminates his or her employment or service as a non-employee
director due to his or her death, retirement, disability or as a result of a
"Change in Control" of the Company. A "Change in Control" of the Company is
defined by the Stock Option Plan to have occurred if: (i) any person other than
Mr. Blecker or the Company becomes the beneficial owner of 25% of more of the
voting power of the Company then outstanding; (ii) during any period of two
consecutive years individuals who at the beginning of such period constitute the
Board of Directors cease for any reason to constitute at least a majority of the
Board; (iii) the stockholders of the Company approve a merger or consolidation
of the Company whereby the voting securities of the Company represent less than
50% of the combined voting power of the Company immediately after such merger or
consolidation; or (iv) the stockholders of the Company approve a plan of
liquidation of the Company or an agreement for the sale or disposition of
substantially all of the Company's assets. However, failure to exercise
incentive stock options within three months after the date on which the
optionee's employment terminates may result in adverse tax consequences to the
optionee. Stock options are non-transferable except by will or the laws of
descent and distribution.
The Company has reserved for issuance pursuant to the Stock Option Plan
760,500 shares of Common Stock. In the event of a stock split, reverse stock
split or stock dividend, the number of shares of Common Stock under the Stock
Option Plan, the number of shares to which any Award relates and the exercise
price per share under any option shall be adjusted to reflect such increase or
decrease in the total number of shares of the Common Stock outstanding.
Under current provisions of the Code, the federal income tax treatment of
incentive stock options and compensatory stock options is different. With
respect to incentive stock options, an optionee who meets certain holding period
requirements will not recognize income at the time the option is granted or at
the time the option is exercised, and a federal income tax deduction generally
will not be available to the Company at any time as a result of such grant or
exercise. With respect to compensatory stock options, the difference between the
market value of the Common Stock on the date of exercise and the option exercise
price generally will be treated as compensation income to the optionee upon
exercise, and the Company will be entitled to a deduction in the amount of
income so recognized.
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No options were granted or exercised in fiscal 1997. The Company
anticipates granting immediately prior to the commencement of this Offering the
following number of options to the following executive officers of the Company
with an exercise price equal to the initial public offering price: 63,600 to Mr.
Blecker; 106,000 to Mr. Geritz; 6,300 to Mr. Kingsley; and 8,400 to Mrs.
Blecker. In addition, the Company anticipates granting 253,100 options to
non-executive employees of the Company with an exercise price equal to the
initial public offering price. These options will be subject to a five-year
vesting schedule providing that 20% of such options will vest annually. In
addition, the Company intends to issue 4,200 compensatory options to each of the
three non-employee directors immediately subsequent to the Annual Meeting of
Stockholders in calendar 1998 and immediately following each subsequent Annual
Meeting (to the extent that options remain available therefor under the Stock
Option Plan). These options will vest immediately and have an exercise price
equal to the fair market value of the Common Stock on the date of grant.
Recognition and Retention Plan and Trust. The Board of Directors of the
Company, on January 22, 1998, adopted the Recognition Plan for directors,
selected officers and employees of the Company, and the stockholders of the
Company, approved such plan by unanimous written consent on January 22, 1998.
The objective of the Recognition Plan is to enable the Company to provide
directors, officers and employees with a proprietary interest in the Company as
an incentive to contribute to its success.
The Recognition Plan is administered by the Compensation Committee, which
will have the responsibility to hold all Common Stock contributed, or to invest
all funds contributed, to a trust created for the Recognition Plan (the
"Trust"). The Recognition Plan will remain in effect for a period of ten years
or until January 21, 2008, unless it is terminated by the Board of Directors or
all assets of the trust are distributed prior to such date.
The Company has reserved for issuance 507,000 shares of Common Stock under
the Recognition Plan. The shares, while restricted, may not be sold, pledged or
otherwise disposed of and are required to be held in the Trust. If a recipient
terminates his or her employment for reasons other than death, disability or
retirement, the recipient will forfeit all rights to the allocated shares under
restriction. The Company will indemnify the trustees of the Trust for all
claims, expenses and liabilities arising out of or related to the exercise of
the trustees' powers and the discharge of their duties under the Trust, unless
the same is due to the gross negligence or willful misconduct of the Trustee.
The Trust may purchase from the Company and/or stockholders thereof additional
shares of Common Stock for distribution pursuant to the Recognition Plan. Shares
of Common Stock granted pursuant to the Recognition Plan generally will be in
the form of restricted stock earned at the rate of 20% per year, subject to
continued employment or service as a director, except that all shares will be
deemed earned as of the last day of a recipient's employment as a result of
death or retirement or, in the event and as of the date of, a Change of Control
of the Company, which is defined under the Recognition Plan to mean any change
of control of the Company which would be required to be reported by the Company
under Regulation 14A of the Exchange Act. Recipients of grants under the
Recognition Plan will not be required to make any payment at the time of grant
or when the underlying shares of Common Stock become vested.
For accounting purposes, compensation expense in the amount of the fair
market value of the Common Stock at the date of the grant to the recipient will
be recognized pro
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rata over the number of years during which the shares vest. The Board of
Directors of the Company can terminate the Recognition Plan at any time, and if
it does so, any shares not allocated will revert to the Company.
The Company does not anticipate granting stock awards for shares of Common
Stock to directors, executive officers and other key personnel immediately
subsequent to the consummation of the Offering but may do so thereafter. It is
currently anticipated that stock awards will be made to other officers and key
personnel by the committee primarily based on performance, although the
committee will be able to consider other factors determined to be relevant in
its sole discretion. In addition, pursuant to the Recognition Plan, shares of
Common Stock authorized to be awarded by the Recognition Plan will be available
to be awarded to non-employee directors of the Company pursuant to a formula
that complies with Rule 16b-3 under the Exchange Act. See "Risk Factors -
Substantial Dilution."
401(k) Plan. The Company has a 401(k) plan for all employees (the "401(k)
Plan"), age 21 or older, with one year of service. The 401(k) Plan is a
contributory defined contribution plan which is intended to qualify under
Section 401(k) of the Code. Participants may contribute to the 401(k) Plan by
salary reduction of up to 20% of annual compensation for the year. Such
contribution defers the employee's earnings up to a maximum of $9,500 in each
plan year, indexed annually. The Company may, in its discretion, determine each
year to make a matching contribution out of current or accumulated net profit
equal to a percentage of the amount deferred by the employee. Although an
employee's contributions to the 401(k) Plan are immediately vested, the matching
contributions made by the Company become vested at the rate of 20% per year upon
the completion of two years of credited service. All funds contributed to the
401(k) Plan are held in a trust maintained by a brokerage firm and investments
are made at the direction of the employee. Contributions by the Company to the
401(k) Plan were $14,898 for fiscal 1997.
Cafeteria Plan. All Company employees who satisfy the conditions for
coverage under the insurance benefit plans maintained by the Company are
eligible to participate in the Company's Cafeteria Plan, which permits employees
to deduct a portion of their gross wages prior to the calculation of federal
income tax, FICA and Medicare deductions and state income tax, to be used to pay
for the following permissible benefits: group health insurance, life insurance,
disability insurance, cancer plan, vision plan, accidental death, dismemberment
plan, or dental insurance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors established a Compensation Committee on January 22,
1998. The Compensation Committee currently is comprised of Messrs. Beck and
Roush. None of the executive officers of the Company currently serves on the
compensation committee of another entity or on any other committee of the board
of directors of another entity performing similar functions.
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CERTAIN TRANSACTIONS
PENDING RECAPITALIZATION
The Company was organized under the laws of the State of Maryland on
December 2, 1998. On January 26, 1998, the Company entered into an Agreement and
Plan of Recapitalization with Mr. Blecker, Mrs. Blecker (collectively the
"Bleckers"), ICARUS Corporation ("ICARUS MD") and ICARUS Services Limited
("ICARUS UK"), providing for the transfer by the Bleckers of all of their shares
of the capital stock of ICARUS MD and ICARUS UK to the Company in exchange for
an aggregate of 2,999,000 shares of Common Stock and 100 shares of Series A
Preferred Stock of the Company (the "Recapitalization"). See "Description of
Capital Stock - Preferred Stock." As a result of the Recapitalization, ICARUS MD
and ICARUS UK will become wholly-owned subsidiaries of the Company. Following
the Recapitalization, ICARUS Nippon will remain a wholly-owned subsidiary of
ICARUS UK, and ICARUS Development and Marketing Corporation will remain a
wholly-owned subsidiary of ICARUS MD. It is anticipated that the
Recapitalization will be consummated immediately prior to the closing of the
Offering.
STOCKHOLDER LOANS TO COMPANY
During fiscal 1992, Mr. Blecker made two loans to the Company in the
aggregate amounts of $100,000 and $25,000, respectively. The loans were made
pursuant to an unsecured demand promissory note bearing interest at 6.5% per
annum. All amounts outstanding under the loans were fully repaid in January
1997.
FUTURE TRANSACTIONS
Future transactions between the Company and related parties will be
approved by a majority of all disinterested directors and will be on terms no
less favorable than those which could be obtained from unrelated third parties.
CONTROL BY PRINCIPAL STOCKHOLDER
Mr. Blecker holds 97.0% of the outstanding Common Stock, and after the
Offering will own approximately 52.9%. Accordingly, Mr. Blecker will, after the
Offering, be in a position to control all matters relating to the Company's
business, including the election of the Company's Board of Directors, the
acquisition or disposition of assets (in the ordinary course of the Company's
business or otherwise), future issuances of Common Stock or other securities of
the Company, and the declaration and payment of dividends on the Common Stock.
In addition, he may be able to prevent, delay or make more difficult any
business combination involving the Company not approved by him. See "Risk
Factors - Control by Principal Stockholders" and "Description of Capital Stock -
Maryland Anti-Takeover Law and Certain Provisions of the Articles of
Incorporation."
The Principal Stockholders of the Company will benefit from this Offering
in that a public market will be created for shares of the Company's Common
Stock and the Principal Stockholders will have substantial unrealized gain with
respect to shares of the Company's Common Stock owned by them following this
Offering.
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<PAGE> 72
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
The Company has adopted provisions in its Articles that eliminate to the
fullest extent permissible under Maryland law the liability of its directors to
the Company or its stockholders for monetary damages except to the extent that
it is proven that the director actually received an improper benefit or profit
in money, property or services or the director's action or failure to act was
the result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding. This provision is designed to ensure that
the ability of the Company's directors to exercise their best business judgment
in managing the Company's affairs, subject to their continuing fiduciary duties
to the Company and its stockholders, is not unreasonably impeded by exposure to
potentially high personal costs or other uncertainties of litigation.
The Articles also provide that the Company shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, because such person is or was a director, officer, employee or
agent of the Company. Under the terms of the Articles, such indemnification also
will be provided to any person who is or was serving at the request of the
Company as a director, officer, employee, agent or in certain other capacities
of another corporation, partnership, joint venture, trust, employee benefit plan
or certain other enterprises. Such indemnification is furnished to the full
extent provided by law against expenses (including attorneys' fees), judgments,
fines, excise taxes and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding. The indemnification
provisions also permit the Company to pay reasonable expenses in advance of the
final disposition of any action, suit or proceeding as authorized by the Board
of Directors, provided that the indemnified person provides a written
affirmation that he or she has met the standards of conduct necessary for
indemnification under applicable law and undertakes to repay the Company if it
is ultimately determined that such person was not entitled to indemnification.
The rights of indemnification provided in the Company's Articles are not
exclusive of any other rights which may be available under the Articles or
Bylaws of the Company, any insurance or other agreement, by vote of stockholders
or disinterested directors or otherwise. In addition, the Articles authorize the
Company to maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Company or with another entity at the request
of the Company, whether or not the Company would have the power to provide
indemnification to such person. The Company intends to obtain director and
officer liability insurance coverage.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
At the present time, there is no pending litigation or proceeding
involving a director, officer, employee or other agent of the Company in which
indemnification would be required or permitted. The Company is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 30, 1998, and as adjusted
to reflect the sale of the shares of Common Stock offered hereby by (i) each
person known by the Company to be the beneficial owner of more than 5.0% of the
Company's Common Stock, (ii) each of the Company's directors, (iii) each of the
Executive Officers named in the Summary Compensation Table and (iv) all
executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING OFFERING
------------------- -------------------
NAME(1) NUMBER PERCENT NUMBER PERCENT
- -------------------------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Herbert G. Blecker (2) 2,910,000 97.0% 2,910,000 52.9%
Eunice E. Blecker (2) 90,000 3.0 90,000 1.6
William F. Geritz, III -- -- -- --
Mark S. Kingsley -- -- -- --
James J. Byrne -- -- -- --
J. Edward Beck, Jr. -- -- -- --
Gary M. Roush -- -- -- --
</TABLE>
All directors and executive officers
as a group (seven persons)
- -------------------------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. The Company believes, based on information furnished by
such persons, that the persons named in the table above have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them. The address of each beneficial owner is One
Central Plaza, 11300 Rockville Pike, Rockville, Maryland 20852, except
that the address for Mr. Roush is c/o Capital Accounting, 1299
Pennsylvania Avenue, N.W., Washington, D.C. 20005, the address for Mr.
Beck is c/o Bitrek Corporation, 330 East Ninth Street, P.O. Box 510
Waynesboro, Pennsylvania 17268, and the address for Mr. Byrne is
c/o Byrne Technology Partners, Ltd., One Galleria Tower, Suite 500,
13344 Noel Rd., Dallas, Texas 75240.
(2) The number of shares shown in the table for each of Mr. Blecker and
Mrs. Blecker excludes the number of shares beneficially owned by the
other. In addition, the number of shares shown in the table for each of
Mr. Blecker and Mrs. Blecker includes 1,000 shares of Common Stock which
are currently issued and outstanding as well as shares issuable pursuant
to the Recapitalization (which also includes 100 shares of Series A
Preferred Stock). See "Certain Transactions - Pending Recapitalization."
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<PAGE> 74
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 20,000,000 shares of Common Stock and
5,000,000 shares of Preferred Stock.
COMMON STOCK
As of January 30, 1998, there were 1,000 shares of Common Stock
outstanding. Upon the Recapitalization, the Company will issue an aggregate of
2,999,000 shares of Common Stock (in addition to 100 shares of Series A
Preferred Stock) to Mr. Blecker and Mrs. Blecker in exchange for all of the
outstanding common stock of ICARUS Corporation and ISL. See "Certain
Transactions - Pending Recapitalization."
Dividends. Subject to the prior rights of the holders of any shares of
preferred stock that may be outstanding, the Company may pay dividends as
declared from time to time by the Board of Directors out of funds legally
available therefor. The holders of Common Stock will be entitled to receive and
share equally in such dividends as may be declared by the Board of Directors.
Voting Rights. Except as provided in any resolution or resolutions adopted
by the Board of Directors establishing any series of Preferred Stock, the
holders of Common Stock possess exclusive voting rights in the Company. Each
holder of shares of Common Stock is entitled to one vote for each share held on
all matters voted upon by stockholders.
Liquidation. Subject to the prior rights of the holders of any shares of
Company Preferred Stock that may be outstanding, in the event of any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the holders of the Common Stock would generally be entitled to
receive pro rata, after payment of all debts and liabilities of the Company, all
remaining assets of the Company available for distribution.
Preemptive Rights; Redemption. Holders of the Common Stock do not have any
preemptive rights with respect to any shares of capital stock of the Company. In
addition, the Common Stock is not subject to any redemption provisions.
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of undesignated,
"blank check" Preferred Stock, of which 100 shares of Series A Preferred Stock
will be outstanding following consummation of the Recapitalization. The Board of
Directors has the authority to issue the Preferred Stock in one or more series
and to fix the price, rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting a series or the designation of such series, without any
further vote or action by the Company's stockholders. The Preferred Stock may be
issued in distinctly designated series, may be convertible into Common Stock and
may rank prior to the Common Stock as to dividend rights, liquidation
preferences, or both, and may have full or limited voting rights. Accordingly,
the issuance of Preferred Stock could adversely affect the voting and other
rights of holders of Common Stock.
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<PAGE> 75
Following consummation of the Recapitalization, there will be 100 shares
of Series A Preferred Stock issued and outstanding and held beneficially and of
record by the Bleckers. The shares of the Series A Preferred Stock rank senior
to the Common Stock as to rights upon liquidation, but are not entitled to any
dividends, are non-redeemable, have no voting rights, no registration rights and
no sinking fund is to be established for their retirement. The Series A
Preferred Stock was issued solely to facilitate the Recapitalization under
applicable law.
The authorized but unissued shares of Preferred Stock and the authorized
but unissued and unreserved shares of Common Stock are available for issuance in
future mergers or acquisitions, in a future underwritten public offering or
private placement or for other general corporate purposes. Except as otherwise
required to approve a transaction in which the additional authorized shares of
Preferred Stock would be issued or as may be required by the NASD to maintain
the quotation of the Common Stock on the National Association of Securities
Dealers, Inc. Automated Quotation ("Nasdaq") National Market no stockholder
approval would be required for the issuance of these shares. The issuance of
Common or Preferred Stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the market price of,
and the voting and other rights of, the holders of Common Stock. Except for this
Offering, the Recapitalization and shares reserved for issuance pursuant to the
Company's employee stock benefit plans, the Company has no current plans to
issue any shares of Common or Preferred Stock.
MARYLAND ANTI-TAKEOVER LAW AND CERTAIN PROVISIONS OF THE ARTICLES OF
INCORPORATION
General. The following discussion is a general summary of certain
provisions of the Maryland General Corporation Law and the Articles of the
Company, which may be deemed to have an anti-takeover effect. The following
description of certain of the provisions of the MGCL and the Articles of the
Company is necessarily general and reference should be made in each case to the
Articles which are set forth as an exhibit to the Company's Registration
Statement filed with the Commission and the applicable provisions of the MGCL.
See "Available Information." Capitalized terms not otherwise defined shall have
the meanings set forth in the Articles.
Maryland General Corporation Law. The MGCL maintains certain provisions
that may have the effect of delaying, deterring or preventing a change of
control of the Company. Section 3-701 and following sections state that control
shares (defined as shares of stock of a corporation owned by a person or as to
which such person is entitled to vote within the ranges of 20% to 33%, 33% or
more but less than 51%, or 51% or more of all voting power) acquired in a
control share acquisition (defined as the acquisition of, or power to vote, such
shares) have no voting rights except to the extent approved by stockholders at a
special meeting called for such purpose by the affirmative vote of two-thirds of
all the votes entitled to be cast on such matter, excluding all shares owned by
the person who acquired such control shares. The corporation that is the target
of a control share acquisition may, at its option, redeem any or all control
shares at their fair value, except for control shares for which voting rights
have been previously approved. In addition, if voting rights for control shares
are approved at a special meeting held in accordance with the statute and the
acquiring person is entitled to exercise or direct the exercise of a majority or
more of all voting power, all stockholders of the corporation (other than the
acquiring person) have the
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<PAGE> 76
right to object to such action and seek from the Company payment of fair value
for their shares, which amount may not be less than the highest price paid by
the acquiring person for his or her shares in the control share acquisition.
This statute may have the effect of discouraging persons from acquiring large
blocks of Company Common Stock. Article X.D. of the Company's Articles expressly
excludes the Blecker Interest, as defined therein, from the operation of these
provisions.
Section 3-603 of the MGCL also contains a provision which is substantially
similar to Article X of the Articles relating to business combinations with
related persons. The Company has elected not to be governed by this provision of
the MGCL.
Nominations and Stockholder Proposals. Article VII.D. of the Company's
Articles governs nominations for election to the Board of Directors, and
requires all nominations for election to the Board of Directors other than those
made by the Board to be made by a stockholder who has complied with the notice
provisions of such section. Article IX.C. of the Articles provides that only
such business as shall have been properly brought before an annual meeting of
stockholders shall be conducted at the annual meeting. Business may be brought
before the meeting by or at the direction of the Board of Directors or otherwise
must be properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the Company. In
both instances, written notice of a stockholder nomination or stockholder
proposal must be communicated to the attention of the Company's Secretary and
either delivered to, or mailed and received at, the principal executive offices
of the Company for the first annual meeting after the filing of the Articles,
before the close of business on the tenth day following the date on which notice
of such meeting is first given to stockholders, and thereafter, not less than 60
days prior to the anniversary date of the mailing of proxy materials by the
Company in connection with the immediately preceding annual meeting of
stockholders of the Company. Each such notice shall include specified matters
set forth in the Articles.
The procedures regarding stockholder nominations and stockholder proposals
will provide the Board of Directors with the information which will be necessary
to evaluate a stockholder nominee to the Board and stockholder proposals and
other relevant information, such as existing stockholder support for a nominee
or business proposal, as well as the time necessary to consider and evaluate
such information in advance of the applicable meeting.
Special Meetings of Stockholders. Article IX of the Company's Articles
provides that special meetings of the Company's stockholders, for any purpose or
purposes, may only be called by the Chairman of the Board, the President or a
majority of the whole Board of Directors and a majority of the Continuing
Directors (generally, those directors at the time of effectiveness of the
Articles and those directors who are not affiliated with the Related Person and
who are elected as directors prior to the time the Related Person (as defined
below) became such, or those directors who are unaffiliated with a Related
Person and who are designated as Continuing Directors before their initial
election by a majority of the other Continuing Directors), or by holders of not
less than majority of all votes entitled to be cast on any issue proposed to be
considered at such special meeting. A "Related Person" is defined generally to
include any person, partnership, corporation, group or other entity (other than
Mr. Blecker, Mrs. Blecker or any of Mr. Blecker's relatives, or the Company) who
is the beneficial owner of 10% or more of the shares of the Company entitled to
vote
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<PAGE> 77
generally in an election of directors ("Voting Shares"). This provision will
make it more difficult for stockholders to take action opposed by the Board of
Directors.
Business Combinations. Article X of the Articles governs any proposed
"Business Combination" (defined generally to include certain sales, purchases,
exchanges, leases, transfers, dispositions or acquisitions of assets, mergers or
consolidations, or certain reclassifications of securities of the Company)
between the Company, on the one hand, and a Related Person, on the other hand.
In general, Article X provides that if certain specified conditions are
not met, then the Company may not become a party to any Business Combination
without the prior affirmative vote at a meeting of the Company's stockholders by
the holders of at least 80% of the Voting Shares, voting separately as a class,
and by an Independent Majority of Stockholders (generally, the holders of a
majority of the outstanding Voting Shares that are not beneficially owned,
directly or indirectly, by a Related Person or any affiliate or associate
thereof). If such approval were obtained, the specified conditions would not
have to be met. Such conditions also would not have to be met if the Board of
Directors approved the Business Combination.
Article X is intended to provide minimum safeguards for stockholders who
do not accept a takeover attempt and continue to hold their shares after the
attempt succeeds and the control of the Company is required by a Related Person.
However, Article X would not restrict another company that merely desired
to exercise control over the Company and did not intend to effect a subsequent
Business Combination. Moreover, these provisions may not apply to an attempted
combination with a person not a Related Person, including Mr. Blecker, Mrs.
Blecker or any "Blecker Interest" (generally, descendants of Mr. Blecker or any
person holding Voting Shares for the benefit of Mr. Blecker, Mrs. Blecker or the
descendants of Mr. Blecker). If, however, another company obtaining control over
the Company were not willing to meet the price and other conditions of Articles
X, the holders of more than one-fifth of the outstanding Voting Shares could
block a Business Combination supported by the remaining stockholders. The result
is that Business Combinations favored by a majority of stockholders might not be
approved. Article X might also discourage a tender offer for the Company's stock
because of the resulting need either to observe the minimum price requirements
or to obtain an 80% stockholder vote as a precondition to any subsequent
Business Combination. This might have the effect of preventing temporary
fluctuations in the market price of the stock of the Company that could result
from actual or rumored takeover attempts.
Amendment of Articles. Article XI of the Company's Articles provides that
any amendment of the Articles must be first approved by a majority of the Board
of Directors and thereafter by the holders of two-thirds of the shares of the
Company entitled to vote in an election of directors, but the approval of 75% of
the shares of the Company entitled to vote in an election of directors is
required for any amendment to Articles VI (pre-emptive rights), VII (directors),
VIII (indemnification), IX (relating to meetings of stockholders), and XI
(amendments to the Articles and Bylaws). In addition, Article X.E. of the
Company's Articles provides that Article X may not be changed, amended or
repealed without the affirmative vote of the holders of at least 80% of the
Voting Shares and by an Independent Majority of Stockholders. However, any
change, amendment or repeal to Article X of the Company's Articles approved by
two-thirds of the whole Board
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of Directors and a majority of the Continuing Directors is not subject to the
approval requirements of Article X.E.
Anti-Takeover Effects. The Board of Directors believes that the foregoing
provisions in the Articles are prudent and, together with applicable state law,
will reduce vulnerability to takeover attempts and certain other transactions
that are not negotiated with and approved by the Board of Directors of the
Company. The Board of Directors believes that these provisions are in the best
interests of the Company and its stockholders. In the Board of Directors'
judgment, the Board of Directors is in the best position to determine the true
value of the Company and to negotiate more effectively for what may be in the
best interests of its stockholders. Accordingly, the Board of Directors believes
that it is in the best interests of the Company and its current and future
stockholders to encourage potential acquirors to negotiate directly with the
Board of Directors and that these provisions will encourage such negotiations
and discourage hostile takeover attempts. It is also the Board of Directors'
view that these provisions should not discourage persons from proposing a merger
or other transaction at prices reflective of the true value of the Company and
where the transaction is in the best interests of all stockholders.
Despite the Board of Directors' belief as to the benefits to the Company's
stockholders of the foregoing provisions, these provisions also may have the
effect of discouraging a future takeover attempt in which stockholders might
receive a substantial premium for their shares over then current market prices.
As a result, stockholders who might desire to participate in such a transaction
may not have an opportunity to do so. The Board of Directors, however, has
concluded that the potential benefits of these provisions outweigh their
possible disadvantages. The Board of Directors of the Company is not currently
aware of any effort that might be made to acquire control of the Company.
Certain Benefit Plan Provisions. In addition to the above provisions, the
Company's Stock Option Plan provides that, in the event of a change in control
of the Company, any outstanding options would become immediately exercisable.
The Company's Recognition Plan also provides that in the event of any change in
control of the Company, all shares of Common Stock subject to a plan share award
shall be deemed earned as of the date of the Change of Control. Such provisions,
to the extent they increase the cost of any acquisition of control, could be
deemed to have an anti-takeover effect. See "Management - Stock Plans - 1998
Stock Option Plan" and "Recognition and Retention Plan and Trust."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Registrar and
Transfer Company, Cranford, New Jersey.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no market for the Common Stock of
the Company. Sales of substantial shares of Common Stock in the public market
following this Offering could adversely affect the market price of the Common
Stock prevailing from time to time.
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Upon completion of this Offering, the Company will have 5,500,000 shares
of Common Stock outstanding. Of these shares, all of the shares sold in this
Offering will be freely transferable without restriction or registration under
the Securities Act, except for any shares purchased by an existing "affiliate"
of the Company as that term is defined by the Securities Act (an "Affiliate"),
which shares will be subject to the resale limitations of Rule 144 adopted under
the Securities Act. On the date of this Prospectus, 3,000,000 "control shares"
as defined in Rule 144 will be outstanding. All of said shares will become
available for sale in reliance upon Rule 144 one year after the date of the
Recapitalization.
The Company and each of the Principal Stockholders have agreed not to
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or enter into any swap or similar agreement that
transfers, in whole or in part, the economic risk of ownership of the Common
Stock, for a period of 180 days after the date of this Prospectus, without the
prior written consent of Hoak Breedlove Wesneski & Co. Hoak Breedlove Wesneski &
Co. may, in its sole discretion and at any time without notice, release all or
any portion of the securities subject to the lock-up agreements.
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 securities for at least one year
(including the holding period of any prior owner except an affiliate of the
Company) 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 number of
shares of Common Stock then outstanding; 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 provisions 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 at any time during the 90
days preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least two years (including the holding period of any prior owner
except an Affiliate), is entitled to sell such shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144. Subject to the contractual restrictions described above, "144(k)
shares" may therefore be sold immediately upon the completion of this Offering.
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from the Company by its employees,
directors, officers, consultants or advisors prior to the date the issuer
becomes subject to the reporting requirements of the Exchange Act, pursuant to
written compensatory benefit plans or written contracts relating to the
compensation of such persons. In addition, the Commission has indicated that
Rule 701 will apply to typical stock options granted by an issuer before it
becomes subject to the reporting requirements of the Exchange Act, along with
the shares acquired upon exercise of such options (including exercises after the
date of this Prospectus). Securities issued in reliance on Rule 701 are
restricted securities and, subject to the contractual restrictions described
above, beginning 90 days after the date of this Prospectus, may be sold by
persons other
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than Affiliates subject only to the manner of sale provisions of Rule 144 and by
Affiliates under Rule 144 without compliance with its two-year minimum holding
period requirements.
The Company anticipates that prior to the date of this Prospectus, options
to purchase 437,400 shares of Common Stock will be outstanding. Shortly after
this Offering, the Company intends to file a registration statement on Form S-8
under the Securities Act covering shares of Common Stock reserved for issuance
under the Company's stock plans. See "Management - Executive Compensation -
Stock Plans." Shares of Common Stock issued upon exercise of options under the
Form S-8 will be available for sale in the public market, subject to Rule 144
volume limitations applicable to Affiliates and subject to the contractual
restrictions described above. The options to be granted will vest annually over
a five-year period.
UNDERWRITING
The Underwriters named below, represented by Hoak Breedlove Wesneski & Co.
(the "Representative"), have severally agreed, subject to the terms and
conditions contained in the underwriting agreement (the "Underwriting
Agreement"), by and between the Company and the Underwriters, to purchase from
the Company the number of shares of Common Stock indicated below opposite their
respective names, at the initial 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 the shares of Common Stock if they purchase any.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Hoak Breedlove Wesneski & Co.........................
---------
Total................................................ 2,500,000
=========
</TABLE>
The Representative has advised the Company that the Underwriters propose
initially to offer the shares of 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
Offering, the public offering price and other selling terms may be changed by
the Representative. 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 Company has 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 375,000 additional shares of Common Stock, to cover over-allotments, if any,
at the same price per share as the initial shares to be purchased by the
Underwriters. To the extent that the
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Underwriters exercise this option, the Underwriters will be committed, subject
to certain conditions, to purchase such additional shares in approximately 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.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or will contribute to payments the Underwriter may be required
to make in respect thereof.
The Principal Stockholders have agreed that, for a period of 180 days from
the date of this Prospectus, they will not offer, sell or otherwise dispose of
any shares of their Common Stock or options to acquire shares of Common Stock
without the prior written consent of Hoak Breedlove Wesneski & Co. The Company
has agreed not to sell any shares of Common Stock or any other securities
convertible into shares of Common Stock for a period of 180 days from the date
of this Prospectus without the prior written consent of Hoak Breedlove Wesneski
& Co., except that the Company may, without consent, grant stock options
pursuant to the Company's stock option plans or issue shares of Common Stock
upon exercise of outstanding stock options.
The Representative has informed the Company that the Underwriters do not
expect to make sales of Common Stock offered by this Prospectus to accounts over
which they exercise discretionary authority in excess of 5% of the shares of
Common Stock offered hereby.
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be
determined by negotiations between the Company and the Representative. Among
the factors to be considered in determining the initial public offering price
are prevailing market and economic conditions, revenues and earnings of the
Company, market valuations of other companies engaged in activities similar to
the Company, estimates of the business potential and prospects of the Company,
the present state of the Company's business operations, the Company's
management and other factors deemed relevant. The estimated initial public
offering price range set forth on the cover of this preliminary prospectus is
subject to change as a result of market conditions and other factors.
Certain persons participating in this Offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the Offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with the
Offering when shares of Common Stock sold by the syndicate member are purchased
in syndicate covering transactions. Such transactions may be effected on the
Nasdaq National Market, or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.
-77-
<PAGE> 82
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C. Locke
Purnell Rain Harrell (A Professional Corporation), Dallas, Texas, is acting as
counsel for the Underwriters in connection with certain legal matters relating
to the Offering.
EXPERTS
The Consolidated Balance Sheet of the Company as of April 30, 1997 and the
related Consolidated Statements of Operations, Changes in Stockholders' Equity
and Cash Flows for the years ended April 30, 1997 and 1996, included in this
Prospectus have been audited by Grant Thornton LLP, independent certified public
accountants, as stated in their report, which is included elsewhere herein, and
have been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company, which is not currently a reporting company, has filed with
the Securities and Exchange Commission (the "Commission") a Registration
Statement on Form SB-2 (the "Registration Statement") under the Securities Act
of 1933, as amended (the "Act"), with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and such Common Stock, reference is made
to the Registration Statement and the exhibits and schedules filed as a part
thereof. Statements contained in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete. In each
instance, reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, and each such statement is qualified in
all respects by such reference. Copies of the Registration Statement, including
exhibits and schedules thereto, and, if the Company becomes a reporting company
after the Offering, copies of its periodic reports and proxy materials, may be
inspected and copied at the Commission's Public Reference Section at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
In addition, the Commission maintains a site on the World Wide Web at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company. Copies may also be obtained at prescribed
rates by writing to the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. If the Company is listed on the National
Association of Securities Dealers Automated Quotation ("Nasdaq") National Market
after the Offering, such information may also be inspected at the offices of the
National Association of Securities Dealers, Inc. ("NASD"), 1735 K Street, N.W.,
Washington, D.C. 20006.
After the Offering, the Company intends to furnish its stockholders with
annual reports containing financial statements audited and reported upon by
independent accountants and quarterly reports containing unaudited summary
financial information for each of the first three quarters of each fiscal year.
-78-
<PAGE> 83
ICARUS INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants................................... F-2
Consolidated Balance Sheet as of April 30, 1997, and Unaudited
Consolidated Balance Sheet as of October 31, 1997........................ F-3
Consolidated Statements of Operations for the Years Ended April 30, 1996
and 1997 and Unaudited Consolidated Statements of Operations for the
Six Months Ended October 31, 1996 and 1997............................... F-4
Consolidated Statements of Stockholders' Equity for the Years
Ended April 30, 1996 and 1997, and Unaudited Consolidated Stockholders'
Equity for the Six Months Ended October 31, 1997......................... F-5
Consolidated Statements of Cash Flows for the Years Ended April 30, 1996
and 1997, and Unaudited Consolidated Statements of Cash Flows for
the Six Months Ended October 31, 1996 and 1997........................... F-6
Notes to Consolidated Financial Statements................................. F-7
F-1
<PAGE> 84
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
ICARUS International, Inc.
We have audited the accompanying consolidated balance sheet of ICARUS
International, Inc. (the Company) as of April 30, 1997, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years ended April 30, 1997 and 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the consolidated financial position of ICARUS International,
Inc., as of April 30, 1997, and the results of its operations and its cash flows
for the years ended April 30, 1997 and 1996, in conformity with generally
accepted accounting principles.
Vienna, Virginia
July 8, 1997
F-2
<PAGE> 85
ICARUS INTERNATIONAL, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
April 30, October 31,
1997 1997
---- ----
(unaudited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 1,716,371 $2,218,315
Accounts receivable, net 1,992,571 1,849,803
Prepaid expenses and other current assets 174,721 190,839
----------- ----------
Total Current Assets 3,883,663 4,258,957
Property and Equipment, net 401,899 475,440
Deferred Offering Costs 245,160 502,623
Other Noncurrent Assets 23,376 34,032
----------- ----------
Total Assets $ 4,554,098 $5,271,052
----------- ----------
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 178,677 $ 346,715
Accrued payroll and related costs 439,581 554,808
Other accrued liabilities 49,926 7,305
Current maturities under capital lease obligations 1,630 1,789
Income taxes payable 165,840 242,046
Deferred income taxes 284,417 155,824
Deferred revenue 1,667,453 1,872,316
----------- ----------
Total Current Liabilities 2,787,524 3,180,803
Deferred Revenue, less current portion 634,033 589,267
Capital Lease Obligations, less current portion 5,159 4,541
Commitments and Contingencies -- --
Stockholders' Equity
Preferred stock, $.01 par value;
5,000,000 shares authorized, 100 shares
issued and outstanding 1 1
Common stock, $.01 par value;
20,000,000 shares authorized, 3,000,000
shares issued and outstanding 30,000 30,000
Additional paid-in capital 10,357 10,357
Retained earnings 1,100,439 1,443,553
Cumulative translation adjustment (13,415) 12,530
----------- ----------
Total Stockholders' Equity 1,127,382 1,496,441
----------- ----------
Total Liabilities and Stockholders' Equity $ 4,554,098 $5,271,052
----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 86
ICARUS INTERNATIONAL, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended April 30, Six months ended October 31,
-------------------- ----------------------------
1996 1997 1996 1997
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Revenue
Software license revenue $ 3,811,905 $5,164,907 $2,471,547 $3,219,349
Maintenance fee and other revenue 1,866,088 2,174,124 1,090,131 1,041,170
----------- ---------- ---------- ----------
Total Revenue 5,677,993 7,339,031 3,561,678 4,260,519
Operating Expenses
Cost of software license revenue 561,968 870,796 418,675 606,545
Cost of maintenance fee and other revenue 537,436 520,304 247,665 286,430
Selling and marketing 2,171,699 2,472,670 1,185,410 1,429,180
Research and development 849,527 904,259 400,013 511,214
General and administrative 1,273,898 1,541,344 741,547 918,340
----------- ---------- ---------- ----------
Total Operating Expenses 5,394,528 6,309,373 2,993,310 3,751,709
----------- ---------- ---------- ----------
Income from Operations 283,465 1,029,658 568,368 508,810
----------- ---------- ---------- ----------
Interest Income, net 20,649 45,575 13,359 49,070
Other (Expense) Income (150) -- -- --
----------- ---------- ---------- ----------
Income Before Income Taxes 303,964 1,075,233 581,727 557,880
Provision for Income Taxes 111,024 418,804 229,728 214,766
----------- ---------- ---------- ----------
Net Income $ 192,940 $ 656,429 $ 351,999 $ 343,114
----------- ---------- ---------- ----------
Net Income Per Share $ 0.06 $ 0.22 $ 0.12 $ 0.11
----------- ---------- ---------- ----------
Weighted Average Shares Outstanding 3,000,000 3,000,000 3,000,000 3,000,000
----------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 87
ICARUS INTERNATIONAL, INC.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional Cumulative Total
Preferred Common Paid-in Retained Translation Stockholders'
Stock Stock Capital Earnings Adjustment Equity
----- ----- ------- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance as of April 30, 1995 $1 $30,000 $10,157 $ 251,070 $(10,688) $ 280,540
Issuance of Common Stock - -- 200 -- -- 200
Translation Adjustment - -- -- -- (11,769) (11,769)
Net Income - -- -- 192,940 -- 192,940
-- ------- ------- ---------- -------- -----------
Balance as of April 30, 1996 1 30,000 10,357 444,010 (22,457) 461,911
Translation Adjustment - -- -- -- 9,042 9,042
Net Income - -- -- 656,429 -- 656,429
-- ------- ------- ---------- -------- -----------
Balance as of April 30, 1997 1 30,000 10,357 1,100,439 (13,415) 1,127,382
Translation Adjustment (unaudited) - -- -- -- 25,945 25,945
Net Income (unaudited) - -- -- 343,114 -- 343,114
-- ------- ------- ---------- -------- -----------
Balance at October 31, 1997 (unaudited) $1 $30,000 $10,357 $1,443,553 $ 12,530 $ 1,496,441
-- ------- ------- ---------- -------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 88
ICARUS INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended April 30, Six months ended October 31,
-------------------- ----------------------------
1996 1997 1996 1997
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from Operating Activities
Net income $ 192,940 $ 656,429 $ 352,001 $ 343,114
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 174,372 182,362 88,182 86,855
Deferred income taxes 59,700 222,839 50,128 (127,789)
Changes in assets and liabilities
Accounts receivable (442,312) (360,404) 277,528 170,315
Prepaid expenses and other current assets (64,328) (365,315) (7,043) (240,965)
Accounts payable and accrued expenses 193,115 20,727 14,748 235,656
Income taxes payable (10,007) 131,241 181,379 102,365
Deferred revenue 415,515 723,866 (205,543) 78,879
--------- ----------- ----------- -----------
Net Cash Provided by Operating Activities 518,995 1,211,745 751,380 648,430
--------- ----------- ----------- -----------
Cash Flows from Investing Activities
Purchase of property and equipment (215,476) (249,635) (72,329) (157,871)
--------- ----------- ----------- -----------
Cash Flows from Financing Activities
Issuance of common stock 200 -- -- --
Capital lease payments (431) (1,681) (1,571) (815)
Repayment of notes payable -- (105,375) -- --
--------- ----------- ----------- -----------
Net Cash Used in Financing Activities (231) (107,056) (1,571) (815)
--------- ----------- ----------- -----------
Effect of Exchange Rate Changes on Cash (22,648) 49,626 (25,698) 12,200
--------- ----------- ----------- -----------
Net Increase in Cash and Cash Equivalents 280,640 904,680 651,782 501,944
Cash and Cash Equivalents, Beginning of Period 531,051 811,691 811,691 1,716,371
--------- ----------- ----------- -----------
Cash and Cash Equivalents, End of Period $ 811,691 $ 1,716,371 $ 1,463,473 $ 2,218,315
--------- ----------- ----------- -----------
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes $ 61,331 $ 63,522 $ 43,942 $ 287,362
--------- ----------- ----------- -----------
Cash paid for interest $ -- $ 4,922 $ -- $ --
--------- ----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 89
ICARUS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting principles applied in the
preparation of the consolidated financial statements follows:
FORMATION OF HOLDING COMPANY AND RECAPITALIZATION
ICARUS International, Inc., was formed December 2, 1997, to be a newly
created holding company for its two wholly owned subsidiaries, ICARUS
Corporation (a Maryland corporation) and ICARUS Services, Limited (a United
Kingdom private limited company). ICARUS International, Inc., and its
subsidiaries are collectively referred to herein as "the Company." In
conjunction with the filing of a registration statement relating to an
initial public offering (see Note K), and immediately prior to the effective
date of such offering, Icarus International, Inc., will issue an aggregate
of 2,999,000 shares of a total of 20,000,000 newly authorized shares of
common stock, and 100 shares of a total of 5,000,000 newly authorized
preferred stock, in exchange for all the outstanding shares of capital stock
of the subsidiaries (the Recapitalization).
The accompanying financial statements, including stockholders' equity and
per share amounts, give retroactive effect to the Recapitalization for all
periods presented.
NATURE OF OPERATIONS
The Company develops and markets project modeling software and services
internationally. The Company's principal products are used in the conceptual
design, estimating, scheduling, cost determination and cost tracking in the
construction of facilities in chemical processing, energy producing,
petrochemical, pharmaceutical, food, pulp and paper and related industries.
The Company's services include maintenance, application consulting services
on a contract basis and training courses.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
ICARUS International, Inc., and its wholly owned subsidiaries. Significant
intercompany accounts and transactions have been eliminated.
INTERIM REPORTING
The accompanying condensed financial information as of October 31, 1997, and
for the six months ended October 31, 1996, and 1997, including such
information included in the Notes to Consolidated Financial Statements and
disclosures regarding matters occurring after April 30, 1997, is unaudited.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, considered necessary for a fair presentation have
been included. Operating results for any interim period are not necessarily
indicative of the results for any other interim period or for an entire
year.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are stated at cost, which approximates market, and
consists of short-term, highly liquid investments with original maturities
of less than three months.
F-7
<PAGE> 90
ICARUS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements -- Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amounts of cash and cash equivalents, accounts receivable and
accounts payable at April 30, 1997, approximate fair value in accordance
with Statement of Financial Accounting Standards (SFAS) No. 107,
"Disclosures About Fair Value of Financial Instruments," due to the
relatively short period of time between origination of the instruments and
their expected realization.
DEPRECIATION AND AMORTIZATION
The Company provides for depreciation and amortization, computed using the
straight-line and declining-balance methods, by charges to operations in
amounts estimated to allocate the cost of the assets over their estimated
useful lives as follows:
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
Computer equipment 3-5 Years
Purchased software programs 3 Years
Furniture and fixtures 7 Years
Leasehold improvements Life of Lease
REVENUE RECOGNITION
The Company recognizes revenue from product licensing agreements in
accordance with the American Institute of Certified Public Accountants
Statement of Position No. 91-1, "Software Revenue Recognition" (SOP 91-1).
The Company typically licenses its products pursuant to single-year and
multi-year noncancelable agreements. Revenue from software license
agreements is recognized upon execution of a contract and shipment of the
software, provided that no significant vendor obligations remain and
collection is probable. For recurring one-year license fees, revenue is
recognized on the contract renewal date. For multi-year agreements, revenue
is recognized ratably over the multi-year period on each successive
anniversary date. Customer payment terms vary. Amounts collected in advance
of satisfying revenue recognition criteria are classified as current and
long-term deferred revenue in the accompanying balance sheets.
Maintenance fee revenue is recognized ratably over the support period, which
is generally one year. Such revenue includes amounts bundled with initial
license fee arrangement for which separate prices have been derived based
upon the Company's historical retail pricing for separate arrangements.
Consulting and training revenue is recognized as the related services are
performed.
Accounts receivable arising from sale of software license agreements,
maintenance, training and other services are due from customers 30 days from
the date invoiced. Provision for returns and uncollectible accounts has been
determined based upon the Company's past experience.
F-8
<PAGE> 91
ICARUS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements -- Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
COMPUTER SOFTWARE DEVELOPMENT COSTS
Development costs relating to new software products and enhancements to
existing software products are expensed as incurred until technological
feasibility has been established, after which additional costs would be
capitalized in accordance with SFAS No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased or Otherwise Marketed." Historically,
the Company has not incurred material software development costs following
the establishment of technological feasibility, and therefore no costs
have been capitalized as of October 31, 1997.
RESEARCH AND DEVELOPMENT COSTS
The Company expenses research and development costs as incurred, including
costs relating to strategic technology arrangements.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of the Company's foreign
affiliates are translated using the local currency as the functional
currency. Assets and liabilities of the affiliates are translated at the
exchange rate in effect at year-end. Income statement accounts are
translated at the average rate of exchange rates prevailing during the year.
Translation adjustments arising from the use of differing exchange rates
from period to period are included in the cumulative translation adjustment
account in stockholders' equity. Gains and losses resulting from foreign
currency transactions are included in operations and are not material for
any of the periods presented.
STOCK-BASED COMPENSATION COSTS
SFAS No. 123, "Accounting for Stock-Based Compensation," encourages but does
not require companies to record stock-based employee compensation plans at
their fair value. The Company has elected to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Accordingly, compensation cost for
employee stock options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant over the
exercise price an employee must pay to acquire the stock.
EARNINGS PER SHARE
Earnings per share are based on the weighted-average common shares
outstanding in each year including the effect of common stock equivalents
and all stock options issued within one year prior to, and in conjunction
with, the Company's initial public offering.
F-9
<PAGE> 92
ICARUS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements -- Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board recently issued three new
accounting standards that will affect the Company's financial reporting
methods. Under SFAS No. 128, the Company will be required to prospectively
change the method used to compute fully diluted earnings per share; however,
the impact is not expected to be material. Under SFAS No. 130, the Company
will be required to display an amount representing total comprehensive
income and its components in the financial statements. Reclassification of
financial statements for earlier periods provided for comparative purposes
is required. Under SFAS No. 131, the Company will be required to report
certain information about its operating segments in its interim and annual
financial statements, and certain information about its products and
services, the geographic areas where it operates and its major customers. In
the initial year of application, comparative information for earlier years
is to be restated. SFAS No. 128 is effective for the Company's fiscal year
1998, and SFAS Nos. 130 and 131 are effective for the Company's fiscal year
1999.
The American Institute of Certified Public Accountants released Statement of
Position 97-2 "Software Revenue Recognition" (SOP 97-2), which supersedes
SOP 91-1. The new SOP 97-2 will be effective for all transactions entered
into by the Company in fiscal year 1999. The new SOP 97-2 requires, among
other things, that revenue should be recognized when there is persuasive
evidence of an existing arrangement, delivery has occurred, the fees charged
are fixed or determinable and collectibility is probable. Additionally, SOP
97-2 provides further that for those arrangements which consist of multiple
elements such as upgrades, enhancements and post-contract support, the fees
charged must be allocated to each element of the arrangement based upon
vendor-specific objective evidence of fair value, which is limited to a
price charged when the element is sold separately or the price for the
element established by management being the relevant authority. The Company
currently recognizes revenue on license agreements when all the conditions
described above have been met, and revenue on multi-year license agreements
typically is not recognized until such time that payments from customers
becomes due (the anniversary date). Additionally, the Company historically
has allocated fees between elements of its arrangements based upon
established prices charged for those elements when sold separately. In
management's opinion, the impact of SOP 97-2 is not expected to be material.
USING ESTIMATES IN PREPARING FINANCIAL STATEMENTS
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenue and expenses during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the 1996 have been reclassified to conform to 1997
presentations.
F-10
<PAGE> 93
ICARUS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements -- Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
CONCENTRATION OF REVENUE IN THE CHEMICAL AND PETROLEUM REFINING INDUSTRIES
The Company derives a substantial majority of its revenue from software
licenses to companies in the chemical and petroleum refining industries,
which are highly cyclical. Accordingly, the Company's future success is
dependent upon the continued demand for computer-aided chemical engineering
software by companies in these industries. The Company believes that
economic downturns in the United States, Europe, Japan and Asia and pricing
pressures experienced by chemical and petroleum companies in connection with
cost containment measures have led to delays and reductions in certain
capital and operating expenditures by many of such companies worldwide. The
Company's revenue has in the past been, and may in the future be, subject to
substantial period-to-period fluctuations as a consequence of such industry
patterns, general domestic and foreign economic conditions and other factors
affecting spending in the chemical and petroleum refining industries. There
can be no assurance that such factors will not have a material, adverse
effect on the Company's business, operating results and financial condition.
NOTE B--ACCOUNTS RECEIVABLE
The following is a summary of accounts receivable:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
--------- -----------
1997 1997
---- ----
<S> <C> <C>
Trade receivables $ 2,109,745 $ 1,864,820
Other receivables 1,621 12,840
Less allowance for returns and
uncollectible accounts (118,795) (27,857)
----------- -----------
$ 1,992,571 $ 1,849,803
----------- -----------
</TABLE>
F-11
<PAGE> 94
ICARUS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements -- Continued
NOTE C--PROPERTY AND EQUIPMENT
The following is a summary of property and equipment:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
--------- -----------
1997 1997
---- ----
<S> <C> <C>
Furniture and fixtures $ 865,365 $ 946,528
Computer equipment 904,092 1,005,906
Leasehold improvements 35,874 36,448
----------- -----------
1,805,331 1,988,882
Accumulated depreciation (1,403,432) (1,513,442)
----------- -----------
Net property and equipment $ 401,899 $ 475,440
----------- -----------
</TABLE>
Depreciation expense on property and equipment for the years ended April 30,
1996 and 1997, was approximately $173,000 and $175,000, respectively.
Depreciation expense for the six months ended October 31, 1997, was
approximately $86,000.
NOTE D--ACCRUED PAYROLL AND RELATED COSTS
The following is a summary of accrued payroll and related costs:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
--------- -----------
1997 1997
---- ----
<S> <C> <C>
Accrued leave $399,522 $508,641
Other payroll-related costs 40,059 46,167
-------- --------
$439,581 $554,808
-------- --------
</TABLE>
The accrued leave liability represents cumulative vested but unused employee
leave. Effective May 1, 1996, the Company established a maximum accrual
limit of 160 hours for any single employee. Prior-year vested amounts
exceeding the limit remain vested and payable, but no further accrual will
result for any employee until the individual's leave balance falls below the
limit.
F-12
<PAGE> 95
ICARUS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements -- Continued
NOTE E--RELATED PARTY TRANSACTION
In 1992, the Company borrowed a total of $125,000 from a shareholder of the
Company under two promissory note agreements. The notes, which were repaid
during fiscal year 1997, were payable on demand and accrued interest at 6.5%
annually.
NOTE F--RETIREMENT PLAN
The Company has adopted a 401(k) profit-sharing plan covering all employees
at least 21 years of age who have been employed one year and have provided
at least 1,000 hours of service. Employees are eligible to enroll in the
plan on May 1 and November 1 of each year and may contribute up to 20% of
their compensation or the statutory limit. Annual contributions by the
employer are discretionary. Contribution expense for the years ended April
30, 1996 and 1997, was $34,406 and $14,898, respectively.
NOTE G--COMMITMENTS
OPERATING LEASES
As of April 30, 1997, the Company has various operating lease commitments
expiring through August 2002 for office space and rental equipment, as
follows:
<TABLE>
<CAPTION>
Year ending April 30,
---------------------
<S> <C>
1998 $ 452,000
1999 128,000
2000 126,000
2001 119,000
2002 119,000
Thereafter --
----------
$ 944,000
----------
</TABLE>
Rent expense was approximately $426,000 and $445,000 for the years ended
April 30, 1996 and 1997, respectively.
CAPITAL LEASE OBLIGATION
The Company has capitalized leases for certain office equipment. The lease
agreements are for periods of five years, with monthly lease payments of
approximately $175.
Minimum lease payments under the capital leases, together with the present
value of the net minimum lease payments as of April 30, 1997, are as
follows:
F-13
<PAGE> 96
ICARUS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements -- Continued
NOTE G--COMMITMENTS -- CONTINUED
<TABLE>
<CAPTION>
Year ending April 30,
---------------------
<S> <C>
1998 $ 2,080
1999 2,080
2000 2,080
2001 1,562
--------
Total minimum lease payments 7,802
Less amounts representing interest 1,013
--------
Present value of net minimum lease payments $ 6,789
--------
</TABLE>
STRATEGIC TECHNOLOGY ALLIANCES
The Company has entered into strategic technology alliances with various
organizations which provide for the integration of complementary
technologies to create new products and marketing capabilities. The terms of
the alliances vary, but generally provide for each participant's funding of
its own research and development and marketing costs and the ultimate
sharing of new product revenue and commissions. Expenses incurred by the
Company during the year ended April 30, 1997, and the six months ended
October 31, 1997, were $-0- and approximately $53,000, respectively. Revenue
and commissions totaling $3,670 have been earned by the Company through
October 31, 1997.
LITIGATION
In the normal course of business operations, the Company is periodically
involved in litigation. Management is of the opinion that the outcome of
such pending litigation would not have a material impact on the Company's
financial statements.
NOTE H--INCOME TAXES
The Company provides deferred income taxes for temporary differences between
assets and liabilities recognized for financial reporting purposes and
income tax purposes. The income tax effects of the temporary differences
result primarily from the use of accrual basis for financial reporting
purposes and cash basis methods for income tax filings, net operating loss
carryforwards and the use of different tax year-ends in the United Kingdom.
The tax effect of significant temporary differences that gave rise to
deferred income taxes as of April 30, 1997, is as follows:
F-14
<PAGE> 97
ICARUS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements -- Continued
NOTE H--INCOME TAXES -- CONTINUED
<TABLE>
<CAPTION>
DEFERRED TAX
LIABILITY
---------
<S> <C>
Deferred revenue $ 364,781
Net operating losses (64,800)
Other (15,564)
-----------
$ 284,417
-----------
</TABLE>
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30, OCTOBER 31,
-------------------- -----------
1996 1997 1997
---- ---- ----
<S> <C> <C> <C>
Current
Federal $ 29,564 $ 169,147 $ 247,000
State 9,526 37,589 54,000
Foreign 12,234 (10,771) 41,555
-------- --------- ---------
51,324 195,965 342,555
Deferred
Federal (47,000) (28,000) (55,000)
State (8,000) (5,000) (13,000)
Foreign 114,700 255,839 (59,789)
-------- --------- ---------
59,700 222,839 (127,789)
-------- --------- ---------
$ 111,024 $ 418,804 $ 214,766
-------- --------- ---------
</TABLE>
The provision for income taxes differs from the federal statutory rate
because of the following:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30, OCTOBER 31,
-------------------- -----------
1996 1997 1997
---- ---- ----
<S> <C> <C> <C>
Federal tax at statutory rate 34.0% 34.0% 34.0%
State income tax, net of federal
tax benefit 4.6 4.6 4.6
Other (2.1) .3 (.1)
---- ---- ----
Provision for income taxes 36.5% 38.9% 38.5%
---- ---- ----
</TABLE>
F-15
<PAGE> 98
ICARUS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements -- Continued
NOTE I -- REVENUE
The following is a summary of revenue:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30, OCTOBER 31,
-------------------- -----------
1996 1997 1997
---- ---- ----
<S> <C> <C> <C>
Software license revenue $ 3,880,190 $ 5,621,988 $ 3,258,864
Maintenance fees and other revenue 1,866,088 1,825,365 1,041,170
Less sales returns and allowances (68,285) (108,322) (39,515)
----------- ----------- -----------
$ 5,677,993 $ 7,339,031 $ 4,260,519
----------- ----------- -----------
</TABLE>
NOTE J--GEOGRAPHIC INFORMATION
The Company's operations are based worldwide through offices in the United
States, the United Kingdom and Japan.
Revenue and operating profit shown below are classified according to the
location of the office originating the invoicing. Revenue and operating
profit classified under the caption "United States" include licensing income
from non-U.S. sources.
<TABLE>
<CAPTION>
APRIL 30,
------------------------------ OCTOBER 31,
1996 1997 1997
---- ---- ----
<S> <C> <C> <C>
Revenue
United States $4,672,554 $ 5,795,198 $3,601,323
United Kingdom 833,131 1,267,119 508,689
Japan 172,308 276,714 150,507
---------- ----------- ----------
Total revenue $5,677,993 $ 7,339,031 $4,260,519
---------- ----------- ----------
Income from operations
United States $ 27,073 $ 558,360 $ 368,540
United Kingdom 226,851 584,228 117,852
Japan 29,541 (112,930) 22,418
---------- ----------- ----------
Total income from operations $ 283,465 $ 1,029,658 $ 508,810
---------- ----------- ----------
</TABLE>
F-16
<PAGE> 99
ICARUS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements -- Continued
NOTE J--GEOGRAPHIC SEGMENT INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
APRIL 30,
----------------------------- OCTOBER 31,
1996 1997 1997
---- ---- ----
<S> <C> <C> <C>
Identifiable assets
United States $2,258,740 $3,048,361 $3,350,724
United Kingdom 594,401 1,209,418 1,459,776
Japan 271,455 296,319 460,552
---------- ---------- ----------
$3,124,596 $4,554,098 $5,271,052
---------- ---------- ----------
</TABLE>
NOTE K--SUBSEQUENT EVENTS
REGISTRATION STATEMENT
The Company's Board of Directors has authorized the filing of a registration
statement relating to an initial public offering of common stock. Costs
relating to the initial public offering have been deferred and are reflected
as other noncurrent assets in the accompanying financial statements. Upon
successful completion of the offering, such costs will be reclassified as a
reduction of net proceeds and additional paid-in capital.
EMPLOYMENT AGREEMENTS
On January 22, 1998, the Company entered into five-year employment
agreements with its chief executive officer and executive vice president
whereby they shall be entitled to minimum base salaries as well as other
employment incentives including discretionary bonuses.
STOCK OPTION PLAN
On January 22, 1998, the Board of Directors and shareholders adopted the
1998 Stock Option Plan (the Plan). The Plan provides for the granting of
incentive stock options to employees of the Company to purchase shares of
the Company's common stock at a price equal to the fair market value of the
common stock at the date of grant. In addition to the granting of incentive
stock options, the Plan also provides for the granting of nonqualified
options to employees, non-employee directors, consultants and agents of the
Company at a price not less than 85% of the fair market value at the date of
grant. Reserved for issuance under the Plan will be 760,500 shares of common
stock, of which 437,400 options to purchase such shares of Common Stock will
be granted immediately prior to the commencement of the initial public
offering, at the offering price.
F-17
<PAGE> 100
ICARUS INTERNATIONAL, INC.
Notes to Consolidated Financial Statements -- Continued
NOTE K--SUBSEQUENT EVENTS -- CONTINUED
All options granted to employees, non-employee directors, consultants and
agents of the Company vest and become exercisable at a rate of 20% per year
on each annual anniversary of the date on which the option was granted. The
Plan expires in January 2008.
RECOGNITION AND RETENTION PLAN AND TRUST
On January 22, 1998, the Board of Directors adopted the Recognition and
Retention Plan and Trust (the Trust). Under the Trust, the Company may make
contributions in cash or shares of common stock to the Trust. All the
Trust's assets shall be invested primarily in the Company's common stock. A
total of 507,000 shares of common stock may be purchased from the Company or
its shareholders by the Trust for distribution. A committee appointed by the
Board of Directors may grant Plan shares to employee and non-employee
directors of the Company.
Plan share awards shall be earned by a recipient at the rate of 20% of the
aggregate number of shares covered by the award as of each anniversary of
the date of grant. All Plan shares, together with any shares representing
stock dividends, shall be distributed in the form of common stock. One share
of common stock shall be given for each Plan share earned and distributable.
Payments representing cash dividends shall be made in cash. The Trust
expires in January 2008, however, the Trust may be terminated earlier if all
benefits have been fully distributed or at the discretion of the Board of
Directors.
NEW OFFICE LEASE
In January 1998, the Company signed a ten year lease agreement for its
new corporate headquarters. The lease will commence on April 1, 1998 and
expires in March 2008. Base rent on the lease is approximately $571,000
and is subject to annual escalations.
F-18
<PAGE> 101
[Inside Back Cover]
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 102
NO 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 OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR BY THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCE
IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary......................................................... 1
Risk Factors............................................................... 6
Use of Proceeds............................................................ 17
Dividend Policy............................................................ 18
Capitalization............................................................. 19
Dilution................................................................... 20
Selected Consolidated Financial Data....................................... 22
Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 23
Business................................................................... 34
Management................................................................. 56
Certain Transactions....................................................... 67
Principal Stockholders..................................................... 69
Description of Capital Stock............................................... 70
Shares Eligible for Future Sale............................................ 74
Underwriting............................................................... 76
Legal Matters.............................................................. 78
Experts.................................................................... 78
Available Information...................................................... 78
Index to Financial Statements.............................................. F-1
UNTIL ___________, 1998 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT 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.
2,500,000 SHARES
COMMON STOCK
[LOGO]
ICARUS INTERNATIONAL,
INC.
PROSPECTUS
HOAK BREEDLOVE
WESNESKI & CO.
____________________, 1998
<PAGE> 103
PART II
INFORMATION NOT REQUIRED
IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
ICARUS International, Inc. (the "Company") is a Maryland corporation. Section
2- 405.1(c) of the Maryland General Corporation Law (the "MGCL") states:
"(c) A person who performs his duties in accordance with the standard
provided in this section shall have the immunity from liability described
under Section 5-417 of the Courts and Judicial Proceedings Article."
Section 5-417 of the Maryland Courts and Judicial Proceedings Article states:
"A person who performs the duties of that person in accordance with the
standard provided under Section 2-405.1 of the Corporations and
Associations Article has no liability by reason of being or having been a
director of a corporation."
Section 2-418 of the MGCL states:
"(a) In this section the following words have the meaning indicated.
(1) "Director" means any person who is or was a director of a corporation
and any person who, while a director of a corporation, is or was serving at
the request of the corporation as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, other enterprise, or employee benefit plan.
(2) "Corporation" includes any domestic or foreign predecessor entity of a
corporation in a merger, consolidation, or other transaction in which the
predecessor's existence ceased upon consummation of the transaction.
(3) "Expenses" include attorney's fees.
(4) "Official capacity" means the following:
(i) When used with respect to a director, the office of director in the
corporation; and
(ii) When used with respect to a person other than a director as
contemplated in subsection (j), the elective or appointive office in the
corporation held by the
II-1
<PAGE> 104
officer, or the employment or agency relationship undertaken by the
employee or agent in behalf of the corporation.
(iii) "Official capacity" does not include service for any other
foreign or domestic corporation or any partnership, joint venture, trust,
other enterprise, or employee benefit plan.
(5) "Party" includes a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
(6) "Proceeding" means any threatened, pending or completed action, suit
or proceeding, whether the civil, criminal, administrative, or investigative.
(b)(1) A corporation may indemnify any director made a party to any
proceeding by reason of service in that capacity unless it is established
that:
(i) The act or omission of the director was material to the matter
giving rise to the proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and deliberate dishonesty; or
(ii) The director actually received an improper personal benefit in
money, property, or services; or
(iii) In the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful.
(2)(i) Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding.
(ii) However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made in respect of any proceeding
in which the director shall have been adjudged to be liable to the
corporation.
(3)(i) The termination of any proceeding by judgment, order, or
settlement does not create a presumption that the director did not meet
the requisite standard of conduct set forth in this subsection.
(ii) The termination of any proceeding by conviction, or a plea of
nolo contendere or its equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption that the director did
not meet that standard of conduct.
II-2
<PAGE> 105
(c) A director may not be indemnified under subsection (B) of this section
in respect of any proceeding charging improper personal benefit to the
director, whether or not involving action in the director's official
capacity, in which the director was adjudged to be liable on the basis
that person benefit was improperly received.
(d) Unless limited by the charter:
(1) A director who has been successful, on the merits or otherwise, in the
defense of any proceeding referred to in subsection (B) of this section shall
be indemnified against reasonable expenses incurred by the director in
connection with the proceeding.
(2) A court of appropriate jurisdiction upon application of a director and
such notice as the court shall require, may order indemnification in the
following circumstances:
(i) If it determines a director is entitled to reimbursement under
paragraph (1) of this subsection, the court shall order indemnification,
in which case the director shall be entitled to recover the expenses of
securing such reimbursement; or
(ii) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances,
whether or not the director has met the standards of conduct set forth in
subsection (b) of this section or has been adjudged liable under the
circumstances described in subsection (c) of this section, the court may
order such indemnification as the court shall deem proper. However,
indemnification with respect to any proceeding by or in the right of the
corporation or in which liability shall have been adjudged in the
circumstances described in subsection(c) shall be limited to expenses.
(3) A court of appropriate jurisdiction may be the same court in which the
proceeding involving the director's liability took place.
(e)(1) Indemnification under subsection (b) of this section may not be
made by the corporation unless authorized for a specific proceeding after a
determination has been made that indemnification of the director is
permissible in the circumstances because the director has met the standard of
conduct set forth in subsection (b) of this section.
(2) Such determination shall be made:
(i) By the board of directors by a majority vote of a quorum
consisting of directors not, at the time, parties to the proceeding, or,
if such a quorum cannot be obtained, then by a majority vote of a
committee of the board consisting solely of two or more directors not, at
the time, parties to such proceeding and who were duly designated to act
in the matter by a majority vote of the full board in which the designated
directors who are parties may participate;
(ii) By special legal counsel selected by the board of directors or a
committee of the board by vote as set forth in subparagraph (i) of this
paragraph, or, if the
II-3
<PAGE> 106
requisite quorum of the full board cannot be obtained therefor and the
committee cannot be established, by a majority vote of the full board in
which director who are parties may participate; or
(iii) By the stockholders.
(3) Authorization of indemnification and determination as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible. However, if the
determination that indemnification is permissible is made by special legal
counsel, authorization of indemnification and determination as to
reasonableness of expenses shall be made in the manner specified in
subparagraph (ii) of paragraph (2) of this subsection for selection of such
counsel.
(4) Shares held by directors who are parties to the proceeding may not be
voted on the subject matter under this subsection.
(f)(1) Reasonable expenses incurred by a director who is a party to a
proceeding may be paid or reimbursed by the corporation in advance of the
final disposition of the proceeding upon receipt by the corporation of:
(i) A written affirmation by the director of the director's good
faith belief that the standard of conduct necessary for indemnification by
the corporation as authorized in this section has been met; and
(ii) A written undertaking by or on behalf of the director to repay
the amount if it shall ultimately be determined that the standard of
conduct has not been met.
(2) The undertaking required by subparagraph (ii) of paragraph (1) of this
subsection shall be an unlimited general obligation of the director but need
not be secured and may be accepted without reference to financial ability to
make the repayment.
(3) Payments under this subsection shall be made as provided by the
charter, bylaws, or contract or as specified in subsection (e) of this
section.
(g) The indemnification and advancement of expenses provided or authorized
by this section may not be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director may be entitled under the
charter, the bylaws, a resolution of stockholders or directors, an agreement
or otherwise, both as to action in an official capacity and as to action in
another capacity while holding such office.
(h) This section does not limit the corporation's power to pay or
reimburse expenses incurred by a director in connection with an appearance as
a witness in a proceeding at a time when the director has not been made a
named defendant or respondent in the proceeding.
(i) For purposes of this section:
II-4
<PAGE> 107
(1) The corporation shall be deemed to have requested a director to serve
an employee benefit plan where the performance of the director's duties to
the corporation also imposes duties on, or otherwise involves services by,
the director to the plan or participants or beneficiaries of the plan;
(2) Excises taxes assessed on a director with respect to an employee
benefit plan pursuant to applicable law shall be deemed fines; and
(3) Action taken or omitted by the director with respect to an employee
benefit plan in the performance of the director's duties for a purpose
reasonably believed by the director to be in the interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose which is
not opposed to the best interests of the corporation.
(j) Unless limited by the charter:
(1) An officer of the corporation shall be indemnified as and to the
extent provided in subsection (d) of this section for a director and shall be
entitled, to the same extent as a director, to seek indemnification pursuant
to the provisions of subsection (d);
(2) A corporation may indemnify and advance expenses to an officer,
employee, or agent of the corporation to the same extent that it may
indemnify directors under this section; and
(3) A corporation, in addition, may indemnify and advance expenses to an
officer, employee, or agent who is not a director to such further extent,
consistent with law, as may be provided by its charter, bylaws, general or
specific action of its board of directors or contract.
(k)(1) A corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the
corporation, or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, other enterprise, or
employee benefit plan against any liability asserted against and incurred by
such person in any such capacity or arising out of such person's position,
whether or not the corporation would have the power to indemnify against
liability under the provisions of this section.
(2) A corporation may provide similar protection, including a trust fund,
letter of credit, or surety bond, not inconsistent with this section.
(3) The insurance or similar protection may be provided by a subsidiary or
an affiliate of the corporation.
(l) Any indemnification of, or advance of expenses to, a director in
accordance with this section, if arising out of a proceeding by or in the
right of the corporation, shall be
II-5
<PAGE> 108
reported in writing to the stockholders with the notice of the next
stockholders' meeting or prior to the meeting."
The Articles of Incorporation ("Articles") of the Company also limit the
liability of, and provide indemnification to, directors and officers of the
Company. Article VIII of the Company's Articles states:
"A. Limitation of Liability. No director who has performed his or her duties
in accordance with the standard set forth in Section 2-405.1 of the MGCL (or any
successor provision thereto) shall be personally liable to the Corporation or
its stockholders for monetary damages for any act or omission by such director
as a director; provided that a director's liability shall not be limited or
eliminated to the extent that: (i) it is proved that the director actually
received an improper benefit or profit in money, property or services for the
amount of the benefit or profit in money, property or services actually
received; or (ii) a judgment or other final adjudication adverse to the director
is entered in a proceeding based on a finding in the proceeding that the
director's action, or failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding. No amendment to or repeal of this Article VIII.A. shall apply to or
have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
B. Indemnification. The Corporation shall indemnify any person who was or is
a party or is threatened to be a made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, limited liability company, partnership, joint venture,
trust or other enterprise or employee benefit plan, against liability and
expenses (including court costs and attorney's fees), judgments, fines, excise
taxes and amounts paid in satisfaction, settlement or compromise actually and
reasonably incurred by such person in connection with such action, suit or
proceeding to the full extent authorized by Section 2-418 of the MGCL or any
successor provision thereto.
C. Advancement of Expenses. Reasonable expenses incurred by a director,
officer, employee or agent of the Corporation in defending a civil or criminal
action, suit or proceeding described in Article VIII.B. shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors only upon receipt of written
affirmation by or on behalf of such person of his good faith belief that he has
met the standard of conduct necessary for indemnification under relevant law and
a written undertaking to repay such amount if it shall ultimately be determined
that the person has not met that standard.
D. Other Rights and Remedies. The indemnification provided by this Article
VIII shall not be deemed to exclude any other rights to which those seeking
indemnification or advancement of expenses may be entitled under the
Corporation's Articles of Incorporation,
II-6
<PAGE> 109
any insurance or other agreement, trust fund, letter of credit, surety bond,
vote of stockholders or disinterested directors or otherwise, both as to actions
in their official capacity and as to actions in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person; provided that no indemnification
shall be made to or on behalf of an individual if a judgment or other final
adjudication establishes that his actions, or omissions to act, were material to
the cause of action as adjudicated and (i) were committed in bad faith; or (ii)
were the result of active and deliberate dishonesty; or (iii) the director
actually received an improper personal benefit in money, property or services;
or (iv) in the case of any criminal proceedings, the director had reasonable
cause to believe that the act or omission was unlawful; provided, however, that
a director who has been successful, on the merits or otherwise, in the defense
of proceedings referred to under clauses (i) through (iv) above, may still be
indemnified as to reasonable expenses actually incurred by such person in
connection with the proceeding as approved by a disinterested majority of the
Board of Directors.
E. Insurance. Upon resolution passed by the Board of Directors, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, limited liability company, partnership, joint venture,
trust or another enterprise or employee benefit plan, against any liability
asserted against him or incurred by him in any such capacity, or arising out of
his status, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article or the MGCL.
F. Modification. The duties of the Corporation to indemnify and to advance
expenses to a director, officer, employee or agent provided in this Article VIII
shall be in the nature of a contract between the Corporation and each such
director, officer, employee or agent and no amendment or repeal of any provision
of this Article VIII shall alter, to the detriment of such director, officer,
employee or agent, the right of such person to the advance of expenses or
indemnification related to a claim based on an act or failure to act which took
place prior to such amendment or repeal.
G. Proceedings Initiated by Indemnified Persons. Notwithstanding any other
provision of this Article VIII, the Corporation shall not indemnify a director,
officer, employee or agent for any liability incurred in an action, suit or
proceeding initiated by (which shall not be deemed to include counter-claims or
affirmative defenses) or participated in as an intervenor or amicus curiae by
the person seeking indemnification unless such initiation of or participation in
the action, suit or proceeding is authorized, either before or after its
commencement, by the affirmative vote of a disinterested majority of the
directors then in office or unless intervention is required by law in order to
protect the rights, claims or defenses of the director, officer, employee or
agent with respect to matters for which the Corporation shall otherwise be
required to provide indemnification hereunder."
Article X of the Company's Bylaws states:
"(a) A director of the Corporation shall not be personally liable for
monetary damages for action taken, or any failure to take action, as a director,
to the extent set forth in the
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<PAGE> 110
Corporation's Articles of Incorporation, which provisions are incorporated
herein with the same affect as if they were set forth herein.
(b) The Corporation shall indemnify any person who is a director, officer,
employee or agent of the Corporation to the extent set forth in the
Corporation's Articles of Incorporation, which provisions are incorporated
herein with the same affect as if they were set forth herein."
In addition, the Company intends to obtain a directors and officers liability
insurance policy relating to certain actions or omissions which may be taken, or
omitted to be taken, by the directors and officers of the Company, as well as a
policy which insures against errors and omissions in the offering documents
relating to the offer and sale of the Common Stock to the public.
II-8
<PAGE> 111
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the expenses to be incurred in connection
with the offering of the Common Stock described herein.
<TABLE>
<S> <C>
SEC filing fee ................................... $7,635
NASD filing fee .................................. 3,088
Legal fees and expenses........................... *
Accounting fees and expenses...................... *
Printing and delivery expenses.................... *
Blue Sky legal fees and expense................... 10,000
Registrar and transfer agent
fees and expenses.............................. 4,750
Nasdaq Market listing fees and expenses........... 17,500
CUSIP fees and expenses........................... 100
Miscellaneous expenses............................ *
-----
Estimated Total............. $
=====
</TABLE>
- ----------------
* To be filed by amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On January 22, 1998, in connection with the Company's formation, ICARUS sold
1,000 shares of Common Stock to Herbert G. Blecker and Eunice E. Blecker (the
"Bleckers") for a total of $1,000. The shares were issued by the Company in a
transaction not involving a public offering pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act").
Immediately prior to the Offering, pursuant to the Agreement and Plan of
Recapitalization by and among the Company and the Bleckers dated January 26,
1998, the Company will issue to the Bleckers an aggregate of 2,999,000 shares of
Common Stock and 100 shares of Series A Preferred Stock in exchange for all of
their shares of ICARUS Corporation and ISL. The issuance of such shares by the
Company will represent a transaction by the issuer not involving any public
offering pursuant to Section 4(2) of the Securities Act.
Other than the transactions described above the Company has sold no
unregistered securities within the past three years.
II-9
<PAGE> 112
ITEM 27. EXHIBITS.
The Exhibits attached hereto are as follows:
1.1 Underwriting Agreement.*
2.1 Agreement and Plan of Recapitalization by and among Mr. Herbert G.
Blecker, Mrs. Eunice Blecker, ICARUS Corporation, ICARUS Service
Limited and the Company, dated January 26, 1998;
3.1 Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
4.1 Form of Stock Certificate of the Company.
5.1 Opinion of Elias, Matz, Tiernan & Herrick L.L.P.*
10.1 Technology Licensing and Marketing Agreement by and between ICARUS
Corporation and Richardson Engineering Services, Inc., dated May
1, 1997.**
10.2 Joint Development Agreement between ICARUS Development and Marketing
Corporation and Hyprotech, Ltd., dated July 24, 1997.**
10.3 Marketing and Development Agreement between ICARUS Corporation and
SRIC Consulting, dated August 4, 1997.**
10.4 Software Distribution and License Agreement between ICARUS
Corporation and Primavera Systems, Inc. dated January 17, 1995.**
10.5 Lease for One Central Plaza, 11300 Rockville Pike, Rockville,
Maryland by and between One Central Plaza Limited Partnership and
the Company, dated October 15, 1976, as amended.*
II-10
<PAGE> 113
10.6 Lease for 600 Jefferson Plaza, Rockville, Maryland, by and between
Allstate Life Insurance Company and the Company, dated December 31,
1997.
10.7 Lease for 16945 Northchase Drive, 14th Floor, Houston, Texas, by and
between Greenpoint Plaza Limited Partnership and the Company, dated
January 31, 1997.
10.8 Lease for Units 3 and 4, 4th floor, First Floor Storeroom and Car
Parking, The Graftons, Stamford New Road, Altrincham, Greater
Manchester, by and between Wayborn Leasing Limited and the Company,
dated April 19, 1993.
10.9 Lease for 5F Sakae Bldg., 2-10-3 Minami-Ikebukuro, Toshima-Ku, Tokyo
171 Japan, by and between Saburo Ikeda and the Company, dated January
20, 1996.
10.10 Employment Agreement between Mr. Herbert G. Blecker and the Company,
dated January 22, 1998.
10.11 Employment Agreement between Mr. William F. Geritz III and the
Company, dated January 22, 1998.
10.12 ICARUS International, Inc. 1998 Stock Option Plan.
10.13 ICARUS International, Inc. Recognition and Retention Plan and Trust.
21.1 List of Subsidiaries of the Company.
23.1 Consent of Elias, Matz, Tiernan & Herrick L.L.P.
23.2 Consent of Grant Thornton LLP.
24.1 Power of Attorney is contained in the signature page to this
Registration Statement.
27.1 Financial data schedule.
- --------
* To be filed by amendment.
** Certain portions of this Exhibit have been omitted from this Registration
Statement and filed separately with the Commission accompanied by a request for
confidential treatment pursuant to Rule 406 under the Securities Act.
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby provides the following undertakings:
(a) The Registrant will provide to the Underwriter at the closing specified
in the Underwriting Agreement certificates in such denominations and registered
in such names as required by the Underwriter to permit prompt delivery to each
purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
II-11
<PAGE> 114
(c) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1), or (4), or 497(h) under
the Securities Act as part of this Registration Statement as of the time the
Commission declared it effective.
(d) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-12
<PAGE> 115
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Rockville, State of Maryland on February 10, 1998.
ICARUS INTERNATIONAL, INC.
By: /s/ Herbert G. Blecker
-------------------------------
Herbert G. Blecker
Chairman of the Board, President
Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of the Registrant, do
hereby constitute and appoint Herbert G. Blecker and Eunice E. Blecker as our
true and lawful attorneys and agents, to do any and all things and act in our
names in the capacities indicated below and to execute any and all instruments
for us in our names in the capacities indicated below which said persons may
deem necessary or advisable to enable the Registrant to comply with the
Securities Act of 1933 and the rules promulgated thereunder in connection with
the offering of Common Stock of the Registrant described in this Registration
Statement, including specifically, but not limited to, power and authority to
sign for us or any of us in our names in the capacities indicated below the
Registration Statement and any and all amendments (including post-effective
amendments) thereto; and we hereby ratify and confirm all that said persons
shall do cause to be done by virtue hereof.
In accordance with 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 stated.
/s/ Herbert G. Blecker Dated: February 10, 1998
- -------------------------------------------
Herbert G. Blecker
Chairman of the Board, President
and Chief Executive Officer
(Principal executive officer)
II-13
<PAGE> 116
/s/ Mark S. Kingsley Dated: February 10, 1998
- -------------------------------------------
Mark S. Kingsley
Controller and Chief Financial Officer;
(Principal Accounting Officer and
Principal Financial Officer)
/s/ Eunice E. Blecker Dated: February 10, 1998
- -------------------------------------------
Eunice E. Blecker
Director, Secretary and Treasurer
/s/ James J. Byrne Dated: February 10, 1998
- -------------------------------------------
James J. Byrne
Director and Vice Chairman of the Board
/s/ William F. Geritz III Dated: February 10, 1998
- -------------------------------------------
William F. Geritz, III
Director and Executive Vice President
/s/ Gary M. Roush Dated: February 10, 1998
- -------------------------------------------
Gary M. Roush
Director
/s/ J. Edward Beck Dated: February 10, 1998
- -------------------------------------------
J. Edward Beck
Director
II-14
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF RECAPITALIZATION
THIS AGREEMENT AND PLAN OF RECAPITALIZATION, dated as of January 26,
1998 (the "Agreement"), is made by and among Mr. Herbert G. Blecker ("Mr.
Blecker"), Mrs. Eunice Blecker ("Mrs. Blecker"), ICARUS Corporation, a Maryland
corporation ("ICARUS MD"), ICARUS Services Limited, a private limited company
organized under the laws of the United Kingdom ("ICARUS UK")(ICARUS MD and
ICARUS UK are referred to collectively herein as the "Operating Companies"), and
ICARUS International, Inc., a Maryland corporation ("Hold Co"). All of the
aforesaid entities are collectively referred to herein as the "Parties," or
individually, as a "Party."
WITNESSETH:
WHEREAS, Mr. Blecker and Mrs. Blecker beneficially own ninety-seven
percent and three percent, respectively, of the issued and outstanding shares
of capital stock of each of ICARUS MD and Hold Co and Mr. Blecker is the sole
owner of all of the issued and outstanding shares of capital stock of ICARUS
UK; and
WHEREAS, the Boards of Directors of ICARUS MD and ICARUS UK have
determined that it is in the best interests of the Operating Companies and
their subsidiaries for the Operating Companies to be reorganized into a holding
company form of ownership in accordance with the terms and conditions of this
Agreement (the "Recapitalization"); and
WHEREAS, the capitalization of ICARUS MD consists of one class of
capital stock, $.01 par value per share (the "MD Stock"), the number of shares
of which are authorized to be issued is one million (1,000,000), of which one
hundred one thousand one hundred and three (101,103) shares are issued and
outstanding and owned beneficially and of record by Mr. Blecker and five
thousand six hundred and three (5,603) shares are issued and outstanding and
owned beneficially and of record by Mrs. Blecker;
WHEREAS, the capitalization of ICARUS UK consists of one class of
shares of L1 each (the "UK Stock"), the number of shares of which are
authorized to be issued is five thousand (5,000), of which two thousand eight
hundred and eighty-nine (2,889) shares are issued and outstanding and owned
beneficially and of record by Mr. Blecker and one (1) share is issued and
outstanding and owned beneficially and of record by Mrs. Blecker;
WHEREAS, the capitalization of Hold Co consists of common stock and
preferred stock; the number of shares of common stock, $.01 par value per share
("Hold Co Common Stock"), which are authorized to be issued is twenty million
(20,000,000), of which nine hundred and seventy (970) shares are issued and
outstanding and owned beneficially and of record by Mr. Blecker and thirty (30)
shares are issued and outstanding and owned beneficially and of record by Mrs.
Blecker; and the number of shares of preferred stock,
<PAGE> 2
Agreement and Plan of Recapitalization
Page 2
$.01 par value per share, which are authorized to be issued is five million
(5,000,000) in the aggregate, and one hundred (100) shares of the Series A
Preferred Stock (the "Hold Co Preferred Stock"), of which no shares are issued
and outstanding as of the date of this Agreement;
WHEREAS, the Recapitalization provided for herein is to be accomplished
through the transfers by Mr. Blecker and Mrs. Blecker of all of their capital
stock of ICARUS UK and ICARUS MD to Hold Co in exchange for a certain number of
shares of the common and preferred stock of Hold Co, subject to the consummation
of the initial public offering of the shares of Hold Co Common Stock; and
WHEREAS, the Recapitalization provided for herein is intended to
result in no recognition of gain or loss to the Operating Companies or to Mr.
and Mrs. Blecker upon the transfer of the capital stock of the Operating
Companies by Mr. and Mrs. Blecker to Hold Co, pursuant to Section 351(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code") and
pursuant to Section 135 of the Taxation of Chargeable Gains Act of 1992 (the
"UK Tax Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, and in accordance with the applicable provisions
of Maryland law and pursuant to the applicable provisions of the Code and the
UK Tax Code and the regulations promulgated thereunder, the Parties hereby
agree that upon the consummation of this Agreement, Mr. Blecker and Mrs.
Blecker will own individually ninety-seven percent and three percent,
respectively, of Hold Co, which corporation will wholly-own directly the
Operating Companies. The terms and conditions of the Recapitalization shall be
as follows:
ARTICLE I
THE RECAPITALIZATION
SECTION 1.1 RECAPITALIZATION PROCEDURE.
a. (i) On the day prior to the Closing Date of this
Agreement (as defined in Section 1.3, below), Mr. Blecker shall transfer,
deliver and convey to Hold Co all of the shares of the UK Stock owned by him,
properly endorsed for transfer, and Mrs. Blecker shall transfer, deliver and
convey to Hold Co all of the shares of the UK Stock owned by her, accompanied
by a stock transfer form duly completed and signed.
(ii) On the Closing Date of this Agreement, Mr.
Blecker shall transfer, deliver and convey to Hold Co all of the shares of the
MD Stock owned by him, properly endorsed for transfer, and Mrs. Blecker shall
transfer, deliver and convey to Hold Co all of
<PAGE> 3
Agreement and Plan of Recapitalization
Page 3
the shares of the MD Stock owned by her, accompanied by a stock transfer form
duly completed and signed.
b. In consideration of the receipt of all of the issued
and outstanding shares of the UK Stock and the MD Stock, Hold Co shall issue to:
(i) Mr. Blecker 2,909,030 duly authorized, validly issued, fully paid and
non-assessable shares of Hold Co Common Stock in consideration of the MD Stock
and ninety-seven (97) duly authorized, validly issued fully paid and
non-assessable shares of the Hold Co Preferred Stock in consideration of the UK
Stock; and (ii) Mrs. Blecker 89,970 duly authorized, validly issued, fully paid
and non-assessable shares of Hold Co Common Stock in consideration of the MD
Stock and three (3) duly authorized, validly issued, fully paid and
non-assessable shares of the Hold Co Preferred Stock in consideration of the UK
Stock.
c. Hold Co shall not issue a certificate for shares of
Hold Co Common Stock or Hold Co Preferred Stock, and neither Mr. Blecker nor
Mrs. Blecker shall be entitled to participate in any dividend or distribution
payable to holders of record of Hold Co Common Stock or Hold Co Preferred
Stock, unless and until Mr. and Mrs. Blecker (as the case may be) shall have
properly surrendered to Hold Co the certificates representing all of their
shares of the UK Stock and the MD Stock, properly endorsed.
d. If the certificates representing shares of the UK
Stock or the MD Stock owned by Mr. Blecker or Mrs. Blecker has been lost,
destroyed, stolen or is otherwise missing, he or she shall receive certificates
representing the shares of Hold Co Common Stock and Hold Co Preferred Stock to
which he or she is entitled in accordance with, and upon compliance with, the
conditions set forth in the respective Bylaws of ICARUS MD and ICARUS UK and
the law applicable thereto.
e. The parties hereto acknowledge and agree that Mr.
Blecker and Mrs. Blecker hereby waive all rights to dissent or seek the payment
of the fair value of their shares pursuant to Section 3-202 of the Maryland
General Corporation Law.
f. If, following the date of this Agreement, Hold Co
shall change the number of outstanding shares of Hold Co Common Stock or Hold
Co Preferred Stock as a result of a revaluation of Hold Co in the initial
public offering process, a dividend, stock split, a reclassification or other
subdivision or combination of outstanding shares or as a result of the issuance
of shares of Hold Co Common Stock or of Hold Co Preferred Stock, and if the
record date of such event occurs prior to the Closing Date, then unless waived
in writing by Mr. Blecker and by Mrs. Blecker, an appropriate and proportionate
adjustment shall be made to the number of shares of Hold Co Common Stock or
Hold Co Preferred Stock so as to appropriately and proportionately increase or
decrease the number of shares of Hold Co Common Stock or Preferred Stock to be
issued hereunder.
<PAGE> 4
Agreement and Plan of Recapitalization
Page 4
SECTION 1.2 RESULTS OF RECAPITALIZATION.
a. On the Closing Date, immediately subsequent to the
consummation of the Recapitalization procedure set forth in Section 1.1, above:
(a) Mr. Blecker shall own ninety seven percent (97%) of the issued and
outstanding Hold Co Common Stock and ninety seven (97%) of the issued and
outstanding Hold Co Preferred Stock; (b) Mrs. Blecker shall own three percent
(3%) of the issued and outstanding Hold Co Common Stock and three percent (3%)
of the issued and outstanding Hold Co Preferred Stock; and (c) Hold Co shall
own: (i) one hundred percent (100%) of the issued and outstanding shares of
ICARUS UK and shall be the direct parent corporation of ICARUS UK; and (ii) one
hundred percent (100%) of the issued and outstanding shares of ICARUS MD and
shall be the direct parent corporation of ICARUS MD.
b. The status of shares of Hold Co Common Stock
outstanding immediately prior to the Closing Date shall not be affected by the
Recapitalization.
c. The Articles of Incorporation and Bylaws of Hold Co
and the Operating Companies in effect on the Closing Date shall be the Articles
of Incorporation and Bylaws of Hold Co and the Operating Companies,
respectively, immediately after the Closing Date until amended pursuant to the
respective provisions thereof.
d. The Board of Directors and officers of Hold Co and
the Operating Companies immediately prior to the Closing Date shall be the
Board of Directors and Officers of Hold Co and the Operating Companies,
respectively, immediately thereafter until changed pursuant to the terms and
conditions of the Articles of Incorporation and Bylaws of the respective
corporations.
SECTION 1.3 CLOSING.
The closing ("Closing") of this Agreement shall take place at
the offices of ICARUS MD, or at such other place as Mr. Blecker shall designate,
on a date and at a time specified by Mr. Blecker ("Closing Date") after the
receipt of all required approvals, consents or authorizations and after
expiration of any and all required waiting periods and shall be conditioned
upon, and occur immediately prior to, the successful consummation of the initial
public offering of the Hold Co Common Stock. The transactions shall be deemed
to be effective as of the Closing Date. At the Closing, all of the parties
hereto shall take such actions (including the exchange of certain closing
documents and the issuance of certificates representing shares of Hold Co Common
Stock and Hold Co Preferred Stock) as may be required herein and as shall
otherwise be required by law to consummate the transactions contemplated hereby
and to make them effective.
<PAGE> 5
Agreement and Plan of Recapitalization
Page 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF
MR. BLECKER AND MRS. BLECKER
Mr. Blecker and Mrs. Blecker hereby represent and warrant to the other
Parties hereto that to the best of their knowledge and belief:
SECTION 2.1 ACCREDITED INVESTOR STATUS AND OWNERSHIP OF
SHARES.
Mr. Blecker and Mrs. Blecker are "accredited investors" as
defined by Regulation D promulgated under the Securities Act of 1933, as
amended and each of them owns and has an unqualified right to and shall
transfer to Hold Co at the Closing, good, valid and marketable title to the
shares of the UK Stock and the MD Stock, free and clear of all liens and other
encumbrances. Other than this Agreement, such shares of the UK Stock and the
MD Stock are not subject to any voting trust, agreement or understanding,
whether written or oral, including without limitation, any mortgage, indenture,
note, guarantee, lease, license, contract, deed of trust, purchase, sale or
other agreement, together with any amendments thereto (a "Contract"), including
any Contract restricting or otherwise relating to the voting or disposition of
such shares.
SECTION 2.2 SELLERS' AUTHORITY.
Each of Mr. Blecker and Mrs. Blecker has the requisite
individual power, capacity and authority under the laws of the State of
Maryland to approve, execute, deliver and perform this Agreement and the other
instruments and documents required or contemplated hereby.
SECTION 2.3 BINDING EFFECT: NO VIOLATION; CONSENTS.
This Agreement constitutes, and, when executed and delivered,
the other documents and instruments to be executed and delivered by each of Mr.
Blecker and Mrs. Blecker pursuant hereto will constitute, valid and binding
agreements of each of Mr. Blecker and Mrs. Blecker, enforceable in accordance
with their respective terms, and neither the execution and delivery of this
Agreement or the other documents and instruments to be executed and delivered
by each of Mr. Blecker and Mrs. Blecker pursuant hereto, nor the consummation
by each of Mr. Blecker and Mrs. Blecker of the transactions contemplated hereby
or thereby will violate any statute or law or any rule, regulation, order,
writ, injunction, judgment or decree of any court or governmental authority
applicable to such individual. No consent, approval, authorization or action
by, notice to or filing with any governmental authority or any other person is
required with respect to Mr. Blecker or
<PAGE> 6
Agreement and Plan of Recapitalization
Page 6
Mrs. Blecker in connection with the execution, delivery and performance of this
Agreement, and other documents and instruments to be executed and delivered by
such individuals pursuant hereto or the consummation by Mr. Blecker or Mrs.
Blecker of the transactions contemplated hereby or thereby.
SECTION 2.4 LITIGATION.
There are no claims, actions, suits, proceedings or
investigations pending or threatened by or against either of Mr. Blecker or
Mrs. Blecker with respect to the Operating Companies, the shares of capital
stock of the Operating Companies or the transactions contemplated hereby, at
law or in equity, before any federal, state, municipal or other governmental
department, commission, board, agency, instrumentality or authority or court,
tribunal, arbitrator or similar panel of any jurisdiction.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF
HOLD CO, ICARUS MD AND ICARUS UK
Hold Co, ICARUS MD and ICARUS UK hereby represent and warrant to the
other Parties as follows:
SECTION 3.1 DUE ORGANIZATION.
Each of Hold Co and Operating Companies is a corporation or
private limited company, as the case may be, validly existing, and in good
standing under the laws of the jurisdiction of its respective incorporation or
organization and has all requisite corporate or organizational power and
authority to carry on its business as now conducted and as proposed to be
conducted through the Closing and to execute, deliver and perform this
Agreement and the other instruments and documents to be executed and delivered
in connection herewith and to carry out the transactions contemplated hereby
and thereby.
SECTION 3.2 DUE AUTHORIZATION.
The execution, delivery, and performance of this Agreement and
the execution and delivery of the other instruments and documents required or
contemplated hereby and the consummation of the transactions contemplated
hereby by each of Hold Co and the Operating Companies have been, or will, prior
to the Closing Date, be duly and validly authorized by the Board of Directors
and all shareholders, or other applicable governing authority, of each of Hold
Co and the Operating Companies.
<PAGE> 7
Agreement and Plan of Recapitalization
Page 7
SECTION 3.3 BINDING EFFECT; NO VIOLATION; CONSENTS.
This Agreement constitutes, and, when executed and delivered,
the other documents and instruments to be executed and delivered by Hold Co and
each applicable Operating Companies pursuant hereto will constitute, valid and
binding agreements of each such company enforceable in accordance with their
respective terms, and neither the execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by each
applicable company pursuant hereto, nor the consummation by each such company
of the transactions contemplated hereby or thereby will (i) violate or conflict
with or result in any breach of any provision of its Articles or Certificate of
Incorporation or other comparable organizational or governing documents, or
Bylaws, or (ii) violate any statute or law or any rule, regulation, order,
writ, injunction, judgment or decree of any court or governmental authority,
excluding from the foregoing clause (ii) such violations which, in the
aggregate, could not reasonably be expected to have a material adverse effect
on the applicable company. No consent, approval, authorization or action by,
notice to, or filing with, any governmental authority or any other person is
required in connection with the execution, delivery and performance of this
Agreement, the other documents and instruments to be executed and delivered by
Hold Co and the Operating Companies pursuant hereto or the consummation by Hold
Co and the Operating Companies of the transactions contemplated hereby or
thereby, except (in the case of consents, approvals and notices required under
Contracts) where the failure to obtain such consents and approvals and give
such notices could not reasonably be expected to have a material adverse
effect.
SECTION 3.4 LITIGATION.
There are no claims, actions, suits, proceedings or
investigations pending or threatened by or against Hold Co or any of the
Operating Companies, at law or in equity, before any federal, state, municipal
or other governmental department, commission, board, agency, instrumentality or
authority or court, tribunal, arbitrator or similar panel of any jurisdiction
which could have the effect of delaying, hindering, preventing or prohibiting
the transactions contemplated hereby.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 APPROVALS.
Prior to the Closing Date, this Agreement shall be approved in
writing by the unanimous written consent of the stockholders of Hold Co, ICARUS
MD and ICARUS UK,
<PAGE> 8
Agreement and Plan of Recapitalization
Page 8
by all required governmental authorities and by any third-party whose approval,
authorization or consent is reasonably deemed to be necessary by the Parties.
SECTION 4.2 TAX OPINION.
Prior to the Closing Date, the Parties hereto shall have
received an opinion of Grant Thornton LLP substantially to the effect that:
(a)(i) for U.S. federal income tax purposes, consummation of the
Recapitalization will constitute a transfer of property to a corporation
controlled by the transferors in exchange for stock as set forth in Section 351
of the Code; (ii) that no taxable gain will be recognized by any Party to the
Recapitalization upon the consummation of this Agreement; (iii) that the basis
of the Hold Co Common Stock and the Hold Co Preferred Stock received by Mr.
Blecker and Mrs. Blecker will be the same as the basis in the UK Stock and MD
Stock surrendered by them therefore; (ii) that, if the Hold Co Common Stock and
Hold Co Preferred Stock is a capital asset in the hands of Mr. Blecker and Mrs.
Blecker at the effective time of the Recapitalization, then the holding period
of the Hold Co Common Stock and Hold Co Preferred Stock received by them in the
Recapitalization will include the holding period of the UK Stock and MD Stock
surrendered therefore; and, (b)(i) for UK income tax purposes, the transfer of
shares of UK Stock in exchange for Hold Co Preferred Stock will not constitute
a taxable disposal for UK tax purposes. In rendering such opinion, Grant
Thornton LLP may rely upon representations contained in certificates of the
Parties.
SECTION 4.3 TERMINATION.
This Agreement may be terminated by any of the Parties only if
the initial public offering of the Hold Co Common Stock does not occur by June
30, 1998, hereto by a notice in writing delivered to the other Parties without
obligation or liability to any other Party.
SECTION 4.4 EXPENSES.
The expenses associated with this Recapitalization shall be
paid by ICARUS MD for all of the Parties.
SECTION 4.5 AMENDMENT; WAIVER.
(a) This Agreement may be amended or modified at any time
and in any respect by the mutual written agreement of all of the Parties
hereto.
(b) Any of the terms or conditions of this Agreement
which may be legally waived may be waived in writing at any time by any Party
hereto which is, or the stockholders of which are, entitled to the benefit
thereof.
<PAGE> 9
Agreement and Plan of Recapitalization
Page 9
SECTION 4.6 FURTHER ASSURANCE.
Each of the Parties hereto agrees to furnish to the others
such further assurances with respect to the matters contemplated herein and
their respective agreements, covenants, representations and warranties
contained herein as such other Parties may reasonably request.
SECTION 4.7 HEADINGS AND CAPTIONS.
Headings and captions of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part hereof.
SECTION 4.8 SEVERABILITY OF PROVISIONS.
The invalidity or unenforceability of any term, phrase,
clause, paragraph, restriction, covenant, agreement or other provision hereof
shall in no way affect the validity or enforceability of any other provision or
part hereof.
SECTION 4.9 GOVERNING LAW.
This Agreement is made pursuant to, and shall be construed and
be governed by, the laws of the State of Maryland and of the United States, and
with respect to ICARUS UK, the laws of England.
SECTION 4.10 ALL TERMS INCLUDED.
This Agreement sets forth all terms, conditions, agreements
and understandings of the Parties with respect to the Recapitalization.
SECTION 4.11 COUNTERPARTS.
This Agreement may be executed in several identical
counterparts, each of which together shall constitute a single instrument. In
making proof of the Agreement, it shall not be necessary to produce or account
for more than one such counterpart.
SECTION 4.12 ASSIGNMENT.
The rights and obligations of the Parties hereto may not be
assigned without the prior written consent of the other Parties. This
Agreement shall be binding upon, and shall inure to the benefit of, the Parties
and their respective heirs, personal representatives, successors and permitted
assignees.
<PAGE> 10
Agreement and Plan of Recapitalization
Page 10
IN WITNESS WHEREOF, the Parties have executed, or have caused this
Agreement to be duly executed on their behalf by their officers thereunto duly
authorized, all as of the date first above written, intending to be legally
bound one to the other and that this Agreement be a contract under seal.
<TABLE>
<S> <C>
ICARUS INTERNATIONAL, INC.
Attest: /s/ By: /s/
---------------------------- ----------------------------------------------
Eunice E. Blecker Herbert G. Blecker
Secretary President
[CORPORATE SEAL]
ICARUS CORPORATION
Attest: /s/ By: /s/
---------------------------- ----------------------------------------------
Eunice E. Blecker Herbert G. Blecker
Secretary President
[CORPORATE SEAL]
ICARUS SERVICES LIMITED
Attest: /s/ By: /s/
---------------------------- ----------------------------------------------
Herbert G. Blecker
Chairman
[CORPORATE SEAL]
HERBERT G. BLECKER
Attest: /s/ By: /s/ (Seal)
---------------------------- ---------------------------------------
Herbert G. Blecker
EUNICE E. BLECKER
Attest: /s/ By: /s/ (Seal)
---------------------------- ---------------------------------------
Eunice E. Blecker
</TABLE>
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
ICARUS INTERNATIONAL, INC.
Pursuant to the Maryland General Corporation Law, the incorporator set
forth below does hereby file with the State Department of Assessments and
Taxation of the State of Maryland (the "Department") the following Articles of
Incorporation:
ARTICLE I
CORPORATE NAME
Name. The name of the corporation is ICARUS International, Inc.
(hereinafter referred to as the "Corporation").
ARTICLE II
DURATION
Duration. The period of duration of the existence of the Corporation is
perpetual.
ARTICLE III
PURPOSE; EFFECTIVE DATE
Purpose and Effective Date. The purpose of the Corporation is to engage
in the development, manufacture, licensing, distribution and sale within and
without the State of Maryland, at wholesale or at retail, computer software and
related hardware at such times and places and in such manner as may be permitted
under the applicable laws of the United States, the State of Maryland and the
several states; to engage in any other lawful activity or business for which a
corporation may be incorporated under the Maryland General Corporation Law (the
"MGCL"). The Corporation shall have all of the general powers of a corporation
as provided by the MGCL. These Articles of Incorporation shall become effective
upon the date that they are accepted by the Department for record.
ARTICLE IV
PRINCIPAL OFFICE; REGISTERED AGENT; INCORPORATORS
Principal Office and Registered Agent. The address of the principal
office of the Corporation in the State of Maryland is One Central Plaza, 11300
Rockville Pike, Rockville, Maryland 20852, until such time as the Board of
Directors shall direct the establishment of a different principal office in
compliance with the Corporation's Bylaws and applicable
<PAGE> 2
ICARUS International, Inc.
Articles of Incorporation
Page 2
Maryland law. The name of the registered agent at such address is Herbert G.
Blecker, who is a resident citizen of the State of Maryland.
Incorporator. The name of the incorporator is Herbert G. Blecker. Mr.
Blecker's address is c/o ICARUS International, Inc., One Central Plaza, 11300
Rockville Pike, Rockville, Maryland 20852. Mr. Blecker is older than eighteen
(18) years of age and is hereby forming a corporation under the general laws of
the State of Maryland.
ARTICLE V
CAPITAL STOCK
Capital Stock. The total number of shares of capital stock which the
Corporation has authority to issue is 25,000,000, of which 20,000,000 shall be
common stock, $0.01 par value per share (hereinafter the "Common Stock") and of
which 5,000,000 shall be preferred stock, $0.01 par value per share (hereinafter
the "Preferred Stock"). The aggregate par value of all the shares of all classes
of the capital stock which the Corporation has the authority to issue is
$250,000.00. The Board of Directors shall have the authority to establish series
of unissued shares of any class of capital stock by fixing and determining the
number, designations, preferences, limitations and relative rights, including
voting rights, of the shares of any series so established to the same extent
that such number, designations, preferences, limitations and relative rights
could be stated if fully set forth in these Articles of Incorporation. Except to
the extent required by governing law, the shares of capital stock may be issued
from time to time by resolution of the Board of Directors without further
approval of stockholders. The Corporation shall have the authority to purchase
its capital stock out of funds lawfully available therefor, which capital stock,
unless otherwise stated herein or in any resolution relating to the Preferred
Stock, shall constitute authorized but unissued shares and may then be issued by
the Corporation as set forth herein.
A description of the different classes and series (if any) of the
Corporation's capital stock and a statement of the designations, and the
relative rights, preferences and limitations of the shares of each class of and
series (if any) of capital stock are as follows:
A. Common Stock. Except as provided in this Article V (or in any
resolution or resolutions adopted by the Board of Directors pursuant hereto),
the exclusive voting power shall be vested in the Common Stock, the holders
thereof being entitled to one vote for each share of such Common Stock standing
in the holder's name on the books of the Corporation. Subject to any rights and
preferences of any class of stock having preference over the Common Stock,
holders of Common Stock shall be entitled to such dividends as may be declared
by the Board of Directors out of funds lawfully available therefor. Upon any
liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, holders of Common Stock shall be entitled to
receive pro rata the
<PAGE> 3
ICARUS International, Inc.
Articles of Incorporation
Page 3
remaining assets of the Corporation after the payment or provision for payment
of the Corporation's debts and liabilities and after the holders of any class of
stock having preference over the Common Stock have been paid in full any sums to
which they may be entitled.
B. Preferred Stock, Series A.
(a) Designation and Rank. The designation of the series of
preferred stock authorized by these Articles of Incorporation shall be Preferred
Stock, Series A (the "Series A Preferred Stock"). The Series A Preferred Stock
shall be perpetual unless redeemed at the option of the Corporation pursuant to
Article V.B.(c) hereof. The Series A Preferred Stock shall consist of one
hundred (100) shares, all of which shall be issuable solely in whole shares. The
Series A Preferred Stock shall be junior to all outstanding indebtedness of the
Corporation. The Series A Preferred Stock shall rank prior to the Corporation's
Common Stock, and to all other classes and series of equity securities of the
Corporation now or hereafter authorized, issued or outstanding (the Common Stock
and such other classes and series of equity securities collectively may be
referred to herein as the "Junior Stock"), other than any classes or series of
equity securities of the Corporation expressly designated as ranking on a parity
with (the "Parity Stock") or senior to (the "Senior Stock") the Series A
Preferred Stock as to, among other things, dividend rights and/or rights upon
liquidation, winding up or dissolution of the Corporation. The Series A
Preferred Stock shall be subject to creation of Senior Stock, Parity Stock and
Junior Stock to the extent not expressly prohibited by these Articles of
Incorporation or otherwise, and shall be initially issued upon terms determined
by the Board of Directors of the Corporation.
(b) Dividends. Holders of shares of Series A Preferred Stock
shall not be entitled to receive dividends in any form, including, but not
limited to, cash, Common Stock or other payment-in-kind.
(c) Redemption. The shares of the Series A Preferred Stock are
non-redeemable.
(d) Voting Rights. The Series A Preferred Stock shall have no
voting rights.
(e) No Sinking Fund. No sinking fund will be established for
the retirement or redemption of shares of Series A Preferred Stock.
(f) Registration Rights. The holders of the Series A Preferred
Stock have no right to request that the Series A Preferred Stock be registered
for sale under the Securities Act of 1933, as amended, or any state securities
act.
<PAGE> 4
ICARUS International, Inc.
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(g) Liquidation Preference.
(i) Amount and Type of Liquidation Preference.
In the event of any liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation, the holders of
shares of Series A Preferred Stock shall be entitled to receive, out of the
assets of the Corporation available for distribution to stockholders, an amount
in cash equal to $1,000.00 for each share outstanding (the "Liquidation
Preference"). If upon such voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Corporation, the net assets of the Corporation
shall be insufficient to permit payment in full of the amounts required to be
paid to the holders of the Series A Preferred Stock and to the holders of any
class of stock or series thereof ranking on a parity with the Series A Preferred
Stock in respect of the distribution of assets, then a pro rata portion of the
full amount required to be paid upon such dissolution, liquidation or winding up
shall be paid to (A) the holders of Series A Preferred Stock and (B) the holders
of any class of stock or series thereof ranking on a parity with the Series A
Preferred Stock in respect of the distribution of assets in proportion to the
respective preferential amounts to which they are entitled (but only to the
extent of such preferential amounts). Such pro rata portion shall be calculated
upon the ratio that the total amount available for distribution to such holders
bears to the total distribution required to be made on the Series A Preferred
Stock and such Parity Stock. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of the Series A Preferred
Stock will not be entitled to any further participation in any distribution of
assets of the Corporation.
(ii) No Dissolution. Neither a change in control,
merger nor consolidation of the Corporation into or with any other company, nor
the merger or consolidation of any other company into or with the Corporation,
nor a sale, transfer or lease of all or any part of the assets of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of this Article V.B.(g).
(iii) Notice of Liquidation. Written notice of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, stating a payment date and the place where the distributable
amounts shall be payable, shall be given as set forth in Article V.B.(i) hereof,
no less than thirty (30) days prior to the payment date stated therein, to the
holders of record of the Series A Preferred Stock at their respective addresses
as the same shall appear on the stock register of the Corporation.
(h) No Other Rights. The shares of Series A Preferred
Stock are not entitled to any preferences, powers or rights (including but not
limited to, preemptive rights to acquire any equity or debt securities of the
Corporation) except as set forth in these Articles of Incorporation. The Board
of Directors shall have the full authority to interpret and construe the terms
and conditions and rights, privileges and limitations set forth herein and
<PAGE> 5
ICARUS International, Inc.
Articles of Incorporation
Page 5
any such written interpretation or construction by the Board shall be final and
binding upon the holders of the Series A Preferred Stock.
(i) Notices. Any notice required by the provisions of this
Article V.B. to be given to the holders of shares of Series A Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his or her address appearing on the
books of the Corporation.
(j) Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.
C. Preferred Stock. The Board of Directors is hereby expressly
authorized to provide, by resolution or resolutions, out of the unissued shares
of Preferred Stock, for additional series of Preferred Stock. Before any shares
of any such series are issued, the Board of Directors shall fix, and hereby is
expressly empowered to fix, by resolution or resolutions, the following
provisions of the shares thereof:
(a) The designation of such series, the number of shares to
constitute such series and the stated value thereof;
(b) Whether the shares of such series shall have voting
rights, in addition to any voting rights provided by law, and, if so, the terms
of such voting rights, which may be general or limited;
(c) The dividends, if any, payable on such series, whether any
such dividends shall be cumulative, and, if so, from what dates, the conditions
and dates upon which such dividends shall be payable, the preference or relation
which such dividends shall bear to the dividends payable on any shares of stock
of any other class or any other series of this class;
(d) Whether the shares of such series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;
(e) The amount or amounts payable upon shares of such series
upon, and the rights of the holders of such series in, the voluntary or
involuntary liquidation, dissolution or winding up, or upon any distribution of
the assets, of the Corporation;
<PAGE> 6
ICARUS International, Inc.
Articles of Incorporation
Page 6
(f) Whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and manner
in which any such retirement or sinking fund shall be applied to the purchase or
redemption of the shares of such series for retirement or other corporate
purposes and the terms and provisions relative to the operation thereof;
(g) Whether the shares of such series shall be convertible
into, or exchangeable for, shares of stock of any other class or any other
series of this class or any other securities, and, if so, the price or prices or
the rate or rates of conversion or exchange and the method, if any, of adjusting
the same, and any other terms and conditions of conversion or exchange;
(h) The price or other consideration for which the shares of
such series shall be issued;
(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of Preferred
Stock and whether such shares may be reissued as shares of the same or any other
series of Preferred Stock;
(j) The limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the payment of dividends or
the making of other distributions on, and upon the purchase, redemption or other
acquisition by the Corporation of, the Common Stock or shares of stock of any
other class or any other series of this class;
(k) The conditions or restrictions, if any, upon the creation
of indebtedness of the Corporation or upon the issue of any additional stock,
including additional shares of such series or of any other series of this class
or of any other class; and
(l) Any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations and
restrictions thereof.
The powers, preferences and relative, participating, optional and other
special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series, except that shares of any one series issued at different times
may differ as to the dates from which dividends thereon shall accrue and/or be
cumulative.
Prior to the issuance of any shares of a series of capital stock
established by resolution adopted by the Board of Directors, if such issuance is
the first issuance of shares of such series since the resolution was adopted,
the Corporation shall file with the Department for record articles supplementary
as required by the MGCL. Upon the filing of such articles supplementary with the
Department, the resolution establishing and designating the series
<PAGE> 7
ICARUS International, Inc.
Articles of Incorporation
Page 7
and fixing and determining the preferences, limitations and relative rights
thereof shall become an amendment of these Articles of Incorporation.
ARTICLE VI
NO PREEMPTIVE RIGHTS
No Preemptive Rights. No holder of the capital stock of the Corporation
shall be entitled as such, as a matter of right or otherwise, to subscribe for
or purchase any part of any new or additional issue of equity or debt of any
class or series whatsoever, of the Corporation, or of securities convertible
into equity or debt of any class whatsoever, whether now or hereafter
authorized, or whether issued for cash or other consideration or by way of a
dividend.
ARTICLE VII
BOARD OF DIRECTORS
Directors. The business and affairs of the Corporation shall be managed
by or under the direction of a Board of Directors. The current number of
directors of the Corporation is three (3). The names of the current members of
the Board of Directors of the Corporation are: Herbert G. Blecker, Eunice E.
Blecker and William F. Geritz III. The business address of each member of the
Board of Directors of the Corporation is One Central Plaza, 11300 Rockville
Pike, Rockville, Maryland 20852.
Except as otherwise fixed pursuant to the provisions of Article V
hereof relating to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation to
elect additional directors, the number of directors shall be determined by
resolution of the majority of the entire Board of Directors as provided in the
Corporation's Bylaws, as may be amended from time to time, provided, however,
that the number of directors shall not be less than three nor greater than
twenty-one. Directors shall be elected by a plurality of the votes cast by the
holders of shares entitled to vote in the election of directors at a meeting of
stockholders at which a quorum is present.
A. Classification and Term. The Board of Directors, other than those
who may be elected by the holders of any class or series of stock having
preference over the Common Stock as to dividends or upon liquidation, shall be
divided into three classes as nearly equal in number as possible, with one class
to be elected annually, as set forth in the Bylaws of the Corporation. The terms
of the initial directors shall expire as of the day of the annual meeting of
stockholders in the calendar year specified provided their respective successor
shall be duly elected and qualified in accordance with the provisions of these
Articles of
<PAGE> 8
ICARUS International, Inc.
Articles of Incorporation
Page 8
Incorporation and the Bylaws of the Corporation: Mrs. Blecker in 1998, Mr.
Geritz in 1999 and Mr. Blecker in 2000.
B. Vacancies. Except as otherwise fixed pursuant to the provisions of
Article V hereof relating to the rights of the holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation to elect directors, any vacancy occurring in the Board of Directors,
whether due to an increase in the number of directors or otherwise, shall be
filled by a majority vote of the Whole Board of Directors and a majority of the
Continuing Directors then in office (as each term is defined by Article X)
though less than a quorum of the Board of Directors, or by a sole remaining
director, and any director so chosen shall be elected until the next annual
meeting of stockholders and until such director's successor shall have been
elected and qualified. Whenever the holders of any class or series of shares or
group of classes or series of shares are entitled to elect one or more directors
by the provisions of these Articles of Incorporation, any vacancies in such
directorships and any newly created directorships of such class or series to be
filled by reason of increase in the number of such directors shall be filled by
the affirmative vote of a majority vote of the Whole Board of Directors and a
majority of the Continuing Directors then in office, though less than a quorum
of the Board of Directors, or by a sole remaining director, and any director so
chosen shall be elected until the next annual meeting of stockholders and until
such director's successor shall have been elected and qualified. When the number
of directors is changed, the Board of Directors shall determine the class or
classes to which the increased or decreased number of directors shall be
apportioned; provided that no decrease in the number of directors shall shorten
the term of any incumbent director.
C. Removal. Subject to the rights of any class or series of stock
having preference over the Common Stock as to dividends or upon liquidation to
elect directors, any director (including persons elected by directors to fill
vacancies in the Board of Directors) may be removed from office with or without
cause by an affirmative vote of not less than two-thirds of the votes eligible
to be cast by stockholders at a duly constituted meeting of stockholders called
expressly for such purpose. Whenever the holders of any class or series of
capital stock of the Corporation are entitled to elect one or more directors by
the provisions of these Articles of Incorporation or any amendment or supplement
thereto, only the holders of shares of that class or series of capital stock
shall be entitled to vote for or against the removal of any director elected by
the holders of the shares of that class or series. At least thirty (30) days
prior to such meeting of stockholders, written notice shall be sent to the
director whose removal will be considered at the meeting.
D. Nominations of Directors. Nominations of candidates for election as
directors of the Corporation at any annual meeting of stockholders may be made
(a) by, or at the direction of, a majority of the Board of Directors or (b) by
any stockholder entitled to vote at such annual meeting. Only persons nominated
in accordance with the procedures set
<PAGE> 9
ICARUS International, Inc.
Articles of Incorporation
Page 9
forth in this Article VII.D. shall be eligible for election as directors at an
annual meeting of stockholders. Ballots bearing the names of all the persons who
have been nominated for election as directors at an annual meeting in accordance
with the procedures set forth in this Article VII.D. shall be provided for use
at the annual meeting of stockholders.
Subject to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Article VII.D. To be timely, a
stockholder's notice shall be delivered to, or mailed and received at, the
principal office of the Corporation not less than (i) with respect to an
election to be held at any annual meeting of stockholders of the Corporation,
(a) for the first such annual meeting after the filing of these Articles of
Incorporation, before the close of business on the tenth day following the date
on which notice of such meeting is first given to stockholders, and (b)
thereafter, sixty (60) days prior to the anniversary date of the mailing of
proxy materials by the Corporation in connection with the immediately preceding
annual meeting of stockholders of the Corporation; and (ii) with respect to a
special meeting of stockholders for the election of directors, the close of
business on the tenth day following the date on which notice of such meeting is
first given to stockholders. Such stockholder's notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director and as to the stockholder giving the notice (i) the
name, age, business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and number of
shares of Corporation stock which are beneficially owned by such person on the
date of such stockholder notice, and (iv) any other information relating to such
person that is required to be disclosed in solicitations of proxies with respect
to nominees for election as directors pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), including, but
not limited to, information required to be disclosed by Items 4, 5, 6 and 7 of
Schedule 14A (or any successors of such items); and (b) as to the stockholder
giving the notice (i) the name and address, as they appear on the Corporation's
books, of such stockholder and any other stockholders known by such stockholder
to be supporting such nominees and (ii) the class and number of shares of
Corporation stock which are beneficially owned by such stockholder on the date
of such stockholder notice and, to the extent known, by any other stockholders
known by such stockholder to be supporting such nominees on the date of such
stockholder notice. At the request of the Board of Directors, any person
nominated by, or at the direction of, the Board for election as a director at an
annual or special meeting of stockholders shall furnish to the Secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee.
The Board of Directors may reject any nomination by a stockholder not
timely made in accordance with the requirements of this Article VII.D. If the
Board of Directors, or a designated committee thereof, determines that the
information provided in a stockholder's
<PAGE> 10
ICARUS International, Inc.
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Page 10
notice does not satisfy the informational requirements of this Article VII.D. in
any material respect, the Secretary of the Corporation shall promptly notify
such stockholder of the deficiency in the notice. The stockholder shall have an
opportunity to cure the deficiency by providing additional information to the
Secretary within such period of time, not to exceed five (5) days from the date
such deficiency notice is given to the stockholder, as the Board of Directors or
such committee thereof shall reasonably determine. If the deficiency is not
cured within such period, or if the Board of Directors or such committee thereof
reasonably determines that the additional information provided by the
stockholder, together with information previously provided, does not satisfy the
requirements of this Article VII.D. in any material respect, then the Board of
Directors may reject such stockholder's nomination. The Secretary of the
Corporation shall notify a stockholder in writing whether his nomination has
been made in accordance with the time and informational requirements of this
Article VII.D. Notwithstanding the procedures set forth in this paragraph, if
neither the Board of Directors nor such committee thereof makes a determination
as to the validity of any nominations by a stockholder, the presiding officer of
the annual meeting of stockholders shall determine and declare at the annual
meeting whether the nomination was made in accordance with the terms of this
Article VII.D. If the presiding officer determines that a nomination was made in
accordance with the terms of this Article VII.D., he shall so declare at the
annual meeting of stockholders and ballots shall be provided for use at the
meeting with respect to such nominee. If the presiding officer determines that a
nomination was not made in accordance with the terms of this Article VII.D., he
shall so declare at the annual meeting and the defective nomination shall be
disregarded.
Notwithstanding the foregoing, and except as otherwise required by law,
whenever the holders of any one or more series of Preferred Stock shall have the
right, voting separately as a class, to elect one or more directors of the
Corporation, the provisions of this Article VII.D. shall not apply with respect
to the director or directors elected by such holders of Preferred Stock.
E. Discharge of Duties. In discharging the duties of their respective
positions, the Board of Directors, committees of the Board and individual
directors shall, in considering the best interests of the Corporation, consider
the effects of any action upon the employees of the Corporation, its customers,
the communities in which offices or other establishments of the Corporation or
any subsidiary are located and all other pertinent factors.
<PAGE> 11
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ARTICLE VIII
INDEMNIFICATION, ETC. OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS
A. Limitation of Liability. No director who has performed his or her
duties in accordance with the standard set forth in Section 2-405.1 of the MGCL
(or any successor provision thereto) shall be personally liable to the
Corporation or its stockholders for monetary damages for any act or omission by
such director as a director; provided that a director's liability shall not be
limited or eliminated to the extent that: (i) it is proved that the director
actually received an improper benefit or profit in money, property or services
for the amount of the benefit or profit in money, property or services actually
received; or (ii) a judgment or other final adjudication adverse to the director
is entered in a proceeding based on a finding in the proceeding that the
director's action, or failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding. No amendment to or repeal of this Article VIII.A. shall apply to or
have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
B. Indemnification. The Corporation shall indemnify any person who was
or is a party or is threatened to be a made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, limited liability company,
partnership, joint venture, trust or other enterprise or employee benefit plan,
against liability and expenses (including court costs and attorney's fees),
judgments, fines, excise taxes and amounts paid in satisfaction, settlement or
compromise actually and reasonably incurred by such person in connection with
such action, suit or proceeding to the full extent authorized by Section 2-418
of the MGCL or any successor provision thereto.
C. Advancement of Expenses. Reasonable expenses incurred by a director,
officer, employee or agent of the Corporation in defending a civil or criminal
action, suit or proceeding described in Article VIII.B. shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors only upon receipt of written
affirmation by or on behalf of such person of his good faith belief that he has
met the standard of conduct necessary for indemnification under relevant law and
a written undertaking to repay such amount if it shall ultimately be determined
that the person has not met that standard.
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D. Other Rights and Remedies. The indemnification provided by this
Article VIII shall not be deemed to exclude any other rights to which those
seeking indemnification or advancement of expenses may be entitled under the
Corporation's Articles of Incorporation, any insurance or other agreement, trust
fund, letter of credit, surety bond, vote of stockholders or disinterested
directors or otherwise, both as to actions in their official capacity and as to
actions in another capacity while holding such office, and shall continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such person;
provided that no indemnification shall be made to or on behalf of an individual
if a judgment or other final adjudication establishes that his actions, or
omissions to act, were material to the cause of action as adjudicated and (i)
were committed in bad faith; or (ii) were the result of active and deliberate
dishonesty; or (iii) the director actually received an improper personal benefit
in money, property or services; or (iv) in the case of any criminal proceedings,
the director had reasonable cause to believe that the act or omission was
unlawful; provided, however, that a director who has been successful, on the
merits or otherwise, in the defense of proceedings referred to under clauses (i)
through (iv) above, may still be indemnified as to reasonable expenses actually
incurred by such person in connection with the proceeding as approved by a
disinterested majority of the Board of Directors.
E. Insurance. Upon resolution passed by the Board of Directors, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, limited liability company, partnership, joint venture,
trust or another enterprise or employee benefit plan, against any liability
asserted against him or incurred by him in any such capacity, or arising out of
his status, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article or the MGCL.
F. Modification. The duties of the Corporation to indemnify and to
advance expenses to a director, officer, employee or agent provided in this
Article VIII shall be in the nature of a contract between the Corporation and
each such director, officer, employee or agent and no amendment or repeal of any
provision of this Article VIII shall alter, to the detriment of such director,
officer, employee or agent, the right of such person to the advance of expenses
or indemnification related to a claim based on an act or failure to act which
took place prior to such amendment or repeal.
G. Proceedings Initiated by Indemnified Persons. Notwithstanding any
other provision of this Article VIII, the Corporation shall not indemnify a
director, officer, employee or agent for any liability incurred in an action,
suit or proceeding initiated by (which shall not be deemed to include
counter-claims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the person seeking indemnification unless such initiation of or
participation in the action, suit or proceeding is authorized, either before or
after its
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commencement, by the affirmative vote of a disinterested majority of the
directors then in office or unless intervention is required by law in order to
protect the rights, claims or defenses of the director, officer, employee or
agent with respect to matters for which the Corporation shall otherwise be
required to provide indemnification hereunder.
ARTICLE IX
MEETINGS OF STOCKHOLDERS AND STOCKHOLDER PROPOSALS
A. Special Meetings of Stockholders. Except as otherwise required by
law and subject to the rights of the holders of any class or series of Preferred
Stock, special meetings of the stockholders of the Corporation may be called
only by (i) the Board of Directors pursuant to a resolution approved by the
affirmative vote of a majority of the Whole Board of Directors and a majority of
the Continuing Directors then in office, (ii) the Chairman of the Board, (iii)
the President, or (iv) the holders of not less than a majority of all votes
entitled to be cast on any issue proposed to be considered at such special
meeting. A request for a special meeting of stockholders by stockholders of the
Corporation shall state the purpose of the meeting and the matters proposed to
be acted on. The Secretary of the Corporation shall inform the stockholders who
make the request for the special meeting of the reasonably estimated cost of
preparing and mailing a notice of the meeting and on payment of such costs to
the Corporation, the Secretary shall notify each stockholder entitled to notice
of the special meeting.
B. Action Without a Meeting. Any action permitted to be taken by the
stockholders at a meeting may be taken without a meeting if consent in writing
setting forth the action so taken shall be signed by all of the stockholders who
would be entitled to vote at a meeting for such purpose and a written waiver of
any right to dissent signed by each stockholder entitled to notice of the
meeting but not entitled to vote at it, and both are filed with the Secretary of
the Corporation as part of the corporate records.
C. Stockholder Proposals. At an annual meeting of stockholders, only
such business shall be conducted, and only such proposals shall be acted upon,
as shall have been brought before the annual meeting by, or at the direction of,
(a) the Board of Directors or (b) any stockholder of the Corporation who
complies with all the requirements set forth in this Article IX.C.
Proposals, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Article IX.C. For stockholder proposals
to be included in the Corporation's proxy materials, the stockholder must comply
with all the timing and informational requirements of Rule 14a-8 of the Exchange
Act (or any successor regulation). With respect to stockholder proposals to be
considered at the annual meeting of stockholders but not
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included in the Corporation's proxy materials, the stockholder's notice shall be
delivered to, or mailed and received at, the principal office of the Corporation
(a) for the first such annual meeting after the filing of these Articles of
Incorporation, before the close of business on the tenth day following the date
on which notice of such meeting is first given to stockholders, and (b)
thereafter, not less than sixty (60) days prior to the anniversary date of the
mailing of proxy materials by the Corporation in connection with the immediately
preceding annual meeting of stockholders of the Corporation. Such stockholder's
notice shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the proposal desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business and, to the
extent known, any other stockholders known by such stockholder to be supporting
such proposal, (c) the class and number of shares of the Corporation stock which
are beneficially owned by the stockholder on the date of such stockholder notice
and, to the extent known, by any other stockholders known by such stockholder to
be supporting such proposal on the date of such stockholder notice, and (d) any
financial interest of the stockholder in such proposal (other than interests
which all stockholders would have).
The Board of Directors may reject any stockholder proposal not timely
made in accordance with the terms of this Article IX.C. If the Board of
Directors, or a designated committee thereof, determines that the information
provided in a stockholder's notice does not satisfy the informational
requirements of this Article IX.C. in any material respect, the Secretary of the
Corporation shall promptly notify such stockholder of the deficiency in the
notice. The stockholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within such period of time,
not to exceed five (5) days from the date such deficiency notice is given to the
stockholder, as the Board of Directors or such committee thereof shall
reasonably determine. If the deficiency is not cured within such period, or if
the Board of Directors or such committee thereof determines that the additional
information provided by the stockholder, together with information previously
provided, does not satisfy the requirements of this Article IX.C. in any
material respect, then the Board of Directors may reject such stockholder's
proposal. The Secretary of the Corporation shall notify a stockholder in writing
whether his proposal has been made in accordance with the time and informational
requirements of this Article IX.C. Notwithstanding the procedures set forth in
this paragraph, if neither the Board of Directors nor such committee thereof
makes a determination as to the validity of any stockholder proposal, the
presiding officer of the annual meeting shall determine and declare at the
annual meeting whether the stockholder proposal was made in accordance with the
terms of this Article IX.C. If the presiding officer determines that a
stockholder proposal was made in accordance with the terms of this Article
IX.C., he shall so declare at the annual meeting and ballots shall be provided
for use at the meeting with respect to any such proposal. If the presiding
officer determines that a stockholder proposal was not made in
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accordance with the terms of this Article IX.C., he shall so declare at the
annual meeting and any such proposal shall not be acted upon at the annual
meeting.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, directors and
committees of the Board of Directors, but in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated, filed and
received as herein provided.
ARTICLE X
CERTAIN BUSINESS COMBINATIONS AND ACQUISITIONS OF STOCK
A. Definitions and Related Matters.
(a) Affiliate. An "Affiliate" of, or a Person "affiliated
with," a specified Person means a Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified.
(b) Associate. The term "Associate" when used to indicate a
relationship with any Person means:
(i) Any corporation, partnership, joint venture,
limited liability company, or other enterprise (other than
the Corporation or a Subsidiary of the Corporation) of
which such Person is a director, officer, member or partner
or is, directly or indirectly, the Beneficial Owner of 10
percent or more of any class of equity securities or equity
interest in such enterprise;
(ii) Any trust or other estate in which such Person
has a 10 percent or greater beneficial interest or as to
which such Person serves as trustee or in a similar
fiduciary capacity;
(iii) Any relative or spouse of such Person, or any
relative of such spouse who has the same home as such
Person; or
(iv) Any investment company registered under the
Investment Company Act of 1940 for which such Person or any
Affiliate or Associate of such Person serves as investment
advisor.
(c) Beneficial Owner. A Person shall be considered the
"Beneficial Owner" of any shares of stock or equity interest (whether or not
owned of record) and shares of stock or equity interests will be considered to
be "Beneficially Owned":
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(i) With respect to which such Person or any Affiliate
or Associate of such Person directly or indirectly has or
shares (1) voting power, including the power to vote or to
direct the voting of such shares of stock or equity
interests and/or (2) investment power, including the power
to dispose of or to direct the disposition of such shares
of stock or equity interest;
(ii) Which such Person or any Affiliate or Associate
of such Person has (1) the right to acquire (whether such
right is exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, and/or
(2) the right to vote pursuant to any agreement,
arrangement or understanding (whether such right is
exercisable immediately or only after the passage of time);
or
(iii) Which are Beneficially Owned within the meaning
of (i) or (ii) of this Article X.A.(c) by any other Person
with which such first-mentioned Person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding, written or oral, with respect to acquiring,
holding, voting or disposing of any shares of stock of the
Corporation or any Subsidiary of the Corporation or
acquiring, holding or disposing of all or substantially
all, or any Substantial Part, of the assets or businesses
of the Corporation or a Subsidiary of the Corporation.
For the purpose only of determining whether a Person is the
Beneficial Owner of a percentage specified in this Article X of the outstanding
Voting Shares, such shares shall be deemed to include any Voting Shares which
may be issuable pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants, options or
otherwise and which are deemed to be Beneficially Owned by such Person pursuant
to the foregoing provisions of this Article X.A.(c).
(d) Business Combination. A "Business Combination" means:
(i) The sale, exchange, lease, transfer or other
disposition to or with a Related Person or any Affiliate or
Associate of such Related Person by the Corporation or any
of its Subsidiaries (in a single transaction or a series of
related transactions) of all or substantially all, or any
Substantial Part, of its or their assets or businesses
(including, without limitation, any securities issued by a
Subsidiary);
(ii) The purchase, exchange, lease or other
acquisition by the Corporation or any of its Subsidiaries
(in a single transaction or a series of
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related transactions) of all or substantially all, or any
Substantial Part, of the assets or business of a Related
Person or any Affiliate or Associate of such Related
Person;
(iii) Any merger or consolidation of the Corporation
or any Subsidiary thereof into or with a Related Person or
any Affiliate or Associate of such Related Person or into
or with another Person which, after such merger or
consolidation, would be an Affiliate or an Associate of a
Related Person, in each case irrespective of which Person
is the surviving entity in such merger or consolidation;
(iv) Any reclassification of securities,
recapitalization or other transaction (other than a
redemption in accordance with the terms of the security
redeemed) which has the effect, directly or indirectly, of
increasing the proportionate amount of Voting Shares of the
Corporation or any Subsidiary thereof which are
Beneficially Owned by a Related Person, or any partial or
complete liquidation, spinoff or splitup of the Corporation
or any Subsidiary thereof; provided, however, that this
Article X.A.(d)(iv) shall not relate to any transaction of
the types specified herein that have been approved by the
affirmative vote of at least two-thirds of the Whole Board
of Directors and a majority of the Continuing Directors; or
(v) The acquisition upon the issuance thereof of
Beneficial Ownership by a Related Person of Voting Shares
or securities convertible into Voting Shares or any voting
securities or securities convertible into voting securities
of any Subsidiary of the Corporation, or the acquisition
upon the issuance thereof of Beneficial Ownership by a
Related Person of any rights, warrants or options to
acquire any of the foregoing or any combination of the
foregoing Voting Shares or voting securities of a
Subsidiary.
As used in this definition, a "series of related transactions" shall
be deemed to include not only a series of transactions with the same Related
Person but also a series of separate transactions with a Related Person or any
Affiliate or Associate of such Related Person.
Anything in this definition to the contrary notwithstanding, this
definition shall not be deemed to include any transaction of the type set forth
in Article X.A.(d)(i) through X.A.(d)(iii) between or among any two or more
Subsidiaries of the Corporation or the Corporation and one or more Subsidiaries
of the Corporation if such transaction has been approved by the affirmative vote
of at least two-thirds of the Whole Board of Directors and a majority of the
Continuing Directors on or prior to the Date of Determination.
(e) Continuing Director. A "Continuing Director" shall
mean:
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(i) Each of the present directors of the Corporation
as set forth in Article VII, whether or not such person is
a Related Person or an Affiliate or Associate of a Related
Person, except that such designation shall in no way be
deemed to affect or change or diminish the fiduciary duties
of such person to the Corporation;
(ii) An individual who is unaffiliated with a Related
Person and who was a member of the Board of Directors prior
to the time that a Related Person acquired 10% or more of
the Voting Shares; or,
(iii) An individual who is unaffiliated with a Related
Person and who is designated before his or her initial
election as a Continuing Director by a majority of the then
Continuing Directors.
(f) Date of Determination. The term "Date of
Determination" means:
(i) The date on which a binding agreement (except
for the fulfillment of conditions precedent, including,
without limitation, votes of stockholders to approve such
transaction) is entered into by the Corporation, as
authorized by its Board of Directors, and another Person
providing for any Business Combination; or,
(ii) If such an agreement as referred to in Article
X.A.(f)(i) above is amended so as to make it less favorable
to the Corporation and its stockholders, the date on which
such amendment is approved by the Board of Directors of the
Corporation; or,
(iii) In cases where neither Article X.A.(f)(i) nor
(ii) shall be applicable, the record date for the
determination of stockholders of the Corporation entitled
to notice of and to vote upon the transaction in question.
A majority of the Continuing Directors shall have the power and duty
to determine the Date of Determination as to any transaction under this Article
X. Any such determination shall be conclusive and binding for all purposes of
this Article X.
(g) Fair Market Value. The term "Fair Market Value" shall
mean:
(i) In the case of stock, the highest closing sale
price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composite
Tape for New York Stock Exchange - Listed Stocks, or, if
such stock is not quoted on the Composite Tape, on the New
York Stock Exchange or the American Stock Exchange, or, if
such stock is not
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listed on such exchanges, on the principal United States
securities exchange registered under the Exchange Act on
which such shares are listed, or, if such shares are not
listed on any such exchange, the highest closing price with
respect to a share of such stock during the 30-day period
preceding the date in question on the National Market
System of the National Association of Securities Dealers
Automated Quotations ("NASDAQ") System, or, if not listed
on the National Market System, the highest mean of the
closing bid and asked quotations on the NASDAQ System
during such 30-day period or any system then in use, or, if
no such quotations are available, the fair market value on
the date in question of a share as determined by a majority
of the Continuing Directors in good faith; and
(ii) In the case of property other than cash or stock,
the fair market value of such property on the date in
question as determined by a majority of the Continuing
Directors in good faith.
(h) Independent Majority of Stockholders. The term
"Independent Majority of Stockholders" shall mean the holders of a majority of
the outstanding Voting Shares that are not Beneficially Owned or controlled,
directly or indirectly, by a Related Person, or any Affiliate or Associate of a
Related Person.
(i) Offer. The term "Offer" shall mean every offer to buy
or otherwise acquire, solicitation of an offer to sell, tender offer for, or
request or invitation for tenders of, a security or interest in a security for
value; provided that the term "Offer" shall not include: (a) inquiries directed
solely to the management of the Corporation and not intended to be communicated
to stockholders which are designed to elicit an indication of management's
receptivity to the basic structure of a potential acquisition with respect to
the amount of cash and/or securities, manner of acquisition and formula for
determining price, or (b) non-binding expressions of understanding or letters of
intent with the management of the Corporation regarding the basic structure of a
potential acquisition with respect to the amount of cash and/or securities,
manner of acquisition and formula for determining price.
(j) Person. The term "Person" shall mean any person,
partnership, corporation, joint venture, limited liability company, trust or
group or other entity (other than the Corporation, any Subsidiary of the
Corporation or a trustee holding stock for the benefit of employees of the
Corporation or its Subsidiaries, or any one of them, pursuant to one or more
employee benefit plans or arrangements). When two or more Persons act as a
partnership, joint venture, limited liability company, syndicate, association,
group or other entity for the purpose of acquiring, holding or disposing of
shares of stock, such partnership, joint venture, limited liability company,
syndicate, association, group or other entity shall be deemed a "Person."
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(k) Related Person. The term "Related Person" shall mean
any Person who or which is (a) the Beneficial Owner, as of the Date of
Determination, or immediately prior to the consummation of a Business
Combination, of 10% or more of the Voting Shares; or (b) an Affiliate of the
Corporation and at any time within the two-year period immediately prior to the
announcement of a Business Combination was the Beneficial Owner, directly or
indirectly, of 10% or more of the then outstanding Voting Shares; or (c) an
assignee of or has otherwise succeeded to any Voting Shares which were at any
time within the two-year period immediately prior to the announcement of a
Business Combination Beneficially Owned by any Related Person, if such
assignment or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the meaning of the
Securities Act of 1933. The term "Related Person" shall not include: (i) the
Corporation; (ii) any Subsidiary of the Corporation; (iii) Herbert G. Blecker;
(iv) Eunice E. Blecker; (v) the ancestors, siblings or lineal descendants of
Herbert G. Blecker; (vi) any Person who holds Voting Shares for the benefit of
any of the above; (vii) any trust, the settlor of which is Herbert G. Blecker or
Eunice E. Blecker; or (viii) the executor, administrator, guardian or personal
representative of the estate of Herbert G. Blecker or Eunice E. Blecker ((i)
through (viii), collectively or individually, the "Blecker Interest").
(l) Substantial Part. The term "Substantial Part" as
used with reference to the assets of the Corporation, of any Subsidiary or of
any Related Person means assets having a value of more than 10% of the total
consolidated assets of the Corporation and its Subsidiaries as of the end of
the Corporation's most recent fiscal year ending prior to the time the
determination is being made, and assets having a value of more than 10% of any
Subsidiary or of any Related Person.
(m) Subsidiary. The term "Subsidiary" shall mean any
corporation or other entity of which the Person in question owns not less than
50 percent of any class of equity securities, directly or indirectly.
(n) Voting Shares. The term "Voting Shares" shall mean
shares of the Corporation entitled to vote generally in the election of
directors.
(o) Whole Board of Directors. The term "Whole Board of
Directors" shall mean the total number of directors which the Corporation would
have if there were no vacancies.
(p) Certain Determinations with Respect to Article X.
(i) A majority of the Continuing Directors shall have
the power to determine for the purposes of this Article X,
on the basis of information known to them: (1) the number
of Voting Shares of which any Person is the Beneficial
Owner, (2) whether a Person is an Affiliate or Associate of
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another, (3) whether a Person has an agreement, arrangement
or understanding with another as to the matters referred to
in the definition of "Beneficial Owner" as hereinabove
defined, (4) whether the assets subject to any Business
Combination constitute a "Substantial Part" as hereinabove
defined, (5) whether two or more transactions constitute a
"series of related transactions" as hereinabove defined,
(6) any matters referred to in Article X.A.(p)(ii) below,
and (7) such other matters with respect to which a
determination is required under this Article X.
(ii) A Related Person shall be deemed to have acquired
a share of the Corporation at the time when such Related
Person became a Beneficial Owner thereof. With respect to
shares owned by Affiliates, Associates or other Persons
whose ownership is attributable to a Related Person under
the foregoing definition of Beneficial Owner, if the price
paid by such Related Person for such shares is not
determinable, the price so paid shall be deemed to be the
higher of (1) the price paid upon acquisition thereof by
the Affiliate, Associate or other Person or (2) the market
price of the shares in question (as determined by a
majority of the Continuing Directors) at the time when the
Related Person became the Beneficial Owner thereof.
(q) Fiduciary Obligations. Nothing contained in this
Article X shall be construed to relieve any Related Person from any fiduciary
obligation imposed by law.
B. Approval of Business Combination.
(a) Except as provided in Article X.B.(b), neither the
Corporation nor any of its Subsidiaries shall become party to any Business
Combination without the prior affirmative vote at a meeting of the Corporation's
stockholders of:
(i) The holders of not less than 80 percent of the
outstanding Voting Shares, voting separately as a class,
and
(ii) An Independent Majority of Stockholders.
Such favorable votes shall be in addition to any stockholder vote
which would be required without reference to this Article X.B.(a) and shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified by law or otherwise.
(b) The provisions of Article X.B.(a) shall not apply to
a particular Business Combination, and such Business Combination shall require
only such stockholder
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vote (if any) as would be required without reference to this Article
X.B., if all of the conditions set forth in subparagraphs (i) through (vii)
below are satisfied:
(i) The ratio of (1) the aggregate amount of the
cash and the Fair Market Value of the other consideration
to be received per share of Common Stock (as defined in
Article V) of the Corporation in such Business Combination
by holders of Common Stock other than the Related Person
involved in such Business Combination, to (2) the market
price per share of the Common Stock immediately prior to
the announcement of the proposed Business Combination, is
at least as great as the ratio of (x) the highest per share
price (including brokerage commissions, transfer taxes and
soliciting dealers' fees) which such Related Person has
theretofore paid in acquiring any Common Stock prior to
such Business Combination, to (y) the market price per
share of Common Stock immediately prior to the initial
acquisition by such Related Person of any shares of Common
Stock; and
(ii) The aggregate amount of the cash and the Fair
Market Value of other consideration to be received per
share of Common Stock in such Business Combination by
holders of Common Stock, other than the Related Person
involved in such Business Combination, is not less than the
highest per share price (including brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by such
Related Person in acquiring any of its holdings of Common
Stock; and
(iii) If applicable, the ratio of (1) the aggregate
amount of the cash and the Fair Market Value of other
consideration to be received per share of Preferred Stock
(as defined in Article V) of the Corporation in such
Business Combination by holders of Preferred Stock other
than the Related Person involved in such Business
Combination, to (2) the market price per share of the
Preferred Stock immediately prior to the announcement of
the proposed Business Combination, is at least as great as
the ratio of (x) the highest per share price (including
brokerage commissions, transfer taxes and soliciting
dealers' fees) which such Related Person has theretofore
paid in acquiring any Preferred Stock prior to such
Business Combination to (y) the market price per share of
Preferred Stock immediately prior to the initial
acquisition by such Related Person of any shares of
Preferred Stock; and
(iv) If applicable, the aggregate amount of the cash
and the Fair Market Value of other consideration to be
received per share of Preferred Stock in such Business
Combination by holders of Preferred Stock, other than the
Related Person involved in such Business Combination, is
not less than the highest per share price (including
brokerage commissions, transfer taxes
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and soliciting dealers' fees) paid by such Related Person
in acquiring any of its holdings of Preferred Stock; and
(v) The consideration (if any) to be received in such
Business Combination by holders of stock other than the
Related Person (whether Common Stock or Preferred Stock)
involved shall, except to the extent that a stockholder
agrees otherwise as to all or part of the shares which he
owns, be in the same form and of the same kind as the
consideration paid by the Related Person in acquiring
Common Stock already owned by it; and
(vi) After such Related Person became a Related Person
and prior to the consummation of such Business Combination:
(1) such Related Person shall vote his shares in
such a manner as to cause, to the extent necessary and
within his power as a stockholder, (x) to maintain the
size of the Board of Directors then in effect as of
the Date of Determination and (y) the Board of
Directors of the Corporation to include at all times
representation by Continuing Directors proportionate
to the ratio that the number of Voting Shares of the
Corporation from time to time owned by stockholders
who are not Related Persons bears to all Voting Shares
of the Corporation outstanding at the time in question
(with a Continuing Director to occupy any resulting
fractional position among the directors);
(2) such Related Person shall not have acquired
from the Corporation, directly or indirectly, any
shares of the Corporation (except (x) upon conversion
of convertible securities acquired by it prior to
becoming a Related Person or (y) as a result of a pro
rata stock dividend, stock split or division of shares
or (z) in a transaction which satisfied all applicable
requirements of this Article X);
(3) such Related Person shall not have acquired
any additional Voting Shares of the Corporation or
securities convertible into or exchangeable for Voting
Shares except as a part of the transaction which
resulted in such Related Person becoming a Related
Person;
(4) such Related Person shall not have (x)
received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial
assistance or tax credits provided by the Corporation
or any Subsidiary of the Corporation, or (y) made any
major change in the Corporation's
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business or equity capital structure or entered into
any contract, arrangement or understanding with the
Corporation except any such change, contract,
arrangement or understanding as may have been approved
by the favorable vote of not less than a majority of
the Whole Board of Directors and a majority of the
Continuing Directors of the Corporation; and
(5) except as approved by a majority of the Whole
Board of Directors and a majority of the Continuing
Directors, there shall have been: (x) no failure to
declare and pay at the regular date therefor any
dividends (whether or not cumulative) on any
outstanding Preferred Stock; (y) no reduction in the
annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of the
Common Stock); and (z) an increase in such annual rate
of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar
transaction which has the effect of reducing the
number of outstanding shares of the stock; and
(vii) A proxy statement complying with the
requirements under the Exchange Act shall have been mailed
to all holders of Voting Shares for the purpose of
soliciting stockholder approval of such Business
Combination. Such proxy statement is not required to be
filed with or approved by the Securities and Exchange
Commission unless otherwise required by law. Such proxy
statement shall contain at the front thereof, in a
prominent place, any recommendations as to the
advisability (or inadvisability) of the Business
Combination which the Continuing Directors, or any of
them, may have furnished in writing and, if deemed
advisable by a majority of the Continuing Directors, an
opinion of a reputable investment banking firm as to the
fairness (or lack of fairness) of the terms of such
Business Combination from the point of view of the holders
of Voting Shares other than any Related Person (such
investment banking firm to be selected by a majority of
the Continuing Directors, to be furnished with all
information it reasonably requests, and to be paid a
reasonable fee for its services upon receipt by the
Corporation of such opinion).
(c) For purposes of Article X.B.(b)(i) through X.B.(b)(iv)
hereof, in the event of a Business Combination upon consummation of which the
Corporation would be the surviving corporation or company or would continue to
exist (unless it is provided, contemplated or intended that as part of such
Business Combination or within one year after consummation thereof a plan of
liquidation or dissolution of the Corporation will be effected), the term "other
consideration to be received" shall include (without limitation)
<PAGE> 25
ICARUS International, Inc.
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Common Stock retained by the stockholders of the Corporation other than Related
Persons who are parties to such Business Combination.
(d) The provisions of this Article X.B. shall not apply
to (i) any Business Combination approved by two-thirds of the Whole Board of
Directors of the Corporation at a time prior to the acquisition of 10 percent or
more of the outstanding Voting Shares of the Corporation by the Related Person,
or (ii) any Business Combination approved by two-thirds of the Whole Board of
Directors and a majority of the Continuing Directors after such acquisition.
C. Evaluation of Business Combinations, Etc. In connection
with the exercise of its judgment in determining what is in the best interest of
the Corporation and its stockholders when evaluating a Business Combination or a
proposal by another Person or Persons to make a Business Combination or a tender
or exchange offer, the Board of Directors of the Corporation shall, in addition
to considering the adequacy of the amount to be paid in connection with any such
transaction, consider all of the following factors and any other factors which
it deems relevant: (i) the social and economic effects of the transaction on the
Corporation and its Subsidiaries and their respective employees, customers,
creditors and other elements of the communities in which the Corporation and its
Subsidiaries operate or are located; (ii) the business and financial condition
and earnings prospects of the acquiring Person or Persons, including, but not
limited to, debt service and other existing or likely financial obligations of
the acquiring Person or Persons, and the possible effect of such conditions upon
the Corporation and its Subsidiaries and the elements of the communities in
which the Corporation and its Subsidiaries operate or are located; and (iii) the
competence, experience and integrity of the acquiring Person or Persons and its
or their management.
D. Voting Rights of Certain Control Shares. The Corporation
shall be governed by the MGCL, Corporations and Associations Volume, Title 3
"Corporations in General Extraordinary Actions," Subtitle 7 "Voting Rights of
Certain Control Shares" and hereby adopts such language and provisions and
incorporates the same herein by reference as though it were written out herein
in full. The Corporation may redeem its shares as set forth in MGCL Section
3-707. If voting rights for "control shares" (as defined by MGCL Section
3-701(d)) are approved at a meeting held under MGCL Section 3-704 and the
"acquiring person" (as defined by MGCL Section 3-701(b)) is entitled to exercise
or direct the exercise of a majority or more of all voting power, all
stockholders of the Corporation, other than the acquiring person, shall have the
rights of objecting stockholders as set forth in MGCL Section 3-708.
Anything in the preceding paragraph to the contrary notwithstanding,
the restrictions set forth in Title 3, Subtitle 7, Section 3-701, et seq. of the
MGCL as adopted hereinabove shall not apply, pursuant to MGCL Section 3-702(b),
to the voting rights of shares of stock
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acquired in a "control share acquisition" (as defined by MGCL Section 3-701(e)),
or otherwise, by the Blecker Interest.
E. Amendments, Etc. of this Article X. Notwithstanding any
other provisions of these Articles of Incorporation or the Bylaws of the
Corporation (and notwithstanding the fact that some lesser percentage may be
specified by law, these Articles of Incorporation or the Bylaws of the
Corporation), this Article X shall not be amended, altered, changed, or
repealed without the affirmative vote of (i) the holders of 80% or more of the
outstanding Voting Shares, voting separately as a class, and (ii) an
Independent Majority of Stockholders; provided, however, that this Article X.E.
shall not apply to, and such vote shall not be required for, any such
amendment, change or repeal recommended to stockholders by the favorable vote
of not less than two-thirds of the Whole Board of Directors, including a
majority of the Continuing Directors, and any such amendment, change or repeal
so recommended shall require only the vote, if any, required under the
applicable provisions of the MGCL, these Articles of Incorporation and the
Bylaws of the Corporation.
F. Election Under Section 3-603 of the MGCL. The Corporation
has expressly elected, under Section 3-603(e)(iii) of the MGCL, not to be
governed by the provisions of Title 3, Subtitle 6, Section 3-601, et seq. of
the MGCL.
ARTICLE XI
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
A. Articles of Incorporation. The Corporation reserves the
right to amend, alter, change or repeal any provision contained in these
Articles of Incorporation, in the manner now or hereafter prescribed by law,
and all rights conferred upon stockholders herein are granted subject to this
reservation. No amendment, addition, alteration, change or repeal of these
Articles of Incorporation shall be made unless it is first approved by the
Board of Directors of the Corporation pursuant to a resolution adopted and
declared advisable by the affirmative vote of a majority of the directors then
in office, and thereafter is approved, at an annual or special meeting, by the
holders of two-thirds of the shares of the Corporation entitled to vote
generally in an election of directors, voting together as a single class,
unless any class or series of shares is entitled to vote thereon as a class, in
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which event the proposed amendment shall be adopted upon receiving the
affirmative vote of the holders of a majority of the shares within each class or
series of outstanding shares entitled to vote thereon as a class and of at least
two-thirds of the total outstanding shares entitled to vote thereon, provided
that, notwithstanding anything contained in these Articles of Incorporation to
the contrary, (i) the affirmative vote of the holders of at least 75 percent of
the shares of the Corporation entitled to vote generally in an election of
directors, voting together as a single class, unless any class or series of
shares is entitled to vote thereon as a class, in which event the proposed
amendment shall be adopted upon receiving the affirmative vote of the holders of
75 percent of the shares within each class or series of outstanding shares
entitled to vote thereon as a class and of at least 75 percent of the total
outstanding shares entitled to vote thereon, shall be required to amend, adopt,
alter, change or repeal any provision inconsistent with Articles VI (relating to
preemptive rights), VII (relating to the Board of Directors), VIII (relating to
indemnification), IX (relating to meetings of stockholders), and this Article
XI, and (ii) Article X shall be amended in the manner specified in Article X.E.
B. Bylaws. The Board of Directors may adopt, alter, amend or
repeal the Bylaws of the Corporation. Such action by the Board of Directors
shall require the affirmative vote of a majority of the directors then in office
at any regular or special meeting of the Board of Directors.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation this 2nd day of December, 1997.
WITNESSED: BY: /s/ Herbert G. Blecker
----------------------- --------------------------------
Herbert G. Blecker
Incorporator
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
ICARUS INTERNATIONAL, INC.
ARTICLE I
OFFICES
The following Bylaws of ICARUS International, Inc., Rockville,
Maryland, were duly adopted by the Board of Directors of the Corporation as of
January 22, 1998:
1.1 Principal Office and Registered Agent. The principal office of
ICARUS International, Inc. (the "Corporation") shall be located in the State of
Maryland at such place as may be fixed from time to time by the Board of
Directors upon filing of such notices as may be required by law, and the
registered agent may have a business office identical with such principal
office.
1.2 Other Offices. The Corporation may have other offices within or
outside the State of Maryland at such place or places as the Board of Directors
may from time to time determine.
ARTICLE II
STOCKHOLDERS' MEETINGS
2.1 Meeting Place. All meetings of the stockholders shall be held at
the principal office of the Corporation, or at such other place within or
without the State of Maryland as shall be determined from time to time by the
Board of Directors, and the place at which any such meeting shall be held shall
be stated in the notice of the meeting.
2.2 Annual Meeting Time. The annual meeting of the stockholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the fourth Thursday
of August at the hour of 11:00 a.m., if not a legal holiday, and if a legal
holiday, then on the next succeeding day not a legal holiday, at the same hour,
or at such other date and time as may be determined by the Board of Directors
and stated in the notice of such meeting. For purposes of these Bylaws, "a legal
holiday" shall be deemed to include all federal holidays, all holidays
recognized by the State of Maryland, Saturdays and Sundays.
2.3 Organization. Each meeting of the stockholders shall be presided
over by the Chairman of the Board, or by the President, or if neither the
Chairman, nor the President is present, by a Vice President or such other
officer as designated by the Board of Directors. The Secretary, or in his or her
absence a temporary Secretary, shall act as secretary of each meeting of the
stockholders. In the absence of the Secretary and any temporary Secretary, the
chairman of the meeting may appoint any person present to act as secretary of
the
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meeting. The chairman of any meeting of the stockholders, unless prescribed
by law or unless the Chairman of the Board has otherwise determined, shall
determine the order of the business and the procedure at the meeting, including
such regulation of the manner of voting and the conduct of discussions as shall
be deemed appropriate by him in his sole discretion.
2.4 Special Meetings. Special meetings of the stockholders for
any purpose may be called at any time in accordance with the provisions of the
Corporation's Articles of Incorporation, which provisions are incorporated
herein by reference and made a part hereof with the same effect as if they were
expressly set forth herein.
2.5 Notice.
(a) Notice of the time and place of the annual
meeting of stockholders shall be given by delivering personally, leaving at his
or her residence or usual place of business or by mailing to the stockholder's
address as it appears on the records of the Corporation, a written or printed
notice of the same stating the place, day and hour of the meeting, at least ten
(10) days and not more than ninety (90) days prior to the meeting, to each
stockholder of record entitled to vote at such meeting and to each other
stockholder entitled to notice of said meeting.
(b) At least ten (10) days and not more than ninety
(90) days prior to the meeting, a written or printed notice of each special
meeting of stockholders, stating the place, day and hour of such meeting, and
the purpose or purposes for which the meeting is called, shall be either
delivered personally, left at his or her residence or principal place of
business or mailed to each stockholder of record entitled to vote at such
meeting at such stockholder's address as it appears on the records of the
Corporation and to each other stockholder entitled to notice of said meeting.
(c) A person entitled to notice of any meeting of
stockholders may waive such notice if he or she: (i) before or after the meeting
signs a waiver of notice which is filed with the records of the stockholders'
meeting, or (ii) is present at the meeting in person or by proxy.
(d) A meeting of stockholders, either annual or
special, convened on the date for which it was called may be adjourned from time
to time without further notice to a date not more than one hundred and twenty
(120) days after the original record date, unless a new record date is fixed and
if so fixed, the meeting may be adjourned to any date as may be determined by
the Board of Directors in their sole discretion. When any stockholders' meeting,
either annual or special, is adjourned and if a new record date is fixed for an
adjourned meeting of stockholders, notice of the adjourned meeting shall be
given as in the case of an original meeting. It shall not be necessary to give
any written
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notice of the time and place of any meeting adjourned, unless a new record date
is fixed therefor, other than an announcement at the meeting at which such
adjournment is taken.
2.6 Voting List. At least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, shall be made by the Secretary, arranged in
alphabetical order, with the address of and number of shares registered in the
name of each, which list shall be kept on file for the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, at the principal office of the Corporation for a period of ten (10) days
prior to such meeting. The list shall be produced and kept open at the time and
place of such meeting by the Secretary of the Corporation and subject to the
inspection of any stockholder who may be present at the meeting. The Stock
Ledger shall be the only evidence as to who are the stockholders entitled to
examine the Stock Ledger, the voting list required by these Bylaws or the books
of the Corporation, or to vote in person or by proxy at any meeting of the
stockholders.
2.7 Quorum; Voting. Except as otherwise required by law:
(a) A quorum for the transaction of business at any
annual or special meeting of stockholders shall consist of stockholders
representing, either in person or by proxy, a majority of the outstanding
capital stock of the Corporation entitled to vote on that matter at such
meeting, except as otherwise provided by statute, the Articles of Incorporation
or these Bylaws; but in the absence of such a quorum, the holders of a majority
of the shares represented at the meeting shall have the right successively to
adjourn the meeting to a specified date (the later scheduled meeting hereafter
referred to as the "adjourned meeting"). At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting. If a quorum shall be present at the commencement of a meeting
but shall withdraw leaving less than a quorum, the meeting may continue and the
Corporation may transact any business that might have been transacted had the
quorum remained. The absence from any meeting of the number of shares required
by law, the Articles of Incorporation or these Bylaws for action upon one matter
shall not prevent action at such meeting upon any other matter or matters which
may properly come before the meeting, if the number of shares required in
respect of such other matters shall be present.
(b) With respect to any other matter other than the
election of directors, the votes of a majority of all votes cast at any properly
called meeting or adjourned meeting of stockholders at which a quorum, as
defined above, is present, shall be sufficient to approve any matter which
properly comes before the meeting, unless the proposition or question is one
upon which by express provisions of law or of the Articles of Incorporation or
these Bylaws, a different vote is required, in which case with express provision
shall govern and establish the number of votes required to determine such
proposition or question.
<PAGE> 4
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(c) Directors are to be elected by a plurality of
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present. Stockholders shall not be permitted to cumulate their votes
for the election of directors. If, at any meeting of the stockholders, due to a
vacancy or vacancies or otherwise, directors of more than one class of the Board
of Directors are to be elected, each class of directors to be elected at the
meeting shall be elected in a separate election by a plurality vote.
2.8 Voting of Shares. Except as otherwise provided in these
Bylaws or to the extent that voting rights of the shares of any class or classes
are limited or denied by the Articles of Incorporation, each stockholder, on
each matter submitted to a vote at a meeting of stockholders, shall have one (1)
vote for each share of stock registered in his or her name on the books of the
Corporation.
2.9 Closing of Transfer Books and Fixing Record Date. For
the purpose of determining stockholders entitled to notice of or to vote at any
meeting of stockholders, or any adjournment thereof, or entitled to receive
payment of any distribution by the Corporation or a share dividend, or in order
to make a determination of stockholders for any other proper purpose, the Board
of Directors may provide that the stock transfer books shall be closed for a
stated period not to exceed twenty (20) days preceding such meeting. If the
stock transfer records shall be closed for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders, such
records shall be closed for at least ten (10) days immediately preceding such
meeting. In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a record date for any such determination of stockholders, such
date to be not more than ninety (90) days and, in case of a meeting of
stockholders, not less than ten (10) days prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
2.10 Proxies. A stockholder may vote either in person or by
proxy executed in writing by the stockholder, or his or her duly authorized
attorney-in-fact. No proxy shall be valid after eleven months from the date of
its execution, unless otherwise expressly provided in the proxy.
2.11 Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of written
directions to the Secretary of the Corporation to the contrary, at any meeting
of the stockholders of the Corporation any one or more of such stockholders may
cast, in person or by proxy, all votes to which such ownership is entitled. In
the event an attempt is made to cast conflicting votes, in person or by proxy,
by the several persons in whose names shares of stock stand, the vote or votes
to which those persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting. In
the event an attempt is made to cast conflicting votes by more than one person
and the votes are evenly split on any particular matter: (i) each faction may
vote the stock in question
<PAGE> 5
ICARUS International, Inc.
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proportionally; or (ii) any person voting the stock or any beneficiary may apply
to a court of competent jurisdiction to appoint an additional person to act with
the persons voting the stock and the stock shall then be voted as determined by
a majority of those persons and the person appointed by the court. If the
written directions given to the Secretary shows that the interests are unequal,
a majority or even split for the purpose of this Bylaw is a majority or even
split in interest.
2.12 Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by an officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares registered
in the name of another held by a fiduciary may be voted by him or her, either in
person or by proxy, on proof of the fact that legal title to the stock has
devolved on him or her in a fiduciary capacity and that he or she is qualified
to act in that capacity. A stockholder whose shares are pledged shall be
entitled to vote such shares until the shares have been legally transferred into
the name of the pledgee, and thereafter the pledgee shall be entitled to vote
the shares so transferred, but this Bylaw does not affect the validity of any
agreement between the pledgor and pledgee as to the giving of proxies or the
exercise of voting rights.
2.13 Stockholder Proposals. Stockholder proposals shall be made
in accordance with the provisions of the Corporation's Articles of
Incorporation, which provisions are incorporated herein by reference and made a
part hereof with the same effect as if they were expressly set forth herein.
2.14 Inspectors. For each meeting of stockholders, the Board of
Directors in advance of the meeting, may appoint one or more inspectors of
election. If for any meeting the inspector(s) appointed by the Board of
Directors shall be unable to act or the Board of Directors shall fail to appoint
any inspector, one or more inspectors may be appointed at the meeting by the
chairman thereof. Such inspectors shall receive and canvass the votes for the
election of directors and or any proposal voted on by ballot and/or by proxy and
certify the results to the Chairman. Each inspector before entering upon the
duties of such office shall take an oath to execute his or her duties with
strict impartiality and to the best of his or her ability.
ARTICLE III
BOARD OF DIRECTORS
3.1 Number and Powers. The management of all the affairs,
property and interests of the Corporation shall be vested in a Board of
Directors. The Board of Directors shall consist of four (4) persons as of the
effective date of these Bylaws. Directors need not be residents of the State of
Maryland nor hold stock of the Corporation. The Board of
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Directors, other than those who may be elected by the holders of any class or
series of stock having preference over the Common Stock as to dividends or upon
liquidation, shall be divided into three classes as nearly equal in number as
possible, with one class to be elected annually. At each annual meeting of
stockholders subsequent to the effective date of the Articles of Incorporation,
directors elected to succeed those whose terms are expiring shall be elected for
a term of office to expire at the third succeeding annual meeting of
stockholders and when their respective successors are elected and qualified. In
addition to the powers and authorities expressly conferred upon it by these
Bylaws and the Articles of Incorporation, the Board of Directors may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Articles of Incorporation or by these Bylaws directed
or required to be exercised or done by the stockholders.
3.2 Change of Number. The number of directors may at any time
be increased or decreased by a vote of a majority of the Whole Board of
Directors and a majority of the Continuing Directors, as such terms are defined
in the Articles of Incorporation, provided that no decrease shall have the
effect of shortening the term of any incumbent director.
3.3 Vacancies. All vacancies in the Board of Directors shall be
filled in the manner provided in the Corporation's Articles of Incorporation,
which provisions are incorporated herein by reference and made a part hereof
with the same effect as if they were expressly set forth herein.
3.4 Removal of Directors. Directors may be removed in the
manner provided in the Corporation's Articles of Incorporation, which provisions
are incorporated herein by reference and made a part hereof with the same effect
as if they were expressly set forth herein.
3.5 Regular Meetings. Regular meetings of the Board of
Directors shall be held at least once each quarter on such day as the Board of
Directors by resolution shall prescribe and at such hour as may be stated in the
notice of the meeting. Meetings of committees of the Board shall be held as
prescribed by resolution of the Board of Directors or by resolution of such
committee. At least three (3) days' notice of the time and place of each meeting
shall be personally delivered, mailed, sent by facsimile with receipt confirmed
by telephone at the director's residence or principal place of business or given
by telephone to each member of the Board or such committee; provided, however, a
schedule of regular meetings may be provided to each director in the manner
specified above and no further notice of any such meeting(s) shall be required.
Such notice shall be deemed to be delivered when deposited in the mail so
addressed with postage prepaid. Neither the business to be transacted at, nor
the purpose of, any regular meeting need be specified in the notice or any
waiver of notice of such meeting. Regular meetings of the Board of Directors or
any committee may be held at the principal place of business of the Corporation
or at such other place or places, either within or without the State of
Maryland,
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as the Board of Directors or such committee, as the case may be, may
from time to time designate. The annual meeting of the Board of Directors shall
be held without notice immediately after the adjournment of the annual meeting
of stockholders, for the purpose of organizing the Board, electing officers and
members of committees and transacting other business.
3.6 Special Meetings.
(a) Special meetings of the Board of Directors may be
called at any time by the Chairman, the President or by a majority of the
authorized number of directors, to be held at the principal place of business of
the Corporation or at such other place or places as the Board of Directors or
the person or persons calling such meeting may from time to time designate.
Notice of all special meetings of the Board of Directors shall be given to each
director by at least one (1) days' service of the same by facsimile with receipt
confirmed by telephone, telephone or personally, and by at least three (3) days'
service when delivered by mail at the address at which the director is most
likely to be reached. Such notice shall be deemed to be delivered when deposited
in the mail so addressed with postage prepaid. Such notice need not specify the
business to be transacted at, nor the purpose of, the meeting.
(b) Special meetings of any committee may be called
at any time by such person or persons and with such notice as shall be specified
for such committee by the Board of Directors, or in the absence of such
specification, in the manner and with the notice required for special meetings
of the Board of Directors.
3.7 Quorum.
(a) A majority of the Whole Board of Directors of the
Corporation, as such term is defined in the Articles of Incorporation, at the
time of a meeting of the Board of Directors shall be necessary at all meetings
to constitute a quorum for the transaction of business. At any meeting of the
Board, no action shall be taken (except adjournment, in the manner provided
below) until after a quorum has been established.
(b) The act of a majority of directors who are present at a
meeting at which a quorum previously has been established (or at any adjournment
of such meeting, provided that a quorum previously shall have been established
at such adjourned meeting) shall be the act of the Board of Directors,
regardless of whether or not a quorum is present at the time such action is
taken.
(c) In the event a quorum cannot be established at the
beginning of a meeting, a majority of the directors present at the meeting, or
the director, if there be only one person, or the Secretary of the Corporation,
if there be no director present, may adjourn the
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meeting from time to time until a quorum is present. Only such notice of such
adjournment need be given as the Board may from time to time prescribe.
3.8 Waiver of Notice. Attendance of a director at a meeting of
directors shall constitute a waiver of notice of such meeting, except where a
director attends for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. A waiver of
notice signed by the director or directors, whether before or after the time
stated for the meeting, shall be equivalent to the giving of notice.
3.9 Registering Dissent. A director who is present at a meeting
of the Board of Directors at which action on a corporate matter is taken shall
be presumed to have assented to such action unless he or she announces his
dissent at the meeting and his dissent shall be entered in the minutes of the
meeting, or unless he or she shall file his or her written dissent to such
action with the person acting as the secretary of the meeting, before the
adjournment thereof, or shall forward such dissent by certified mail, return
receipt requested, bearing a postmark from the United State Postal Service to
the Secretary of the Corporation within twenty four (24) hours after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action or failed to make his or her dissent known at
the meeting.
3.10 Executive, Audit and Other Committees.
(a) Standing or special committees may be appointed from its
own number by the Board of Directors from time to time and the Board of
Directors may from time to time vest in such committees with such powers as it
may see fit, subject to such conditions as may be prescribed by the Board. An
Executive Committee may be appointed by resolution passed by a majority of the
Whole Board of Directors. It shall have and exercise all of the authority of the
Board of Directors, except in reference to amending the Articles of
Incorporation, declaring dividends or distributions on the capital stock of the
Corporation, issuing stock except as permitted by the MGCL Section 2-411(b),
adopting a plan of merger, share exchange or consolidation, recommending the
sale, lease or exchange or other disposition of all or substantially all the
property and assets of the Corporation otherwise than in the usual and regular
course of business, recommending a voluntary dissolution or a revocation
thereof, or any other action requiring the approval of the stockholders, or
amending these Bylaws. An Audit Committee may be appointed by a resolution
approved by a majority of the Whole Board of Directors, as such term is defined
in the Corporation's Articles of Incorporation, and at least a majority of the
members of the Audit Committee shall be directors who are not also officers of
the Corporation. The Audit Committee shall recommend independent auditors to the
Board of Directors annually and shall review the Corporation's budget, the scope
and results of the audit performed by the Corporation's independent auditors and
the Corporation's system of internal control with management and such
independent auditors, and such other duties as may be assigned to the Audit
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Committee. All committees so appointed shall keep regular minutes of the
transactions of their meetings and shall cause them to be recorded in books kept
for that purpose at the principal office of the Corporation. The designation of
any such committee, and the delegation of authority thereto, shall not relieve
the Board of Directors, or any member thereof, of any responsibility imposed by
law.
(b) Unless otherwise provided by the Board of Directors, a
majority of the members of any committee shall constitute a quorum for the
transaction of business at any meeting of such committee and the acts of a
majority of the members present at a meeting at which a quorum is present shall
be the acts of the committee.
3.11 Remuneration. Directors, as such, may receive a stated
salary for their service, and by resolution of the Board of Directors, a fixed
sum and expenses of attendance, if any, may be allowed for attendance at each
regular or special meeting of such Board. Members of standing or special
committees may be allowed like compensation for attending committee meetings.
3.12 Action by Directors Without a Meeting. Any action required
or which may be taken at a meeting of the directors, or of a committee thereof,
may be taken without a meeting if a consent in writing, setting forth the action
so taken or to be taken, shall be signed by all of the directors, or all of the
members of the committee, as the case may be and filed with the minutes of the
proceedings of the Board or committee. Such consent shall have the same effect
as a unanimous vote.
3.13 Action of Directors by Communications Equipment. Any action
required or which may be taken at a meeting of directors, or of a committee
thereof, may be taken by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time.
3.14 Nominations. Nominations of candidates for election as
directors at any annual meeting of stockholders shall be made in the manner set
forth in the provisions of the Corporation's Articles of Incorporation, which
provisions are incorporated herein by reference and made a part hereof with the
same effect as if they were expressly set forth herein.
3.15 Presiding Officer. The Chairman of the Board shall preside
at all meetings of the Board of Directors at which the Chairman is present. In
the Chairman's absence, the Vice Chairman (if any) shall preside. In the absence
of the Chairman and/or Vice Chairman, the Board shall select a chairman of the
meeting from among the directors present.
<PAGE> 10
ICARUS International, Inc.
Bylaws
Page 10
ARTICLE IV
CAPITAL STOCK
4.1 Certificates. Certificates of stock shall be issued in
numerical order, and each stockholder shall be entitled to a certificate signed
by the Chairman of the Board, President or a Vice President, and the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of such officers may be facsimiles if the certificate is manually signed on
behalf of a transfer agent, or registered by a registrar, other than the
Corporation itself or an employee of the Corporation. If an officer who has
signed or whose facsimile signature has been placed upon such certificate ceases
to be an officer before the certificate is issued, it may be issued by the
Corporation with the same effect as if the person were an officer on the date of
issue. Each certificate of stock shall state:
(a) that is it issued by the Corporation;
(b) the name of the person to whom issued;
(c) the number and class of shares and the
designation of the series, if any, which such certificate represents;
(d) the par value of each share represented by such
certificate; and
(e) the designations and preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption and the differences of
the relative rights and preference between the shares of each series to the
extent that they have been set and the authority of the Board of Directors to
set the relative rights and preferences of subsequent series, or a statement
that the Corporation shall provide such information to any stockholder upon
request and without charge.
4.2 Transfers.
(a) Transfers of stock shall be made only upon the
stock transfer books of the Corporation, kept at the principal office of the
Corporation or at its principal place of business, or at the office of its
transfer agent or registrar, by the person or person named in the certificate or
by the attorney lawfully constituted in writing representing such person or
persons and upon surrender of the certificate or certificates being transferred
which certificate shall be properly endorsed for transfer or accompanied by a
duly executed stock power. Whenever a certificate is endorsed by or accompanied
by a stock power executed by someone other than the person or persons named in
the certificate, evidence of authority
<PAGE> 11
ICARUS International, Inc.
Bylaws
Page 11
to transfer shall also be submitted with the certificate. All certificates
surrendered to the Corporation for transfer shall be cancelled.
(b) The Board of Directors shall have the power and
authority to make all such rules and regulations as it shall deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
(c) Transfer agents and registrars for the
Corporation's stock shall be banks, trust companies or other financial
institutions located within or without the State of Maryland as shall be
appointed by the Board of Directors. The Board shall also define the authority
of such transfer agents and registrars. The Board of Directors may, by
resolution, open a share register in any state of the United States, and may
employ an agent or agents to keep such register, and to record transfers of
shares therein.
4.3 Registered Owner. Registered stockholders shall be treated
by the Corporation as the holders in fact of the stock standing in their
respective names and the Corporation shall not be bound to recognize any
equitable or other claim to or interest in any share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
expressly provided below or by the laws of the State of Maryland. The Board of
Directors may adopt by resolution a procedure whereby a stockholder of the
Corporation may certify in writing to the Corporation that all or a portion of
the shares registered in the name of such stockholder are held for the account
of a specified person or persons.
4.4 Mutilated, Lost or Destroyed Certificates. In case of any
mutilation, loss or destruction of any certificate of stock, another may be
issued in its place upon receipt of satisfactory proof of such mutilation, loss
or destruction. The Board of Directors may impose conditions on such issuance
and may require the giving of a satisfactory open penalty bond with surety or
indemnity to the Corporation in such sum as they might determine and upon the
payment of the Corporation's reasonable costs incident thereto, or establish
such other procedures as they deem necessary.
4.5 Fractional Shares or Scrip. The Corporation may but is not
obliged to (a) issue fractions of a share which shall entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the Corporation in the event of liquidation; (b) arrange for
the disposition of fractional interests by those entitled thereto; (c) pay in
cash the fair value of fractions of a share as of the time when those entitled
to receive such shares are determined; or (d) issue scrip in registered or
bearer form which shall entitle the holder to receive a certificate for a full
share upon the surrender of such scrip aggregating a full share, and unless
otherwise provided, does not entitle its holder to exercise voting rights,
receive dividends, or participate in the assets of the Corporation in the event
of liquidation.
<PAGE> 12
ICARUS International, Inc.
Bylaws
Page 12
4.6 Shares of Another Corporation. Shares owned by the
Corporation in another corporation, domestic or foreign, may be voted by such
officer, agent or proxy as the Board of Directors may determine or, in the
absence of such determination, by the President or a Vice President of the
Corporation.
ARTICLE V
OFFICERS
5.1 Designations. The officers of the Corporation shall be a
Chairman of the Board, a Chief Executive Officer, a President, a Secretary and a
Treasurer, such Vice Presidents, Assistant Secretaries and Assistant Treasurers
as the Board may designate, each of whom shall be elected by a majority vote of
the Board of Directors for one year at their first meeting after the annual
meeting of stockholders, and who shall hold office until their successors are
elected and qualify. The Board of Directors also may elect or authorize the
appointment of such other officers as the business of the Corporation may
require. Any two or more offices may be held by the same person, but such person
may not serve concurrently as the President and a Vice President of the
Corporation and may not execute, acknowledge or verify an instrument required by
law to be executed, acknowledge or verified by more than one officer. The Board
of Directors may appoint a Vice Chairman of the Board, but the person holding
that position shall not be considered an officer of the Corporation.
5.2 Powers and Duties. The officers of the Corporation shall
have such authority and perform such duties as the Board of Directors may from
time to time authorize or determine. In the absence of action of the Board of
Directors, the officers shall have such powers and duties as may be provided in
these Bylaws and as generally pertain to their respective offices.
5.3 Delegation. In the case of absence or inability to act of
any officer of the Corporation and of any person herein authorized to act in his
place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer or any director or other person whom
it may select.
5.4 Vacancies. Vacancies in any office arising from any cause
may be filled by a vote of a majority of the Whole Board of Directors, as such
term is defined in the Articles of Incorporation, at any regular or special
meeting of the Board.
5.5 Other Officers. Directors may appoint such other officers
and agents as it shall deem necessary or expedient, who shall hold their offices
for such terms and shall exercise such powers and perform such duties as shall
be determined from time to time by the Board of Directors.
<PAGE> 13
ICARUS International, Inc.
Bylaws
Page 13
5.6 Term; Removal. The officers of the Corporation shall hold
office until their successors are chosen and qualify. Any officer or agent
elected or appointed by the Board of Directors may be removed at any time, with
or without cause, by the affirmative vote of a majority of the Whole Board of
Directors, as such term is defined in the Corporation's Articles of
Incorporation, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
5.7 Salaries. The salaries and other compensation of all
officers of the Corporation shall be fixed by the Board of Directors.
ARTICLE VI
DIVIDENDS AND FINANCE
6.1 Dividends. Subject to the conditions and limitations
imposed by the MGCL, dividends may be declared by the Board of Directors and
paid by the Corporation.
6.2 Reserves. There may be set aside out of the net earnings of
the Corporation such sum or sums as the directors from time to time in their
absolute discretion deem expedient as a reserve fund to meet contingencies or
for any other proper purpose.
6.3 Depositories. The monies of the Corporation shall be
deposited in the name of the Corporation in such financial institution or
financial institutions or trust company or trust companies as the Board of
Directors shall designate, and shall be drawn out only by check or other order
for payment of money signed by such persons and in such manner as may be
determined by resolution of the Board of Directors. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors. In the absence of such a
resolution, the President and Treasurer shall be deemed authorized to sign such
documents.
6.4 Contracts. The Board of Directors may authorize any officer
or officers, agent or agents to enter into any contracts or execute and deliver
any instrument in the name and on behalf of the Corporation. Such authority may
be general or confined to specific instances. Unless otherwise directed by the
Board of Directors, the Chairman of the Board shall have the authority to bind
the Corporation to those contracts made in the ordinary and usual course of
business of the Corporation.
6.5 Loans. No loan shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority may be general or confined
to specific purposes.
<PAGE> 14
ICARUS International, Inc.
Bylaws
Page 14
ARTICLE VII
CORPORATE SEAL
The Board of Directors may provide a suitable seal, containing the
name of the Corporation, which seal shall be in the custody of the Secretary of
the Corporation, and may provide for one or more duplicates thereof to be kept
in the custody of such other officer(s) of the Corporation as the Board may
prescribe.
ARTICLE VIII
BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account and shall keep minutes and proceedings of its stockholders and Board of
Directors; and it shall keep at its principal office, or at the office of its
transfer agent or registrar, a record of its stockholders, giving the names and
addresses of all stockholders and the number and class of the shares held by
each. Any books, records and minutes may be in written form or any other form
capable of being converted into written form within a reasonable time.
ARTICLE IX
FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Corporation shall end on the 30th day of April
each year. The Corporation shall be subject to an annual audit as of the end of
its fiscal year by independent public accountants appointed by and responsible
to the Board of Directors. The appointment of such accountants shall be subject
to annual ratification by the stockholders.
ARTICLE X
PERSONAL LIABILITY OF DIRECTORS; INDEMNIFICATION
(a) A director of the Corporation shall not be personally
liable for monetary damages for action taken, or any failure to take action, as
a director, to the extent set forth in the Corporation's Articles of
Incorporation, which provisions are incorporated herein by reference and made a
part hereof with the same affect as if they were expressly set forth herein.
(b) The Corporation shall indemnify any person who is a
director, officer, employee or agent of the Corporation to the extent set
forth in the Corporation's Articles
<PAGE> 15
ICARUS International, Inc.
Bylaws
Page 15
of Incorporation, which provisions are incorporated herein by reference and made
a part hereof with the same affect as if they were expressly set forth herein.
ARTICLE XI
AMENDMENTS
Amendments. These Bylaws may be altered, amended or repealed only in
the manner set forth in the Corporation's Articles of Incorporation, which
provisions are incorporated herein by reference and made in part hereof with the
same effect as if they were expressly set forth herein.
As adopted by the Board of Directors this 22nd day of January 1998.
/s/ Eunice E. Blecker
--------------------------
Eunice E. Blecker
Secretary
<PAGE> 1
EXHIBIT 4.1
[FRONT OF CERTIFICATE]
[CERTIFICATE NUMBER] [NUMBER OF SHARES]
SEE REVERSE FOR CERTAIN
DEFINITIONS AND LIMITATIONS
[FORM OF STOCK CERTIFICATE]
ICARUS INTERNATIONAL, INC.
INCORPORATED UNDER THE LAWS OF
THE STATE OF MARYLAND
PAR VALUE $0.01 PER SHARE, COMMON STOCK
This certifies that is the registered holder of
fully paid and non-assessable shares of the Common Stock, par value
$0.01 per share, of ICARUS International, Inc., Rockville, Maryland (the
"Corporation"), incorporated under the laws of the State of Maryland.
These shares are transferable on the books of the Corporation by the
holder of record hereof, in person, or by a duly authorized attorney or
legal representative upon surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are subject
to all the provisions of the Corporation's Articles of Incorporation and
Bylaws and all amendments thereto (copies of which are on file with the
Secretary of the Corporation).
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be executed by the original signatures of its duly
authorized officers and has caused its seal to be affixed hereto.
Dated:
CORPORATE
SEAL
MARYLAND
1998
- --------------------------------- -----------------------------------
Eunice E. Blecker Herbert G. Blecker
Secretary President & Chief Executive Officer
<PAGE> 2
[FORM OF BACK OF CERTIFICATE]
The shares represented by this Certificate are subject to limitations
and restrictions as set forth in the Articles of Incorporation ("Articles") of
the Corporation which are on file in the office of the Maryland Department of
Assessments and Taxation, Baltimore, Maryland and the Bylaws of the Corporation
which are on file with the Secretary of the Corporation. The Articles of the
Corporation authorize the Corporation to issue more than one class of stock,
including classes of preferred stock, which may be issued in one or more series.
The Corporation will furnish to any stockholder upon request and without charge
a full statement of the designations, preferences, limitations and relative
rights of the shares of each class authorized to be issued and, with respect to
the issuance of any preferred stock to be issued in series, the relative rights
and preferences between the shares of each series so far as the rights and
preferences have been fixed and determined and the authority of the Board of
Directors to fix and determine the relative rights and preferences of subsequent
series.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT -____________Custodian -____________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act__________________
in common (State)
</TABLE>
For value received, ___________________ hereby sell, assign and
transfer unto ___________________, ________________ Shares of the Common Stock
evidenced by the within Certificate, and do hereby irrevocably constitute and
appoint ________________, Attorney, to transfer the said Stock on the books of
the within named Corporation, with full power of substitution in the premises.
Dated ___________________
In presence of
_________________________________________
_________________________________________
<PAGE> 1
Exhibit 10.1
CONFIDENTIAL TREATMENT REQUESTED - REDACTED
TECHNOLOGY LICENSING AND MARKETING AGREEMENT
This Technology Licensing and Marketing Agreement (hereinafter called
Agreement) is entered into as of the first day of May 1997, by and between
ICARUS Corporation, a Maryland corporation with offices at One Central Plaza,
11300 Rockville Pike, Rockville, Maryland 20852, hereinafter called ICARUS, and
Richardson Engineering Services Inc., an Arizona corporation having an office at
1742 South Fraser Drive, Mesa, AZ 85204-6601 hereinafter called RICHARDSON.
WHEREAS ICARUS has developed computer software, database products,
publications, technology, and know-how related to the design and project and
process evaluation of projects in the chemical processing and related
industries; and
WHEREAS ICARUS has developed a direct sales and marketing force,
affiliates, and a worldwide network of dealers, distributors, sales agents, and
business partners; and
WHEREAS ICARUS desires to develop computer software, technology, and
know-how which incorporate RICHARDSON computer software, database products,
technology, and know-how and market such software, technology, and know-how
worldwide to its customers via ICARUS' direct sales and marketing force,
affiliates, and worldwide network of dealers, distributors, sales agents, and
business partners; and
WHEREAS RICHARDSON has developed computer software, database products,
publications, technology, and know-how related to the estimating of projects in
the chemical processing and related industries; and
WHEREAS RICHARDSON desires to utilize ICARUS' direct sales and
marketing force, affiliates, and worldwide network of dealers, distributors,
sales agents, and business partners for the purpose of increasing RICHARDSON'S
sales of its software, database products, training, publications, and other
products; and
WHEREAS RICHARDSON has compiled, created and published general
construction estimating information in textual form contained in three volumes
entitled "Richardson General Construction Standards" and has compiled, created
and published process plant construction estimating information in textual form
contained in four volumes entitled "Richardson Process Plant Estimating
Standards" (hereinafter collectively referred to as the "Standards");
WHEREAS RICHARDSON has compiled, created and published the Standards in
machine readable format, entitled "Combined General Construction, Process Piping
and Equipment," ("Combined") which has also been published in two parts entitled
"General Construction" ("General") and "Process Piping and Equipment"
("Piping"), hereinafter collectively referred to as the "Data Bases" and
individually referred to as the "Individual Data Bases"; and
<PAGE> 2
WHEREAS RICHARDSON and ICARUS desire to enter into a beneficial
relationship for the purpose of expanding their markets; and
WHEREAS it is the intent of RICHARDSON and ICARUS that integration of
their respective technologies will permit ICARUS to develop software that
encompasses conceptual estimating through detailed estimating.
NOW, THEREFORE, in consideration of the mutual promises and
undertakings set forth in this Agreement, ICARUS and RICHARDSON hereby agree as
follows:
1. Definitions
A. "ICARUS MARKETING CHANNELS" means the ICARUS direct sales and
marketing force, ICARUS affiliates, and ICARUS' worldwide
network of dealers, distributors, sales agents, and business
partners, as the same may be determined or altered by ICARUS
from time to time.
B. "CPI" means the Chemical Processing Industries including but
not limited to the chemical, specialty chemical, oil,
petrochemical, pharmaceutical, ore beneficiation, food,
electrical power generation, pulp and paper, and related
industries.
C. "RACE" means the Unit Cost Estimating Software (as hereinafter
defined) developed by and/or owned by RICHARDSON which is
designed to produce cost estimates and related data and
information for processing facilities in the CPI during the
term of this Agreement.
D. "RICHARDSON Software" means RACE and any other computer
software programs developed by and/or owned by RICHARDSON
during the term of this Agreement which are Unit Cost
Estimating Software (as hereinafter defined).
E. "RICHARDSON Database Products" means the Data Bases and
Individual Data Bases which are marketed and distributed by
RICHARDSON to its customers on media such as but not limited
to CD ROM, Floppy Diskettes, Computer Tape, and/or Computer
Files which can be accessed by computer software.
F. "ICARUS Software and Services" means
(i) any system of computer programs, associated
documentation, technology, and know-how owned and/or
marketed by ICARUS MARKETING CHANNELS including but
not limited to the ICARUS 2000, ICARUS Process
Evaluator (IPE), ICARUS Project Manager (IPM),
Questimate, ICARUS Mentor, ARCHES(R), ICUE, ICUE
Reporter, ICARUS Manpower Productivity Expert (MPE),
COST(R)
<PAGE> 3
System, and the firmware known as the ICARUS System
Device (as hereinafter defined), and
(ii) any other or future system of computer programs,
and/or any combination of these systems and/or any
modifications made to such systems or combinations
thereof which may become part of this Agreement (as
determined by ICARUS) along with their associated
documentation, technology, and know-how, and
(iii) any services owned and/or marketed by ICARUS
MARKETING CHANNELS relating to ICARUS' computer
programs and/or products and services marketed by
ICARUS MARKETING CHANNELS including all associated
documentation, technology, know-how, and any
estimates prepared by ICARUS using ICARUS 2000,
ICARUS Process Evaluator (IPE), ICARUS Project
Manager (IPM), Questimate, ICARUS Mentor, ARCHES(R),
ICUE, ICUE Reporter, ICARUS Manpower Productivity
Expert (MPE), COST(R) or any other ICARUS systems and
programs.
G. [*]
H. "Project Component" means a particular type of process
equipment, materials handling equipment, or the material and
associated labor required to install the equipment in a
processing facility in the CPI.
I. "Design and Cost Model" means a mathematical representation of
a Project Component which is part of a computer program which
simulates the mechanical design, and/or cost of a process
facility design under a specified set of conditions and which
may use expert systems technology to represent and/or develop
certain data relating to and/or incorporating process design,
process simulation, unit operation(s) design, unit processes
design, mechanical design, process selection and/or sizing,
and/or user expertise and which can use an object oriented
project knowledge base.
J. "ICARUS System Device" or "ISD" means the firmware and
associated computer programs, technology, and know-how
developed and/or owned by ICARUS that when attached to a
serial port of a computer controls the calendar time
(duration) and number of users that can access a particular
computer program.
- ----------------
* This information has been omitted pursuant to a request for
confidential treatment.
<PAGE> 4
K. "End-User Customer" means an organization that purchases
and/or licenses RICHARDSON Software and/or RICHARDSON Database
Products for its own use and not for sale and/or licenses
and/or sublicense to others.
2. Licensed Rights
A. Nothing in this Agreement shall be construed to transfer title
to RICHARDSON Software, RICHARDSON Database Products and/or
any other service or any publication owned by RICHARDSON, to
ICARUS.
B. Nothing in this Agreement shall be construed to transfer title
to ICARUS Software and Services to RICHARDSON.
C. Nothing in this Agreement shall be construed to restrict
RICHARDSON from marketing RICHARDSON Software, RICHARDSON
Database Products, or any RICHARDSON publication or service
directly to RICHARDSON customers.
D. Nothing in this Agreement shall be construed to restrict
ICARUS from marketing ICARUS Software and Services to ICARUS
MARKETING CHANNELS and/or ICARUS customers, nor restrict
ICARUS from developing or attempting to develop or license
from others, other software technology and know how, whether
similar or dissimilar to the RICHARDSON Software and/or
Integrated Software (as hereinafter defined). ICARUS agrees
not to develop and/or market, apart from the Integrated
Software, Unit Cost Estimating Software during the term of
this Agreement. Nothing contained in this Agreement, however
shall be construed to obligate ICARUS to develop or devote any
particular amount of financial or other resources to the
development of, marketing of, or sale or licensing of the
Integrated Software. However ICARUS shall have the right to
develop software ("Customer Software") that contains Unit Cost
Estimating Software for a customer of ICARUS provided that
such Customer Software is not otherwise directly or indirectly
marketed by ICARUS or such customer as a commercially
available product.
E. ICARUS hereby grants RICHARDSON the right to become an ICARUS
Sales Agent, with the non-exclusive right to market ICARUS
software directly to RICHARDSON'S customers. ICARUS agrees to
pay RICHARDSON the fee as specified in the ICARUS Sales
Agent's Agreement.
F. RICHARDSON shall provide to ICARUS, and hereby grants to
ICARUS, the right to use the original source code of the
RICHARDSON Software ("Original RICHARDSON Source Code")
subject to the following:
<PAGE> 5
(i) If ICARUS requests that an addition, deletion and/or
other change be made to the Original RICHARDSON
Source Code (hereafter "Modified RICHARDSON Source
Code"), that relates solely to the functional
operation of RICHARDSON'S Software then ICARUS shall
describe such change to RICHARDSON, whereupon
RICHARDSON shall have the option to either create the
Modified RICHARDSON Source Code or elect to have
ICARUS do so. If RICHARDSON elects to create the
Modified RICHARDSON Source Code itself but either
does not or cannot make the requested change within
the time frame requested by ICARUS, then ICARUS shall
have the right to create the Modified RICHARDSON
Source Code. The party creating the Modified
RICHARDSON Source Code shall, upon completion and
testing, give a copy to the other party.
(ii) ICARUS is hereby permitted to integrate and/or
interface the Original RICHARDSON Source Code and/or
Modified RICHARDSON Source Code and/or RICHARDSON
Software, with ICARUS Software and Services; the
resulting integrated software hereby being deemed the
"Integrated Software", and any modifications to the
Original RICHARDSON Source Code or Modified
RICHARDSON Source Code made by ICARUS in conjunction
therewith being hereby deemed the "Integration Source
Code." RICHARDSON agrees at all times to cooperate
with ICARUS and/or assist ICARUS in performing the
interface and/or integration of RICHARDSON Software
and ICARUS Software and Services. Thereafter, ICARUS
shall be responsible for making and tracking such
additional changes as may be necessary in all future
versions thereof.
(iii) RICHARDSON shall have the right to elect not to
incorporate the Modified RICHARDSON Source Code into
the RICHARDSON Software as marketed by RICHARDSON;
however, ICARUS shall nevertheless be permitted to
incorporate the Modified RICHARDSON Source Code into
the Integrated Software.
(iv) Notwithstanding the foregoing, ICARUS shall also
retain the right to make changes to the Original
RICHARDSON Source Code or Modified RICHARDSON Source
Code that relates solely to copy and/or license
management using the ICARUS System Device (or any
substitute device utilized by ICARUS), and such
changes as may be required in order to integrate
RICHARDSON Software into ICARUS Software and Systems,
and which shall be deemed part of the Integration
Source Code.
(v) RICHARDSON shall at all times retain sole ownership
and title to the Original RICHARDSON Source Code and
the Modified RICHARDSON Source Code, if created by
RICHARDSON.
<PAGE> 6
ICARUS shall at all times retain sole ownership and
title to the source code of all ICARUS Software
Original and to those portions of the Modified
RICHARDSON Source Code created by ICARUS in
accordance with the terms of this Agreement. Subject
to the terms of this Agreement, RICHARDSON and ICARUS
hereby grant exclusive, fully paid-up cross-licenses
to one another to make, use, sell, copy, publish, or
otherwise reproduce and utilize those portions of the
Modified RICHARDSON Source Code authored or created
by RICHARDSON or ICARUS.
G. Except to the extent such rights have already been granted for
those existing RICHARDSON dealers identified in paragraph 3
below, RICHARDSON hereby grants ICARUS the exclusive right to
market, sell, license and sublicense RICHARDSON Software and
RICHARDSON Database Products via ICARUS MARKETING CHANNELS.
RICHARDSON hereby grants ICARUS the right to purchase such
RICHARDSON Database Products, at a discount of forty percent
(40%) or the highest discount offered to any RICHARDSON
reseller, whichever discount is greater, off the list price of
RICHARDSON Database Products.
H. RICHARDSON and ICARUS agree to cooperate to reconcile their
respective two cost bases for their cost estimating and
pricing methodologies so that ICARUS Software and Services,
ICARUS' data and RICHARDSON data are consistent. RICHARDSON
agrees to provide ICARUS, upon request, a technical review
before each release of RICHARDSON Software and RICHARDSON
Database Products, to ensure consistency with ICARUS Software
and Services.
I. License of RICHARDSON Marks
(i) RICHARDSON hereby grants to ICARUS for the term of
this Agreement a worldwide non-exclusive right and
license, but not the obligation, to use and
sublicense to ICARUS and ICARUS Marketing Channels
the RICHARDSON trademarks, service marks, brand
names, logos, and other proprietary rights used by
RICHARDSON for the RICHARDSON Software and RICHARDSON
Database Products (the "RICHARDSON Marks") in
connection with the distribution, advertising and
promotion of the RICHARDSON Database Products,
RICHARDSON Software, and Integrated Software, subject
to the provisions of this Section 2 Paragraph I.
(ii) ICARUS acknowledges and agrees that except for the
limited right to use the RICHARDSON Marks to the
extent herein setforth, ICARUS has no rights in the
RICHARDSON Marks. ICARUS acknowledges that RICHARDSON
owns and retains all proprietary rights in and to all
RICHARDSON Marks, and that ICARUS shall take no
action or
<PAGE> 7
make any registration that would otherwise convey or
grant an interest in said RICHARDSON Marks. ICARUS
agrees not to contest or take any action to contest
RICHARDSON's ownership of the RICHARDSON Marks, or to
use, employ or attempt to register any trademark,
service mark, or tradename in any country in the
world that is confusingly similar to the RICHARDSON
Marks.
(iii) ICARUS agrees that RICHARDSON shall be the sole owner
of any and all goodwill in the RICHARDSON Marks built
up in the United States and in any country in which
the RICHARDSON Database Products, RICHARDSON
Software, and Integrated Software are distributed by
ICARUS.
(iv) ICARUS shall take no action that impairs or otherwise
tarnishes the RICHARDSON Marks.
(v) ICARUS shall require its Affiliates and Dealers to
adhere to the terms of this provision, and shall take
steps generally consistent with the monitoring of
ICARUS' own marks to ensure that its Affiliates and
Dealers use the RICHARDSON Marks in accordance with
the terms of the license herein.
(vi) ICARUS agrees to cooperate (at no cost to ICARUS)
with RICHARDSON to protect RICHARDSON's ownership of
and interest in the RICHARDSON Marks. This
cooperation includes prompt notice to RICHARDSON of
instances known to ICARUS in which a third party is
using the RICHARDSON Marks without authorization.
RICHARDSON shall have the right, but not the
obligation, and shall bear all costs and expenses, to
(a) institute and prosecute any actions for
infringement of the RICHARDSON Marks throughout the
world; (b) defend any petition to cancel any
registration of the RICHARDSON Marks; (c) and oppose
any attempted use of or application to register any
mark confusingly similar to, or a colorable imitation
of, any of the RICHARDSON Marks throughout the world.
In the event that RICHARDSON elects not to exercise
the foregoing rights in any particular instance,
ICARUS may, at its cost and expense, exercise such
rights.
(vii) Nothing contained in this Agreement shall be deemed
to grant to RICHARDSON any rights to use, sublicense
or otherwise, any trademarks, service marks, brand
names, logos, and other proprietary rights belonging
to ICARUS; and RICHARDSON agrees that ICARUS shall be
the sole owner of any and all goodwill in the
aforementioned, and RICHARDSON shall take no action
that impairs or otherwise tarnishes same.
<PAGE> 8
J. Nothing contained in this Agreement shall be construed as
limiting rights that the parties may enjoy outside the scope
of the rights granted and the obligations and restrictions set
forth or treated herein.
3. Marketing
Subject to all existing and pending Dealer and Distributor agreements
between RICHARDSON and third parties, the existence of which ICARUS
acknowledges the notice of, RICHARDSON and ICARUS agree that RICHARDSON
and ICARUS MARKETING CHANNELS, will be the exclusive worldwide marketers
of RICHARDSON'S Software and RICHARDSON Database Products to the CPI.
RICHARDSON and ICARUS agree that ICARUS MARKETING CHANNELS shall be the
exclusive worldwide resellers of RICHARDSON Software and RICHARDSON
Database Products. However RICHARDSON shall have the right to market
RICHARDSON Software and RICHARDSON Database Products directly to its own
End-User Customers, but not for subsequent resale or transfer.
4. Additional Obligations of the Parties
A. RICHARDSON agrees to assist ICARUS in the development and
marketing of ICARUS' ARCHES(R) software and such other
software as may be owned or developed by ICARUS, for building
design and construction. RICHARDSON shall in its sole
discretion decide the level of any such assistance if any. It
is the understanding of the parties that ICARUS will control
the development of the ARCHES(R) software.
B. RICHARDSON agrees to provide ICARUS with one (1) current
updated copy of each publication marketed by RICHARDSON in
order for ICARUS to (i) check for any inconsistencies between
ICARUS Software and Services and RICHARDSON Software,
RICHARDSON Database Products, RICHARDSON data and/or
technology, and (ii) for ICARUS to become knowledgeable about
such RICHARDSON publications.
C. Each party shall bear its own costs associated with any
development work related to any software development and
technology integration.
5. Training
A. ICARUS agrees to inform ICARUS customers about RICHARDSON
training classes relating to the use of (i) the RICHARDSON
Software, and (ii) RICHARDSON Database Products. RICHARDSON
agrees to train ICARUS personnel and certify them for
retraining of others, in order that ICARUS may offer training
to its customers relating to the use of RICHARDSON Database
Products.
<PAGE> 9
B. ICARUS agrees to train ICARUS MARKETING CHANNELS in order to
promote RICHARDSON Database Products.
6. Maintenance and Technical Support Services
A. ICARUS agrees to provide all technical support services to
customers licensing Integrated Software from ICARUS Marketing
Channels. RICHARDSON shall at its sole option determine the
amount of technical support services RICHARDSON shall provide
customers of Integrated Software. RICHARDSON agrees to provide
software maintenance and bug fixes of RICHARDSON Software to
ICARUS as soon as they are available for use by customers of
RICHARDSON Software at no charge to ICARUS or ICARUS
customers.
B. RICHARDSON agrees to provide all technical support services to
customers licensing RICHARDSON Database Products from ICARUS
Marketing Channels at no charge to ICARUS or ICARUS customers.
7. Covenants
A. RICHARDSON agrees that it shall not enter agreement(s) with
any third party to market RICHARDSON Software or RICHARDSON
Database Products, or to develop products which would be in
competition with ICARUS Software and Services, for the full
term of this agreement or any renewal term of this agreement
and without regard to any early termination of this agreement
except upon mutual agreement by both parties.
B. ICARUS agrees that it shall not enter agreement(s) with any
third party to market Unit Cost Estimating Software, or to
develop products which would be in competition with RICHARDSON
Unit Cost Estimating Software, or RICHARDSON Database
Products, for the full term of this agreement or any renewal
term of this agreement and without regard to any early
termination of this agreement except upon mutual agreement by
both parties.
8. Term
This Agreement shall be effective on the date first above written and
shall remain in force until terminated as provided herein, or for a period
of ten (10) years and shall be automatically renewed for additional
renewal terms of ten (10) years, unless six (6) months prior to any
anniversary date of a renewal term after the tenth (10th) year, either
party gives written notice of termination.
<PAGE> 10
9. Default
In the event of default by either party under any term or condition of
this Agreement, in addition to all other rights and remedies at law
available to the non-defaulting party, the non-defaulting party shall be
entitled to full and complete equitable relief, including the remedy of
temporary, preliminary and permanent injunction, in order to enforce the
terms and conditions of this Agreement and to protect the non-defaulting
parties' rights, including intellectual property rights and proprietary
information.
10. Trade Secrets and Technical Information
A. ICARUS and RICHARDSON agree to treat all proprietary technical
information and trade secrets identified as such by either party as
they would treat their own most valuable trade secrets.
B. ICARUS and RICHARDSON shall, unless otherwise authorized in writing
by the other party, hold in confidence and not divulge to third
parties or use in any way other than for providing services as
described herein, any confidential technical information identified
in writing as such by the party providing such information, which is
disclosed, directly or indirectly, to either party by the other.
Confidential technical information shall not include:
(i) information already known by the recipient and which was
acquired in a lawful manner and without obligation of
confidentiality;
(ii) information which is now or hereafter becomes a part of the
public domain through no wrongful act of the recipient;
(iii) information lawfully received by the recipient, without
obligation of confidentiality, from a third party who is free
to disclose it; or
(iv) information which the recipient can show by reasonable
evidence had been independently developed without reference to
confidential information received from the other party hereto.
11. Reports
A. ICARUS shall submit a quarterly report to RICHARDSON within thirty
(30) days of the last day of each calendar quarter listing the name
and address of each customer (i) licensing Integrated Software and/or
other ICARUS software containing RICHARDSON'S Database Products, from
ICARUS MARKETING CHANNELS, and (ii) that purchased RICHARDSON'S
Database Products from ICARUS MARKETING CHANNELS.
<PAGE> 11
B. RICHARDSON shall submit a quarterly report to ICARUS within thirty
(30) days of the last day of each calendar quarter listing the name
and address of each customer licensing ICARUS software directly from
RICHARDSON, and provide to ICARUS a copy of the signed license
agreement for each customer. The foregoing shall bin addition to the
requirements of the ICARUS Sales Agent's agreement described in
paragraph 2E above.
12. Payments
[*]
13. Force Majeure
ICARUS, ICARUS MARKETING CHANNELS and RICHARDSON shall not be
liable for failure or delay of performance hereunder if occasioned by
"force majeure", including war, declared or undeclared, fire, flood,
interruption of transportation, embargo, accident, explosion, inability to
procure, or shortage of supply of materials, equipment or production
facilities, governmental orders, regulations, restrictions, priorities or
rationing, or by strike, lockout, or other labor troubles, or any other
cause beyond the control of the party claiming that its failure of
performance was occasioned by "force majeure". Any suspension of
performance by reason of this paragraph shall be limited to the period
during which such cause or failure exists, but such suspension shall not
affect the term of this Agreement as heretofore defined.
- -----------------
* This information has been omitted pursuant to a request for confidential
treatment.
<PAGE> 12
14. Entire Agreement
This Agreement constitutes the agreement between the parties hereto and
supersedes all prior negotiations, representations or agreements related
to this Agreement either written or oral. No changes, alterations or
modifications to this Agreement shall be effective unless in writing and
signed by the parties hereto, provided, however, RICHARDSON'S marketing of
ICARUS software shall be governed by the ICARUS Sales Agent's agreement.
15. Notices and Transmittals
A. All notices required or permitted to be given by this Agreement shall
be in writing and shall be sent by registered or certified mail to
ICARUS or RICHARDSON at their office addresses set forth in this
Agreement or such other address as notified in writing after the date
hereof.
B. The date of any notice shall be the date it is first received by the
office of the addressee.
C. All Notices shall be directed to:
ICARUS:
ICARUS Corporation
One Central Plaza
ll300 Rockville Pike
Rockville, MD 20852
Attention: President
RICHARDSON:
Richardson Engineering Services Inc.
1742 S Fraser DR
Mesa, AZ 85204-6601
Attention: President
16. Index - Headings
Index to this Agreement and headings and subheadings of Articles contained
herein are used for convenience and ease of reference, and in no way
define, limit or describe the scope or intent of this Agreement or any of
its provisions.
<PAGE> 13
17. Severability
If any provision or clause of this Agreement or application thereof to any
person or circumstance is held invalid or unconscionable, such invalidity
or unconscionability shall not affect any other provision or application
of the Agreement which can be given effect without the invalid or
unconscionable provision or application, and to this end the provisions of
this Agreement are declared to be severable.
18. Waiver and Invalidity
No benefit or right accruing to either party under this Agreement shall be
deemed waived unless the waiver is reduced to writing and signed by both
parties. The waiver by either party in one instance of any act, condition
or requirement stipulated in this Agreement shall not be deemed a
continuing waiver or a waiver of any other act, condition or requirement
or a waiver of the same act, condition or requirement in other instances.
19. Governing Law
The validity, construction and interpretation of this Agreement, and the
rights and obligations of the parties hereto, shall be governed by the
laws of the State of Maryland, U.S.A. (including, where applicable, the
Uniform Commercial Code as adopted by the State of Maryland).
20. Warranties
A. Each party represents and warrants to the other party that it is the
author and owner of its software, technology, and know-how and/or has
full and exclusive right to grant all licenses and rights granted
herein, that its software, technology, and know-how have not been
published or, disclosed under circumstances that have caused loss of
copyright or, trade secret status therein, and that its software,
technology, and know-how do not infringe any copyright or other
proprietary rights including trade secrets of any third party.
B. RICHARDSON hereby represents and warrants that the Original
RICHARDSON Source Code is as represented, that the media containing
same shall be free of defects in materials and workmanship, and that
any inherent defects shall be promptly remedied by RICHARDSON without
cost, expense or further liability to ICARUS.
<PAGE> 14
21. Indemnification
A. RICHARDSON and ICARUS hereby agree to indemnify and defend the other
party against all claims that such party's respective software
infringes any patent, copyright, trademark, or trade secret rights of
a third party, and such party agrees to pay all costs, damages, and
attorney fees incurred by the other party with any such claim. The
parties further agree to submit to personal jurisdiction in any forum
in which the other party may be sued on any claim subject to
indemnification.
B. Neither party shall have any obligation to defend the other party, or
to pay any such costs, damages, and attorney fees for any claim based
upon the combination, operation, or use of the other party's software
and/or technology with any programs or data not supplied by that
party if such infringement would have been avoided by the
combination, operation, or use of such software and/or technology
without such particular programs or data.
C. The parties represent and warrant that no claim of infringement of
any patent, copyright, trademark, or other intellectual property
right, has been made or is pending against that party or any entity
from which that party has obtained such rights relative to software
delivered to the other party hereunder.
D. The foregoing indemnities are conditioned on (i) prompt written
notice of any claim or proceeding subject to indemnity; (ii)
reasonable cooperation by the indemnified party in the defense and
settlement of such claim at the expense of the indemnifying party;
and (iii) prior written approval by the indemnifying party of any
settlement, which approval shall not be unreasonably withheld.
22. Confidentiality of Terms
Neither party shall, without prior written authorization of the other
party, disclose to any third party the terms and conditions of this
Agreement except as may be necessary to establish or assert rights
hereunder or as required by law; provided, however, that either party may,
on a confidential basis, disclose this Agreement to its accountants,
attorneys, financing organizations, or as otherwise may be required by
law.
23. Assignment
Neither party shall sell, transfer, assign, or subcontract any right or
obligation hereunder except as expressly provided herein without the prior
written consent of the other party. Any act in derogation of the foregoing
shall be null and void. The parties agree that the foregoing does not
apply to a transfer of ownership of either party.
<PAGE> 15
24. Arbitration
Any controversy or claim arising out of or relating to this Agreement, or
the breach thereof, shall be settled by arbitration in accordance with the
Rules of the American Arbitration Association, and judgment upon the award
rendered by the Arbitrator(s) may be entered into any Court having
jurisdiction thereof. Notwithstanding the foregoing, this provision shall
not be deemed to preclude either party from obtaining equitable relief,
including injunctive relief in any court of competent jurisdiction to
enforce any term or condition hereunder without the necessity of
arbitration.
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have executed and sealed this Agreement effective the day and year first above
written.
Richardson Engineering Services Inc. (RICHARDSON)
By/s/John H. Heitkamp (SEAL)
- -------------------------------------------------------
Signature Date
John H. Heitkamp
- -------------------------------------------------------
Name
President
- -------------------------------------------------------
Title
ICARUS Corporation (ICARUS)
By/s/William F. Geritz III (SEAL)
- -------------------------------------------------------
Signature Date
William F. Geritz III
- -------------------------------------------------------
Name
Vice President
- -------------------------------------------------------
Title
<PAGE> 17
RICHARDSON ENGINEERING SERVICES, INC.
1742 S. Fraser Dr.
P.O. Box 9103
Mesa, Arizona 85214-9103
(602) 497-2062 * Fax: (602) 497-5529 * Email:[email protected]
May 18, 1997
RICHARDSON ENGINEERING SERVICES, INC.
Whereas Richardson and ICARUS have agreed to the marketing and reselling
exclusivity under paragraph 3 of their agreement, Richardson agrees to
make reasonable efforts to lawfully non-renew or terminate said
distributor agreements pursuant to the Term and Termination section
present in every agreement. In addition, in order to protect Richardson's
income derived from the annual renewal of Database Products previously
sold under above said agreements, ICARUS grants to Richardson the right to
offer replacement agreements granting the above said distributors the
right to maintain only those Database Products sold to End-User Customers
while the original agreements were in effect. In addition, ICARUS agrees
to allow Richardson the retention of its agreement with its distributor in
Canada and agrees to allow Richardson to sign the pending agreements with
distributors in Mexico, Venezuela and Indonesia allow.
/s/ William F. Geritz 5/18/97 Vice President
- -------------------------------------------------------
William F. Geritz
/s/ John H. Heitkamp 5/18/97 President
- -------------------------------------------------------
John H. Heitkamp
<PAGE> 1
Exhibit 10.2
CONFIDENTIAL TREATMENT REQUESTED - REDACTED
JOINT DEVELOPMENT AGREEMENT
THIS JOINT DEVELOPMENT AGREEMENT ("Agreement") made effective this 24th
day of July, 1997, by and between ICARUS DEVELOPMENT AND MARKETING CORPORATION,
11300 Rockville Pike, Rockville, Maryland 20852 ("ICARUS") and HYPROTECH, LTD.,
1110 Center Street North, Calgary, Alberta, Canada T2E 2R2 ("HYPROTECH").
RECITALS
A. The "engineering work processes" in the engineering field,
construction field, and research and development field and within owner operator
companies, consist of conceptual design, basic engineering, detailed
engineering, operations and maintenance; which processes utilize and/or have a
need to utilize software for process simulation, equipment selection, sizing and
cost estimating.
B. HYPROTECH and ICARUS presently believe that there is a relatively
low level of software integration across the foregoing disciplines, and desire
to develop and offer an integrated set of software applications that will
provide engineers and others with an environment in which to address process
simulation, equipment selection, equipment sizing and cost estimating.
C. HYPROTECH has developed a proprietary flow sheet process simulation
program called HYSYS. Using object-oriented programming, HYSYS represents a
framework in which engineering applications can be implemented from conceptual
design through plant operation within a single environment. ICARUS owns the
rights to industry proven software and technology in the areas of design, cost
estimating, scheduling, computer aided engineering (CAE), computer aided design
(CAD), and expert system technologies.
D. HYPROTECH and ICARUS are entering into this Agreement, in order to
integrate appropriate portions of their respective technologies and produce
Jointly Developed Products (as hereinafter defined), which address engineering
work processes in the Chemical Processing Industry, where HYSYS and/or HYSIM are
used as the source of process information.
<PAGE> 2
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, which are
hereby incorporated by reference and made a part hereof, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto covenant and agree as follows:
1. Definitions.
HYPROTECH Technology means the proprietary computer software
owned and/or marketed by HYPROTECH relating to process simulation, modeling,
equipment selection, equipment sizing, cost estimating, heuristics, HYPROTECH
Framework, and all associated data, technology, information, and know-how.
HYPROTECH Products means the software programs and related
services owned and/or marketed by HYPROTECH which are based upon HYPROTECH
Technology, including but not limited to HYSYS and HYSIM simulation software
products.
ICARUS Technology means the proprietary computer software
owned and/or marketed by ICARUS relating to equipment selection, equipment
sizing, cost estimating, cost modeling, volumetric modeling, heuristics,
scheduling, project management, Computer Aided Engineering (CAE), Computer Aided
Design (CAD), expert systems development, knowledge bases, object database,
knowledge based and object database driven graphics, and all associated data,
technology, information, and know-how.
ICARUS Products means the software programs and related
services owned and/or marketed by ICARUS which are based upon ICARUS Technology,
including but not limited to ICARUS Process Evaluator (IPE), ICARUS Mentor,
ICARUS Project Manager, Questimate, ICARUS 2000, and their related products.
Proprietary Information means software, firmware,
documentation, data, source code, methods, procedures, and related know-how
including all copyright, patent, trade secret and other intellectual property
rights. For purposes of this agreement, Proprietary Information shall not
include information available in the public domain, or information learned from
another source.
CPI means the chemical processing industries, including
chemical processing, oil refining, natural gas processing, energy producing,
petrochemical, pharmaceutical, food, pulp and paper, ore beneficiation and
related industries.
Authorized Simultaneous User ("ASU") means the number of end
users as shown in the appropriate end-user license agreement that may
simultaneously utilize the software product licensed.
2
<PAGE> 3
Affiliate means, with respect to any party, any other Person
which is affiliated with such party, and for the purposes hereof:
a. two Persons will be considered to be affiliated with
one another if one of them controls the other, or if
both of them are controlled by a common third party,
and
b. one Person will be considered to control another
Person if it has the Power to direct or cause the
direction of the management and policies of the other
Person, whether directly or indirectly, through one
or more intermediaries or otherwise, and whether by
virtue of the ownership of shares or other equity
interests, the holding of voting rights or
contractual rights, or otherwise.
Person means any individual, corporation, partnership,
government body, association or unincorporated organization.
Customer means end user and excludes distributors and
resellers.
Existing Customer means any Person authorized under a license
agreement to use the products of a party at the time of the first commercial
release of any Jointly Developed Product.
HYPROTECH Framework means the component-based application
programming interface ("API"), algorithmic organization, control, and storage
architecture developed by HYPROTECH for use in HYPROTECH software applications.
Jointly Developed Software Modules means software jointly
developed by HYPROTECH and ICARUS and associated know-how, data, methods,
procedures, and technology and that does not contain any HYPROTECH Technology or
ICARUS Technology or either party's Proprietary Information.
Jointly Developed Product(s) means a software end-product,
which is jointly developed by HYPROTECH and ICARUS and which may contain
portions of HYPROTECH Technology, portions of ICARUS Technology, portions of
Jointly Developed Software Modules, and/or technology jointly developed by both
parties.
PICASSO means the software product that was in development by
HYPROTECH and that HYPROTECH planned to use with the HYPROTECH Framework, and
that was planned to address engineering work processes in the CPI such as but
not limited to conceptual design, equipment selection, equipment sizing, and
cost estimation.
3
<PAGE> 4
PLANT-PRODUCT means the software product intended to be
primarily marketed to process engineers with little or no prior cost engineering
experience or responsibility, where nothing more than data provided by a
converged steady state simulation case is required to produce a cost estimate.
This product includes PICASSO, other appropriate HYPROTECH Technology and
appropriate ICARUS Technology. PLANT-PRODUCT shall be completed jointly by the
parties pursuant to this Agreement, and shall be deemed a Jointly Developed
Product.
PROCESS-PRODUCT means the software product intended to be
primarily marketed to process engineers where process simulation data is
necessary, but not sufficient input by itself to produce a cost estimate that is
satisfactory to the user. This product includes PICASSO, other appropriate
HYPROTECH Technology and appropriate ICARUS Technology.
PROCESS-PRODUCT shall be completed jointly by the parties
pursuant to this Agreement, and shall be deemed a Jointly Developed Product.
HYSYS-IPE means the Jointly Developed Products (PLANT-PRODUCT
and PROCESS-PRODUCT) that are intended to address engineering work processes in
the CPI and that use HYSYS and/or HYSIM as the source of process information.
For the purposes of this Agreement, the two versions of HYSYS-IPE referred to
are PLANT-PRODUCT and PROCESS-PRODUCT.
2. HYSYS-IPE. The parties agree to direct their initial joint
development efforts towards completion of PLANT-PRODUCT and PROCESS-PRODUCT as
Jointly Developed Products, permitting an integrated link into the HYSYS
Framework resulting in an integrated engineering package, capable of offering
conceptual design, process design, dynamic operability and control analysis,
process and capital and operating cost optimization, equipment selection,
sizing, cost estimating, scheduling, CAD and CAE technology. The parties agree
to complete the development of PLANT-PRODUCT and PROCESS-PRODUCT such that each
may be licensed according to its own pricing structure.
It is planned that PLANT-PRODUCT shall contain the appropriate
software modules in ICARUS' IPE software for translation of HYSIM and/or HYSYS
output, equipment selection, equipment sizing, and the appropriate software
modules for design and cost estimation of equipment, bulks, and indirect costs
that are currently in ICARUS' Questimate software.
It is planned that PROCESS-PRODUCT shall contain the
appropriate software modules for translation of HYSIM and/or HYSYS output,
equipment selection, equipment sizing, and the appropriate software modules for
design and cost estimation of equipment, bulks, and indirects that are currently
in ICARUS' IPE software.
4
<PAGE> 5
2.1 Phase I Development of HYSYS-IPE: The parties shall
develop HYSYS- IPE in two phases. The objective of Phase I shall be to produce
the two different versions of HYSYS-IPE referred to above. Both parties shall
endeavor to deliver products to the market no later than the end of September,
1997.
PLANT-PRODUCT shall be developed by ICARUS providing
appropriate modules of its Questimate plant cost estimating engine, which the
parties shall combine with the appropriate ICARUS process simulation interface
modules for transferring process simulation output results from HYSIM and HYSYS
into input suitable data for equipment selection and sizing, and by building a
one-way communication interface to HYSYS-Steady State. PLANT-PRODUCT shall use
the existing ICARUS modules for transfer of process information from HYSIM and
HYSYS.
For PROCESS-PRODUCT, the parties shall create a
one-way interface between the appropriate ICARUS IPE cost estimation modules and
HYSIM and HYSYS-Steady State.
Phase II: During the second phase of development of
HYSYS-IPE, the parties shall endeavor to enhance the products, such that they
may be delivered to the marketplace with the following, general capabilities:
(i) operate in an interactive manner, (ii) support partial recalculations, (iii)
are user-extensible, and (iv) allow for two-way communication with HYSYS as
necessary for automated capital optimization.
Both PLANT-PRODUCT and PROCESS-PRODUCT shall strive
to create two-way, interactive, and fully-integrated links to HYSYS such that
the parties will be able to immediately upon successful development enter the
market for end user license of these products.
3. Accomplishment of Primary Business Objectives. The parties
agree to direct their efforts towards accomplishing the following primary
business objectives in three phases.
3.1 Phase One Objectives:
(i) Jointly announce the HYPROTECH-ICARUS relationship to the
marketplace as soon as practicable in order to attract attention, establish
dominance, and pre-empt potential competitive actions.
(ii) Release Jointly Developed Products as soon as possible
(as mutually determined by the parties), to exploit 1st-mover advantages, and
reinforce announcement of the venture.
5
<PAGE> 6
3.2 Phase Two Objectives:
(i) Establish a unique competitive advantage by integrating
the appropriate existing HYPROTECH Technology and appropriate existing ICARUS
Technology to produce the HYSYS-IPE products.
(ii) Establish a unique competitive advantage by developing
the Jointly Developed Products to behave in an interactive manner, support
partial recalculation, are user-extensible, and allow for two-way communication
necessary for automated capital optimization.
3.3 Long Range Objectives:
(i) Develop Jointly Developed Products (as mutually
determined) so that modern technology in this field provides a strategic
advantage over existing technology.
(ii) Capture greater market share for process evaluation
software by the year 2000, in order to position the joint products as "defacto
standards" in the marketplace.
(iii) Grow primary demand (new market) for process
evaluation-based solutions by 100% by the year 2000.
4. Coordination of Product Development.
(i) ICARUS shall control and maintain the engineering side
(ICARUS Technology portion) of all Jointly Developed Products incorporating or
intended to incorporate ICARUS Technology.
(ii) HYPROTECH shall control and maintain the framework and
related user interfaces for the Jointly Developed Products (HYPROTECH Framework)
and add functionality to the process engineering side (HYPROTECH Technology).
(iii) ICARUS and HYPROTECH will agree on an object interface
format that will integrate ICARUS Technology with HYPROTECH Technology and
produce a product suite according to Section 2 of this Agreement within the
first 3 years of this Agreement.
(iv) As to all Jointly Developed Products, both parties must
jointly agree that the product is functional and ready to be marketed before
either party shall release the product to the marketplace.
5. Licensing Necessary to Marketing.
(i) HYPROTECH grants to ICARUS the right to sub-license the
HYPROTECH Technology contained in HYSYS-IPE and any agreed-to optional modules,
but only in object code form, and only as a part of HYSYS-IPE or other Jointly
Developed Products.
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(ii) ICARUS grants to HYPROTECH the right to sub-license
the ICARUS Technology contained in the HYSYS-IPE product and any agreed-to
optional modules, but only in object code form and only as a part of HYSYS-IPE
or other Jointly Developed Products.
(iii) Each party will grant the other a royalty free,
non-transferable, world-wide license to incorporate any Jointly Developed
Software Modules into each party's respective software products and/or services
for licensing in object code form only and provided that such party's respective
software products and/or services do not directly or indirectly compete with any
product and/or service of the other party being offered or marketed as of the
date of this Agreement, or compete with any Jointly Developed Product.
(iv) Neither party grants to the other party, a license to any
Proprietary Information except to the extent as set forth in Section 5 (i) and 5
(ii).
6. Pricing and Commissions.
6.1 Pricing of PROCESS-PRODUCT: The price schedule for
PROCESS-PRODUCT is shown on Schedule A attached hereto. Both parties shall
jointly develop future pricing schedules, however, in the event of a pricing
dispute over PROCESS-PRODUCT, HYPROTECH shall defer to ICARUS.
6.2 Pricing of PLANT-PRODUCT: The price schedule for
PLANT-PRODUCT is shown on Schedule A attached hereto. Both parties shall jointly
develop future pricing schedules, however, in the event of a pricing dispute
over PLANT-PRODUCT, HYPROTECH shall defer to ICARUS.
[*]License fees due under a multi-year license which are not
equal in amounts during each year of the license (other than due to differences
resulting from consumer price index or other inflationary escalators or a change
in the software licensed), shall be reamortized equally over the entire license
term to which such fees relate, for the purposes of determining the first year's
license fees upon which the commission hereunder shall be based. The "selling
party" as that term is used in this paragraph shall be deemed to be the party
that licenses the Jointly Developed Product to a Customer; however, the parties
agree to assist each other in the sales and marketing of Jointly Developed
Products, and if both parties have been directly involved with a Customer
(whether via telephone, writing, facsimile or other electronic communication or
transmission, and/or by personal visit, which involvement is confirmed in
writing or by other tangible means), or where one party has requested the other
party to assist it by contacting the Customer directly and such assistance is in
fact provided, then such sale shall be considered a "joint sale" and the
commissions due
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hereunder shall be divided equally between both parties. General assistance by
one party to the other party's sales and marketing personnel in furtherance of a
sale, but without direct Customer contact, shall not constitute a "joint sale."
6.4 Form of License; Calculation of Revenue: The preferred
form of end-user software license will be a five-year license for a specified
number of Authorized Simultaneous Users to be agreed upon by both parties
regardless of who sells the product. The term "sale," "sell," "selling party" or
any derivation thereof or similar term used in this Agreement is solely for the
convenience of the parties, and both parties agree that all end-user
transactions regarding the use of HYSYS-IPE and/or any other Jointly Developed
Product shall be pursuant to a license agreement only, and that no ownership
rights or title shall transfer. In addition, under no circumstances shall any
Proprietary Information, including specifically source code, transfer or be
placed in escrow with any end-user or anyone else.
6.5 Other Party's Products; [*]: In addition to the HYSYS-IPE
offerings, both parties may elect to market the other party's products (i.e.,
excluding Jointly Developed Products) through their direct sales force, dealers,
distributors, sales agents, or network of business partners, after sales
certification training in the appropriate product by the party that has
marketing rights to such product. [*]Where there exists documented evidence of
prior sales activity with the account in question by the party that has
marketing rights to the product, there shall be no finder's fee due.
7. Resource Commitment and Revenue Share.
7.1 Staffing. Each party will determine the necessary amounts
of staff and other resources to be devoted to the development of Jointly
Developed Products. Each party shall appoint one or more Technical Project
Managers (Section 12 below), each of whom will consult with the other in
determining appropriate amounts of staffing and resources.
7.2 Planning. Each party will develop and submit to the other
party a proposed marketing plan with respect to HYSYS-IPE and any other Jointly
Developed Products. Each party agrees to use reasonable efforts to market
Jointly Developed Products, and both parties shall agree on a joint marketing
and promotional activity plan ("M&P"), and the budget for same. The M&P budget
and the various allocations within the budget shall be determined by the
Business Managers to be appointed by the parties (Section 12 below), who shall
consult with each other in finalizing the M&P budget. The items contained within
the M&P budget are intended to be expended by the parties, with each party
contributing such amounts as may be mutually agreed upon. Nothing contained
therein
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shall preclude either party from incurring additional costs for marketing and
sales, and each party shall be solely responsible for all costs incurred with
respect to its own marketing and sales. As to all such expenses incurred by
either party in conjunction with development, marketing and/or sales, the party
incurring same shall indemnify, defend and hold the other party harmless against
all claims for same.
7.3 Technical Support. HYPROTECH and ICARUS agree to fund
Support, Documentation and Training activities and resources in amounts
determined by each such party to be adequate, and each party's Business Managers
shall consult in making such determinations. Each party shall be responsible for
the performance, maintenance, user documentation, technical documentation, and
technical support to Customers, for its own software modules that are part of
any Jointly Developed Product. The primary technical support for HYPROTECH
Technology in Jointly Developed Products shall be directly from HYPROTECH to the
end-user, and the primary technical support for ICARUS Technology in Jointly
Developed Products shall be from ICARUS to the end-user. Both parties shall
conduct all technical support to end-users in such a manner as to provide the
highest level of comfort to all Customers of all Jointly Developed Products,
regardless of which party made the sale.
7.4 Reporting. Each party will provide a report of licensing
activity, and accounting for money received for each calendar quarter and shall
pay monies due the other party as a result of activities in that calendar
quarter within 30 days of the end of that calendar quarter with respect to (i)
Jointly Developed Products, and (ii) one party's products pursuant to Section
6.5.
7.5 Technology Development. Each party shall be responsible
for all costs associated with its technology (except for new technology jointly
developed by both parties, which costs shall be determined prior to each such
venture), user documentation, technical support, marketing, and sales as such
relates to any Jointly Developed Product.
7.6 Revenue Share for Existing Customers of ICARUS.
Revenues shall be divided after deduction of the sales commission to be paid
pursuant to Section 6 above.[*]
7.7 Revenue Share for all other sales. Revenues from
all sources other than licenses to Existing Customers shall be divided after
deduction of the sales commission to be paid pursuant to Section 6 above.[*]
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7.8 Future Revenue Shares. HYPROTECH and ICARUS shall
jointly develop license fees and revenue splits for any other Jointly Developed
Products.
8. Marketing.
8.1 Jointly Developed Products: Both parties agree to
collaborate in joint worldwide marketing efforts by utilizing existing direct
sales and marketing personnel, affiliates, dealers, distributors, sales agents,
and business partners of both parties. Both parties shall endeavor to develop a
collaborative marketing plan no later than September 30, 1997, detailing sales
strategy and joint marketing activities such as press releases, trade shows,
technology conferences, user conferences, technical articles, etc. Both parties
will have the right to market Jointly Developed Products.
8.2 PROCESS-PRODUCT: Marketing of the PROCESS-PRODUCT shall
endeavor to take advantage of the positive brand and corporate images that exist
in the marketplace for both companies and their products. All Jointly Developed
Products shall be marketed under the joint names of both parties; however, it
shall not be required that each party's name receive equal prominence on all
packaging, documentation, and other marketing and sales materials, provided, the
company name and logo of both parties must nevertheless be displayed in a manner
that is readily identifiable and readable by the Customer, although not equal in
prominence. In the event of any dispute between the parties regarding the
marketing of PROCESS-PRODUCT, including the identification of name and logo as
herein set forth, the ultimate decision regarding such marketing shall be made
by ICARUS, which agrees to act reasonably with respect to same. No marketing
activity shall diminish or tarnish the reputation, or corporate or brand image
of either party, its products or any Jointly Developed Products.
8.3 PLANT PRODUCT: Marketing of the PLANT-PRODUCT shall
endeavor to take advantage of the positive brand and corporate images that exist
in the marketplace for both companies and their products. All Jointly Developed
Products shall be marketed under the joint names of both parties; however, it
shall not be required that each party's name receive equal prominence on all
packaging, documentation, and other marketing and sales materials, provided, the
company name and logo of both parties must nevertheless be displayed in a manner
that is readily identifiable and readable by the Customer, although not equal in
prominence. In the event of any dispute between the parties regarding the
marketing of PLANT-PRODUCT, including the identification of name and logo as
herein set forth, the ultimate decision regarding such marketing shall be made
by HYPROTECH, which agrees to act reasonably with respect to same. No marketing
activity shall diminish or tarnish the reputation, or corporate or brand image
of either party, its products or any jointly developed products.
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8.4 [*]
9. Technology and Proprietary Information Ownership.
9.1 Owned Technologies: ICARUS shall retain sole ownership of
ICARUS Technology and its Proprietary Information, and HYPROTECH shall retain
sole ownership of HYPROTECH Technology and its Proprietary Information. Each
party shall retain sole ownership of any existing or new technology, software
modules, models, capabilities, know-how, routines, and/or Proprietary
Information, developed by it for or used by it in HYSYS-IPE or any other Jointly
Developed Product. Neither party shall have any rights to the other party's
Technology or Proprietary Information.
9.2 Other Use: Either party will be able to use Jointly
Developed Software Modules for applications that lie outside the scope of any
Jointly Developed Product, including HYSYS-IPE, without compensation to the
other party, provided that such applications do not directly or indirectly
compete with the other party's products (HYPROTECH Products or ICARUS Products)
or any Jointly Developed Products.
9.3 Access to Other Technologies: In the course of their
business, either party may obtain access to other technologies from external
third parties. There is no restriction on either party entering into external
agreements as appropriate, provided that the terms of any external agreement do
not violate this Agreement.
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9.4 Associated Software Modules: Both parties may have today,
or will develop in the future, external to the development program of HYSYS-IPE,
associated modules that may provide additional marketing benefits to the other
party. It is agreed that these modules will be provided to the other party at
the prices in commercial (non-government) published price schedule(s), the terms
of compensation to be negotiated as necessary, provided no prior exclusivity
exists that takes precedence.
9.5 No Transfers: Neither party shall transfer, assign,
pledge, grant a lien on or otherwise encumber any Jointly Developed Products, or
Proprietary Information or Technology used in any Jointly Developed Products or
its rights granted under this Agreement, whether outright or as collateral.
9.6 Confidentiality: Neither HYPROTECH nor ICARUS shall
disclose any Proprietary Information of the other to a third party.
10. End User Licensing.
The parties agree that all "sales" shall be via mutually agreed upon
license agreements only. Both parties will agree on the form of end-user license
agreement(s), but agree that all end-user license agreements for Jointly
Developed Products shall contain adequate protections and fixed monetary
limitations of damages for HYPROTECH and ICARUS, and limitations and disclaimers
in the areas of warranty, liability, condition of merchantability or fitness for
the purpose, infringement, and appropriate indemnifications. HYPROTECH agrees to
utilize the basic form of the standard license form utilized by ICARUS for IPE,
reserving the right for HYPROTECH to amend as necessary to offer additional
protections deemed important to HYPROTECH.
11. Competition.
11.1 Each party agrees not to disassemble, reverse engineer, or create
derivative works of the other party's software, software modules, or other
Proprietary Information.
11.2 [*]
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[*]
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[*]
11.5 Both parties will agree not to directly or indirectly recruit or
employ each other's employees during the term of this Agreement and for a period
of five (5) years after termination or expiration of this Agreement.
12. Additional Responsibilities of Each Party.
12.1 The parties shall jointly select from their own full time
personnel a Technical Project Manager and a Business Manager for each joint
development effort, who will define relative responsibilities and expected
revenues. Those personnel shall then select a Product Manager who is a full time
staff member of HYPROTECH or ICARUS, for each Jointly Developed Product.
12.2 It shall be the responsibility of the foregoing
individuals to provide to management at both companies, the development
schedule, budget and marketing strategy with expected revenues for each year
ending 30 April. The development schedule will indicate three-month milestones,
identify the party responsible for the development, and any additional personnel
required. It is the responsibility of management at both companies to review the
schedule, budget, development, assignments, marketing and revenue goals, and to
provide necessary input and final approvals in order to produce a set of
schedules acceptable to both parties.
12.3 Each party will make the appropriately qualified
personnel available to the development team and marketing team. Each party will
endeavor to have the necessary development team for HYSYS-IPE in place no later
than July 31, 1997. Each party will be solely responsible to make all
enhancements to its software modules, as such
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enhancements relate to the development of HYSYS-IPE or any other Jointly
Developed Product. Each party will make the necessary modifications to existing
program functionality and/or routines within the time frame agreed to in the
development schedules. If agreed to by the Technical Project Managers and
approved by each company's management, development personnel may be relocated on
a temporary basis from one company's offices to the other company's offices for
efficiency purposes, and subject to such terms and conditions as the parties may
agree upon.
12.4 Both parties will exchange versions of their software
which are included in Jointly Developed Products and documentation with each new
version, and provide copies of such software as needed for the other party to
perform its obligations under this Agreement. Both parties agree to provide
necessary information needed by the development team in order to complete the
integration of the two products.
13. Intellectual Property Rights.
Each party hereby warrants to the other that the technology
provided by said party to any Jointly Developed Product and/or used in the
development thereof, does not and shall not infringe upon any third party United
States and Canadian intellectual property rights including but not limited to
copyright, patent, trade mark and trade secrets. Each party agrees to indemnify,
defend and hold the other party harmless with respect to any proceeding brought
by a third party against the other party, alleging infringement of intellectual
property rights. As a condition thereof, each party indemnified hereunder agrees
to give the indemnifying party prompt, written notice of any such claim, suit or
proceeding, and permit the indemnifying party to defend such claim, suit or
proceeding. Under this provision, the indemnifying party shall have control over
the defense of any such claim, suit or proceeding, including appeals,
negotiations, and rights to settle or effect a settlement or compromise thereof,
and agrees to use best efforts to secure the right to continue using the
allegedly infringing technology or agrees to modify or replace same in order to
make it non-infringing. In addition, all expenses incurred with respect to any
such efforts in relation to correcting Jointly Developed Products in the
possession of Customers in order to make them non-infringing, shall be borne by
the indemnifying party.
14. Copy and Unauthorized Use Protection.
Any Jointly Developed Product containing ICARUS software must
have adequate protection against unauthorized use and license management. The
parties agree to use the ICARUS developed ICARUS System Device (ISD) as the
license manager for any product containing ICARUS software, provided ICARUS
agrees to adopt another device if the alternate device can be shown to be as
effective as ICARUS' own and has the same protection against unauthorized use
and license management.
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15. Third Party Licenses.
Each party may utilize third party technology in its
respective software components, provided (i) the technology is properly licensed
by that party for the application and subsequent re-license in the marketplace
to Customers, (ii) each licensing party informs the other party to this
Agreement that licensed technology is being used with an adequate description of
same and the source thereof, and (iii) any costs of such licensing are (a) borne
solely by the party licensing such technology with respect to technology
licenses existing as of the signing of this agreement, the cost of which is
deemed to be already included in the determination of the price schedule and
revenue sharing provisions of this Agreement, and (b) must include any price
adjustments and/or revenue sharing adjustments necessary to be reflective of the
costs of licensing any such technology as may be negotiated by the parties.
16. Subcontractors.
Either party may subcontract a portion of the development work
of any Jointly Developed Product to another person or entity, subject to the
other party's consent, which consent will not be unreasonably withheld. It is
agreed that no subcontracting to a direct or indirect competitor of either party
will occur. In order to subcontract, the other person or entity providing the
services must sign a written agreement, in advance, to be bound by all
intellectual property protections and other indemnifications and protections
afforded to the parties hereunder, and said agreement must include terms
approved by both parties which ensure that both HYPROTECH and ICARUS will retain
exclusive rights to the developed intellectual property and technology. Any
technology developed by a subcontractor will be covered under the terms of this
Agreement.
17. Term.
17.1 Term: The term of this Agreement will be ten (10)
years.
17.2 Default: In the event of material default hereunder, the
non-defaulting party shall give the defaulting party written notice thereof,
adequately describing the default, whereupon the defaulting party shall have
ninety (90) days within which to cure same. If not cured, the non-defaulting
party shall be permitted to exercise all available remedies, and/or terminate
this Agreement pursuant to paragraph 20 hereof.
17.3 Equitable Relief: Notwithstanding the foregoing, nothing
herein shall be deemed to preclude either party from seeking equitable relief of
an appropriate nature, including injunctive relief, against the other party,
with respect to any violation of this Agreement which relates to the
unauthorized release of technology or Proprietary Information or infringement
upon intellectual property rights, without waiting the ninety (90) day period
set forth in Section 17.2 above.
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18. Change in Ownership. A substantial change in ownership is
defined as the change in controlling interest (51% or more) of either party.
With the exception of the specific conditions described in this Section 18, this
contract will remain in force notwithstanding a change in ownership. However, if
a controlling interest (51%) in one party is acquired by a direct competitor of
the other party or if the parent of one party acquires a controlling interest in
a competitor of the other party, this Agreement can be terminated at the option
of the other party, and the other party will have the right to continue the
development and marketing of Jointly Developed Products and any new products
which may or may not be deemed competitive with Jointly Developed Products,
notwithstanding Section 11.2, Competition, and payments due each party shall
continue as defined elsewhere in this Agreement.
19. Disputes/Informal Resolution: Disputes regarding material breaches
of this Agreement shall be governed pursuant to the terms and conditions of this
Agreement pertaining to a party's default. Non-material disputes shall be
resolved in the following manner: The parties shall engage in dialogue between
their Business and Project Managers, and shall progressively involve higher
levels of management as necessary. Either party may notify the other party in
writing, of the existence of a non-material dispute requiring resolution,
whereupon the parties shall have thirty (30) days within which to resolve the
dispute in the manner hereinabove set forth. In the event the parties are unable
to resolve the dispute within said thirty (30) day period or such additional
period of time as to which the parties have agreed in writing, then either party
may invoke and demand binding arbitration pursuant to the rules of the American
Arbitration Association then in effect. If the parties are unable to agree to
the materiality of the breech or dispute, it shall be deemed material for the
purpose of this Section 19. Notwithstanding the foregoing, the parties may agree
in writing to have any material dispute also resolved by arbitration in
accordance with the rules of the American Arbitration Association or pursuant to
any other means. Arbitration under this paragraph shall be held in the State of
Maryland. Nothing herein shall be deemed to limit either party's remedies at law
or in equity with respect to any material breach of this Agreement.
20. Termination.
20.1 Insolvency: The term of this Agreement terminates
automatically in the event that either party is or becomes insolvent.
20.2 Change of Ownership. The term of this Agreement can
also be terminated as provided in Section 18 above.
20.3 Default: The term of this Agreement can also be
terminated if either party is in material default and has not cured the
condition within the agreed to period of time. In such event, the non-defaulting
party shall have, in addition to its other remedies, the option of:
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(a) Allowing the term of this Agreement to
continue for a period of its choosing, but not longer than the current term; or
(b) Terminating the term of this Agreement
immediately.
In the event of termination due to Default, the
non-defaulting party has the right to continue the development and marketing of
Jointly Developed Products and any new products which may or may not be deemed
competitive with Jointly Developed Products, notwithstanding Section 11.2
Competition.
20.4 Responsibilities Upon Termination:
(i) With the exception of termination due to insolvency, both
sides agree to continue to support any then existing Jointly Developed Products
until the end of the term of any license thereof to any Customer.
(ii) Both parties shall retain equal rights to all Jointly
Developed Software Modules which have been made part of the Jointly Developed
Products. However, neither party shall thereafter market, sell, use, distribute,
transfer ownership or possession, lease, license or loan any Jointly Developed
Product, or any trademark or servicemark associated therewith, whether under the
name existing immediately prior to termination or any other name, except to the
extent necessary for the fulfillment of license agreements existing as of the
date of termination, nor shall either party reproduce any Jointly Developed
Product or prepare derivative works therefrom. Notwithstanding the foregoing, in
the event of a termination of this Agreement pursuant to Section 18 above based
upon a change in ownership or pursuant to Section 20.3 above based on a material
default, then the other party shall continue to have the right to market Jointly
Developed Products; provided, however, the provisions of Sections 6.3, 7.4, 7.6
and 7.7 shall be deemed applicable to such post-termination sales of Jointly
Developed Products.
(iii) Notwithstanding termination of the term of this
Agreement, all provisions of this Agreement pertaining to the ownership of
technology, Proprietary Information, intellectual property rights,
indemnifications, and other protections shall remain in full force and effect.
Notwithstanding termination of the term of this Agreement, all provisions of
this Agreement pertaining to non-competition shall remain in full, except as
provided for in Sections 18, Change of Ownership, and 20.3, Default.
21. No Warranties.
21.1 All software and technology contributed by either party
to development of any Jointly Developed Products shall be deemed to be for each
party to evaluate, test and incorporate as determined by the parties jointly.
Therefore, all such software and technology shall be deemed to have been
contributed in "AS IS" condition, and without any warranty or representation of
any kind or nature. The parties shall jointly assume all risk
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associated with the performance or non-performance thereof and neither party
shall be liable to the other as a result of any improper performance or
non-performance thereof.
21.2 Neither party shall be liable to the other as a result of
any failure of any Jointly Developed Product or any component or technology
owned or developed by either party or jointly and contributed thereto. Each
party hereby acknowledges that software is generally of such complexity that
there may be inherent defects, which neither party guarantees can be corrected
or are capable of being corrected. Each party agrees to use reasonable, good
faith efforts to correct or work around any defects.
21.3 NEITHER PARTY MAKES ANY WARRANTIES, EXPRESS OR IMPLIED,
IN FAVOR OF THE OTHER PARTY, AND EACH PARTY HEREBY DISCLAIMS ALL SUCH
WARRANTIES, INCLUDING ANY EXPRESS WARRANTIES, IMPLIED WARRANTY OF
MERCHANTABILITY, IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, AND ALL
OTHER EXPRESS OR IMPLIED WARRANTIES.
22. Limitation of Liability.
Each party hereby agrees that neither party, nor its
affiliates, dealers, business partners, agents or employees, will be liable to
the other party, with respect to any loss or, damage howsoever arising out of
the use of any Jointly Developed Product and/or any technology incorporated
therein, the results of the use or marketing thereof, or the inability to market
same. In no event shall either party be responsible to the other party for any
special indirect incidental or consequential or exemplary damages. Each party
hereby acknowledges that this limitation of liability is reasonable under the
circumstances, and having regard to the state of the art of computer software
and other component programs thereof, and the nature of this relationship. Each
party agrees to equally bear all risks associated with their joint development
efforts. The limitations herein set forth shall apply even if the other party
has been advised of the possibility of damages, and shall apply to damages of
any nature whatsoever, including without limitation, loss of profits, loss of
revenue, loss of business opportunities, loss of software, loss of data, cost of
recreating software technology or data, cost of any substitute software
technology, data or equipment, and regardless of the theory on which any such
claim or liability may exist, whether based in contract, warranty, negligence,
other tort or any other theory whatsoever.
23. Affiliates.
23.1 Compliance: Both parties agree that each party will take
such action as is appropriate or necessary with respect to its Affiliates, as
well as each of their subcontractors and/or licensors, to assure compliance with
all obligations under this agreement including restrictions on copying and other
protections afforded to each party hereunder, to the extent such Affiliates
become involved in any manner whatsoever with respect to this Agreement.
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23.2 Affiliates Ownership of Technology, Etc.: Each party
recognizes that with respect to each party's respective technology, Proprietary
Information and/or other contributions to the joint development efforts
described in this Agreement, that such party's Affiliates may own and/or share
rights therein. To the extent that either party's Affiliate(s), owns or shares
such rights, such party to this Agreement will take all action necessary and/or
appropriate to require that such rights be transferred to it for the purposes of
this Agreement or that such Affiliate contribute same to the joint development
effort described under this Agreement. To the extent any such Affiliate owns or
shares rights to technology, Proprietary Information and/or otherwise, such
Affiliate has been identified on Schedule B attached hereto.
24. Miscellaneous.
24.1 Complete Agreement; Interpretation: This Agreement,
together with any attachments referred to herein which are hereby made a part
hereof, constitutes the entire agreement of the parties, all prior negotiations,
proposals and writing pertaining to same being superceded hereby. No changes,
alterations or modifications to this Agreement shall be effective unless in
writing and signed by the parties. All headings and numbering in this Agreement
are for the convenience of the parties and for reference only, and shall in no
way be used in the interpretation of any of the provisions hereof.
24.2 Non-Waiver: No benefit or right accruing to either party
under this Agreement shall be deemed waived unless the waiver is agreed to in
writing and signed by the other party. A waiver in one instance of any act,
condition or requirements stipulated herein shall not be deemed a continuing
waiver, nor a waiver of the applicable term or condition of this Agreement, nor
a waiver of any other act, condition or requirement.
24.3 Jury Waiver: Each party hereto knowingly,
voluntarily and intentionally waives the right it may otherwise have to trial by
jury of any dispute arising under or relating in any way to this Agreement.
24.4 No Assignment: Either party may assign this Agreement
upon the prior written consent of the other party, but only to an affiliate or
successor of either party, provided that the assignee confirms its acceptance
and assumption of all terms and conditions herein set forth. This Agreement and
the rights herein granted shall otherwise be non-assignable.
24.5 Laws and Regulations: The validity, construction and
interpretation of this Agreement and the rights and obligations of the parties
hereto shall be governed by the laws of the State of Maryland, U.S.A. (including
where applicable, the Uniform Commercial Code as adopted in the State of
Maryland). Except for actions based on infringement by one party of the other
party's intellectual property rights or breach by one party of its duty of
secrecy and restricted use of confidential information owed to the other party,
each party consents to the jurisdiction and venue of any State or Federal Court
of competent
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jurisdiction in the State of Maryland with respect to any dispute arising out of
this Agreement, and further agrees that the mailing to the other's last known
address by registered mail of any process shall constitute lawful and valid
service of process. This Agreement shall be deemed to have been entered in the
State of Maryland.
24.6 Employee Compliance: Both parties agree that each will
take such action as is appropriate or necessary with respect to its employees,
to assure compliance with all obligations under this Agreement, including
restrictions on copying and other protections afforded to each party hereunder.
24.7 Severability: If any provision or clause of this
Agreement or the application thereof to any person or circumstances is held
invalid or unenforceable, such invalidity or unenforceability shall not affect
the other provisions or applications hereof, which can be given effect, without
the invalid or unenforceable provision or application, and to that end the
provisions of this Agreement are declared to be severable.
24.8 Notices: Notices to either party hereunder shall be sent
by certified mail or registered mail, return receipt requested, by courier or by
recognized, overnight delivery, to the following addresses or to such other
address which either party may hereafter designate by like notice:
ICARUS Development and Marketing Corporation
11300 Rockville Pike
Rockville, Maryland 20852
Attn: President
HYPROTECH, Ltd.
1110 Center Street North
Calgary
Alberta, Canada T2E 2R2
Attn: President
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IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
effective the date first above written, intending this document to constitute an
agreement under seal, and intending to be legally bound hereby.
ICARUS DEVELOPING AND HYPROTECT LTD.
MARKETING CORPORATION
By:/s/Herbert G. Blecker (seal) By:/s/Wayne Sim (seal)
- ------------------------------- -------------------------------------
Herbert G. Blecker Wayne D. Sim
- ------------------------------- -------------------------------------
Name Name
Senior Vice President - Research &
President Development
- ------------------------------- -------------------------------------
Title Title
28 Jul 97
- ------------------------------- -------------------------------------
Date Date
22
<PAGE> 1
Exhibit 10.3
CONFIDENTIAL TREATMENT REQUESTED - REDACTED
MARKETING AND PRODUCT DEVELOPMENT AGREEMENT
This Agreement (the "Agreement") is made and entered into as of the 4th
day of August, 1997 by and between ICARUS Corporation, a Maryland corporation
("ICARUS"), whose principal office is located at I Central Plaza, 11300
Rockville Pike, Rockville Maryland 20852, and SRI Consulting, Inc., a California
corporation ("SRIC"), whose principal office is located at 333 Ravenswood Menlo
Park, California 94025 USA.
WITNESSETH:
WHEREAS, ICARUS is the provider of preeminent commercial
process/project evaluation software and over its 28-year market presence has
developed a reputation and software technology that is used by hundreds of
companies in over 35 countries;
WHEREAS, SRIC is one of the leading providers of process economics
information for the chemical and energy industry;
WHEREAS, the parties desire to jointly develop and market a new suite
of products that will build upon the knowledge base of SRIC's Process Economics
Program (PEP) and ICARUS' expertise in project engineering, cost estimating, and
scheduling of engineering and construction;
WHEREAS, the parties also desire to jointly market each other's
existing products to the extent described in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, conditions,
and obligations hereinafter set forth, SRIC and ICARUS agree as follows:
1. DEFINITION OF TERMS
FOR PURPOSES OF THIS AGREEMENT, THE FOLLOWING TERMS SHALL HAVE
THE MEANINGS
indicated:
a. "CATEGORIES OF INFORMATION" means the conceptual groupings
of information and data which may include supporting documentation in electronic
or hard copy format. Categories of Information include, but are not limited to,
process data, graphical representations, comparative economic results, technical
specifications, visualization aids, cost summaries, and detailed data. The
detailed data will contain information relating to a particular process such as
but not limited to the process description, process design, plot plan, equipment
arrangement, equipment costs and lists, bulk material and associated field
manpower listings, offsites, basic engineering, detailed engineering,
procurement, and home office work products, drawing lists, and effort hours,
engineering and construction schedules, operating costs, and maintenance costs.
<PAGE> 2
b. "ICARUS" means ICARUS Corporation.
c. "ICARUS MARKETING CHANNELS" means the ICARUS direct sales and
marketing force, ICARUS' affiliates, and ICARUS' worldwide network of dealers,
distributors, sales agents, and business partners, as the same may be determined
or altered by ICARUS from time to time.
d. "ICARUS MARKS" means the names "ICARUS" and "ICARUS 2000" as well as
the logo or logos set forth on Exhibit A used in any form or format, style or
design, as well as any goodwill and rights, at common law or otherwise,
pertinent thereto, and refers to trademarks, service marks, and trade names.
e. "ICARUS PROCESS EVALUATOR" and/or "IPE" means a system of computer
programs trademarked by ICARUS and/or its affiliates and associated
documentation, firmware, technology and know-how owned and/or licensed by ICARUS
for use in determining the capital cost, operating costs, and financial
information for a processing facility in the chemical processing, energy
producing, petrochemical, pharmaceutical, food, pulp and paper, ore
beneficiation and related industries.
f. "ICARUS 2000" means a system of computer programs trademarked by
ICARUS and associated documentation, firmware, technology and know-how owned
and/or licensed by ICARUS for use in preliminary design and estimating in the
construction of facilities in the chemical processing, energy producing,
petrochemical, pharmaceutical, food, pulp and paper, ore beneficiation and
related industries.
g. "ICARUS TECHNOLOGY" means the proprietary computer software owned
and/or licensed by ICARUS relating to the equipment selection, equipment sizing,
cost estimating, scheduling, project management, CAE, CAD, expert systems,
expert systems development, knowledge bases, object database, knowledge based
and object database driven graphics, and their associated data, information, and
know-how, including but not limited to ICARUS Process Evaluator (IPE), and
ICARUS 2000, together with all modifications, enhancements, upgrades thereof, or
new products or technology made or developed from time to time.
h. "INTELLECTUAL PROPERTY RIGHTS" means all copyrights (including,
without limitation, the exclusive right to use, make recordings of, reproduce,
modify, adapt, edit, enhance, maintain, support, market, sell, rent, sell for
rental, sublicense, distribute copies of, publicly and privately display and
publicly and privately perform, exploit, exhibit, the copyrighted work and to
prepare derivative works), patent rights, trade secrets, trademarks, service
marks, moral rights, author's rights, contract and licensing rights, and other
intellectual property rights, as may exist now and/or hereafter come into
existence, and all renewals and extensions thereof, regardless of
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<PAGE> 3
whether any of such rights arise under the laws of the United States or any
other state, country or jurisdiction.
i.[*].
j. "JOINTLY DEVELOPED MARKS" means any trademarks, service marks, trade
names and logos used in any form or format, style or design, as well as any
goodwill and rights, at common law or otherwise, pertinent thereto, created or
developed by SRIC and ICARUS in connection with the marketing and distribution
of the Jointly Developed Products. "Jointly Developed Marks" shall not include
the ICARUS Marks or the SRIC Marks.
k. "PEP KNOWLEDGE BASE" means the process engineering information,
data, and know-how owned and/or licensed by SRIC relating to the Process
Economics Program (PEP).
1. "PROPRIETARY INFORMATION" means all confidential or proprietary
information of one party disclosed to the other, either orally or in writing,
including but not limited to software, technology, documentation, data, source
code, methods, procedures, program functionality, know-how, trade secrets,
copyrights, patents, discoveries, inventions, techniques, processes, algorithms,
designs, schematics, contracts, customer lists, financial information, sales and
marketing information, and other business information.
m. "SRIC" means SRI Consulting, Inc. a wholly-owned subsidiary of SRI
International.
n. "SRIC MARKETING CHANNELS" means the SRIC direct sales and marketing
force, SRIC's affiliates, and SRIC's network of distributors, sales agents, and
business partners, as the same may be determined or altered by SRIC from time to
time.
o. "SRIC MARKS" means the names "SRI Consulting," and "SRI Consulting,
a subsidiary of SRI International," as well as the logo or logos set forth on
Exhibit B used in any form or format, style or design, as well as any goodwill
and rights, at common law or otherwise, pertinent thereto, and refers to
trademarks, service marks, and trade names.
p. "SRIC TECHNOLOGY" means any proprietary intellectual property (e.g.,
software, hardware, methodologies, copyrighted materials) owned and/or licensed
by SRIC and its affiliates, including but not limited to the PEP Knowledge Base,
together with all modifications, enhancements, upgrades thereof, or new products
or technology made or developed from time to time.
- -----------------------
* This information has been omitted pursuant to a request for
confidential treatment.
3
<PAGE> 4
2. DURATION
a. Except as otherwise provided herein, the term of this
Agreement will commence on the date first written above and will terminate on
the fourth anniversary thereof unless extended in writing by mutual agreement of
the parties.
b. Either party may at any time, upon six months prior written
notice, terminate this Agreement prior to its scheduled expiration date if
revenues from the sale, license or other distribution of existing products and
programs of such party have declined due to the sale, license or other
distribution of the Jointly Developed Products.
c. Either party may, by written notice to the other party,
terminate this Agreement under the following conditions:
i. If the other party shall have failed to carry out any of
its obligations under this Agreement, or if any other condition arises from
default of such other party which interferes or threatens to interfere with the
successful carrying out of the activities contemplated by this Agreement. If
such condition continues for a period of fourteen days following such notice,
the party who gave such notice may, at its option, terminate this Agreement upon
thirty days written notice to the other party.
ii. If any representation or warranty made by the other
party herein was false or misleading in any material respect as of the date of
this Agreement.
iii. If the activities contemplated hereunder have been
suspended due to a "force majeure event" described in Section 2(e).
iv. If the other party files a petition in bankruptcy or is
adjudged a bankrupt, or if a petition in bankruptcy is filed against such party
(and is not dismissed within sixty (60) days thereafter), or if such party
becomes insolvent or makes an assignment for the benefit of creditors, or if
such party discontinues its business, or if a receiver is appointed for such
party or such party's business who is not discharged within sixty (60) days.
d. Upon the expiration or earlier termination of this Agreement
for any reason, each party shall be released from all obligations and
liabilities to the other occurring or arising after the date of such expiration
or termination, except as otherwise provided herein. Notwithstanding such
expiration or termination, each party shall remain liable for any breach of this
Agreement, and shall remain obligated to pay over to the other party at the
times stated in Section 8(d) its share of any and all fees, revenues, and other
amounts payable hereunder with respect to any end-user agreements entered into
on or prior to the date of expiration or termination. In addition, upon the
expiration or earlier termination of this Agreement for any
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<PAGE> 5
reason, each party shall take immediate steps to terminate the activities in a
prompt and orderly manner and to reduce losses and to keep further expenditures
to a minimum.
e. Each party shall promptly notify the other party in writing
of the occurrence of any force majeure event. As used herein, "force majeure"
shall mean events attributable to any one of the following causes:
i. Natural causes, such as earthquakes, typhoons, storms,
floods, epidemics, and other similar causes affecting activities to such an
extent as makes it impossible or impracticable for either party to carry out, in
whole or in part, its obligations under this Agreement.
ii. Human causes, such as war, armed invasions, revolution,
insurrection, blockade, riot, civil disturbance, strikes, or other analogous or
similar causes, including the occurrence of a national banking moratorium, to
such an extent as makes it unsafe, impossible, or impracticable for either party
to carry out, in whole or impart, its obligations under this Agreement.
On the day of giving or receiving such notice of force
majeure, each party shall be relieved from liability for any failure to carry
out its obligations due to the occurrence of such force majeure event. If the
force majeure event continues for a period exceeding ninety days, either party
may terminate this Agreement by giving thirty days written notice to the other.
3. JOINTLY DEVELOPED PRODUCTS
a. Products. The parties hereby agree to develop and market
Jointly Developed Products to provide specific capital and operating cost
estimates to companies studying technology selection or upgrade for construction
and investment in selected product areas. Jointly Developed Products will
initially include a "Business Model" and a "Project Model." Jointly Developed
Products may also include a "PEPCOST/ICARUS Cost Estimation Program." The
following is a general description of these products:
i. Business Model: The Business Model will be a software
program that will contain several Categories of Information relating to a
particular process design. The Business Model will be an interactive multi-media
electronic document that is driven from an individual PEP process reflecting the
PEP technical content and the process estimation (capital and operating) cost
results of the ICARUS Technology. Because of the vast quantity of information to
be contained in a Business Model, the parties anticipate that the media used for
product delivery will be CD-ROM. There will also be a summary narrative that
describes the various subsets of Categories of Information referred to in the
Business Model. Examples of narratives and types of information may include
items such as Process Flow Diagrams (PFD's),
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<PAGE> 6
Piping & Instrumentation Diagrams (P&ID's), Scope of Work Narratives,
Contingency Analyses, and other topics suitable for the particular process.
ii. Project Model: The Project Model will be supplied on software media
that contains the PEP-based input data for ICARUS 2000 and ICARUS Process
Evaluator (IPE) for a specific process that will enable the customer who is a
user of ICARUS 2000 and/or ICARUS Process Evaluator (IPE) to prepare certain
project information (cost estimate, schedule of engineering and construction)
for the particular process. There may also be a Project Model offering that
includes a license of ICARUS 2000.
iii. PEPCOST/ICARUS Cost Estimation Program: The parties will explore
the viability of a PEPCOST/ICARUS modified cost estimation program targeted at
serving the R&D/planning/technology development cost estimation needs of both
operating companies and E&Cs. The parties anticipate that this product will
essentially provide the PEPCOST level of detail and presentation in a mode
compatible with more powerful, more detailed versions of some ICARUS software
(e.g., IPE, Icarus 2000). The utilities consumption estimate module of PEPCOST
is a particular feature that may be included in this cost estimation program.
b. Development Schedule. The anticipated development schedule for the
Business Model and Project Model is as follows, and is expected to begin after
this Agreement has been signed by both parties:
i. Prototype for ethyl benzene (EB): June-September 1997 alpha, beta
testing by both parties with selected potential and existing clients. The alpha
prototype will use the ICARUS 2000 run (report) based on the PEP input of design
bases and major equipment listings for Mobil/Badger EB process. The GUI screens
developed by ICARUS, augmented with an icon for production cost information,
will be used as the "front end." SRIC will provide current Mobil/Badger EB
production cost information for use in the prototype model.
ii. Additional product schedule: To be determined by September 1997.
The parties intend to develop up to 10-20 products (with multiple processes)
each six months during the term of this Agreement, subject to each party's
review and customer acceptance. SRIC will provide the PEP input of design bases
and major equipment listings for each product, and ICARUS will run the initial
cost estimations.
iii. Custom client requests: The parties will use their best efforts to
develop mechanism/pricing to handle custom client requests for evaluations.
c. Marketing. The parties agree to jointly market the Jointly Developed
Products on a worldwide basis by utilizing the ICARUS Marketing Channels and the
SRIC Marketing Channels. The parties will develop a collaborative marketing plan
to coincide with the
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initial marketing of the beta version of the first Jointly Developed Product.
The marketing plan is expected to detail sales strategy and joint marketing
activities such as press releases, trade shows, technology conferences, user
conferences, and technical articles. Subject to Section 6(h) and 7(b)(iii), the
parties will market the Jointly Developed Products under the joint names of each
party with each party's name receiving equal prominence on all packaging,
documentation and other marketing and sales materials.
4. JOINT MARKETING OF EXISTING ICARUS PRODUCTS AND SRIC'S
PEP PRODUCTS
Each party will use its reasonable efforts to identify leads
for the existing products of the other party, to be turned over to the party for
follow-up. The parties anticipate that they will jointly market each other's
products as follows:
a. Within the first month of the term of this Agreement,
each party will, subject to Section 6(h):
i. Notify its existing customer base of this
Agreement. Marketing vehicles anticipated to be used include ICARUS' newsletter
and the PEP Bulletin, a PEP Special Notice, and other ongoing market
communication lines.
ii. Reference each other in promotional
materials.
iii. Exchange customer lists. Customer lists
provided are anticipated to include the names of the current PEP Program and
ICARUS licensee contacts. The disclosure and use of each party's customer lists
will be subject to Section 9 (Confidential Information).
iv. Provide basic sets of promotional materials
to each another in electronic and print form.
b. Within the first quarter of the term of this
Agreement, each party will:
i. Provide hotlinks to the other's web pages
(ICARUS' and PEP's).
ii. Agree upon new sets of joint promotional
material referencing each other's existing products.
5. OTHER DEVELOPMENT ACTIVITIES
In addition to the marketing and development activities
described above, two additional development activities are anticipated to be
pursued under this Agreement, as follows:
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a. Reengineering of PEP Report preparation to incorporate ICARUS (or
ICARUS/PEPCOST) cost estimating procedures and Icarus' simulator or CAD links.
This development will constitute more of a "behind the scenes" operation, but is
expected to be potentially valuable to ICARUS and SRIC for insights into new
ways of working, and building an extended value network.
i. The parties expect to target 1-3 "New" reports in the
first year of this Agreement.
ii. SRIC's PEP staff will lead this development, with an
Icarus contact on the project team.
b. Joint SRIC/ICARUS development of products outside the PEP domain,
such as mines and minerals, biotechnology, and electronics. The parties will
undertake a review of such additional products at six month intervals.
Initiation will require the consent of both parties. If such products proceed to
the product development and marketing stages, the parties will amend this
Agreement accordingly.
6. PERFORMANCE OF MARKETING AND DEVELOPMENT ACTIVITIES
a. Management Committee; Contact Persons. The marketing and development
activities contemplated hereunder shall be carried out under the ultimate
direction of a management committee comprised of four to six representatives,
one-half to be designated by SRIC and one-half to be designated by ICARUS. The
management committee shall meet once per calendar quarter during the term hereof
at the principal place of business of each party (on a rotating basis. All
actions of the management committee shall be taken by unanimous vote. During the
time that the management committee is not meeting, the following individuals
shall (except as otherwise provided herein), subject to any restrictions imposed
by the management committee, have general supervisory authority and control over
the marketing and development activities contemplated hereunder:
SRIC. Primary contact: Process Economics Program Director
(Sara Soder)
Secondary contact: Vice President, Chemicals & Energy
Group (Emilio Cvitkovic)
ICARUS. Primary contact: Herbert G. Blecker, President
Secondary contact: Mr. William F. Geritz
Either party may change such designation at any time by notice to the other
party.
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<PAGE> 9
b. Staffing and Resources. The management committee will determine the
appropriate amount of staffing and other resources to be devoted to the
marketing and development activities contemplated hereunder.
c. Budget. Prior to the initiation of each Jointly Developed Product,
the management committee will prepare a budget with respect to the marketing and
promotion of such product. The budget shall set forth the expected costs and
expenses to be incurred with respect to such marketing effort. Each party shall
contribute a mutually agreed amount toward payment of such expenses. All
expenses incurred in excess of the budgeted amount shall be the sole
responsibility of the party incurring such expenses, except as otherwise agreed.
d. End-User Support. The management committee will determine the
appropriate amount of support to be provided by each party to the end-users of
the Jointly Developed Products, including documentation and training activities.
Notwithstanding the foregoing, each party shall be responsible for the
performance, maintenance, user documentation, technical documentation, and
technical support to end-users with respect to its own software modules that are
part of any Jointly Developed Product. The primary technical support for the
SRIC Technology incorporated in a Jointly Developed Product shall be directly
from SRIC to the end-user, and the primary technical support for the ICARUS
Technology incorporated in a Jointly Developed Product shall be directly from
ICARUS to the end-user. Each party shall conduct all technical support to
end-users in accordance with the standard of care described in Section 6(f)
regardless of which party completed the sale, license or other distribution.
Notwithstanding the expiration or earlier termination of this Agreement, each
party will continue to provide support to end-users as provided above to the
extent required by the applicable license agreement with the end-user.
e. Prohibition against Recruitment. Each party agrees not to directly
or indirectly recruit each other's employees during the term of this Agreement
and for a period of one year after the expiration or earlier termination of this
Agreement.
f. Standard of Care. Each party agrees to assign professionally
qualified personnel to the marketing and development of the Jointly Developed
Products and the other activities contemplated hereunder and to carry out such
activities in conformity with generally accepted professional standards. Each
party shall exercise all reasonable skill, care, and diligence in the
performance of its obligations under this Agreement. Each party will be found to
have fulfilled all contractual obligations by diligently applying its best
technical efforts to the performance thereof within the time and cost
limitations contemplated hereby. Notwithstanding the foregoing, each party's
Technology contributed for development of Jointly Developed Products shall be
deemed contributed in "As Is" condition, without warranty or representation,
with each party assuming the risk of performance or non-performance thereof.
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g. Information Sharing. Each party shall provide the other party with
copies of or access to any information and materials in such party's possession
that the other party reasonably requires to carry out the activities. The party
receiving such materials shall use them solely for the purpose of carrying out
the activities. The confidentiality provisions of this Agreement (Section 9)
shall apply to the use of such materials. Any information of a general,
conceptual nature may be retained by either party for its own use and made a
part of its research data base, subject to Section 10 (Other Activities).
h. Promotional Materials. Each party agrees that it will not use the
name of the other party, either expressed or implied, in any of its advertising
or sales promotional materials or web sites without the prior written approval
of the other party. Neither party will issue any publicity releases or other
promotional materials or create or contract for any web sites or web site links
describing the Jointly Developed Products or the other activities contemplated
by this Agreement without the prior written approval of the other party. In the
event that either party intends to distribute outside of its own organization
any brochure issued by the other party that discusses the marketing and
development activities contemplated by this Agreement, such brochure shall be
used in its entirety, unless any proposed summary or abridgment of the brochure
has first been approved by the other party in writing.
i. End-User Licensing. All end-user licensing agreements for the
Jointly Developed Products will be in such form as is mutually agreed to in
advance by each of the parties. All end user use shall be by license agreement
only unless ICARUS and SRIC agree otherwise.
j. Individual Responsibilities. The parties agree that they shall
individually be responsible for the following activities during the term hereof:
i. SRIC. SRIC agrees that it will:
(1) provide all necessary technical support information
that the parties mutually agree is needed by the
ICARUS development team in order to complete the
Jointly Developed Products;
(2) supply ICARUS with new versions of pertinent SRIC
Technology/PEP Knowledge Base as they are developed
and/or released to SRIC customers as needed by
ICARUS to develop, market, sell, maintain, and
technically support the Jointly Developed Products;
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(3) be responsible for the preparation of all input of
process information for each process selected for a
Jointly Developed Product; and
(4) promptly after execution and delivery of this
Agreement, provide ICARUS with one up-to-date copy of
each document prepared by SRIC relating to the
processes in the PEP program chosen for joint product
development so that ICARUS (x) may become familiar
with such processes that are candidates for
development of Jointly Developed Products, (y) can
prepare the necessary project engineering information
that will be incorporated in each selected process in
the Jointly Developed Products, and (z) can provide
technical support related to the Jointly Developed
Products.
ii. ICARUS. ICARUS agrees that it will:
(1) be solely responsible to develop, and make all
modifications and enhancements to, all software in
Jointly Developed Products;
(2) determine the appropriate method of copy protection
required (if any) for all Jointly Developed Products;
(3) be responsible for the duplication of all software on
all media which is part of any Jointly Developed
Product.ICARUS will have the right to duplicate media
containing SRIC Technology that is part of any
Jointly Developed Product prepared for customer sale
at no additional charge to ICARUS except as described
in Section 8; and
(4) be responsible for the preparation of all input and
output of project information including but not
limited project infrastructure, offsites, and site
development.
k. Insurance. During the term of this Agreement, each party shall, in
its individual name and at its sole cost and expense, procure and maintain in
full force and effect insurance covering the marketing and development
activities contemplated hereunder, in such amounts and
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with such deductibles as are customarily maintained by others engaged in similar
businesses. Within ten (10) days after execution and delivery of this Agreement,
each party shall furnish to the other a certificate of insurance evidencing such
coverage, and thereafter, shall furnish renewal certificates no later than
thirty (30) days after the renewal date.
1. Accounting; Financial Reporting. At all times during the term of
this Agreement, each party shall keep accurate books of account in which all
matters relating to the activities contemplated hereunder, including all license
fees, shall be entered. The books of account shall be kept on an accrual basis
and shall be open to examination by either party and its authorized
representatives at all reasonable times at each party's principal place of
business. Upon request of either party, the other party shall engage a mutually
acceptable accounting firm to perform an annual audit of such other party's
books of account insofar as they relate to the activities contemplated hereunder
(it being agreed that KPMG Peat Marwick LLP or Grant Thornton are each
acceptable). Each party agrees to provide to the other party (at such other
party's expense) all such financial information as such other party shall
reasonably require to satisfy the tax and financial reporting obligations of
such party with respect to the activities contemplated hereunder.
m. Tax Returns. Each party shall be responsible for the preparation of
its own federal, state and local income and other tax returns relating to the
activities contemplated hereunder.
7. INTELLECTUAL PROPERTY
a. Technology/Knowdge Base Ownership. The parties hereby agree that,
except as otherwise provided in this Agreement:
i. SRIC will continue to have exclusive rights of ownership,
licensing, and marketing of the PEP Knowledge Base and SRIC Technology
contributed to the Jointly Developed Products, including such technology
contributed or developed by SRIC pursuant to section 6j (i) hereof.
ii. ICARUS will continue to have exclusive rights of ownership,
licensing, and marketing of ICARUS Technology contributed to the Jointly
Developed Products, including such technology contributed or developed by ICARUS
pursuant to Section 6j (ii) hereof.
iii. Except as otherwise specified in this Agreement, neither party
will have any rights to use any Intellectual Property Rights (including but not
limited to the SRIC Marks and the ICARUS Marks) or Technology owned and/or
licensed by the other party.
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b. Licensing of Technology and Marks.
i. During the term of this Agreement, SRIC hereby grants to ICARUS
a nonexclusive (subject to Section 10), royalty-free, worldwide license to use
the SRIC Technology in the development, production, marketing, sale, license and
other distribution of the Jointly Developed Products, and ICARUS hereby grants
to SRIC a nonexclusive (subject to Section l0), royalty-free, worldwide license
to use the ICARUS Technology in the development, production, marketing, sale,
license and other distribution of the Jointly Developed Products. Said license
shall not be sublicenseable and shall not be transferable except in connection
with an assignment or transfer of this Agreement made in accordance with Section
l5(f).
ii. Notwithstanding Section 7(a), ICARUS shall license a two (2)
user system of ICARUS 2000 Windows NT software to SRIC at no charge to SRIC
during the term of this Agreement so that SRIC can prepare input to ICARUS 2000
for the jointly selected processes that SRIC and ICARUS will be marketing in the
Jointly Developed Products. ICARUS further agrees to license other ICARUS
products to SRIC as required for joint product development under a license
agreement that is mutually agreeable.
iii. During the term of this Agreement, SRIC hereby grants to
ICARUS a nonexclusive, royalty-free, worldwide license to use the SRIC Marks,
solely for uses related to the marketing and distribution of the Jointly
Developed Products and solely if used as set forth in Section 3(c) and as
follows: "SRI" and the "SRI logos" (or a variation thereof) shall be used only
with the words "Consulting" or "SRI Consulting." During the term of this
Agreement, ICARUS hereby grants to SRIC a nonexclusive, royalty-free, worldwide
license to use the ICARUS Marks, solely for uses related to the marketing and
distribution of the Jointly Developed Products and solely if used as set forth
in Section 3(c) and as follows: ICARUS, ICARUS 2000, ICARUS 2000 NT, and ICARUS
Process Evaluator.
c. [*] The parties agree to cooperate with each other in applying for,
and in executing any, applications and/or assignments reasonably necessary to
protect such Intellectual Property Rights (including but not limited to the
Jointly Developed Marks), the cost and expense of which shall be borne equally.
Each party agrees to refrain from using or filing any application(s) to
register, in any class and in any country, the Jointly Developed Marks without
the prior written approval of the other party. Except as provided in the next
sentence, during the term hereof and for a period ending two (2) years after its
expiration or earlier termination, each party agrees not to sell, license or
otherwise market or
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* This information has been omitted pursuant to a request for
confidential treatment.
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<PAGE> 14
distribute the jointly owned rights or its interest therein without the prior
written consent of the other party. Upon the expiration or earlier termination
of this Agreement for any reason, the parties shall endeavor to enter into a
license agreement pursuant to which one party shall license the Jointly
Developed Products and the Jointly Developed Marks to the other at an agreed
upon royalty.
8. PRICING; FEES AND REVENUE SHARING
a. Jointly Developed Products. The pricing for the
Jointly Developed Products and the fee and revenue sharing arrangement shall be
as follows:
i. Pricing. The price schedule for
each Jointly Developed Product will be determined by mutual agreement of the
parties after completion of the beta testing phase and prior to additional
product development. It is the intent of the parties that each Jointly Developed
Product be priced to represent value in the marketplace with respect to the
inherent process and project technology represented in such Jointly Developed
Product and the calendar time and effort hours saved by use of the Jointly
Developed Product by the customer.
ii. [*]
b. Existing Products. The parties will be entitled to
marketing fees on completed sales or licensing of existing SRIC PEP Products or
ICARUS Products as follows:
i. [*]
ii. [*]
- --------------------
* This information has been omitted pursuant to a request for
confidential treatment.
14
<PAGE> 15
[*]
iii. Review of Sales Targets. For the initial six months of
the term of this Agreement, ICARUS' Director of Sales and SRIC's PEP Program
Director will review quarterly targets for sales contact to avoid customer
misunderstandings or complaints. Review of sales targets will continue by mutual
agreement of the parties for the remainder of this Agreement.
c. Other Development Activities. Prior to the commencement of
other development activities, the parties will amend this Agreement to set forth
the fee and revenue sharing arrangements applicable thereto.
d. Reconciliation and Payment. The party who completes the sale,
license or other distribution of a Jointly Developed Product shall be
responsible for billing and collection of the royalty, license fees or other
payments from the end-user. Regardless of which party completes the sale,
license or other distribution of a SRIC PEP Product or ICARUS Product, the party
whose product it is shall be responsible for billing and collection of the
royalty or other payments from the end-user. Sales and license agreements will
be reviewed quarterly (January 31, April 30, July 31, and October 31) by ICARUS'
Director of Sales and SRIC's PEP Program Director for accuracy of claims. Each
party will provide a calculation of the marketing fees and other amounts due the
other party hereunder on a quarterly basis (January 31, April 30, July 31,
October 31) and pay the calculated amount due within 30 days of the quarter end.
Except as to manifest errors brought to the attention of the other party within
thirty (30) days after its rendition, each such calculation shall be final and
conclusive as to each party, as to the items therein set forth (but not as to
any omissions). Any amounts not paid when due shall incur interest at the rate
of eighteen percent (18%) per annum (or the maximum rate permitted by law,
whichever is less).
e. Costs and Expenses; Taxes. Except as provided in Section 6(c), each
party will be responsible for payment of its own costs and expenses related to
the research, development, production, marketing, and sale of the Jointly
Developed Products and the existing products, and all other costs, charges,
taxes and expenses incurred with respect to the Jointly Developed Products, the
existing products, and the other activities contemplated by this Agreement.
Without limiting the foregoing, each party will be responsible for the payment
to governmental authority of any income, capital or franchise taxes imposed on
such party with respect to the activities contemplated by this Agreement that
are based on or measured by its net income, gross receipts or net worth.
- --------------------
* This information has been omitted pursuant to a request for
confidential treatment.
15
<PAGE> 16
9. CONFIDENTIAL INFORMATION
a. The parties recognize and agree that the disclosure of some
Proprietary Information is necessary for the carrying out of the activities
contemplated by this Agreement. Therefore, the parties agree that during the
term of this Agreement, and for a period of two (2) years after its expiration
or earlier termination, each party shall maintain the confidentiality of any
Proprietary Information disclosed to it. Neither party shall use the other
party's Proprietary Information for any purpose except in connection with the
activities contemplated by this Agreement. Neither party will disclose or make
accessible to any person or business entity of any type any Proprietary
Information that was disclosed by one party to the other unless required to do
so by judicial or administrative process (provided that the recipient shall
promptly notify the discloser and shall allow the discloser a reasonable time to
oppose such process before making disclosure). The parties agree that access to
any disclosed Proprietary Information will be limited to employees or
subcontractors who have a need to know such Proprietary Information for the
purpose of carrying out the terms of this Agreement and who have agreed in
writing to receive it under terms at least as restrictive as those contained
herein. The parties further agree that any Proprietary Information will be
safeguarded by the recipient with the same degree of care it would use for its
own proprietary or confidential information. Each party will immediately notify
the other of any unauthorized use or disclosure of the Proprietary Information
and will assist the other in remedying such unauthorized use or disclosure.
b. Each party agrees that a breach by that party of this
Section 9 will cause irreparable damage to the other party for which the
recovery of monetary damages would be inadequate, and therefore specifically
agrees that such other party is entitled to obtain temporary, preliminary, and
permanent injunctive relief to protect its rights hereunder, in addition to any
and all other remedies available at law or equity.
c. This section shall not apply to information: (i) that is or
becomes available to the public other than by breach of this Agreement; (ii)
that is rightfully received by the recipient from a third party without
confidentiality limitations; (iii) that the recipient can demonstrate by clear
and convincing evidence was independently developed by the recipient's employees
or subcontractors without access to the Proprietary Information; or (iv) that is
shown by written evidence to have been known by the recipient without any
restrictions as to use or disclosure prior to the disclosure of the Proprietary
Information to the recipient.
d. The Proprietary Information disclosed by one party to the
other, and any copies thereof created by the recipient, shall remain the
property of the discloser. Upon the expiration or earlier termination of this
Agreement, the recipient shall within fourteen (14) days return to the
discloser, or at the discloser's election destroy, all Proprietary Information
of the discloser, and all copies thereof, and provide a written accounting to
the discloser of such return or destruction unless retention of such information
is necessary to fulfill the discloser's obligation
16
<PAGE> 17
to continue to provide support to end-users pursuant to Section 6(d), in which
case the recipient shall return or destroy such information and provide such
accounting at the earliest possible time when such retention is no longer
necessary.
e. Except as otherwise provided herein, no license or
conveyance of any rights in any Proprietary Information or Intellectual Property
Rights is granted or implied by the disclosure of Proprietary Information under
this Agreement.
10. OTHER ACTIVITIES
During the term of this Agreement, (i) each party agrees not
to develop products that will directly compete with the Jointly Developed
Products, and (ii) each party agrees not to license the ICARUS Technology (in
the case of ICARUS) or the SRIC Technology (in the case of SRIC) to third
parties to use in the development, production, marketing, sale, license and
other distribution of products that will directly compete with the Jointly
Developed Products. Subject to the foregoing, each party may (i) pursue other
business opportunities that integrate its own Technology with other products and
(ii) engage in or possess an interest in other business ventures of every nature
and description, independently or with others, and neither party shall have any
right by virtue of this Agreement in or to such other business opportunities or
ventures, or in or to the income or profits derived therefrom.
11. REPRESENTATIONS AND WARRANTIES (TECHNOLOGY AND
INTELLECTUAL PROPERTY)
a. SRIC hereby represents and warrants that (i) the SRIC
Technology is original and does not and will not infringe upon the Intellectual
Property Rights of any third party and (ii) SRIC is (or with respect to
modifications, enhancements and upgrades will be) the sole and exclusive owner
or licensee of all rights in the SRIC Technology. SRIC's liability for a breach
of this representation and warranty shall be subject to the limitation of
liability contained in Section 13. EXCEPT FOR THE FOREGOING REPRESENTATION AND
WARRANTY, THE SRIC TECHNOLOGY IS PROVIDED "AS IS" AND WITHOUT ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
b. ICARUS hereby represents and warrants that (i) the ICARUS
Technology is original and does not and will infringe upon the Intellectual
Property Rights of any third party and (ii) ICARUS is (or with respect to
modifications, enhancements and upgrades will be) the sole and exclusive owner
or licensee of all rights in the ICARUS Technology. ICARUS' liability
17
<PAGE> 18
for a breach of this representation and warranty shall be subject to the
limitation of liability contained in Section 13. EXCEPT FOR THE FOREGOING
REPRESENTATION AND WARRANTY, THE ICARUS TECHNOLOGY IS PROVIDED "AS IS" AND
WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
12. INDEMNITIES
a. SRIC agrees at its expense to defend, indemnify and hold
harmless ICARUS, its respective officers, directors, employees, and agents
(collectively, "ICARUS Indemnitees") from and against all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) arising
out of any claims, suits or proceedings, whatever their nature and however
arising, that may be brought or made against any ICARUS Indemnitee (i) by reason
of SRIC's material breach, default, performance, or nonperformance of this
Agreement or by reason of SRIC's material breach of any representation or
warranty contained herein (including the representations and warranties made in
Section 1l(a)); or (ii) for any personal injury, product liability or other
claim arising from SRIC's performance under this Agreement; provided, that (i)
ICARUS notifies SRIC in writing within thirty (30) days of knowledge of the
claim; (ii) SRIC has sole control of the defense and all settlement negotiations
and the terms and conditions of any final settlement; and (iii) ICARUS provides
SRIC with the assistance, information and authority necessary to perform SRIC's
obligations under this Section. SRIC will reimburse the reasonable out-of-pocket
expenses incurred by ICARUS in providing such assistance. SRIC's LIABILITY TO
ICARUS UNDER THIS SECTION 12(a) SHALL BE SUBJECT TO THE LIMITATION OF LIABILITY
CONTAINED IN SECTION 13.
b. ICARUS agrees at its expense to defend, indemnify and hold
harmless SRIC its respective officers, directors, employees, and agents
(collectively, "SRIC Indemnitees") from and against all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) arising
out of any claims, suits or proceedings, whatever their nature and however
arising, that may be brought or made against any SRIC Indemnitee (i) by reason
of ICARUS' material breach, default, performance, or nonperformance of this
Agreement or by reason of ICARUS' material breach of any representation or
warranty contained herein (including the representations and warranties made in
Section 1l(b)); or (ii) for any personal injury, product liability or other
claim arising from ICARUS' performance under this Agreement; provided, that (i)
SRIC notifies ICARUS in writing within thirty (30) days of knowledge of the
claim; (ii) ICARUS has sole control of the defense and all settlement
negotiations and the terms and conditions of any final settlement; and (iii)
SRIC provides ICARUS with the assistance, information and authority necessary to
perform ICARUS' obligations under this Section. ICARUS will reimburse the
reasonable out-of-pocket expenses incurred by SRIC in providing such assistance.
ICARUS' LIABILITY TO SRIC UNDER THIS SECTION 12(b) SHALL BE SUBJECT TO THE
LIMITATION OF LIABILITY CONTAINED IN SECTION 13.
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<PAGE> 19
c. The indemnity provisions contained in this Section 12 shall
survive the expiration or earlier termination of this Agreement for a period of
two (2) years thereafter.
13. LIMITATION OF LIABILITY
ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING,
NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INCIDENTAL, CONSEQUENTIAL, OR
SPECIAL DAMAGES, OR FOR THE LOSS OF ANTICIPATED PROFITS ARISING FROM ANY BREACH
OF THIS AGREEMENT BY SUCH PARTY (INCLUDING ANY BREACH OF ANY WARRANTY BY SUCH
PARTY), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
IN NO EVENT SHALL A PARTY'S LIABILITY TO THE OTHER FOR ANY CLAIM REGARDLESS OF
LEGAL THEORY EXCEED ONE MILLION UNITED STATES DOLLARS (US$1,000,000). THE
PROVISIONS OF THIS AGREEMENT ALLOCATE THE RISKS BETWEEN EACH OF THE PARTIES, AND
THE FEE AND REVENUE SHARING ARRANGEMENTS CONTAINED HEREIN REFLECT THIS
ALLOCATION OF RISK AND THE LIMITATION OF LIABILITY SPECIFIED HEREIN.
14. REPRESENTATIONS' WARRANTIES AND COVENANTS (GENERAL)
a. SRIC hereby makes the following representations and
warranties to, and covenants with, ICARUS, with full knowledge that ICARUS is
acting in reliance thereon in executing this Agreement and entering into and
carrying on the activities contemplated hereunder:
i. Organization. SRIC is, and during the term
of this Agreement shall, at all times, continue to be a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California.
ii. Authority. SRIC has all requisite power
and authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery by SRIC of this Agreement, and the
performance by SRIC of its obligations hereunder, have been duly and validly
authorized by SRIC, and no other corporate proceedings on the part of SRIC are
necessary to authorize such execution, delivery and performance. This Agreement
has been duly executed and delivered by SRIC, and this Agreement and all
exhibits and documents executed and delivered by SRIC in connection with the
consummation of the transactions contemplated hereby, are the valid and legally
binding obligations of SRIC, enforceable against SRIC in accordance with the
terms hereof and thereof, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting creditor's rights generally and by principles of equity (whether
considered in a proceeding at law or in equity). No consent, approval or other
action by any governmental authority is required in connection with the
execution, delivery and performance by SRIC of this Agreement.
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<PAGE> 20
iii. No Violation. The execution, delivery and
performance by SRIC of this Agreement, and the consummation of the transactions
contemplated hereby, do not and will not (i) violate, conflict with, or result
in the breach of any provision of the charter documents or by-laws of SRIC, (ii)
violate, conflict with or result in the breach of any of the terms of, result in
a material modification of, or otherwise give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time, or both,
constitute) a default under, any material instrument, contract or other
agreement to which SRIC is a party or by or to which any of its assets or
properties may be bound or subject, (iii) violate any order, writ, judgment,
injunction, award or decree of any federal, state, local or foreign court,
arbitrator or governmental or regulatory body against, or binding upon, SRIC or
any of its assets or properties, (iv) violate any statute, law or regulation of
any governmental or regulatory body; or (v) result in the creation or imposition
of any lien, charge or encumbrance of any nature or description upon any of the
properties, assets or businesses of SRIC.
b. ICARUS hereby makes the following representations and
warranties to, and covenants with, SRIC, with full knowledge that SRIC is acting
in reliance thereon in executing this Agreement and entering into and carrying
on the activities contemplated hereunder:
i. Organization. ICARUS is, and during the term
of this Agreement shall, at all times, continue to be a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Maryland.
ii. Authority. ICARUS has all requisite power
and authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery by ICARUS of this Agreement, and the
performance by ICARUS of its obligations hereunder, have been duly and validly
authorized by ICARUS, and no other corporate proceedings on the part of ICARUS
are necessary to authorize such execution, delivery and performance. This
Agreement has been duly executed and delivered by ICARUS, and this Agreement and
all exhibits and documents executed and delivered by ICARUS in connection with
the consummation of the transactions contemplated hereby, are the valid and
legally binding obligations of ICARUS, enforceable against ICARUS in accordance
with the terms hereof and thereof, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting creditor's rights generally and by principles of equity (whether
considered in a proceeding at law or in equity). No consent, approval or other
action by any governmental authority is required in connection with the
execution, delivery and performance by ICARUS of this Agreement.
iii. No Violation. The execution, delivery and
performance by ICARUS of this Agreement, and the consummation of the
transactions contemplated hereby, do not and will not (i) violate, conflict
with, or result in the breach of any provision of the charter documents or
by-laws of ICARUS, (ii) violate, conflict with or result in the breach of any of
the
20
<PAGE> 21
terms of, result in a material modification of, or otherwise give any other
contracting party the right to terminate, or constitute (or with notice or lapse
of time, or both, constitute) a default under, any material instrument, contract
or other agreement to which ICARUS is a party or by or to which any of its
assets or properties may be bound or subject, (iii) violate any order, writ,
judgment, injunction, award or decree of any federal, state, local or foreign
court, arbitrator or governmental or regulatory body against, or binding upon,
ICARUS or any of its assets or properties, (iv) violate any statute, law or
regulation of any governmental or regulatory body; or (v) result in the creation
or imposition of any lien, charge or encumbrance of any nature or description
upon any of the properties, assets or businesses of ICARUS.
15. MISCELLANEOUS
a. Dispute Resolution.
i. The parties will attempt in good faith to
resolve through negotiation any dispute, claim or controversy arising out of or
relating-to this Agreement. Either party may initiate negotiations by providing
written notice in letter form to the other party, setting forth the subject of
the dispute and the relief requested. The recipient of such notice will respond
in writing within five days with a statement of its position on and recommended
solution to the dispute. If the dispute is not resolved by this exchange of
correspondence, then representatives of each party with full settlement
authority will meet at a mutually agreeable time and place within ten days of
the date of the initial notice in order to exchange relevant information and
perspectives, and to attempt to resolve the dispute.
ii. If the dispute is not resolved by these
negotiations, the parties agree that any and all disputes, claims or
controversies arising out of or relating to this Agreement shall be submitted to
J.A.M.S./ENDISPUTE ("JAMS"), or its successor, for non-binding mediation, and if
the matter is not resolved through mediation, then it shall be submitted to
JAMS, or its successor, for final and binding arbitration. Either party may
commence mediation by providing to JAMS and the other party a written request
for mediation, setting forth the subject of the dispute and the relief
requested. The parties will cooperate with JAMS and with one another in
selecting a mediator from JAMS's panel of neutrals, and in scheduling the
mediation proceedings. The parties covenant that they will participate in the
mediation in good faith, and that they will share equally in its costs. All
offers, promises, conduct and statements, whether oral or written, made in the
course of the mediation by any of the parties, their agents, employees, experts
and attorneys, and by the mediator or any JAMS employees, are confidential,
privileged and inadmissible for any purpose, including impeachment, in any
arbitration or other proceeding involving the parties, provided that evidence
that is otherwise admissible or discoverable shall not be rendered inadmissible
or non-discoverable as a result of its use in the mediation. Either party may
initiate arbitration with respect to the matters submitted to mediation by
filing a written demand for arbitration at any time
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<PAGE> 22
following the initial mediation session or 45 days after the date of filing the
written request for mediation, whichever occurs first. The mediation may
continue after the commencement of arbitration if the parties so desire. Unless
otherwise agreed by the parties, the mediator shall be disqualified from serving
as arbitrator in the case. The provisions of this clause may be enforced by any
court of competent jurisdiction, and the party seeking enforcement shall be
entitled to an award of all costs, fees and expenses, including attorneys fees,
to be paid by the party against whom enforcement is ordered.
iii. If the dispute is not resolved by negotiations or mediation, the
parties agree that any and all disputes, claims or controversies arising out of
or relating to this Agreement shall be submitted to final and binding
arbitration before JAMS, or its successor, pursuant to the United States
Arbitration Act, 9 USC Sec. 1 et seq. in the City and County of San Francisco.
The arbitration will be conducted in accordance with the provisions of JAMS's
Streamlined Arbitration Rules and Procedures in effect at the time of filing of
the demand for arbitration. The parties will cooperate with JAMS and with one
another in selecting an arbitrator from JAMS's panel of neutrals, and in
scheduling the arbitration proceedings. The parties covenant that they will
participate in the arbitration in good faith, and that they will share equally
in its costs. The provisions of this clause may be enforced by any court of
competent jurisdiction, and the party seeking enforcement shall be entitled to
an award of all costs, fees and expenses, including attorneys' fees, to be paid
by the party against whom enforcement is ordered. Judgment upon any arbitration
award may be entered in any court having jurisdiction. Either party may bring an
action, including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this Agreement applies in any court having
jurisdiction over such action. If JAMS or its successor is unable or legally
precluded from administering the arbitration, then the American Arbitration
Association will serve.
iv. Each party agrees to keep all disputes and arbitration proceedings
strictly confidential, except for disclosures of information required in the
ordinary course of business of the parties or by applicable law or regulation.
b. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without regard to its
conflicts of laws principles.
c. Notice. Any notice or other communication required or desired to
be given under this Agreement shall be in writing and in the English language
and shall be personally delivered or sent by electronic mail, facsimile,
overnight courier, or certified or registered mail, postage prepaid, return
receipt requested, addressed to the intended recipient as set forth in the
preamble to this Agreement or to such other address as shall be given to the
other party in writing. Notices delivered in person shall be effective upon
receipt; notices sent by electronic mail or fax
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<PAGE> 23
shall be effective upon confirmed receipt; notices sent by courier shall be
effective upon receipt; and notices sent by mail shall be effective five
business days after being deposited in the mail as provided above.
d. Severability. If a court of competent jurisdiction shall declare
that any provision of this Agreement is invalid, illegal, or incapable of being
enforced in whole or in part, the remaining conditions and provisions or
portions hereof shall nevertheless remain in full force and effect and
enforceable, and no provision shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
e. Entire Agreement; Amendments. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof, and the parties
hereto have made no agreements, representations or warranties relating to the
subject matter of this Agreement that are not set forth herein. This Agreement
expressly supersedes all previous correspondence, proposals, acceptance letters,
letters of intent and memoranda of understanding whether signed or unsigned,
that relate to the subject matter hereof, including without limitation the
"Principles of Agreement for a Marketing and Product Development Agreement"
signed May 29, 1997. No amendment to or modification of this Agreement is valid
unless made in writing and signed by the parties hereto. Each party recognizes
that no inducements or promises, oral or otherwise, have been made by any party,
or anyone acting on behalf of any party, that are not embodied in this
Agreement.
f. Assignment. The rights, benefits, duties and obligations of this
Agreement shall bind and inure to the benefit of each party's respective
successors and assigns, provided that this Agreement may not be assigned or
transferred by a party without the prior written consent of the other party,
which consent shall not be unreasonably withheld.
g. Waiver. The failure of either party to insist upon strict
performance of any of the terms, conditions, and provisions of this Agreement
shall not be construed as a waiver or relinquishment of future compliance
herewith or with any other term, condition, or provision hereof, and said terms,
conditions, and provisions shall remain in full force and effect. No waiver of
any term or condition of the Agreement on the part of either party shall be
effective for ANY purpose whatsoever unless such waiver is in writing and signed
by such party and then only in the specific instance and for the specific
purpose given.
h. Headings. The headings of sections are inserted for convenience and
shall not affect any interpretation of this Agreement. All references to
Sections and Exhibits without further attribution shall be deemed to refer to
the Sections and Exhibits to this Agreement.
i. Agency Authority. Nothing contained herein shall give either party
the authority to bind the other in any transaction relating to this Agreement or
otherwise. Except as expressly contained herein, nothing in this Agreement shall
be construed as creating any agency, partnership, or other form of joint
enterprise between the parties.
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<PAGE> 24
j. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered a part of a single, original
agreement.
k. Transaction Costs. Each party will be responsible for its own
transaction costs with respect to the preparation, execution and delivery of
this Agreement.
l. No Third-Party Rights. This Agreement shall not (directly,
indirectly, contingently or otherwise) confer or be construed as conferring any
rights or benefits on any person (other than the parties and their permitted
successors and assigns).
IN WITNESS WHEREOF, SRIC and ICARUS have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
SRI Consulting, Inc.
By:
Its:
ICARUS Corporation
By:
Its:
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<PAGE> 25
Exhibit A
The following are ICARUS Marks and Logos as of 8 July 1997.
Mark Status
- ----------------------------------------------------
ARCHES & Design Service Mark Reg. No. 1,088,288
CCOST Proprietary Mark
COST and Design Service Mark Reg. No. 947,465
ICARUS & Design Pending
ICARUS 2000 NT Proprietary Mark
ICARUS 2000 Reg. No. 1,675,542
ICARUS Manpower Productivity Expert Proprietary Mark
ICARUS Mentor Design Reg. No. 1,715,096
ICARUS Mentor - Trademark
ICARUS Process Evaluator Pending
ICARUS Project Manager & Design Pending
ICARUS Project Object Database Trademark
ICARUS Pending
ICUE Reporter Trademark
ICUE Trademark
Questimate Reg. No. 1,519,653
Translating Ideas into Dollars Trademark
<PAGE> 26
Exhibit B
The following are SRIC logos protected under this agreement.
[SRI CONSULTING (logo)]
[Subsidiary of SRI International
(logo)]
In addition to the SRIC marks indicated in Section l.o, the following marks are
also protected:
Process Economics Program and its common abbreviation, PEP
PEP Bulletin
PEPCOST Cost Estimation Software Program
PEP Yearbook International
Use of other SRIC or SRI International marks and logos is outside the scope
of this Agreement.
<PAGE> 1
Exhibit 10.4
CONFIDENTIAL TREATMENT REQUESTED-REDACTED
SOFTWARE DISTRIBUTION AND LICENSE AGREEMENT
This SOFTWARE DISTRIBUTION AND LICENSE AGREEMENT (this "Agreement")
is entered into as of the 17th day of January 1995, by and between ICARUS
CORPORATION, a Maryland corporation with offices at One Central Plaza, 11300
Rockville Pike, Rockville, Maryland 20852 ("ICARUS"), and PRIMAVERA SYSTEMS
INC., a Delaware corporation having an office at Two Bala Plaza, Bala Cynwyd,
Pennsylvania 19004 ("PRIMAVERA").
WHEREAS, Primavera has developed computer software and related
technology related to the scheduling of projects, and
WHEREAS, ICARUS has developed technology related to the project evaluation
and process evaluation of projects in the processing and related industries, and
WHEREAS, ICARUS desires to distribute Primavera computer software
technology with its computer software and market such bundled software worldwide
to its customers via its sales force, and through its Affiliate and its Dealers.
NOW, THEREFORE, in consideration of the mutual promises and undertakings
set forth in this Agreement, ICARUS and Primavera hereby agree as follows:
ARTICLE I
CONTRACT DOCUMENTS
1.01 Contract Documents. The agreement between the parties (Agreement)
shall consist of the Basic Agreement (pages 1 through 28) and the following
appendix:
1.02 Conflict. Should there be any conflict between the Basic Agreement
and the appendix, the Basic Agreement shall control.
ARTICLE II
DEFINITIONS
2.01 "Primavera Software" means the Primavera Project Planner project
scheduling software product commonly referred to in the industry as "P3 for
Windows," and all other software and firmware received by ICARUS under this
Agreement including user documentation, updates, upgrades and replacements
thereto, marketed directly or indirectly by Primavera.
2.02 "Source Code" means the Licensed Software when written in a form or
language understandable to humans, generally in a higher level computer language
and further including embedded comments, where such source code as created by
Primavera contains
- 1 -
<PAGE> 2
sufficient information to permit a programmer with ordinary skills in writing
code for project scheduling to update or modify such software.
2.03 "User Documentation" means user manuals or other written descriptions
of the Licensed Software prepared by Primavera to assist an end user of such
software to understand and use such software.
2.04 "Program Documentation" means specifications and other written
descriptions of the Licensed Software sufficiently detailed to enable a skilled
programmer to have reasonable facility in understanding, using, updating and
modifying such software, and in incorporating such software in other software
products.
2.05 "Enhancement Kit" means a sealed package commercially released by
Primavera containing an Upgrade or Update to the Licensed Software encoded in
Object Code on electronic media, and documentation therefor, developed by
Primavera during the term of this Agreement.
2.06 "Licensed Software" means the Primavera Software and all Updates
and Upgrades thereto.
2.07 "Licensed Materials" means the Licensed Software and the User
Documentation.
2.08 "Confidential Information" means business and technical information
of a party hereto that is treated as confidential by such party, and which
includes but is not limited to computer programs, source code, algorithms,
customer lists, price lists, marketing plans and business plans, and that is
furnished to the other party hereto with written notice that the same is deemed
"Confidential Information."
2.09 "Object Code" means the Licensed Software in a form that can be
executed by a computer using the appropriate operating system without
compilation or interpretation. Object Code specifically excludes Source Code.
2.10 "Firmware" means any hardware device which must be present in the
computer operating environment while Primavera Software is functioning.
2.11 "ICARUS Software" means software marketed by ICARUS that incorporates
ICARUS project evaluation and/or process evaluation and/or cost estimating
and/or cost engineering technology for the chemical processing industries,
including but not limited to the chemical, petrochemical, oil refining, power
generation, ore beneficiation, pulp and paper, food, and related industries.
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2.12 "Software Product" means a software product that comprises ICARUS
Software bundled with the Licensed Software, and is packaged and marketed by
ICARUS, its Affiliates, or its Dealers as a single product.
2.13 All dollar ($) figures herein are United States dollars.
2.14 "License Year" means a calendar year. The First License Year shall be
the calendar year 1995.
2.15 "Dealer" means an ICARUS authorized dealer, distributor, or Business
Partner that purchases or licenses Software Products from ICARUS and resells or
licenses such Software Products to another Dealer or to an End User. All Dealers
are independent contractors.
2.16 "Affiliate" means ICARUS Services Limited, an English corporation
having an office at The Graftons, Stamford New Road, Altrincham WA14 1DQ,
England. ICARUS Services Limited is a corporation separate from ICARUS and is an
independent contractor.
2.17 "Primavera Product Kits" or " Product Kits" means a sealed package
bearing a unique serial number or series of unique serial numbers and which
includes (a) a copy of Primavera Software encoded in Object Code on electronic
media in a form released by Primavera, and (b) User Documentation developed by
Primavera.
2.18 "End User" means a person or entity that purchases or licenses one or
more copies of the Software Products from ICARUS, its Affiliate or Dealers, and
uses such Software Products solely in accordance with the terms of a Primavera
End User License.
2.19 "Primavera End User License" means the written license agreement
contained in each Primavera Product Kit that is distributed to each End User as
part of a Software Product and which shall be the same as that distributed by
Primavera to its own customers), and pursuant to which the End User has the
limited right to use the Licensed Software. The form of the Primavera End User
License is attached hereto as Appendix B.
2.20 "Update" means all corrections, minor improvements or additions, and
substitutions to the Licensed Materials prepared or owned by Primavera and which
may from time to time be distributed to end users without imposition of an
additional charge.
2.21 "Upgrade" means all modifications, additions and substitutions to
the Licensed Materials that result in substantial performance, structural, or
functional improvements or additions for which Primavera generally imposes a
separate charge on its end users.
2.22 "Kit Order" means a written order from ICARUS to Primavera for
Product Kits or Enhancement Kits manufactured by Primavera.
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2.23 "Derivative Work" means any work, other than the Software Product,
derived from the Licensed Software or that utilizes or incorporates any part
thereof, in any medium, format or form whatsoever.
ARTICLE III
LICENSE GRANT
3.01 License. Primavera hereby grants to ICARUS, and ICARUS hereby accepts
from Primavera, a worldwide nonexclusive non-transferable right and license
during the term of this Agreement to:
(a) Distribute Primavera Product Kits solely as part of a Software
Product, and not as a standalone product, to End Users by sale or license
directly and through its Affiliate and Dealers;
(b) Distribute Primavera Product Kits by sale or license directly
and through its Affiliate and Dealers to End Users that have previously licensed
ICARUS Software;
(c) Distribute Enhancement Kits to End Users that have previously
licensed a Software Product by sale or license directly and through its
Affiliate and Dealers; and
(d) Use, publicly perform and publicly display the Licensed
Materials in marketing, promotion and support of the Software Products and to
sublicense its Affiliate and Dealers to do the same.
3.02 Version. Upon the commercial release by Primavera of Upgrades, if
any, to the Licensed Materials, ICARUS and Primavera shall jointly decide which
version of the Licensed Materials to include in the Software Products. It is
intended that during throughout the term of this Agreement that ICARUS shall
deliver the then current release of the Primavera software to its customers
subject to the time required by ICARUS to coordinate its own software with the
latest version from Primavera.
3.03 Distribution of Product Kits. ICARUS shall distribute the sealed
Primavera Product Kits and Enhancement Kits intact, with all packaging,
documentation, and Primavera End User Licenses contained therein. ICARUS shall
neither add any materials nor remove any materials from the Product Kits or the
Enhancement Kits. ICARUS shall not alter, deface or conceal any trademark or
tradename appearing in or on the Product Kits or the Enhancement Kits. ICARUS
shall require by written agreement that its Affiliate and Dealers adhere to the
terms of this provision.
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[*]
In the event Primavera shall receive any ICARUS software or firmware from
ICARUS, Primavera shall not in any way translate, disassemble, reverse engineer
or decompile same. This provision shall survive the termination of this
Agreement.
3.05 Title; Reserved Rights.
(a) ICARUS acknowledges and agrees that the Licensed Materials are
owned by Primavera. The ownership of the copyrights in the Licensed Materials,
and title to the Licensed Materials and all copies thereof, shall remain with
Primavera. ICARUS shall have no ownership rights to them by virtue of this
Agreement.
(b) Primavera acknowledges and agrees that the ICARUS Software and
the Software Products, as collective works, are owned by ICARUS. The ownership
of the copyrights in the ICARUS software and the Software Products, as
collective works, and title to the ICARUS Software and all copies thereof, shall
remain with ICARUS. Primavera shall have no ownership rights to them by virtue
of this Agreement.
(c) Primavera hereby reserves all rights not specifically granted
herein to ICARUS. Except as expressly provided in Paragraph 3.01 hereof,
Primavera does not convey to ICARUS in this Agreement any intellectual property
rights in the Licensed Materials, including without limitation rights under
patent or copyright. By way of example, ICARUS shall have no right to reproduce,
copy, or modify or prepare "Derivative Works. of the Licensed Materials, the
Primavera Product Kits, or the Enhancement Kits.
3.06 No Obligation to Develop or Market. Nothing contained in this
Agreement shall be construed to obligate ICARUS to develop, market or license
the Software Products.
3.07 Competing Products.
(a) Primavera acknowledges and agrees that ICARUS may develop,
attempt to develop, market or license to or from others project scheduling or
evaluation software similar in nature to the Primavera Software or the Software
Products in competition with PRIMAVERA, none of which is precluded by this
Agreement.
(b) ICARUS acknowledges and agrees that, in view of the nonexclusive
nature of the rights granted to ICARUS herein, Primavera retains the right to
offer, sell, license,
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market or distribute the Licensed Materials and the Primavera Product Kits
directly or indirectly to any person or entity for any purpose, including
without limitation the development of software products that are functionally
similar to or competitive with ICARUS Software, the Software Products or any
other product hereafter distributed by ICARUS.
(c) ICARUS agrees to furnish reasonable advance notice to Primavera
in writing prior to entering into an agreement to license from a third party
project scheduling or project evaluation software, where such license permits
ICARUS to market such project scheduling or project evaluation software for
general license or sale to others. Primavera agrees to furnish reasonable
advance notice to ICARUS in writing prior to entering into an agreement to
license from a third party design or estimating software, where such license
permits Primavera to market such design or estimating software for general
license or sale to others.
3.08 Rental or Loan of Product Kits.
(a) ICARUS shall neither rent nor loan the Product Kits or the
Enhancement Kits, provided, however, ICARUS shall have the right to loan to
prospective End Users solely for evaluation purposes those Product Kits and
Enhancement Kits furnished to ICARUS pursuant to subparagraph (b). ICARUS shall
require by written agreement that its Affiliate and Dealers adhere to the terms
of this provision.
(b) Primavera shall, during the term of this Agreement, and upon
written request from ICARUS, furnish to ICARUS at no charge (except as provided
below) in each calendar year no more than twelve (12) Primavera Product Kits and
any related Enhancement Kits for inclusion in Software Products for loan to
prospective End Users. In no event shall the duration of any loan exceed sixty
(60) days. In the event the duration of any loan exceeds sixty (60) days, ICARUS
shall pay to Primavera the applicable royalty for said Product Kit without
regard to whether ICARUS invoices or collects funds from said prospective End
User, or otherwise causes the termination of the loan period; provided, however,
ICARUS may, subject to the limitations of the license grant, thereafter sell or
license said Primavera Product Kit without incurring any additional royalty
obligation to Primavera for said kit. ICARUS shall reimburse Primavera for the
shipping costs incurred by Primavera in furnishing such Product Kits for loan.
3.09 Internal Use; Training; Sales Demonstrations. Primavera shall, during
the term of this Agreement, and upon written request from ICARUS, furnish to
ICARUS at no charge in each calendar year Primavera Product Kits and any related
Enhancement Kits for use by ICARUS, its Affiliate and Dealers, in the amounts
set forth below, solely for their internal use, sales demonstrations, training
and technical support. ICARUS shall pay to Primavera the shipping costs incurred
by Primavera in furnishing same.
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[*]
3.10 License of Primavera Marks.
(a) Primavera hereby grants to ICARUS for the term of this Agreement
a worldwide non-exclusive right and license, but not the obligation, to use and
sublicense to its Affiliate and Dealers the Primavera trademarks, service marks,
brand names, and logos used by Primavera for the Primavera Software (the
"Primavera Marks") in connection with the distribution, advertising and
promotion of the Software Products, subject to the provisions of this Paragraph
3.10.
(b) ICARUS acknowledges and agrees that except for the limited right
to use the Primavera Marks to the extent herein setforth, ICARUS has no rights
in the Primavera Marks. ICARUS acknowledges that Primavera owns and retains all
proprietary rights in and to all Primavera Marks, and that ICARUS shall take no
action or make any registration that would otherwise convey or grant an interest
in said Primavera Marks. ICARUS agrees not to contest or take any action to
contest Primavera's ownership of the Primavera Marks, or to use, employ or
attempt to register any trademark, service mark, or tradename in any country in
the world that is confusingly similar to the Primavera Marks.
(c) ICARUS agrees that Primavera shall be the sole owner of any and
all goodwill in the Primavera Marks built up in the United States and in any
country in which the Software Products are distributed by ICARUS.
(d) ICARUS shall take no action that impairs or otherwise tarnishes
the Primavera Marks. ICARUS shall not remove or alter any Primavera Mark from
the Product Kits or Enhancement Kits.
(e) ICARUS shall require its Affiliate and Dealers to adhere to the
terms of this provision, and shall take steps generally consistent with the
monitoring of ICARUS's own marks to ensure that its Affiliate and Dealers use
the Primavera Marks in accordance with the terms of the license herein.
(f) ICARUS agrees to cooperate (at no cost to ICARUS) with Primavera
to protect Primavera's ownership of and interest in the Primavera Marks. This
cooperation includes prompt notice to Primavera of instances known to ICARUS in
which a third party is using the Primavera Marks without authorization.
Primavera shall have the right, but not the obligation, and shall bear all costs
and expenses, to (i) institute and prosecute any
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actions for infringement of the Primavera Marks throughout the world; (ii)
defend any petition to cancel any registration of the Primavera Marks; and (iii)
oppose any attempted use of or application to register any mark confusingly
similar to, or a colorable imitation of, any of the Primavera Marks throughout
the world. In the event that Primavera elects not to exercise the foregoing
rights in any particular instance, ICARUS may, at its cost and expense, exercise
such rights.
(g) Nothing contained in this Agreement shall be deemed to grant to
Primavera any rights to use, sublicense or otherwise, any trademarks, service
marks, brand names, logos belonging to ICARUS; and Primavera agrees that ICARUS
shall be the sole owner of any and all goodwill in the aforementioned, and
Primavera shall take no action that impairs or otherwise tarnishes same.
3.11 Misleading Practices; Unauthorized Warranties.
(a) To protect and preserve the goodwill and image of Primavera and
the Primavera Software, ICARUS agrees that it shall:
(i) refrain from publishing or using any misleading or
deceptive advertising or promotional material with respect to the Primavera
Software; and
(ii) refrain from making any representations, warranties
or guarantees to its Affiliate, Dealers or End Users with respect to the
specifications, features or capabilities of the Primavera Software or the
Product Kits that are inconsistent with or in addition to the warranty contained
in Primavera's End User License Agreement or the descriptions contained in the
User Documentation.
(b) ICARUS shall require that its Affiliate and Dealers agree in
writing to abide by the terms of this provision.
(c) ICARUS shall indemnify, defend and hold Primavera harmless
against claims by third parties arising from a breach by ICARUS, its Affiliate
or Dealers of this provision.
ARTICLE IV
PRODUCT KITS
4.01 Manufacture of Product Kits. Primavera shall have the sole right
to manufacture Primavera Product Kits, Demo Versions, and Enhancement Kits.
ICARUS shall not manufacture such kits.
4.02 Copy Protection Code. In the event ICARUS furnishes Primavera with
copy protection software in object code form, Primavera shall, at the reasonable
request of
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ICARUS, incorporate such software in the Licensed Software contained in the
Primavera Product Kits delivered to ICARUS hereunder.
4.03 Product Kit Content; Revisions.
(a) Primavera reserves the right at any time without liability or
prior notice to ICARUS to (i) determine the contents of each Product Kit, and
(ii) revise such contents, provided, however, that the incorporation of any
Upgrade or Update in the Primavera Software contained in the Product Kit shall
be subject to the provisions of subparagraph (b).
(b) Primavera shall furnish to ICARUS no less than thirty (30) day
advance written notice of the commercial release by Primavera of any Upgrades or
Updates to the Primavera Software, which notice shall describe generally the
revisions reflected in such Upgrade or Update. ICARUS shall thereafter have the
right, which it may exercise by furnishing written notice to Primavera, to order
from Primavera Product Kits containing Primavera Software that incorporates such
Update or Upgrade. In the absence of such written notice from ICARUS, Primavera
shall, in fulfillment of Kit Orders from ICARUS, continue to ship to ICARUS
Product Kits containing Primavera Software that does not incorporate such
Upgrades or Updates. Nothing herein shall be deemed to preclude ICARUS from
subsequently electing to receive such upgrade or update provided such upgrade or
update remains available from Primavera.
(c) Nothing in this Agreement shall be construed to impose on
Primavera an obligation to develop or commercially release Upgrades to the
Primavera Software.
4.04 Revised Product Kits. In the event Primavera commercially releases
revised Product Kits, ICARUS may exchange the Product Kits in its inventory for
such revised Product Kits. ICARUS shall pay all shipping costs in connection
with any such exchange.
4.05 Initial Delivery of Product Kits. Within fourteen (14) days of the
date of this Agreement, Primavera shall deliver to ICARUS an initial supply of
12 Product Kits for inclusion by ICARUS in the Software Products.
4.06 Orders for Product Kits. Subsequent to the initial delivery of
Product Kits pursuant to Paragraph 4.05, all future orders by ICARUS for Product
Kits and Enhancement Kits shall be made pursuant to written Kit Orders.
4.07 Shipment of Product Kits; Risk of Loss.
(a) Primavera shall ship Product Kits and Enhancement Kits ordered
by ICARUS within five (5) days of the date of receipt by Primavera of the Kit
Order.
(b) Primavera shall ship all Product Kits and Enhancement Kits
F.O.B. Primavera's point of shipment to the ICARUS facilities designated in the
Kit Order. Unless
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specified in the Kit Order, Primavera shall select the mode of shipment and the
carrier. ICARUS shall pay all shipping, freight and insurance charges.
(c) All risk of loss or damage for any Product Kits or Enhancement
Kits shall pass to ICARUS upon delivery by Primavera to the freight carrier, to
ICARUS, or to ICARUS's agent for delivery, whichever first occurs.
4.08 Controlling Terms. The terms and conditions of this Agreement shall
apply to each order accepted or shipped by Primavera. Any terms or conditions
appearing on the face or reverse side of any Kit Order that are different or
additional to the terms and conditions of this Agreement shall not be binding on
the parties unless both parties hereto expressly agree in a separate writing to
be bound by such different or additional terms and conditions. The terms and
conditions of this Agreement shall govern in the event of any conflict between
this Agreement and the terms of any Kit Order.
4.09 Cancellation of Order by Primavera. Primavera reserves the right to
cancel or suspend any Kit Order placed by ICARUS for Product Kits, or refuse or
delay shipment thereof, if ICARUS fails to make payments as required herein.
4.10 Cancellation of Order by ICARUS. ICARUS may cancel any Kit Order
without fee ten (10) days or more before the confirmed shipping date of the
Product Kits or Enhancement Kits.
4.11 Primavera End User License Agreement. All Product Kits and
Enhancement Kits (and Licensed Materials contained therein) furnished hereunder
and distributed by ICARUS shall be subject to the terms and conditions of
Primavera's End User License included in each Product Kit and Enhancement Kit,
as may be amended by Primavera from time to time. ICARUS shall ensure that each
End User shall receive such End User License.
4.12 Security Interest. ICARUS hereby pledges, assigns and grants to
Primavera, its successors and assigns a continuing security interest in and to
all Product Kits and Enhancement Kits delivered by Primavera to ICARUS hereunder
to secure payment in full to Primavera. ICARUS shall execute such UCC-1 forms
and other documents reasonably requested by Primavera to perfect such security
interest. Nothing herein shall be deemed to grant to Primavera a security
interest in any ICARUS Software or Software Product.
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ARTICLE V
PRICES; PAYMENT
5.01 Prices to ICARUS.
(a) ICARUS shall pay to Primavera the following license fees:
(i) for each copy of a Software Product licensed for operation
by End User on a single user system, a Base License Fee (as adjusted in
subparagraph (b) below) based upon the number of single user systems as set
forth in the "Single User Systems" license fee chart in Appendix A, and subject
to the additional terms and conditions contained therein; and
(ii) for each copy of a Software Product licensed for
operation by End User on network systems, a Base License Fee (as adjusted in
subparagraph (b) below) based upon the number of simultaneous users in the End
User organization, as set forth in the "LAN" license fee chart in Appendix A,
and subject to the additional terms and conditions contained therein; and
[*]
In the event that an Enhancement Kit commercially released by
Primavera contains an Update, not an Upgrade, ICARUS shall pay to Primavera for
each Enhancement Kit only the shipping costs incurred by Primavera in furnishing
such Enhancement Kit to ICARUS.
(iv) The Base License Fees set forth in subparagraphs (i) and
(ii) above shall be adjusted for inflation as set forth in subparagraph (b)
below, and all pricing derived therefrom shall be likewise adjusted.
(b) Commencing with calendar year 1996, the adjusted Base License
Fee payable by ICARUS to Primavera for each additional copy of a Software
Product licensed to an End User shall consist of the Base License Fee for each
such copy, adjusted as of the commencement of each License Year during the term
hereof, by any change in the Index now known as the United States Bureau of
Labor Statistics, Consumer Price Index for all Urban Consumers, Washington, D.C.
Metropolitan Area (1982-84 = 100) (hereinafter referred to as the Index), or its
successor (or if discontinued its most nearly comparable
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successor) Index. Such adjustment shall be made by adding to the Base License
Fee, the product of the Base License Fee multiplied by a fraction
(i) the numerator of which is the difference between the Index
figure for the latest month of January for which the index is available at the
time of invoicing and the Index figure for the month of January for the First
License Year, and
(ii) the denominator of which is the Index figure for the
month of January of the First License Year.
The result of the foregoing computation shall constitute the adjusted
annual Base License Fees payable by ICARUS for each additional copy of a
Software Product licensed by ICARUS during the then current License Year. In the
event such Index is discontinued with no successor or comparable Index, then the
parties shall attempt to agree upon a substitute formula for the determination
of such License Fee adjustments in the basic License Fee to be paid hereunder,
but if they are unable to agree upon a substitute formula within thirty (30)
days, then the matter shall be determined by arbitration in accordance with the
then applicable rules of the American Arbitration Association. However, any such
substitute formula for License Fee adjustments whether arrived at by agreement
of the parties or by arbitration, shall require such adjustments to be
calculated and effected on the annual basis hereinbefore set forth.
5.02 End User Identification Reports; Forecasts.
(a) ICARUS shall submit to Primavera within thirty (30) days
following the last day of each ICARUS corporate quarter, a quarterly report
setting forth the names and addresses of each End User to which ICARUS, its
Affiliate or Dealers distributed a Software Product or an Enhancement Kit during
such quarter.
5.03 Payments by ICARUS.
(a) ICARUS shall pay to Primavera the license fees payable pursuant
to Paragraph 5.01 for each copy of a Software Product or Enhancement Kit
licensed to an End User within thirty (30) days following the last day of the
ICARUS corporate quarter during which such Software Product or Enhancement Kit
was licensed.
5.04 Interest. Interest shall accrue on any delinquent amounts owed by
ICARUS to Primavera hereunder at the rate of one and one-half percent (1.5%) per
month, or the maximum rate permitted by applicable law, whichever is less.
5.05 Taxes. ICARUS shall be responsible for and shall pay any and all
taxes, duties, withholdings or similar charges that are due and payable by
ICARUS directly to any governmental authority as a result of the distribution or
licensing of the Software Products,
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including all sales, user, value-added, excise, personal property or other
similar taxes imposed by any local, state or federal government or regulatory
agency of any country.
5.06 Records; Audit.
(a) ICARUS shall maintain complete and accurate records sufficient
to permit the computation of the license fees payable hereunder to Primavera.
ICARUS shall, upon ten (10) days advance written notice by Primavera, but not
more frequently than once each calendar year, permit reasonable inspection of
such records by Primavera or its accountants at the offices of ICARUS during
normal working hours. Primavera shall maintain in confidence and not use or
disclose to third parties any of the information contained in or derived from
such records without the prior written consent of ICARUS.
(b) The cost of any audit shall be borne solely by Primavera, except
that if any audit reveals an underpayment by ICARUS of royalties for any quarter
of ten (10%) percent or more, ICARUS shall reimburse Primavera for all
reasonable costs associated with the audit and Primavera shall have the right to
audit the records maintained by ICARUS every six months from that time forth. If
any audit reveals an understatement of ICARUS of the license fees due hereunder,
ICARUS shall pay the amount of the understatement within ten (10) days of
receiving written notice from Primavera, which shall include a copy of the audit
report. If any audit reveals that ICARUS has overpaid the license fees, the
amount of the overpayment shall be applied to reduce the amount of the next
payment due from ICARUS, or at the election of ICARUS, shall be paid to ICARUS
within ten (10) days. Nothing herein shall be deemed to preclude ICARUS from
disputing the results of such audit.
(c) This provision shall survive for one (1) year following the
expiration or termination of this Agreement.
ARTICLE VI
TECHNICAL SUPPORT; CONFIDENTIALITY
6.01 Support to End Users. During the term of this Agreement, Primavera
shall offer to End Users such technical support services as Primavera makes
available to other end users of the Licensed Software at a price and under other
terms and conditions that are substantially the same as those offered by
Primavera to other similarly situated end users, including the applicability of
Primavera's technical support policies with respect to superseded versions of
the Licensed Software; provided, however, Primavera shall not offer, sell or
distribute Enhancement Kits directly to End Users, regardless of whether they
subscribe to Primavera's technical support services. The parties acknowledge and
agree that ICARUS, its Affiliate and Dealers shall have sole opportunity and
responsibility to order such Enhancement Kits from Primavera and distribute them
to End Users.
6.02 Support to ICARUS. Nothing in this Agreement shall be construed to
obligate Primavera to furnish technical support, maintenance services or
training of any kind to
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ICARUS or to its Affiliate and Dealers, provided, however, any such support,
maintenance or training shall upon request, be provided at Primavera's
convenience to ICARUS at no greater charge than Primavera's charges its own
customers.
6.03 Confidentiality.
(a) Each party may disclose to the other information concerning its
Confidential Information as may be necessary to further the performance of this
Agreement. Each party agrees to treat the other's Confidential Information in
the manner prescribed herein.
(b) Primavera and ICARUS shall protect the other's Confidential
Information as follows:
(i) Except as specifically provided herein or otherwise
permitted by the other party in writing, each party shall not disclose
Confidential Information of the other party to third parties. Each party may
disclose Confidential Information of the other party only to those employees and
agents required to have knowledge of same to perform their duties pursuant to
this Agreement. Each party shall require each such employee or agent to enter
into a written non-disclosure agreement containing provisions substantially
consistent with the terms hereof prior to the disclosure of Confidential
Information to such employee or agent. Each party shall treat the Confidential
Information of the other party with the same degree of care as it protects its
own Confidential Information, and in no case less than a reasonable degree of
care.
(ii) Except as may specifically be permitted herein, upon the
termination of this Agreement, each party shall return to the other, or if so
requested, destroy all Confidential Information in the other's possession or
control, except such Confidential Information as may be reasonably necessary to
exercise the rights that survive the termination of this Agreement, but solely
to the extent and for the duration necessary.
(c) The foregoing obligations of confidentiality shall not apply
with respect to either party's Confidential Information to the extent that it:
(i) is within or later falls within the public domain
through no fault of the party receiving the Confidential Information; or
(ii) is, or becomes, available to the receiving party from
third parties who, in making such disclosure, have breached no written
confidentiality agreement, fiduciary or other duty; or
(iii) is previously known by the receiving party; or
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(iv) is independently developed by or for the receiving
party without use of the Confidential Information.
ARTICLE VII
WARRANTY; INDEMNIFICATION
7.01 Warranty to ICARUS. Primavera hereby warrants to ICARUS that the
Product Kits and Enhancement Kits, when and as delivered to ICARUS, shall be
free from physical defects in materials and workmanship. This warranty shall
apply only during the period commencing upon delivery of the Product Kit or
Enhancement Kit and ending upon the later of (a) six (6) months after receipt by
ICARUS of the Product Kit or Enhancement Kit or (b) six (6) months after
delivery by ICARUS to an End User of the Enhancement Kit or Software Product
containing the Product Kit. Notwithstanding the foregoing, to the extent any
Primavera End User License contained in a Primavera Product Kit or Enhancement
Kit extends to any End User Warranty coverage broader in scope, longer in
duration or otherwise more comprehensive than the above warranty, then Primavera
shall honor such broader, longer or more comprehensive warranty for such Product
Kit or Enhancement Kit.
7.02 Warranty to End Users. The sole and exclusive warranty of Primavera
to End Users is set forth in the Primavera End User License Agreement contained
in each Product Kit and Enhancement Kit, and Primavera makes no other warranties
to or for the benefit of End Users in this Agreement.
7.03 Replacement Requests; Returns. ICARUS shall -honor all requests
from End Users for return or replacement of Product Kits or Enhancement Kits
pursuant to the terms of the warranty from Primavera contained in Primavera's
End User License Agreement. ICARUS shall require its Affiliate and Dealers to
submit to it all such requests for returns and replacements by End Users.
7.04 Exclusive Remedy; Replacement and Return Procedure.
(a) Primavera shall replace defective Product Kits and Enhancement
Kits that are returned to Primavera's point of shipment, freight prepaid, and
this shall be the sole and exclusive remedy of ICARUS, its Affiliate, Dealers
and End Users for any breach of Primavera's warranty, unless the Primavera End
User License specifies other rights and/or remedies.
(b) ICARUS shall request return authorization from Primavera prior
to a return shipment of defective Product Kits or Enhancement Kits, or of
Product Kit or Enhancement Kit returns by End Users, and Primavera shall provide
annual reimbursement of freight charges for such returns. Primavera may, at its
option, provide credit vouchers to ICARUS for the such kits replaced or returned
based on the fees charged to ICARUS hereunder.
- 15 -
<PAGE> 16
7.05 Warranty Disclaimer. THE WARRANTY STATED IN PARAGRAPH 7.01 IS
PRIMAVERA'S SOLE AND EXCLUSIVE WARRANTY TO ICARUS PERTAINING TO THE LICENSED
MATERIALS, THE PRODUCT KITS AND THE ENHANCEMENT KITS, AND PRIMAVERA HEREBY
DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7.06 Exclusion of Consequential Damages; Limitation of Liability. IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY, OR TO ITS AFFILIATE
DEALERS OR END USERS, FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES,
REGARDLESS OF THE NATURE OF THE CLAIM, INCLUDING WITHOUT LIMITATION LOST
PROFITS, COSTS OF DELAY, ANY FAILURE OF DELIVERY, COSTS OF LOST OR DAMAGED DATA
OR DOCUMENTATION OR LIABILITIES TO THIRD PARTIES ARISING FROM ANY SOURCE. IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY, OR TO ITS AFFILIATE,
DEALERS OR END USERS FOR DAMAGES IN EXCESS OF THE LICENSE FEES PAID BY ICARUS TO
PRIMAVERA HEREUNDER; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATION OF
LIABILITY SHALL NOT OPERATE TO LIMIT THE LIABILITY OF ICARUS TO PRIMAVERA FOR
INFRINGEMENT OF PRIMAVERA'S INTELLECTUAL PROPERTY RIGHTS IN THE LICENSED
MATERIALS OR FOR PAYMENTS DUE UNDER THE TERMS OF THIS AGREEMENT.
7.07 Limitation of Primavera Liability. IN THE EVENT THAT,
NOTWITHSTANDING PARAGRAPH 7.04 HEREOF, PRIMAVERA IS FOUND LIABLE FOR DAMAGES
BASED ON ANY DEFECT OR NONCONFORMITY IN A PRODUCT KIT OR AN ENHANCEMENT KIT,
ITS TOTAL LIABILITY FOR EACH DEFECTIVE KIT SHALL NOT EXCEED THE LICENSE FEE
PAID BY ICARUS FOR SUCH KIT.
7.08 Indemnification by Primavera. Primavera shall defend and hold ICARUS
harmless from all claims, suits, damages and expenses (including attorney's
fees) arising from a claim against ICARUS that the Licensed Materials infringe a
United States patent, copyright, trademark or other intellectual property right,
provided that Primavera receives prompt written notice of any such claim from
ICARUS, and Primavera is afforded the opportunity to exercise sole control of
the defense and all negotiations pertaining to such claim. Primavera shall also
have the right, at its expense, either to procure the right for ICARUS to
continue to distribute the Licensed Materials, or to replace or modify them so
that they become non-infringing. If neither of the foregoing alternatives is
available on terms that Primavera, in its sole discretion, deems desirable,
ICARUS shall return to Primavera the infringing Product Kits or Enhancement Kits
in its possession upon written request from Primavera, in which event Primavera
shall refund to ICARUS the price paid, if any, by ICARUS for such returned kits.
7.09 Notification of Infringement, Etc. ICARUS shall promptly notify
Primavera of (a) any claims, allegations or notification that the marketing,
licensing or use of the Licensed
- 16 -
<PAGE> 17
Materials may or will infringe any patent, copyright, trademark or other
intellectual property right of any other person or entity; (b) any determination
or discovery that any person or entity is or may be infringing any patent,
copyright, trademark or other intellectual property right owned by Primavera;
and (c) any known failure of an End User to abide by the terms of Primavera's
End User License Agreement.
7.10 Indemnification. ICARUS shall defend, indemnify and hold Primavera
harmless from any and all claims of loss or damage to property or injury to
persons arising from the installation, use or possession of the Software
Products by ICARUS, its Affiliate, Dealers, End Users or any other person.
ARTICLE VIII
TERM; TERMINATION
8.01 Term. This Agreement shall become effective as of the date first
written above and continue for an initial term of ten (10) years, unless sooner
terminated as provided herein. Thereafter, either party may terminate this
Agreement upon ninety (90) days advance written notice to the other party.
8.02 Termination for Material Breach. Either party may, at its option,
terminate this Agreement in the event of a material breach by the other party.
Such termination may be effected only through a written notice to the other
party, specifically identifying the breach or breaches on which termination is
based. Following receipt of such notice, the party in breach shall have sixty
(60) days to cure such breach or breaches, said cure period to proceed
simultaneously with the dispute resolution procedure, if any, conducted pursuant
to Paragraph 9.12 hereof, and this Agreement shall terminate in the event that
such cure is not made by the end of such period. In the event that the parties
dispute either the existence of a material breach or the adequacy of attempted
cure, and either party submits such dispute to arbitration under Paragraph 9.13
hereof, the termination shall not be deemed effective until the arbitrator
renders a final decision finding an uncured material breach, provided, however,
that the termination shall be deemed effective if arbitration pursuant to
Paragraph 9.13 hereof is not initiated within fifteen (15) days after the
progressive dispute negotiation procedures under Paragraph 9.12 hereof are
complete. Either party may cure an alleged breach without waiving its right to
dispute resolution and arbitration as herein set forth, and shall be entitled as
part of a favorable arbitrator's decision to be compensated for payments made to
effect such cure or the payments due for Licensed software or services
delivered, as the case may be, to which it would have been entitled under this
Agreement.
8.03 Bankruptcy. If either party files a petition in bankruptcy (or is the
subject of an involuntary petition in bankruptcy that is not dismissed within
sixty (60) days after the effective filing date thereof); or is or becomes
insolvent; or enters into any formal arrangement with its creditors, or ceases
doing business in the ordinary course; or admits
- 17 -
<PAGE> 18
of a general inability to pay its debts as they become due; then the other party
shall have the right to terminate this Agreement upon thirty (30) days written
notice.
8.04 Survival. Upon termination of this Agreement, ICARUS, its Affiliate
and Dealers may distribute to End Users their remaining inventory of Software
Products, provided that ICARUS remit to Primavera all license fees due and
payable hereunder by reason of the distribution of such remaining inventory. End
Users as of the effective date of expiration or termination of this Agreement
and End Users that license the remaining inventory of Software Products pursuant
to this Paragraph 8.04 shall have a continuing right to use the Licensed
Materials in accordance with the terms of Primavera's End User License.
Paragraphs 3.03, 3.04, 3.11, 6.03, 7.08, 7.10 and 8.04, and Articles VII and IX
hereof shall also survive the termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.01 Entire Agreement. This Agreement, together with the Appendices
hereto, collectively set forth the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and, except as
specifically provided herein, supersede and merge all prior oral and written
agreements, discussions and understandings between the parties with respect to
the subject matter hereof, and neither of the parties shall be bound by any
conditions, inducements or representations other than as expressly provided for
herein.
9.02 Independent Contractors. In making and performing this Agreement,
Primavera and ICARUS act and shall act at all times as independent contractors
and nothing contained in this Agreement shall be construed or implied to create
an agency, partnership or employer and employee relationship between them. At no
time shall either party make commitments or incur any charges or expenses for or
in the name of the other party.
9.03 Notices. Any notice required or permitted to be given hereunder,
shall, except where specifically provided otherwise, be given in writing to the
person listed below by registered mail or overnight delivery service, and the
date upon which any such notice is received at the designated address shall be
deemed to be the date of such notice. Any notice shall be delivered as follows:
If to ICARUS: ICARUS Corporation
11300 Rockville Pike
Rockville, Maryland 20852
Attention: President
- 18 -
<PAGE> 19
If to Primavera: Primavera Systems, Inc.
Two Bala Plaza
Bala Cynwyd, Pennsylvania 19004
Attention: Joel M. Koppelman
President
or addressed to such other address as that party may have given by written
notice in accordance with this provision.
9.04 Amendments; Modifications. This Agreement may not be amended or
modified except in a writing duly executed by the parties hereto.
9.05 Assignment. Neither party may assign this Agreement, or any part
thereof, without the prior written consent of the other party.
9.06 Severability. The provisions of this Agreement shall be severable,
and if any of them are held invalid or unenforceable for any reason, such
provision shall be adjusted to the minimum extent necessary to cure such
invalidity. The invalidity or unenforceability of one or more of the provisions
contained in this Agreement shall not affect any other provisions of this
Agreement.
9.07 Waivers. Any delay or forbearance by either party in exercising any
right hereunder shall not be deemed a waiver of that right.
9.08 Governing Law. This Agreement shall be governed by and interpreted
in accordance with the substantive laws of the State of Delaware.
9.09 Disclaimer of UN Convention on Sale of Goods. PURSUANT TO ARTICLE 6
OF THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF
GOODS ("UN CONVENTION"), THE PARTIES AGREE THAT THE UN CONVENTION SHALL NOT
APPLY TO THIS AGREEMENT.
9.10 Export Controls.
(a) ICARUS shall cooperate (but at no cost to ICARUS) with Primavera
as reasonably necessary to permit Primavera to comply with the laws and
administrative regulations of the United States relating to the control of
exports of commodities and technical data ("Export Laws").
(b) ICARUS hereby assures Primavera that ICARUS will not export or
re-export directly or indirectly (including via remote access) any part of the
Licensed Materials or the Product Kits (including any Confidential Information)
to any country for which a validated license is required for such export or
re-export under the Export Laws without first obtaining such a validated
license.
- 19 -
<PAGE> 20
(c) ICARUS will defend Primavera against any and all claims, and
indemnify Primavera against any and all losses or expenses, arising from or
otherwise in respect of any asserted violation of the Export Laws by ICARUS,
provided that Primavera shall furnish ICARUS with assistance and information and
cooperate with ICARUS in the defense of any such claim.
9.11 Force Majeure. Neither ICARUS, its Affiliate and Dealers nor
Primavera shall be liable for failure or delay of performance hereunder if
occasioned by force majeure, including war, declared or undeclared, fire, flood,
interruption of transportation, embargo, accident, explosion, inability to
procure, or shortage of supply of materials, equipment or production facilities,
governmental orders, regulations, restrictions, priorities or rationing, or by
strike, lockout, or other labor troubles, or any other cause beyond the control
of the party claiming that its failure of performance was occasioned by force
majeure. Any suspension of performance by reason of this paragraph shall be
limited to the period during which such cause or failure exists, but such
suspension shall not affect the term of this Agreement as heretofore defined.
9.12 Progressive Dispute Negotiation Procedure.
(a) This paragraph will govern any dispute between Primavera and
ICARUS arising from or related to the subject matter of this Agreement that is
not resolved by agreement between their respective personnel responsible for day
to day administration and performance of this Agreement.
(b) Prior to the filing of any suit with respect to such a dispute
(other than a suit seeking injunctive relief with respect to intellectual
property rights), the party believing itself aggrieved (the " Invoking Party")
will call for progressive management involvement in the dispute negotiation by
notice to the other party. Such a notice will be without prejudice to the
Invoking Party's right to any other remedy permitted by this Agreement.
(c) Primavera and ICARUS will use their best efforts to arrange
personal meetings and/or telephone conferences as needed, at mutually convenient
times and places, between their negotiators at the following successive
management levels, each of which will have a period of allotted time as
specified below in which to attempt to resolve the dispute:
PRIMAVERA ICARUS ALLOTTED TIME
FIRST LEVEL Manager ________ Manager _______ 7 bus. days
SECOND LEVEL CEO __________ CEO __________ 15 days
(d) The allotted time for the first-level negotiators will begin on
the effective date of the Invoking Party's notice.
- 20 -
<PAGE> 21
(e) If a resolution is not achieved by the negotiators at any given
management level at the end of their allotted time, then the allotted time for
the negotiators at the next management level, if any, will begin immediately.
(f) If a resolution is not achieved by negotiators at the final
management level within their allotted time, then either party may within ten
(10) business days request mediation to resolve the dispute.
(g) The Mediation Rules of the American Arbitration Association
shall be used unless Primavera and ICARUS agree otherwise.
(h) The mediation shall take place in the city of the party that is
not the Invoking Party.
(i) The allotted period for completion of the mediation shall be
thirty (30) days.
(j) If a resolution is not achieved by mediation within the allotted
time or if mediation is not requested within the permitted ten-day period, then
either party may file an arbitration demand or other permitted action to resolve
the dispute.
9.13 Arbitration. In the event a dispute between the parties arising under
this Agreement is not resolved using the procedures of Paragraph 9.12, the
parties shall submit to binding arbitration before a single arbitrator in
Wilmington, Delaware, under the Commercial Arbitration Rules of the American
Arbitration Association, except that temporary restraining orders or preliminary
injunctions, or their equivalent in any country of the world, may be obtained
from any court of competent jurisdiction. The pre-hearing and hearing
proceedings in the arbitration shall be generally governed by the Federal Rules
of Civil Procedure and the judicial precedent interpreting those rules. The
decision of the arbitrator shall be final and binding with respect to the
dispute subject to the arbitration and shall be enforceable in any court of
competent jurisdiction. Each party shall bear its own expenses, attorney's fees
and costs incurred in such arbitration.
9.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one Agreement.
9.15 Construction. This Agreement is the product of joint draftsmanship
and shall not be construed against one party more strictly than against the
other.
9.16 Confidentiality of Agreement. The pricing (Paragraph 5.01) terms of
this Agreement shall remain confidential, except to the extent disclosure may be
necessary in conjunction with enforcement of any term hereof, and on an as
needed basis to either party's accountants, lawyers and other professional
advisors, and to ICARUS' Affiliates.
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<PAGE> 22
9.17 Headings. The headings in this Agreement are inserted merely for the
purpose of convenience and shall not affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have executed this Agreement as of the day and year first above written.
ATTEST: PRIMAVERA SYSTEMS, INC.
/s/ Mary R. Welloch BY:/s/ Joel M. Koppelman
- -------------------------- -------------------------
TITLE: President
-------------------
ATTEST: ICARUS CORPORATION
/s/ Lucy Brown BY:/s/ Herbert G. Blecker
- -------------------------- -------------------------
TITLE: President
-------------------
- 22 -
<PAGE> 23
APPENDIX A --PRIMAVERA PRICE SCHEDULE
PRIMAVERA PROJECT PLANNER AND FINEST HOUR
NUMBER OF BASE LICENSE FEE EACH ADDITIONAL
SIMULTANEOUS LAN (LAN PRICE FOR SIMULTANEOUS USER
USERS (QUANTITY) SIMULTANEOUS (EACH ADDITIONAL)
USERS ON SAME FILESERVER)
[*]
SINGLE USER SYSTEMS
NUMBER OF SINGLE USER BASE LICENSE FEE - BULK EACH ADDITIONAL SYSTEM -
SYSTEMS PRICE (BULK PRICE FOR BULK PRICE
SEPARATE SINGLE USER (BULK INCREMENTAL PRICE)
UNITS)
[*]
Terms and conditions:
- - Prices are in U.S. Dollars.
- - LAN pricing is for the product installed on a single fileserver. The LAN
product is not separable into independent units.
- - Bunk pricing is only valid for quantities ordered on the same purchase
order for the same delivery date to the same end user organization. The
bulk packs may not be shared among purchasers.
- - For quantities not specifically listed, use the incremental price from the
next lower tier.
- -------------
* This information has been omitted pursuant to a request for
confidential treatment.
- 23 -
<PAGE> 1
EXHIBIT 10.6
LEASE BETWEEN
ALLSTATE LIFE INSURANCE COMPANY
AND
ICARUS INTERNATIONAL, INC.
FOR SPACE AT
600 JEFFERSON PLAZA
ROCKVILLE, MARYLAND
DECEMBER 31, 1997
DATE
<PAGE> 2
TABLE OF CONTENTS
PARAGRAPH
1.1 DEFINITION..........................................................
1.2 SCHEDULES AND ADDENDA...............................................
2.1 LEASE OF PREMISES...................................................
2.2 PRIOR OCCUPANCY.....................................................
3.1 RENT................................................................
3.2 DEPOSIT; PREPAID RENT...............................................
3.3 OPERATING COST......................................................
3.4 TAXES...............................................................
4.1 CONSTRUCTION CONDITIONS.............................................
4.2 COMMENCEMENT OF POSSESSION..........................................
5.1 PROJECT SERVICES....................................................
5.2 INTERRUPTION OF SERVICES............................................
6.1 USE OF LEASED PREMISES..............................................
6.2 INSURANCE...........................................................
6.3 REPAIRS.............................................................
6.4 ASSIGNMENT OF SUBLETTING............................................
6.5 ESTOPPEL CERTIFICATE................................................
7.1 SUBSTITUTE PREMISES.................................................
7.2 ADDITIONAL RIGHTS RESERVED TO LANDLORD..............................
8.1 CASUALTY AND UNTENANTABILITY........................................
9.1 CONDEMNATION........................................................
10.1 WAIVER AND INDEMNITY................................................
10.2 WAIVER AND SUBROGATION..............................................
10.3 LIMITATION OF LANDLORD'S LIABILITY..................................
11.1 TENANT'S DEFAULT....................................................
11.2 REMEDIES OF LANDLORD................................................
12.1 SURRENDER OF LEASED PREMISES........................................
12.2 HOLD OVER TENANCY...................................................
13.1 QUIET ENJOYMENT.....................................................
13.2 ACCORD AND SATISFACTION.............................................
13.3 SEVERABILITY........................................................
13.4 SUBORDINATION AND ATTORNMENT........................................
13.5 ATTORNEY'S FEES.....................................................
13.6 APPLICABLE LAW......................................................
13.7 BINDING EFFECT; GENDER..............................................
13.8 TIME................................................................
13.9 ENTIRE AGREEMENT....................................................
13.10 NOTICES.............................................................
13.11 HEADINGS............................................................
13.12 BROKERAGE COMMISSIONS...............................................
<PAGE> 3
LIST OF SCHEDULES
1. Description of Leased Premises
2. Rules and Regulations
3. Utility Services
4. Maintenance Services
5. Parking
6. Work Letter
7. Certificate of Acceptance
8. Addendum
<PAGE> 4
LEASE
This Lease is made December 31, 1997 between Allstate Life Insurance Company
("Landlord") and ICARUS INTERNATIONAL Inc. ("Tenant").
ARTICLE ONE
DEFINITIONS, SCHEDULES AND ADDENDA
1.1 DEFINITIONS:
a Leased Premises shall mean the entire 5th floor, as described in
Schedule 1.
b. Building shall mean Jefferson Plaza located at 600 Jefferson Plaza,
Rockville, Maryland 20852.
c. Project shall mean Jefferson Plaza located at 600 Jefferson Plaza,
Rockville, Maryland and 20852.
d. Tenant's Square Footage shall mean 28,922 rentable square feet;
Total Square Footage of the Building shall mean 115,215 rentable square feet.
e. Lease Commencement Date shall mean April 1, 1998, which may be
adjusted pursuant to paragraph 4.2 of this Lease; Lease Expiration Date shall
mean March 31, 2008; Lease Term shall mean the period between Lease Commencement
Date and Lease Expiration Date.
f. Base Rent shall mean $571,209.50 ($19.75 per square foot of Tenant's
Square Footage) per year, payable in monthly installments of $47,600.79 plus
applicable sales tax, if any; Commencing with the second lease year, the Base
Rent shall be increased annually by an amount equal to three percent (3%) of the
Base Rent in effect for the previous lease year. In addition to the annual
increase specified above, the Base Rent for the sixth lease year shall also be
increased by $1.00 per rentable square foot of space comprising the Leased
Premises.
g. Tenant's Pro Rata Share shall mean 25.1 %. Base Year shall mean the
calendar year during which the Lease Commencement occurs.
h. Deposit shall mean $300,000.00.
i. Permitted Purpose shall mean general office space and all related
and ancillary uses.
J. Authorized Number of Parking Spaces shall mean 3.23 spaces per 1,000
sq. spaces at a rate of $50.00 per space per month for unreserved spaces and $75
per month for reserved spaces. Tenant shall be entitled to up to seven reserved
parking spaces.
<PAGE> 5
k. Managing Agent shall mean LaSalle Partners Management Limited whose
address is 600 Jefferson Plaza, Rockville, Maryland 20852.
l. Broker of Record shall mean LaSalle Partners Management Limited.
m. Cooperating Broker shall mean Trammell Crow Company.
n. Landlord's Mailing Address: Allstate Plaza G5B Northbrook Illinois
60062 Attention: Real Estate Equity Investment Division.
o. Tenant's Mailing Address: One Central Plaza, 11300 Rockville Pike,
Suite 604, Rockville Maryland 20852 and after occupancy, the Leased Premises.
1.2 SCHEDULES AND ADDENDA: The schedules and addenda listed below are
incorporated into this Lease by reference unless lined out. The terms of
schedules, exhibits and typewritten addenda, if any, attached or added hereto
shall control over any inconsistent provisions in the paragraphs of this Lease.
a. Schedule 1: Description of Leased Premises and/or Floor Plan
b. Schedule 2: Rules and Regulations
c. Schedule 3: Utility Services
d. Schedule 4: Maintenance Services
e. Schedule 5: Parking
f. Schedule 6: Work Letter
g. Schedule 7: Certificate of Acceptance
h. Schedule 8: Addendum
ARTICLE TWO
PREMISES
2.1 LEASE OF PREMISES: In consideration of the Rent and the provisions
of this Lease, Landlord leases to Tenant and Tenant accepts from Landlord the
Leased Premises. Tenant's Square Footage is a stipulated amount based on
Landlord's method of determining Total Square Footage for rental purposes and
may not reflect the actual amount of floor space available for Tenant's use.
2.2 PRIOR OCCUPANCY: Tenant shall not occupy the Leased Premises prior
to Lease Commencement Date except with the express prior written consent of
Landlord and in accordance with the provisions of Schedule 6. If with Landlord's
consent, Tenant occupies the Leased Premises prior to the Lease Commencement
Date, Tenant shall pay Landlord Base Rent in the amounts specified in paragraph
1.1 (f), and Tenant's Pro Rata Share of Excess Operating Costs, as defined in
paragraph 3.3(b), from the first day of such occupancy. These amounts will be
payable on the first day of such occupancy and thereafter on the first day of
every calendar month until the first day of the Lease Term. A prorated monthly
installment shall be paid for the fraction of the month if Tenant's occupancy of
the Leased Premises commences on any day other than the first day of the month.
If Tenant shall occupy the Leased Premises prior to Lease
<PAGE> 6
Commencement Date, all covenants and conditions of this Lease shall be binding
on the parties commencing at such prior occupancy.
ARTICLE THREE
PAYMENT OF RENT
3.1 RENT: Tenant shall pay each monthly installment of Base Rent in
advance on the first calendar day of each month. During the Base Year, no Excess
Operating Costs shall be paid by Tenant. For each calendar year following the
Base Year, Tenant shall pay each monthly installment of Tenant's Pro Rata Share
of Excess Operating Costs in advance together with each monthly installment of
Base Rent. Monthly installments for any fractional calendar month, at the
beginning or end of the Lease Term, shall be prorated based on the number of
days in such month Base Rent, together with all other amounts payable by Tenant
to Landlord under this Lease, including, without limitation, any late charges
and interest due Landlord for Rent not paid when due, shall be sometimes
referred to collectively as Rent. Tenant shall pay all Rent, without deduction
or set-off, to Landlord or Managing Agent at a place specified by Landlord. Rent
not paid when due shall bear interest until paid, at the rate of 2% per month,
or at the maximum rate allowed by law, whichever is less, from the date when
due. Tenant shall also pay a processing charge of $50 with each late payment of
"Rent". Landlord agrees to waive the processing and interest charge for late
payments of Rent twice during any twelve month period during the Lease Term,
provided any such late Rent payment is paid in full within 10 days of the date
when due.
3.2 DEPOSIT; PREPAID RENT: Tenant has paid to Landlord the Deposit as
security for performance of Tenant's obligations under this Lease. In the event
Tenant fully complies with all the terms and conditions of this Lease, the
Deposit shall be refunded (or the letter of credit appropriately reduced) to
Tenant, without interest unless otherwise required by law, One Hundred Thousand
Dollars ($100,000.00) upon the expiration of the third lease year, One Hundred
Thousand Dollars ($100,000.00) upon the expiration of the fourth lease year and
the balance upon expiration of this Lease. Landlord may, but is not obligated
to, apply a portion of the Deposit to cure any default hereunder and Tenant
shall pay on demand the amount necessary to restore the Deposit-in full within
10 days after notice by Landlord.
3.3 OPERATING COSTS: Tenant shall pay Tenant's Pro Rata Share of any
Excess Operating Costs as follows:
a. Operating Costs' shall mean all reasonable and actual expenses
relating to the operation, management, maintenance and repair of Leased
Premises, the Building or the Project, including but not limited to: real estate
taxes and assessments; gross rents, sales, use, business, corporation, franchise
or other taxes (except income taxes); utilities not separately chargeable to
other events; insurance premiums and (to the extent used) deductibles;
maintenance, repairs and replacements; refurbishing and repainting; cleaning,
janitorial and other services; equipment, tools, materials and supplies; air
conditioning, heating and elevator service; property management including
management fees; security; employees and contractors; resurfacing and restriping
of walks, drives and parking areas; signs, directories and markers; landscaping;
and snow and rubbish removal and, to the extent not offset by garage income, the
costs and expenses associated with the operation, maintenance, repair, and/or
replacement of the parking garage and/or areas.
<PAGE> 7
Operating Costs shall not include expenses for legal services, real estate
brokerage and leasing commissions, Landlord's income taxes, income tax
accounting, interest, depreciation, general corporate overhead, or capital
improvements to the building or Project except for capital improvements
installed for the purpose of reducing or controlling expenses, or required by
any governmental or other authority having or asserting jurisdiction over the
Building or Project provided, however, only the amortized portion of such cost
applicable to such lease year shall be included in the Operating Costs for such
lease year, based upon a straight-line basis of amortization in accordance with
generally accepted accounting principle. (GAAP). In addition, the following
additional items "shall not be included in "Operating Costs": expenses for which
Landlord is reimbursed or indemnified; all expenses incurred in procuring new
tenants including advertising expenses, rent concessions, renovation or
alteration costs; interest or amortization payments of any mortgage or loan; any
rental under any ground or underlying leases; wages, salaries or other
compensation of any executive above one (1) direct building manager and, with
respect to any other building employee or personnel not devoting full time to
the operation or maintenance of the Building, an allocable portion of such
expense attributable to other properties; the cost of correcting any defects to
the Building; charitable contributions; continuing education, trade association
fees or dues and other costs of Building staff; other cost not customarily or
reasonably included in Operating Costs. If any expense, though paid in one year,
relates to more than one calendar year, at option of Landlord, such expense may
be proportionately allocated among such related calendar years. In the event
that the Building is not fully leased during any calendar year, Landlord may
make appropriate adjustments to the Operating Costs, using reasonable
projections, to adjust such costs to an amount that would normally be expected
to be incurred if the Building were 95% leased, and such adjusted costs shall be
used for purposes of this paragraph 3.3. 'Excess Operating Costs' shall mean any
excess of (i) Landlord's Operating Costs for any calendar year following the
Base Year over (ii) the actual Operating Costs of the Base Year.
b. Tenant shall pay, in equal monthly installments, Tenant's Pro Rata
Share of any estimated Excess Operating Costs for each calendar year which falls
(in whole or in part) during the Lease Term (prorated for any partial calendar
year at the beginning or end of the Lease Term). Annually, or from time to time,
based on actual and projected Operating Cost data, Landlord may adjust it
estimate of Operating Costs upward or downward. Within 15 days after notice to
Tenant of a revised estimate of Operating Costs, Tenant shall remit to Landlord
a sum equal to any shortage of the amount which should have been paid to date
for the then current calendar year based on the revised estimate, and all
subsequent monthly estimated payments shall be based on the revised estimate.
c. As soon as possible, after the first day of each year Landlord shall
compute the actual Operating Costs for the prior calendar year, and shall give
notice thereof to Tenant. Within 30 days after receipt of such notice, Tenant
shall pay any deficiency between estimated and actual in Tenant's Pro Rata Share
of any Excess Operating Costs for the prior calendar year (prorated for any
partial calendar year at the beginning or end of the Lease Term). In the event
of overpayment by Tenant, Landlord shall apply the excess to the next payment of
Rent when due, until such excess is exhausted or until no further payments of
Rent are due, in which case, Landlord shall pay to Tenant the balance of such
excess within 30 days thereafter. Tenant or its representatives shall have the
right, upon reasonable notice, to examine Landlord's books and
<PAGE> 8
records with respect to the Operating Costs at the management office during
normal business hours at any time within one (1) year of the date Tenant
receives the annual statement of Operating Costs for any particular year. In the
event the review or audit reveals an overpayment by Tenant of its share of
Operating Costs in excess of ten percent, Landlord shall promptly reimburse
Tenant the reasonable costs and expenses incurred to conduct such review or
audit. In the event the audit reflects an underpayment by Tenant, Tenant shall
promptly pay any additional amount(s) due to Landlord for Tenant's Pro Rata
Share of Operating Costs.
3.4 TAXES: In addition to Base Rent and other sums to be paid by Tenant
hereunder, Tenant shall reimburse Landlord as additional Rent, on demand, any
taxes payable by Landlord (a) upon, measured by or reasonably attributable to
the cost or value of Tenant's equipment, fixtures and other personal property
located in the Leased Premises (b) upon or measured by the monthly rental
payable hereunder, including, without limitation, any gross receipts tax or
excise tax; (c) upon or with respect to the possession, leasing, operation,
management, maintenance, alteration. repair, use or occupancy by Tenant of the
Leased Premises or any portion thereof; (d) upon this Lease or any document to
which Tenant is a party creating or transferring an interest or an estate in the
Leased Premises.
ARTICLE FOUR
IMPROVEMENTS
4.1 CONSTRUCTION CONDITIONS: The improvements shall be constructed as
described in the work letter attached hereto as Schedule 6 (the "Improvements").
The expenses to be incurred as between Landlord and Tenant for construction of
the Improvements are specified in Schedule 6. Landlord's approval of Tenant's
plans for improvements shall create no responsibility or liability on the part
of Landlord for their completeness, design sufficiency, or compliance with laws,
rules and regulations of governmental agencies or authorities.
4.2 COMMENCEMENT OF POSSESSION: If the Leased Premises are not
substantially completed by the scheduled Lease Commencement Date then the Lease
Commencement Date shall be extended to a date 5 days after Landlord shall notify
Tenant that the Leased Premises are ready for occupancy and the Lease Expiration
Date shall be adjusted accordingly. If Landlord fails to cause the Leased
Premises to be ready for occupancy at the time of the scheduled Lease
Commencement Date, Landlord and Landlord's agents, officers, employees, or
contractors shall not be liable for any damage, loss, liability or expense
caused thereby, and this Lease shall not become void or voidable unless such
failure continues for more than 120 days, in which case Tenant may terminate
this Lease upon 20 days written notice to Landlord. Prior to occupying the
Leased Premises, Tenant shall execute and deliver to Landlord a letter in the
form attached as Schedule 7, acknowledging the Lease Commencement Date and
certifying that the improvements have been substantially completed and that
Tenant has examined and accepted the Leased Premises.
<PAGE> 9
ARTICLE FIVE
PROJECT SERVICES
5.1 PROJECT SERVICES: Landlord shall furnish:
a. Utility Services: The utility services listed on Schedule 3
("Utility Services ). Should Tenant, in Landlord's sole judgment, use
additional, unusual or excessive Utility Services, Landlord reserves the right
to charge for such services as determined either by a separate submeter,
installed at Tenant's expense, or by methods specified by an engineer selected
by Landlord.
b. Maintenance Services: of all interior and exterior common areas of
the Building areas including lighting landscaping, cleaning, painting,
maintenance and repair of the exterior of the Building and its structural
portions and roof, including all of the services listed on SCHEDULE 4
("Maintenance Services").
c. Parking: Parking under the terms and conditions described in
Schedule 5 ("Parking"). Utility Services, Maintenance Services and Parking
described above shall be collectively referred to as Project Services . The
costs of Project Services shall be a part of Operating Costs.
5.2 INTERRUPTION OF SERVICES: Landlord does not warrant that any of the
Project Services will be free from interruption. Any Project Service may be
suspended by reason of accident or of necessary repairs, alterations or
improvements, or by strikes or lockouts, or by reason of operation of law, or
causes beyond the reasonable contra of Landlord. Subject to possible rent
abatement as may be provided pursuant to the conditions described in paragraph
8.1, any such interruption or discontinuance of such Project Services shall
never be deemed a disturbance of Tenant's use and possession of the Leased
Premises, or render Landlord liable to Tenant for damage by abatement of rent or
otherwise, or relieve Tenant from performance of Tenant's obligations under this
Lease; provided, however, that should such interruption or discontinuance of
Project Services which materially impairs Tenant's ability to conduct its
business continue for 4 consecutive business days, then beginning on the fifth
business day, Landlord shall abate Base Rent and Tenant's Pro Rata Share of
Excess Operating Costs, for that portion of the Leased Premises rendered
untenantable, from the fifth business day after said interruption or
discontinuance until the Project Services are restored. Landlord shall use its
best efforts to cause the Project Services to be promptly restored.
ARTICLE SIX
TENANT'S COVENANTS
6.1 USE OF LEASED PREMISES: Tenant agrees to:
a. Permitted Usage: Use the Leased Premises for the Permitted Purpose
only and for no other purpose.
<PAGE> 10
b. Compliance with Laws: At Tenant's expense, comply with the
provisions of all recorded covenants, conditions and restrictions and all
building, zoning, fire and other governmental laws, ordinances, regulations or
rules now in force or which may hereafter be in force relating to Tenant's use
and occupancy of the Leased Premises, the Building, or the Project and all
requirements of the carriers of insurance covering the Project.
c. Nuisances or Waste: Not do or permit anything to be done in or about
the Leased Premises, or bring or keep anything in the Leased Premises that may
increase Landlord's fire and extended coverage insurance premium, damage the
Building or the Project, constitute waste, constitute an immoral purpose, or be
a nuisance, public or private, or menace or other disturbance to tenants of
adjoining premises or anyone else.
d. Hazardous Substances: (i) comply with all Environmental Laws; (ii)
not cause or permit any Hazardous Materials to be treated, stored, disposed of,
generated, or used in the Leased Premises or the Project, provided, however,
that Tenant may store, use or dispose of products customarily found in offices
and used in connection with the operation and maintenance of property if Tenant
complies with all Environmental Laws and does not contaminate the Leased
Premises, Project or environment; (iii) promptly after receipt, deliver to
Landlord any communication concerning any past or present, actual or potential
violation of Environmental Laws, or liability of either party for Environmental
Damages. Environmental Laws mean all applicable present and future statutes,
regulations, rules, ordinances, codes, permits or orders of all governmental
agencies, departments, commissions, boards, bureaus, or instrumentalities of the
United States, states and their political subdivisions and all applicable
judicial, administrative and regulatory decrees and judgments relating to the
protection of public health or safety or of the environment. Hazardous Materials
include substances (i) which require remediation under any Environmental Laws;
or (ii) which are or become defined as a "hazardous waste", "hazardous
substance", pollutant or contaminant under any Environmental Laws; or (iii)
which are toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic or mutagenic; or (iv) which contain petroleum hydrocarbons,
polychlorinated biphenyls asbestos, asbestos containing materials or urea
formaldehyde.
e. Alterations and improvements: Make no alterations or improvements to
the Leased Premises without the prior written approval of Landlord and
Landlord's mortgagee, if any, which consent shall not be unreasonably withheld;
provided, however, Tenant may make non-structural alterations which in any one
instance do not exceed One Thousand Dollars ($1,000.00) without the consent of
Landlord as long as Tenant provides Landlord with a description of the work or
any plans and specifications prepared by Tenant, if any. Any such alterations or
improvements by Tenant shall be done in a good and workmanlike manner, at
Tenant's expense, by a licensed contractor approved by Landlord in conformity
with plans and specifications approved by Landlord. If requested by Landlord,
Tenant will post a bond or other security reasonably satisfactory to Landlord to
protect Landlord against liens arising from work performed for Tenant.
Landlord's approval of the plans and specifications for Tenant's alterations or
improvements shall create no responsibility or liability on the part of Landlord
for their completeness, design sufficiency, or compliance with all laws, rules
and regulations of governmental agencies or authorities.
<PAGE> 11
f. Liens: Keep the Leased Premises, the Building and the Project free
from liens arising out of any work performed, materials furnished or obligations
incurred by or for Tenant other than the initial Leasehold improvements to be
constructed by Landlord hereunder within the Allowance. If, at any time, a lien
or encumbrance is filed against the Leased Premises, the Building or the Project
as a result of Tenant's work, materials or obligations, Tenant shall promptly
discharge such lien or encumbrance. If such lien or encumbrance has not been
removed within 30 days from the date it is made, Tenant agrees to deposit with
Landlord cash or a bond, which shall be in a form and be issued by a company
acceptable to Landlord in its sole discretion, in an amount equal to 150% of the
amount of the lien, to be held by Landlord as security for the lien being
discharged.
g. Rules and Regulations: Observe, perform and abide by all the rules
and regulations promulgated by Landlord from time to time. Schedule 2 sets forth
Landlord's rules and regulations in effect on the date hereof.
h. Signage: Obtain the prior approval of the Landlord before placing
any sign or symbol in doors or windows or elsewhere in or about the Leased
Premises, or upon any other pan of the Building, or Project including building
directories. Any signs or symbols which have been placed without Landlord's
approval may be removed by Landlord. Upon expiration or termination of this
Lease, all signs installed by Tenant shall be removed and any damage resulting
therefrom shall be promptly repaired, or such removal and repair may be done by
Landlord and the cost charged to Tenant as Rent. Tenant shall be entitled to a
proportionate amount of the listings in each Building directory (based upon
Tenant's Pro Rata Share) in which tenants shall be listed.
6.2 INSURANCE: Tenant shall, at its own expense procure and maintain
during the Lease Term: (i) fire and extended casualty insurance covering Tenant
s trade fixtures, merchandise and other personal property located in the Leased
Premises, in an amount not less than 100% of their actual replacement cost, and
(ii) worker's compensation insurance in at least the statutory amounts, and
(iii) commercial general liability insurance with respect to the Leased Premises
and Tenant's activities in the Leased Premises and in the Building and the
Project, providing bodily injury and broad form property damage coverage with a
maximum $5,000 deductible, or such other amount approved by Landlord in writing,
and minimum coverage as follows:
a. $1,000,000 with respect to bodily injury or death to any one person;
b. $5,000,000 with respect to bodily injury or death arising out of any
one occurrence;
c. $1,000,000 with respect to property damage or other loss arising out
of any one occurrence.
Landlord shall provide the Tenant with a declaration of self insurance
or Landlord shall maintain during the term comparable fire and extended casualty
insurance on the Building and commercial liability insurance for liability
arising in the common areas of the Building and Project.
<PAGE> 12
Nothing in this paragraph 6.2 shall prevent Tenant from obtaining
insurance of the kind and in the amounts provided for under this paragraph under
a blanket insurance policy covering other properties as well as the Leased
Premises, provided, however, that any such policy of blanket insurance (i) shall
specify the amounts of the total insurance allocated to the Leased Premises,
which amounts shall not be less than the amounts required by subparagraphs a.
through c. above, and (ii) such amounts so specified shall be sufficient to
prevent any one of the assureds from becoming a coinsurer within the terms of
the applicable policy, and (iii) shall, as to the Leased Premises, otherwise
comply as to endorsements and coverage with the provisions of this paragraph.
Tenant's insurance shall be with a company which has a rating equal to
or greater than Best's insurance Reports classification of A, Class X or its
equivalent, as such classification is determined as of the Lease Commencement
Date. Landlord and Landlord's mortgagee, if any, shall be named as additional
insureds under Tenant's insurance, and such Tenant's insurance shall be primary
and non-contributing with Landlord's insurance. Tenant's insurance policies
shall contain endorsements requiring 30 days notice to Landlord and Landlord's
mortgagee, if any, prior to any cancellation, lapse or nonrenewal or any
reduction in amount of coverage.
Tenant shall deliver to Landlord as a condition precedent to its taking
occupancy of the Leased Premises certificates of insurance (with respect to the
liability policy) and evidence of insurance (ACCORD Number 27) or equivalent
(with respect to the property policy), or certified copies of either of the
policies.
6.3 REPAIRS: Tenant, at its sole expense, agrees to maintain the
interior of the Leased Premises in a neat, clean and sanitary condition. If
Tenant fails to maintain or keep the Leased Premises in good repair and such
failure continues for 5 days after written notice from Landlord or if such
failure results in a nuisance or health or safety risk, Landlord may perform any
such required maintenance and repairs provided Landlord has first given Tenant
written notice and five (5) business days opportunity to cure as aforesaid, and
the cost thereof shall be payable by Tenant as Rent within 10 days of receipt of
an invoice from Landlord. Tenant shall also pay to Landlord the costs of any
repair to the Building or Project necessitated by any act or neglect of Tenant.
6.4 ASSIGNMENT AND SUBLETTING: Tenant shall not assign, mortgage,
pledge, or incumber this Lease, or permit all or any part of the Leased Premises
to be subleased without the prior written consent of Landlord and Landlord's
mortgagee, if any, which consent shall not be unreasonably withheld or delayed.
Any transfer of this Lease by merger, consolidation, reorganization or
liquidation of Tenant, or by operation of law, or change in ownership of or
power to vote the majority of the outstanding voting stock of a corporate
Tenant, or by change in ownership of a controlling partnership interest in a
partnership Tenant, shall constitute an assignment for the purposes of this
paragraph. Notwithstanding the foregoing, Tenant shall have the right to assign
or sublease pan or all of the Leased Premises to any of its subsidiaries,
affiliates or any parent corporation of Tenant with prior written notice to
Landlord provided that (i) Tenant continues to be primarily liable on its
obligations as set forth herein; (ii) any such assignee or subleases shall
assume and be bound by all covenants and obligations of Tenant herewith; (iii)
the proposed assignee or subleases is, in Landlord's reasonable judgment,
<PAGE> 13
compatible with other tenants in the Building and seeks to use the Leased
Premises only for the Permitted Purpose and for a use that is not prohibited
under the terms of a lease with another tenant in the Building; and (iv) such
use would not result in a material change in the number of personnel working in,
or members of the general public visiting, the Leased Premises. Nothing herein
shall prohibit any subsidiary or affiliate of Tenant from using any portion of
the Leased Premises.
In addition to other reasonable bases, Tenant hereby agrees that
Landlord shall be deemed to be reasonable in withholding its consent, if (b)
such proposed assignment or sublease is to any party who is then a tenant of the
Building or the Project if Landlord has comparable area; or (c) Tenant is in
default under any of the terms, covenants, conditions, provisions and agreements
of this Lease at the time of request for consent or (d) the proposed subtenant
or assignee is in Landlord's good faith Judgment, incompatible with other
tenants in the Building, or seeks to use any portion of the Leased Premises for
a use not consistent with other uses in the Building, or is financially
incapable of assuming the obligations of this Lease; or (e) the proposed
assignee of sublessee or its business is subject to compliance with additional
requirements of the law (including related regulation) commonly known as the
Americans with "Disabilities Act" beyond those requirements which are applicable
to the Tenant, unless the proposed assignee or sublessee shall: (i) first
deliver plans and specifications for complying with such additional requirements
and obtain Landlord's consent thereto, and (in comply with all Landlord's
conditions for or contained in such consent, including without limitation,
requirements for security to assure the lien-free completion of such
improvements. Tenant shall submit to Landlord the name of a proposed assignee or
subtenant, the terms of the proposed assignment or subletting, the nature of the
proposed subtenant's business and such information as to the assignee's or
subtenant's financial responsibility and general reputation as Landlord may
reasonably require.
No subletting or assignment, even with the consent of Landlord, shall
relieve Tenant of its primary obligation to pay the Rent and to perform all of
the other obligations to be performed by Tenant hereunder. The acceptance of
Rent by Landlord from any other person or entity shall not be deemed to be
waiver by Landlord of any provision of this Lease or to be a consent to any
assignment, subletting or other transfer. Consent to one assignment, subletting
or other transfer shall not be deemed to constitute consent to any subsequent
assignment, subletting or transfer.
In lieu of giving any consent to a sublet or an assignment of all the
Leased Premises, Landlord may, at Landlord's option, elect to terminate this
Lease. in the case of a proposed subletting of a portion of the Leased Premise
in excess of twenty-five percent of the original Leased Premises Landlord may,
at Landlord's option, elect to terminate the Lease with respect to that portion
of the Leased Premises being proposed for subletting. The effective date of any
such termination shall be 30 days after the proposed effective date of any
proposed assignment or subletting.
Nothing herein shall permit the Landlord to terminate this Lease in
those instances where Tenant sublets or assigns all or any portion of the Lease
Premises to a subsidiary or affiliate of Tenant or a person or entity acquiring
Tenant, whether structured as an asset or stock purchase.
<PAGE> 14
One-half of any proceeds in excess of Base Rent and Tenant's Pro Rata
Share of Excess Operating Costs which is received by Tenant pursuant to an
assignment or subletting consented to by Landlord, less reasonable brokerage
commissions actually paid by Tenant, and less other costs incurred by Tenant in
connection with making the space available for lease, shall be remitted to
Landlord as extra Rent within 10 days of receipt by Tenant. For purposes of this
paragraph, all money or value in whatever form receded by tenant from or on
account of any party as consideration for an assignment or subletting shall be
deemed to be proceeds received by Tenant pursuant to an assignment or
subletting.
6.5 ESTOPPEL CERTIFICATE: From time to time and with 10 days of such
party's receipt of a request from the other, each party shall execute and
deliver a certificate certifying with any appropriate exceptions, (i) that this
Lease is in full force and effect without modification or amendment, (ii) the
amount of Rent payable by Tenant and the amount, if any, of Prepaid Rent and
Deposit paid by Tenant to Landlord, or (iii) otherwise, if any, which Tenant has
received or is entitled to receive (iv) that Tenant has not assigned its rights
under this Lease or sublet any portion of the Leased Premises, (v) that such
party has performed all of its obligations due to be performed under this Lease
and that there are no defenses, counterclaims, deductions or offsets outstanding
or other excuses for performance under this Lease, (vi) that such party (and/or
their proposed lender, purchaser or other party to whom the requesting party
directs the certificate to be sent) may rely on the information contained in the
certificate, and (vii) such other fact reasonably requested by such party
(and/or their proposed lender, purchaser or other party to whom the requesting
party directs the certificate to be sent).
ARTICLE SEVEN
LANDLORD'S RESERVED RIGHTS
7.1 SUBSTITUTE PREMISES: Landlord shall have the right at any time,
upon giving Tenant 60 days written notice, to relocate at Landlord's expense the
Leased Premises on any floor of the Building or elsewhere in the Project,
provided that Tenant's Square Footage shall be approximately the same. Should
Landlord give Tenant written notice of the relocation of the Leased Premises
after Tenant has commenced or completed the approved installation of partitions
or other improvements, Landlord shall furnish Tenant with similar partitions or
other improvements of equal quality. Landlord hereby agrees to pay expenses
resulting from relocating the Tenant including moving expenses, telephone
installation, computer wires, wiring and installation, and the cost of
stationery to replace that made obsolete as a result of the move. The relocation
of the Leased Premises shall not affect any of the clauses or conditions of this
Lease, including the Rent. Notwithstanding anything in this Section 7.1 to the
contrary, the provisions of this Section 7.1 shall not apply and Landlord shall
not have the right to relocate Tenant if Tenant (its parent, affiliates,
subsidiaries, successor. or assigns) is/are in full occupancy of the entire
fifth floor of the Building.
7.2 ADDITIONAL RIGHTS RESERVED TO LANDLORD: Without notice and without
liability to Tenant or without effecting an eviction or disturbance of Tenant's
use or possession, Landlord shall have the right to (i) grant utility easements
or other easements in, or replat, subdivide or make other changes in the legal
status of the land underlying the Building or the Project as Landlord shall deem
appropriate in its sole discretion, provided such changes
<PAGE> 15
do not substantially interfere with Tenant's use of the Leased Premises for the
Permitted Purpose; (ii) enter the Leased Premises at reasonable times and at any
time in the event of an emergency to inspect, alter or repair the Leased
Premises or the Building and to perform any acts related to the safety,
protection, reletting, sale or improvement of the Leased Premises or the
Building, any portion of the Leased Premises with restricted access shall only
be accessed by Landlord in coordination with Tenant so as to preserve the
secrecy or confidentiality of any work being performed therein. Rent shall be
prorated on a per diem basis and apportioned in accordance with the part of the
Leased Premises which is usable by Tenant until the damaged part is ready for
Tenant's occupancy. Notwithstanding the foregoing, If any damage was proximately
caused by an act or omission of Tenant, its employees, agents, contractors,
licensees or invitees, then, in such event, Tenant agrees that Rent shall not
abate or be diminished during the term of this Lease (iii) change the name or
street address of the Building or the Project; (iv) install and maintain signs
on and in the Building and the Project; and (v) make such rules and regulations
as, in the sole judgment of Landlord, may be needed from time to time for the
safety of the tenants, the care and cleanliness of the Leased Premises, the
Building and the Project and the preservation of good order therein.
ARTICLE EIGHT
CASUALTY AND UNTENANTABILITY
8.1 CASUALTY AND UNTENANTABIUTY: If the Building is made substantially
untenantable or if Tenant's use and occupancy of the Leased Premises are
substantially interfered with due to damage to the common areas of the Building
or if the Leased Premises are made wholly or partially untenantable by fire or
other casualty, Landlord may, by notice to Tenant within 45 days after the
damage, terminate this Lease. Such termination shall become effective as of the
date of such casualty.
If the Leased Premises are made partially or wholly untenantable by
fire or other casualty and this Lease is not terminated as provided above,
Landlord shall restore the Leased Premises to the condition they were in on the
Lease Commencement Date, not including any personal property of Tenant or
alterations performed by Tenant.
If the Landlord does not terminate this Lease as provided above, and if
Landlord fails within 120 days from the date of such casualty to restore the
damaged common areas thereby eliminating substantial interference with Tenant's
use and occupancy of the Leased Premises, or fails to restore the Leased
Premises to the condition they were in on the Lease Commencement Date, not
including any personal property or alterations performed by Tenant, Tenant may
terminate this Lease as of the end of such 120 day period.
In the event of termination of this Lease pursuant to this paragraph,
Rent shall be prorated on a per diem basis and paid to the date of the casualty,
unless the Leased Premises shall be tenantable, in which case Rent shall be
payable to the date of the lease termination. If the Leased Premises are
untenantable and this Lease is not terminated, Rent shall abate on a per diem
bests from the date of the casualty until the Leased Premises are ready for
occupancy by Tenant. If part of the Leased Premises are untenantable,
<PAGE> 16
ARTICLE NINE
CONDEMNATION
9.1 CONDEMNATION: If all or any part of the Leased Premises shall be
taken under power of eminent domain or sold under imminent threat to any public
authority or private entity having such power, this Lease shall terminate as to
the part of the Leased Premises so taken or sold, effective as of the date
possession is required to be delivered to such authority. In such event, Base
Rent shall abate in the ratio that the portion of Tenant's Square Footage taken
or sold bears to Tenant's Square Footage. If a partial taking or sale of the
Leased Premises, the Building or the Project (i) substantially reduces Tenant's
Square Footage resulting in a substantial inability of Tenant to use the Leased
Premises for the Permitted Purpose, or (ii) renders the Building or the Project
not commercially viable to Landlord in Landlord's sole opinion, either Tenant in
the case of (i), or Landlord in the case of (ii), may terminate this Lease by
notice to the other party within 30 days after the terminating party receives
written notice of the portion to be taken or sold. Such termination shall be
effective 180 days after notice thereof, or when the portion is taken or sold,
whichever is sooner. All condemnation awards and similar payments shall be paid
and belong to Landlord, except any amounts awarded or paid specifically to
Tenant for removal and reinstallation of Tenant's trade fixtures, personal
property or Tenant's moving costs.
ARTICLE TEN
WAIVER AND INDEMNITY
10.1 WAIVER AND INDEMNITY: Except for those claims arising from
Landlord's breach of this Lease, negligence or willful misconduct, Tenant, to
the extent permitted by law, waives all claims it may have against Landlord, and
against Landlord's agents and employees for any damages sustained by Tenant or
by any occupant of the Leased Premises, or by any other person, resulting from
any cause arising at any time. Tenant agrees to hold Landlord harmless and
indemnified against calms and liability for injuries to all persons and for
damage to or loss of property occurring in or about the Leased Premises or the
Bandit due to Tenant's breach of this Lease or any act of negligence or default
under this Lease by Tenant, its contractors, agents, employees, licensees and
invitees. Tenant agrees to Indemnify, defend, reimburse and had Landlord
harmless against any Environmental Damages incurred by Landlord arising from
Tenant's breach of paragraph 6.1 (d) of this Lease. Environmental Damages means
all claims, Judgments, losses, penalties, fines, liabilities, encumbrances,
liens, costs and reasonable expenses of investigation, defense or good faith
settlement resulting from violations of Environmental Laws, and including,
without limitation: (i) damages for personal injury and injury to property or
natural resources; (ii) reasonable fees and disbursement of attorneys,
consultants, contractors, experts and laboratones; and flip costs of any
cleanup, remediation, removal, response, abatement, containment, closure,
restoration or monitoring work required by any Environmental Law and other costs
reasonably necessary to restore full economic use of the Leased Premises or
Project
10.2 WAIVER OF SUBROGATION: Tenant and Landlord release each other and
waive any right of recovery against each other for loss or damage to the waiving
party or its respective property, which occurs in or about the Leased Premises
or Building, whether due to the negligence of either party, their agents,
employees, officers, contractors, licensees, invitees or otherwise, to the
extent that such loss or damage is insurable against under the terms of
<PAGE> 17
standard fire and extended coverage insurance policies. Tenant and Landlord
agree that all policies of insurance obtained by either of them in connection
with the Leased Premises shall contain appropriate waiver of subrogation
clauses.
10.3 LIMITATION LANDLORD'S LIABILITY: The obligations of Landlord under
this Lease do not constitute personae obligations of the individual partners,
shareholders, directors, officers, employees or agents of Landlord, and Tenant
shall look solely to Landlord's interest in the Building and land and to no
other assets of Landlord for satisfaction of any liability in respect of this
Lease. Tenant will not seek recourse against the individual pawners,
shareholders, directors, officers, employees or agents of Landlord or any of
their personal assets for such satisfaction. Notwithstanding any other
provisions contained herein, Landlord shall not be liable to Tenant, its
contractors, agents or employees for any consequential damages or damages for
loss of profits.
ARTICLE ELEVEN
TENANT'S DEFAULT AND LANDLORD'S REMEDIES
11.1 TENANT'S DEFAULT: It shall be an "Event of Default" if Tenant
shall (i) fail to pay any monthly installment of Base Rent or Tenant's Pro Rata
Share of Excess Operating Costs, or any other sum payable hereunder within 10
days after such payment is due and payable; (ii) violate or fail to perform any
conditions, covenants, or agreements herein made by Tenant respecting Tenant's
insurance requirements as specified in paragraph 6.2, and such violation or
failure shall continue for 5 business days after written notice thereof to
Tenant by Landlord; (iii) violate or fat to perform any of the other conditions,
covenants or agreements herein made by Tenant, and such violation or failure
shall continue for 15 days after written notice thereof to Tenant by Landlord;
provided, however, of such default is of a nature that it cannot reasonably be
cured within 15 days, it shall not be an Event of Default of Tenant commences to
cure within such 15 day period and diligently prosecunes such cure to completion
within the time reasonably required for such cure, not to exceed 60 days; (iv)
make a general assignment for the benefit of its creditors or file a petition
for bankruptcy or other reorganization, liquidation, dissolution or similar
relief; (v) have a proceeding filed against Tenant seeking any relief mentioned
in (v) above; (vi) have a trustee, receiver or liquidator appointed for Tenant
or a substantial part of as property; (vii) abandon or vacate the Leased
Premises and any portion of Rent is delinquent; (viii) default under any other
lease, of any, within the Building or the Project; or (ix) if Tenant is a
partnership, of any partner of the partnership is involved in any of the acts or
events described in subparagraphs (i) through (viii) above.
11.2 REMEDIES OF LANDLORD: If an Event of Default occurs, Landlord,
may, at its option, within 5 days after written notice to Tenant, reenter the
Leased Premises, to the extent provided by law remove all persons therefrom,
take possession of the Leased Premises, and remove ail of Tenant's personal
property at Tenant's risk and expense and, either (i) terminate this Lease and
Tenant's right of possession of the Leased Premises or (ii) maintain this Lease
in full force and effect and endeavor to relet all or part of the Leased
Premises. In the event Landlord elects to maintain this Lease, Landlord shall
have the right to relet the Leased Premises for such rent and upon such terms as
Landlord deems reasonable and necessary, and Tenant shall be liable for all
damages sustained by Landlord, including but not limited to, any deficiency in
<PAGE> 18
Rent for the period of time which would have remained in the Lease Term in the
absence of any termination, leasing fees, attorneys' fees, other marketing and
collection costs, the cash value of any concessions granted to Tenant and all
expenses of placing the Leased Premises in first class rentable condition.
Landlord retains the right to terminate this Lease, at any time, notwithstanding
that Landlord fails to terminate this Lease initially. If Landlord is unable
after diligent efforts to relet the Leased Premises within 60 days after
termination of this Lease, Landlord may elect at any time thereafter to have
Tenant immediately pay, as liquidated damages and not as a penalty. all Rent
then due and the present value (discounted at 10%) of all Rent which would have
become due (based on Base Rent and Tenant's Pro Rata Share of Excess Operating
Costs payable at the time of such election and the cash value of any concessions
granted to Tenant) for the period of time which would have remained in the Lease
Term in the absence of any termination. Landlord agrees to use reasonable
efforts to relet the Leased Premises.
The remedies granted to Landlord herein shall be cumulative and shall
not exclude any other remedy allowed by law, and shall not prevent the
enforcement of any claim Landlord may have against Tenant for anticipatory
breach of the unexpired term of this Lease, including without limitation, a
claim for attorney's fees incurred by Landlord.
ARTICLE TWELVE
TERMINATION
12.1 SURRENDER OF LEASED PREMISES: On expiration of this Lease, if no
Event of Default exists, Tenant shall surrender the Leased Premises in the same
condition as when the Lease Term commenced, ordinary wear and tear or damage
from casualty excepted. Except for furnishings, trade fixtures and other
personal property installed at Tenant's expense, all alterations, additions or
improvements, whether temporary or permanent in character, made in or upon the
Leased Premises, either by Landlord or Tenant, shall be Landlord's property and
at the expiration or earlier termination of the Lease Term shall remain on the
Leased Premises without compensation to Tenant, except if requested by Landlord
at the time Tenant seeks approval for such alteration (but exclusive of the
Leasehold Improvements) or Tenant as its expense an and without delay shall
remove any alterations, additions or improvements made to the Leased Premises by
Tenant designated by Landlord to be removed, and repair any damage to the Leased
Premises or the Building caused by such removal. If Tenant fails to repair the
Leased Premises, Landlord may complete such repairs and Tenant shall reimburse
Landlord for such repair and restoration. Landlord shall have the option to
require Tenant to remove all its property. If Tenant fails to remove such
property as required under this Lease, Landlord may dispose of such property in
its sole discretion without any liability to Tenant, and further may charge the
cost of any such disposition to Tenant.
12.2 HOLD OVER TENANCY: If Tenant shall hold over after the Lease
Expiration Date, Tenant may be deemed, at Landlord's option, to occupy the
Leased Premises as a tenant from month to month, which tenancy may be terminated
by one month's written notice. During such tenancy, Tenant agrees to pay to
Landlord, monthly in advance, an amount equal to double the Base Rent which
would become due (based on Base Rent and Tenant's Pro Rata Share of Excess
Operating Costs payable for the last month of the Lease Term, together with all
other amounts payable by Tenant to Landlord under this Lease), and to be bound
by all of the terms,
<PAGE> 19
covenants and conditions herein specified. If Landlord relets the Leased
Premises or any portion thereof to a new tenant and the term of such new lease
commences during the period for which Tenant holds over, Landlord shall also be
entitled to recover from Tenant all costs and expenses, attorneys fees, damages
or loss of profits incurred by Landlord as a result of Tenant's failure to
deliver possession of the Leased Premises to Landlord when required under this
Lease.
ARTICLE THIRTEEN
MISCELLANEOUS
13.1 QUIET ENJOYMENT: If and so long as Tenant pays all Rent and keeps
and performs each and every term, covenant and condition herein contained on the
part of Tenant to be kept and performed, Tenant shall quietly enjoy the Leased
Premises without hindrance by Landlord.
13.2 ACCORD AND SATISFACTION: No receipt and retention by Landlord of
any payment tendered by Tenant in connection with this Lease shall constitute an
accord and satisfaction, or a compromise or other settlement, notwithstanding
any accompanying statement, instruction or other assertion to the contrary
unless Landlord expressly agrees to an accord and satisfaction, or a compromise
or other settlement, in a separate writing duly executed by Landlord. Landlord
will be entitled to treat any such payments as being received on account of any
item or items of Rent, interest, expense or damage due in connection herewith,
in such amounts and in such order as Landlord may determine at its sole option.
13.3 SEVERABILITY: The parties intend this Lease to be legally valid
and enforceable in accordance with all of its terms' to the fullest extent
permitted by law. If any term hereof shall be invalid or unenforceable, the
parties agree that such term shall be stricken from this Lease to the extent
unenforceable, the same as of it never had been contained herein. Such
invalidity or unenforceability shall not extend to any other term of this Lease,
and the remaining terms hereof shall continue in effect to the fullest extent
permitted by law, the same as if such stricken term never had been contained
herein.
13.4 SUBORDINATION AND ATTORNMENT: Tenant acknowledges that this Lease
is subordinate to all leases in which Landlord is lessee and to any mortgage or
deed of trust now in force against the Building and to all advances made or
hereafter to be made thereunder, provided the holder thereof agrees in writing
for Tenant's benefit not to disturb Tenant's rights under this Lease so long as
there is no Event of Default under this Lease, Tenant agrees that this Lease
shall be subordinate to any future leases in which Landlord is lessee and to any
future first mortgage or deed of trust hereafter in force against the Building
and to all advances made or hereafter to be made thereunder (all such existing
and future leases, mortgages and deeds of trust referred to collectively as
"Superior Instruments.") Landlord shall use its best efforts obtain a written
nondisturbance agreement from all current and future mortgagees, ground lessors,
and lessors under any superior leases, in form and substance reasonably
acceptable to the parties. Tenant also agrees that if the holder of any Superior
instrument elects to have this Lease superior to its Superior instrument and
gives notice of its election to Tenant, then this Lease shall be superior to the
lien of any such lease, mortgage or deed of trust and all renewals, replacements
and extensions thereof, whether this Lease is dated before or after such lease,
mortgage or deed
<PAGE> 20
of trust. If requested in writing by Landlord or any first mortgagee or ground
lessor of Landlord, Tenant agrees to execute a subordination agreement required
to further effect the provisions of this paragraph.
In the event of any transfer in lieu of foreclosure or termination of a
lease in which Landlord is lessee or the foreclosure of any Superior instrument,
or sale of the Property pursuant to any Superior instrument, Tenant shall attorn
to such purchaser, transferee or lessor and recognize such party as landlord
under this Lease, provided such party acquires and accepts the Leased Premises
and assumes Landlord's obligations under the Lease to be performed from and
after the date such party acquires the Leased Premises, subject to this Lease.
The agreement of Tenant to attorn contained in the immediately preceding
sentence shall survive any such foreclosure sale or transfer.
13.5 ATTORNEY'S FEES: If the services of an attorney are required by
any party to secure the performance under this Lease or otherwise upon the
breach or default of the other party to the Lease, or if any judicial remedy is
necessary to enforce or interpret any provision of the Lease, the prevailing
party shall be entitled to reasonable attorney's fees, costs and other expenses,
in addition to any other relief to which such prevailing party may be entitled.
13.6 APPLICABLE LAW: This Lease shall be construed according to the
laws of the state in which the Leased Premises are located.
13.7 BINDING EFFECT; GENDER: This Lease shall be binding upon and inure
to the benefit of the parties and their successors and assigns. It is understood
and agreed that the terms 'Landlord' and 'Tenant' and verbs and pronouns in the
singular number are uniformly used throughout this Lease regardless of gender,
number or fact of incorporation of the parties hereto.
13.8 TIME: Time is of the essence of this Lease.
13.9 ENTIRE AGREEMENT: This Lease and the schedules and addenda
attached set forth all the covenants, promises, agreements, representations,
conditions, statements and understandings between Landlord and Tenant concerning
the Leased Premises and the Building and the Project, and there are no
representations, either oral or written between them other than those in this
Lease. This Lease shall not be amended or modified except in writing signed by
both parties. Failure to exercise any right in one or more instances shall not
be construed as a waiver of the right to strict performance or as an amendment
to this Lease.
13.10 NOTICES: Any notice or demand provided for or given pursuant to
this Lease shall be in writing and served on the parties at the addresses listed
in paragraph 1.1(n) and paragraph 1.1(o). Any notice shall be either (i)
personally delivered to the addressee set forth above, in which case it shall be
deemed delivered on the date of delivery to said addressee; or (ii) sent by
registered or certified mall receipt requested, in which case it shall be deemed
delivered 3 business days after being deposited in the U.S. Mail; (iii) sent by
a nationally recognized overnight courier, in which case it shall be deemed
delivered 1 business day after deposit with such courier; or (iv) sent by
telecommunication (Fax) during normal business hours in which case it shall be
deemed delivered on the day sent, provided an original is received by
<PAGE> 21
the addressee after being sent by a nationally recognized overnight courier
within 1 business day of the Fax The addresses and Fax numbers listed in
paragraphs 1.1 (n) and 1.1 (o) may be changed by written notice to the other
parties, provided, however, that no notice of a change of address or Fax number
shall be effective until the date of delivery of such notice. Copies of notices
are for informational purposes only and a failure to give or receive copies of
any notice shall not be deemed a failure to give notice.
3.11 HEADINGS: The headings on this Lease are included for convenience
only and shall not be taken into consideration in any construction or
interpretation of this Lease or any of its provisions.
13.12 BROKERAGE COMMISSIONS: Tenant and Landlord each represents to the
other that no broker or agent was instrumental in procuring or negotiating or
consummating this Lease other than Broker of Record whose compensation shall be
paid by Landlord, and Cooperating Broker, if any, whose compensation shall be
paid by Broker of Record, and Tenant and Landlord each agree to defend,
indemnity and hold harmless the other party against any loss, cost, expense or
liability for any compensation, commission, fee or charge, including reasonable
attorney's fees, resulting from any claim of any other broker, agent or
financier claiming under or through the indemnifying party in connection with
this Lease or its negotiation.
SUBMISSION OF THIS INSTRUMENT FOR EXAMINATION OR SIGNATURE BY TENANT
DOES NOT CONSTITUTE-JTE A RESERVATION OF OR OPTION FOR LEASE, AND IT IS NOT
EFFECTIVE AS A LEASE OR OTHERWISE UNTIL EXECUTION AND DELIVERY BY BOTH LANDLORD
AND TENANT.
This Lease is executed as of the date first written above.
TENANT: LANDLORD:
ICARUS International, Inc. Allstate Life Insurance Company
By__________________________
Its Herbert G. Blecker, President By_________________________________
Authorized Signatories
By__________________________
Its Eunice E. Blecker, Secretary
Where Tenant is a corporation, this Lease shall be signed by a President or Vice
President and Secretary or Assistant Secretary of Tenant. Any other signatories
shall require a certified corporate resolution.
<PAGE> 22
SCHEDULE 2
RULES AND REGULATIONS
1. The sidewalks, entrances, halls, corridors, elevators and stairways of the
Building and Project shall not be obstructed or used as a waiting or lounging
place by tenants, and their agents, servants, employees, invitees, licensees and
visitors. All entrance doors leading from any Leased Premises to the hallways
are to be kept closed at all times.
2. Landlord reserves the right to refuse admittance to the Building after
reasonable business hours, as established from time to time, to any person not
producing both a key to the Leased Premises and/or a pass Issued by Landlord. In
case of invasion, riot, public excitement or other commotion, Landlord also
reserves the right to prevent access to the Building during the continuance of
same. Landlord shall in no case be liable for damages for the admission or
exclusion of any person to or from the Building.
3. Landlord will furnish each tenant with two keys to each door lock on the
Leased Premises and access cards to initially satisfy Tenant's requirements so
as to provide same to each of Tenant's employees at no cost or expense to
Tenant, provided, however, Tenant shall be responsible for the reasonable cost
of any replacement keys and access cards. Nothing herein shall preclude the
Tenant from changing any or all of the locks to or within the Leased Premises at
any time provided same is coordinated with Landlord and Landlord is provided
with a set of keys thereto. Landlord and Tenant shall mutually agree upon the
cost of any additional access cards or keys requested by Tenant. No tenant shall
have any keys made for the Leased Premises; nor shall any tenant alter any lock,
or install new or additional locks or bolts, on any door without the prior
written approval of Landlord, which consent shall not be unreasonably withheld.
If Landlord approves any lock alteration or addition, the tenant making such
alteration shall supply Landlord with a key for any such lock or bolt. Each
tenant, upon the expiration or termination of its tenancy, shall deliver to
Landlord all keys and access cards in any such tenant's possession for all locks
and bolts in the Building.
4. No tenant shall cause any unnecessary labor by reason of such tenant's
carelessness or indifference in the preservation of good order and cleanliness
of the Leased Premises. Tenants will see that (i) the windows are closed, (ii)
the doors securely locked, and (iii) all water faucets and other utilities are
shut off (so as to prevent waste or damage) each day before leaving the Leased
Premises. In the event tenant must dispose of crates, boxes, etc. which will not
fit into office waste paper baskets, it will be the responsibility of tenant to
dispose of same. In no event shall tenant set such items in the public hallways
or other areas of the Building or garage facility, excepting tenant's owned
Leased Premises, for disposal.
5. Landlord reserves the right to prescribe the date, time, method and
conditions that any personal property, equipment, trade fixtures, merchandise
and other similar items shall be delivered to or removed from the Building. No
iron safe or other heavy or bulky object shall be delivered to or removed from
the Building, except by experienced safe men, movers or riggers approved in
writing by Landlord. All damage done to the Building by the delivery or removal
of such items, or by reason of their presence in the Building, shall be paid to
Landlord,
<PAGE> 23
immediately upon demand, by the tenant by, through, or under whom such damage
was done. There shall not be used in any space, or in the public halls of the
Building, either by tenant or by jobbers or others, in the delivery or receipt
of merchandise, any hand trucks, except those equipped with rubber tires.
6. Tenant shall not cover or obstruct any skylights, windows, doors and transoms
that reflect or admit light into passageways or into any other part of the
Building.
7. The toilet rooms, toilets, urinals, wash bowls and water apparatus shall not
be used for any purpose other than for those for which they were constructed or
installed, and no sweepings, rubbish, chemicals, or other unsuitable substances
shall be thrown or placed therein. The expense of any breakage, stoppage or
damage resulting from violation(s) of this rule shall be borne by the tenant by
whom, or by whose agents, employees, invitees, licensees or visitors, such
breakage, stoppage or damage shall have been caused.
8. No sign, name, placard, advertisement or notice visible from the exterior of
any Leased Premises, shall be inscribed, painted or affixed by any tenant on any
part of the Building or Project without the prior written approval of Landlord.
All signs or letterings on doors, or otherwise, approved by Landlord shall be
inscribed, painted or affixed at the sole cost and expense of the tenant, by a
person approved by Landlord. A directory containing the names of all tenants in
the Building shall be provided by Landlord at an appropriate place on the first
floor of the Building.
9. No signalling, telegraphic or telephonic instruments or devices, or other
wires, instruments or devices, shall be installed by Tenant in connection with
any Leased Premises without the prior written approval of Landlord or
specifically identified and located on Construction Documents as defined in
Schedule 6. Such installations, and the boring or cutting for wires, shall be
made at the sole cost and expense of the tenant and under control and direction
of Landlord. Landlord retains, in all cases, the right to require (i) the
installation and use of such electrical protecting devices that prevent the
transmission of excessive currents of electricity into or through the Building,
(ii) the changing of wires and of their installation and arrangement underground
or otherwise as Landlord may direct, and (iii) compliance on the part of all
using or seeking access to such wires with such rules as Landlord may establish
relating thereto. All such wires used by tenants must be clearly tagged at the
distribution boards and Junction boxes and elsewhere in the Building, with (i)
the number of the Leased Premises to which said wires lead, (ii) the purpose for
which said wires are used, and (iii) the name of the company operating same.
10. Tenant, their agents, servants or employees, shall not (a) go on the roof of
the Building, (b) use any additional method of heating or air conditioning the
Leased Premises, (c) sweep or throw any dirt or other substance from the Leased
Premises into any of the halls, corridors, elevators, or stairways of the
Building, (d) bring in or keep in or about the Leased Premises any vehicles or
animals of any kind, (e) install any radio or television antennae or any other
device or item on the roof, exterior walls, windows or windowsills of the
Building, (f) place objects against glass partitions, doors or windows which
would be unsightly from the interior or exterior of the Building, (g) use any
Leased Premises (i) for lodging or sleeping, (ii) for cooking (except that the
use by any tenant of Underwriter's Laboratory-approved equipment for
microwaving,
<PAGE> 24
brewing coffee, tea and similar beverages shall be permitted, provided that such
use is in compliance with law), (iii) for any manufacturing, storage or sale of
merchandise or property of any kind, (h) cause or permit unusual or
objectionable odor to be produced or permeate from the Leased Premises,
including, without limitation, duplicating or printing equipment fumes, and (i)
install or operate any vending machines in the Leased Premises unless
specifically identified and located on Construction Documents as defined in
Schedule 6. Tenant, its agents, servants and employees, invitees, licensees, or
visitors shall not permit the operation of any musical or sound producing
instruments or device which may be heard outside Leased Premises, Building or
garage facility, or which may emit electrical waves which will impair radio or
television broadcast or reception from or into the Building.
11. No canvassing, soliciting, distribution of hand bills or other written
material, or peddling by Tenant shall be permitted in the Building or the
Project, and tenants shall cooperate with Landlord in prevention and elimination
of same.
12. Tenant shall give Landlord prompt notice of all accidents to or defects in
air conditioning equipment, plumbing, electrical facilities or any part or
appurtenances of Leased Premises.
13. If any Leased Premises becomes infested with vermin by acts of Tenant, the
Tenant, at its sole cost and expense, shall cause its premises to be
exterminated from time to time to the satisfaction of the Landlord and shall
employ such exterminators as shall be approved by Landlord.
14. No curtains, blinds, shades, screens, awnings or other coverings or
projections of any nature shall be attached to or hung in, or used in connection
with any door, window or wall of the premises of the Building by Tenant without
the prior written consent of Landlord.
15. Landlord shall have the right to prohibit any advertising by tenant which,
in Landlord's opinion, tends to impair the reputation of Landlord or of the
Building, or its desirability as an office building for existing or prospective
tenants who require the highest standards of integrity and respectability, and
upon written notice from Landlord, tenant shall refrain from or discontinue such
advertising.
16. Wherever the word "tenant" occurs, it is understood and agreed that it shall
also mean tenant's employees and agents. Tenant shall cooperate with Landlord to
assure compliance by all such parties with rules and regulations.
17. Landlord will not be responsible for lost or stolen personal property,
equipment, money or any article taken from Leased Premises, Building or garage
facilities regardless of how or when loss occurs.
18. All contractors and or technicians performing work for Tenant within the
Leased Premises, Building or garage facilities shall be referred to Landlord for
reasonable approval before performing such work. This shall apply to all work
including, but not limited to, installation of telephones, electrical devises
and attachments, and all installations affecting floors, walls,
<PAGE> 25
windows, doors, ceilings, equipment of any other physical feature of the
Building, Leased Premises or garage facilities.
19. Showcases and any other articles shall not be placed in front of or affixed
to any part of the exterior of the Building, nor placed in the halls, corridors
or vestibules by Tenant without the prior written consent of Landlord.
20. The Tenant shall not do anything in the Leased Premises, or bring or keep
anything herein, which will in any way increase or tend to increase the risk of
fire or rate of insurance, or which shall conflict with the Regulations of the
Fire Department, any fire laws, with any insurance policy on the Building or any
part thereof, or with any rules or ordinances established by any governmental
authority.
21. The requirements of Tenant will be attended to only upon application to the
Managing Agent. Employees of Landlord shall not perform any work or do anything
outside of their regular dates unless under special instructions from Landlord,
and no employee will admit any person (Tenant or otherwise) to any office
without specific instructions from Landlord.
22. No Tenant shall obtain for use upon the Leased Premises or accept barbering
or other personal services on the Leased Premises, except for persons authorized
by Landlord and at the hours and under regulations fixed by Landlord.
23. Landlord reserves the right to make reasonable amendments, modifications and
additions to the rules and regulations heretofore set forth, and to make
additional reasonable rules and regulations, as in Landlord's sole Judgment may
from time to time be needed for the safety, care, cleanliness and preservation
of good order of the Building.
SCHEDULE 3
UTILITY SERVICES
The Landlord shall provide, as part of Operating Costs, except as
otherwise provided, the following services:
(1) Air Conditioning and heat for normal purposes only, to provide in
Landlord's judgment, comfortable occupancy Monday through Friday from __ am. to
__ p.m., and Saturday from __ a.m. to __ p.m., Sundays and holidays excepted.
Tenant agrees not to use any apparatus or device, in or upon or about the Leased
Premises, and Tenant further agrees not to connect any apparatus or device math
the conduits or pipes, or other means by which such services are supplied, for
the purpose of using additional or unusual amounts of such services, without
written consent of Landlord.
(2) Electric power for lighting and operating of office machines is
generally provided twenty-four hours a day, seven days a week. Electric power
furnished by Landlord is intended
<PAGE> 26
to be that consumed in normal office use for lighting and small office machines
including desktop computers, copiers and fax machines.
(3) Water for drinking, lavatory and toilet purposes from the regular
Building supply (at the prevailing temperature) through fixtures installed by
Landlord, (or by Tenant with Landlord's written consent).
SCHEDULE 4
MAINTENANCE SERVICES
(1) In order that the Building may be kept in a state of cleanliness,
each tenant shall during the term of each respective lease, permit Landlord's
employees (or Landlord's agent's employees) to take care of and clean the Leased
Premises and tenants shall not employ any person(s) other than Landlord's
employees (or Landlord's agent employees) for such purpose.
(2) Landlord shall supply public restroom supplies, public area lamp
replacement, window washing with reasonable frequency, and janitorial services
to the common areas of the Building and Leased Premises during the time and in
the manner that such janitorial services are customarily furnished in suburban
office buildings in Rockville, Maryland.
(3) Landlord agrees to maintain the exterior and common areas of
Building to include maintenance of the structure, roof, mechanical, electrical
and HVAC equipment, architectural finish, laws and shrub care, snow removal and
so on, excluding only those items specifically excepted elsewhere in this Lease.
SCHEDULE 5
PARKING
Landlord hereby grants to Tenant a license to the use during the term
of this Lease the spaces described in Article 1.1(j). Said parking spaces shall
be made available to Tenant on an allocated basis and Tenant agrees to comply
with such reasonable rules and regulations as may be made by Landlord from time
to time in order to insure the proper operation of the parking facilities. In
consideration of the right to use said parking spaces, Tenant shall pay to
Landlord on the first day of each calendar month, the amount specified in
Article 1.1(j), in addition to the Rent and other charges payable by Tenant
under this Lease. Tenant agrees not to overburden the parking facilities and
agrees to cooperate with Landlord and other tenants in the use of parking
facilities. Landlord reserves the right in its reasonable discretion to
determine whether parking facilities are becoming crowded, and in such event, to
allocate specific parking spaces among Tenant and other tenants or to take such
other steps necessary to correct such condition, including but not limited to
policing and towing, and if Tenant, its agents, officers, employees,
contractors, licensees or invitees are deemed by Landlord to be contributing to
such condition, to charge to Tenant as Rent that portion of the cost thereof
which Landlord reasonably determines to be caused thereby. Landlord may, in its
reasonable discretion, change the location and nature of the parking spaces
available to Tenant, provided that after such change, there shall be available
to
<PAGE> 27
Tenant the same number of spaces as available before such change. The provisions
of this Section 5 are subject to the provisions of Section 1.1(j) of this Lease.
SCHEDULE 6
1. Definitions The terms defined in this paragraph, for purposes of
this Schedule, shall have the meanings specified below, and, in addition to the
terms defined below, terms defined in the Lease shall, for purposes of this
Schedule, have the meanings specified in the Lease.
1.01 "Leasehold Improvements" means those items which are supplied,
installed and finished by Landlord, according to and described in the
Construction Documents (as hereinafter defined) and which shall be paid for by
Landlord (subject to the Allowance) as provided for in paragraph 2.03 below.
Landlord acknowledges and agrees that the Leasehold Improvements shall include,
incorporate and re-use to the extent possible, at no charge or cost to Tenant,
all materials comprising the existing tenant improvements in the Leased
Premises. The Construction Documents shall include as part of the Leasehold
Improvements to be provided by Landlord hereunder, any additional, supplemental
heating, ventilating and air conditioning equipment necessary to exclusively
serve the Leased Premises (or any portion thereof), to service the Leased
Premises (or any portion thereof) on a seven day, twenty-four hour basis. Tenant
shall reimburse Landlord any additional out-of-pocket electrical cost incurred
by Landlord to operate such supplemental unit(s) and the parties will agree upon
an appropriate metering device to be installed as part of the Leasehold
Improvements and at Tenant's cost to the extent such cost is not covered by the
Allowance.
1.02 "Construction Documents" means the approved construction drawings,
plans and specifications referred to in paragraph 2.03.
1.03 "Substantial Completion" means that the Leasehold Improvements
have been substantially completed according to the Construction Documents and
that all necessary permits authorizations, approvals and/or certificates of
occupancy have been obtained by Landlord to permit Tenant to occupy the entire
Leased Premises for the Permitted Purpose except for items which will not
materially affect the use of the Leased Premises and which customarily are
deemed to be "punchlist work."
2. Construction Documents; Payments
2.01 An outline of the Leased Premises is attached hereto and made a
part hereof as Schedule 1. A preliminary floor plan of the Leased Premises will
be approved by the parties as soon as possible and when initialled by the
parties will be incorporated by reference and made a part of this Lease as
Schedule 1A. (the "Preliminary Plan")
2.02 Landlord shall cause to be prepared and submitted to Tenant for
approval all drawings, plans and specifications necessary to construct the
Leasehold Improvements. Within five (5) business days from the date the
documents are submitted to Tenant ("Document Approval Period"), Tenant shall
approve or disapprove the documents. If the Tenant disapproves the
<PAGE> 28
documents within the Document Approval Period, then the Landlord and Tenant
shall attempt to resolve the objections of Tenant; and if a resolution cannot be
reached within ten (10) days of Tenant's notice of disapproval, then either
Tenant or Landlord shall have the right to terminate the Lease by written notice
to the other.
The fees and expenses for preparing the drawings, plans and specifications shall
be included in the Final Cost (defined in paragraph 2.03 below).
2.03 Upon Tenant's approval of the final form of the drawings, pans and
specifications, which shall constitute the Construction Documents, Landlord
shall prepare an analysis of the cost of constructing the Leasehold improvements
according to the Construction Documents (the "Final Cost") and submit such
analysis to Tenant for its approval. Within five (5) business days from the date
the Final Cost has been submitted to Tenant ("Cost Approval Period"), Tenant
shall approve or disapprove the Final Cost. If Tenant fails to respond within
the Cost Approval Period, it shall be conclusively presumed that Tenant has
approved the Final Costs. If Tenant does not approve the Final Cost, It shall
promptly notify Landlord; in which case Tenant and Landlord shall use their best
efforts to amend the Construction Documents in a manner satisfactory to each. If
they are unable to do so within 10 days after Tenant notifies Landlord as
provided in the preceding sentence, either party may terminate the Lease by
delivering written notice to the other. Tenant acknowledges that Landlord's sole
monetary obligation is to pay the costs attributable to the construction of the
Leasehold Improvements, up to an aggregate maximum limit of $20.00 per square
foot of Tenant's Square Footage (the "Allowance"), and Tenant shall pay all
other costs of the construction of the Leasehold improvements in excess of the
Allowance ("Tenant's Share"). Landlord acknowledges and agrees that the
Allowance shall be used toward the construction of the Leasehold Improvements,
including all architectural services, engineering fees, preparation of working
drawings, permit fees and other related services (including overtime and other
expenses incurred to expedite the construction of the Leasehold Improvements to
meet the Lease Commencement Date), the installation of additional heating,
ventilating and air conditioning units and other special installations, and that
a portion of the Allowance (up to $2.00 per square foot of Tenant's Square
Footage) may be used to fund the installation of telephone and computer wiring,
moving and other related expenses incurred by Tenant in relocating its offices
to the Leased Premises, all as reasonably agreed upon by Tenant and Landlord. In
addition, all costs attributable to changes and variations from the Construction
Documents in excess of the Allowance (including, without limitation, any fees
and expenses of the Consultants and any increased costs of construction) shall
be paid by Tenant.
3. Leasehold Improvements
3.01 The following provisions shall apply to the construction of the
Leasehold Improvements:
(a) All work involved in the completion of the Leasehold Improvements
shall be carried out by Landlord and its agents and contractors under
the sole direction of Landlord without the imposition of a fee for
Landlord's supervision or management of the construction process within
the scope of the work originally specified in the Construction
Documents. Tenant shall cooperate with Landlord and its agents and
<PAGE> 29
contractors to promote the efficient and expeditious completion of the
Leasehold Improvements; and
(b) Landlord agrees to construct the Leasehold Improvements in
accordance with the Construction Documents, provided Tenant has
complied with all the applicable provisions of this Schedule and the
Lease.
3.02 If there are any changes in the Leasehold Improvements requested
by, or on behalf of, Tenant from the work as reflected in the Construction
Documents, each such change must receive the prior written approval of Landlord,
and Tenant shall bear the cost of all such changes in excess of the Allowance.
3.03 Landlord shall have no obligation to commence construction of any
work in the Leased Premises until (a) Tenant has approved the Construction
Documents and the Final Cost for the construction of the Leasehold Improvements
as required by the provisions hereof, and (b) Landlord shall have received
Tenant's advance payment in an amount equal to the Tenant's Share, if any.
4. Lease Commencement Date
4.01 Landlord shall notify Tenant when Substantial Completion has been
achieved and the Lease Commencement Date shall be established as set forth in
the Lease. Notwithstanding anything to the contrary contained in the Lease or
this Schedule, the Lease Commencement Date shall not be extended for any delay
in Substantial Completion to the extent that such delay is caused in whole or in
part by any act or omission attributable to Tenant, including without
limitation:
(a) Tenant's request for any Leasehold Improvements which require
materials which need to be ordered and are not immediately available;
(b) Tenant's failure to furnish promptly information concerning
Tenant's requirements pertaining to construction of the Leasehold
Improvements or any other information requested by the Landlord as
necessary or useful to prepare the Construction Documents;
(c) Tenant's failure to approve promptly the Construction Documents and
Final Cost; and
(d) Tenant's request for any changes in the Leasehold Improvements from
the work as reflected in the Construction Documents.
Landlord agrees to use its best efforts to substantially complete the
Leasehold Improvements so as to permit Tenant to occupy the Leased Premises on
or before March 31, 1998.
4.02 In any event, Rent payable under the Lease shall not abate by
reason of any delay, expense or other burden arising out of or incurred in
connection with the design or construction of the Leasehold Improvements to the
extent that such delay, expense or other burden is caused
<PAGE> 30
in whole or in part by any act or omission attributable to Tenant (including,
without limitation, the acts and omissions referred to in subparagraphs (a)
through (d) of paragraph 4.01 above).
5. Tenant's Access To Leased Premises
5.01 Landlord, in its sole discretion, may permit Tenant and Tenant's
agents or independent contractors to enter the Leased Premises prior to the
scheduled Lease Commencement Date in order that Tenant may do other work as may
be required by Tenant to make the Leased Premises ready for Tenant's use and
occupancy; provided, however, subject to the coordination of its activities with
Landlord and provided such activities do not materially interfere with
Landlord's work to be performed hereunder, Landlord agrees that Tenant (and its
representatives or contractors) shall be permitted access to the Leased Premises
while the walls and interior partitions are exposed to install any cable, wire
or conduit. Such permission must be in writing prior to entry. If Landlord
permits such prior entry, then such license shall be subject to the condition
that Tenant and Tenant's agents, contractors, workmen, mechanics, suppliers, and
invitees shall work in harmony with and not interfere with Landlord and its
agents and contractors in doing its work in the Leased Premises or the Building
or with other tenants and occupants of the Building or the Project. If at any
time such entry shall cause or threaten to cause disharmony or interference,
Landlord, in its sole discretion, shall have the right to withdraw and cancel
such license upon notice to Tenant. Tenant agrees that any such entry into the
Leased Premises shall be deemed to be under ail of the terms, covenants,
conditions and provisions of the Lease, except as to the covenant to pay
periodic Rent. Tenant further agrees that, to the extent permitted by law and
consistent with the terms of this Lease, Landlord and its principals shall not
be liable in any way for any injury or death to any person or persons, loss or
damage to any of the Leasehold Improvements or installations made in the Leased
Premises or loss or damage to property placed therein or there about, the same
being at Tenant's sole risk.
5.02 In addition to any other conditions or limitations on such license
to enter the Leased Premises prior to the Lease Commencement Date, Tenant
expressly agrees that none of its agents, contractors, workmen, mechanics,
suppliers or invitees shall enter the Leased Premises prior to the Lease
Commencement Date unless and until each of them shall furnish Landlord with
satisfactory evidence of insurance coverage, financial responsibility and
appropriate written releases of mechanics' or materialmen's lien claims.
6. Miscellaneous Provisions Landlord and Tenant further agree as
follows:
6.01 Except as herein expressly set forth with respect to the Leasehold
Improvements, Landlord has no agreement with Tenant and has no obligation to do
any work with respect to the Leased Premises. Any other work in the Leased
Premises which may be permitted by Landlord pursuant to the terms and conditions
of the Lease shall be done at Tenant's sole cost and expense and in accordance
with the terms and conditions of the Lease.
6.02 This Schedule shall not be deemed applicable to: (a) any
additional space added to the original Leased Premises at any time, whether by
the exercise of any options under the
<PAGE> 31
Lease or otherwise, or (b) any portion of the original Leased Premises or any
additions thereto in the event of a renewal or extension of the original Lease
Term, whether by the exercise of any options under the Lease or any amendment or
supplement thereto. The construction of any additions or improvements to the
Leased Premises not contemplated by this Schedule shall be effected pursuant to
a separate work letter agreement or other document, in the form then being used
by Landlord and specifically address the allocation of costs relating to such
construction.
<PAGE> 32
SCHEDULE 7
CERTIFICATE OF ACCEPTANCE
TENANT _________________________
LEASED PREMISES ________________________
LOCATED AT ________________________
This letter is to certify that:
1. The above referenced Leased Premises have been accepted by the Tenant
for possession.
2. The Leased Premises are substantially complete in accordance with the
plans and specifications used in constructing the demised premises.
3. The Leased Premises can now be used for intended purposes.
The execution of this certificate shall not relieve the Landlord of its
obligation to expeditiously complete all work to which the Tenant is entitled
under the terms of its lease with the Landlord. Neither this certificate, nor
Tenant's occupancy of the Leased Premises, shall be construed to relieve the
Landlord of its responsibility to remedy, correct, replace, reconstruct or
repair any deviation, deficiency or defect in the work or in the materials or
equipment furnished by the Landlord, without cost to Tenant, if a claim with
respect thereto is made by Tenant.
Commencement Date ___________, 19__.
Expiration Date ____________, 19__.
Executed this __ day of ________, 19_.
TENANT
By:_______________________
Authorized Signatory
<PAGE> 33
SCHEDULE 8
ADDENDUM
ADDITIONAL PROVISIONS
2. Option to Renew
Tenant shall have one option to renew ("Option to Renew") this Lease for five
(5) years (the "Renewal Period"). If Tenant desires to exercise its Option to
Renew, Tenant shall give Landlord written notice ("Renewal Notice") thereof on
or before *. During the thirty (30) day period following Landlord's receipt of
the Renewal Notice, Landlord and Tenant shall use reasonable efforts to
negotiate a mutually agreeable base rent ("Market Base Rent") for the Renewal
Period. The Market Base Rent shall be negotiated in light of then current terms
for renewing tenants for comparable space, including market rents, term of
renewal, and operating expense pass throughs. Within fifteen (15) business days
of agreement by the parties on the Market Base Rent and other terms of the
renewal, Landlord shall deliver to Tenant an amendment to this Lease extending
this Lease on such terms. Such amendment shall not contain any further option to
renew. Tenant shall execute and deliver the amendment to Landlord within ten
(10) business days following receipt of such amendment. The foregoing option and
rights are subject to there existing no Event of Default of which Tenant has
been notified and no prior Event of default which Tenant failed to cure within
any applicable cure period, are personal to the original Tenant executing the
Lease, may not be assigned; provided, however such right to extend the term of
this Lease may also be exercised by any parent, affiliate or subsidiary of
Tenant or any entity acquiring Tenant, to which the Lease may be assigned
pursuant to Section 6.04. Time is of the essence in the exercise of Tenant's
Option to Renew. Should Tenant fail to exercise such option, execute and deliver
any required documents, or perform any of its required obligations under this
section, or should the parties be unable to agree on Market Base Rent for the
Renewal Period, within the time periods set forth above, then this Option to
Renew and any other rights of Tenant under the Lease in the nature of options,
shall be null and void, and the Lease shall terminate at the end of the Lease
Term.
*(9) months prior to the expiration of the initial lease term.
ADDITIONAL PROVISIONS
3. Right of First Opportunity
Provided no Event of Default then exists, Tenant will have the right of first
opportunity ("Right of First Opportunity") to lease space that becomes available
on the fourth (4th) floor of the Building. Landlord shall notify Tenant in
writing when said space becomes available. Tenant will then have ten (10)
business days to respond in writing of Tenant's intent to exercise this Right of
First Opportunity. If Tenant fails to respond in said (10) day period, then
Tenant will have waived this Right of First Opportunity for said space. Upon
Landlord's receipt of Tenant's written acknowledgment to exercise said Right of
First Opportunity, Landlord shall have ten (10) days to provide Tenant with the
terms and conditions under which the Landlord would propose
<PAGE> 34
to lease the space to Tenant, which terms and condition shall reflect what
Landlord reasonably believes to be a market proposal for such space. Landlord
and Tenant shall then have thirty (30) days to negotiate and agree to the terms
and conditions. If Landlord and Tenant have not agreed to terms and conditions
during said thirty (30) day period, then Landlord shall be allowed to lease said
space to a third party.
ADDITIONAL PROVISIONS
4. Option to Terminate
Tenant shall have a one time right to terminate the Lease on *1 ("Early
Termination Date"). In order to exercise such option, Tenant shall give Landlord
prior written notice ("Termination Notice") on *2 of its election to terminate
this Lease. The Termination Notice shall be valid only if accompanied by a
cashier's check in an amount equal to $*3 ("Termination Fee"). If all of the
foregoing conditions are timely satisfied by Tenant, this Lease shall terminate
on the Early Termination Date as if such date were the Lease Expiration Date.
The foregoing option and rights are subject to there existing no Event of
Default of which Tenant has been notified and no prior Event of Default which
Tenant failed to cure within any applicable cure period, are personal to the
original Tenant executing the Lease, may not be assigned; provided, however,
such right to terminate may also be exercised by any parent, affiliate or
subsidiary of Tenant, or any entity acquiring Tenant, to which this Lease may
have been assigned. Time is of the essence in the exercise of Tenant's Option to
Terminate. Should Tenant fail to exercise such option and deliver notice thereof
to Landlord, or fail to perform any of its required obligations under this
section within the time periods set forth above (including, without limitation,
paying the Termination Fee at the same time as the Termination Notice), then
this Option to Expand shall terminate and be null and void. Within ten (10) days
of Tenant's receipt of an invoice for same, Tenant shall promptly pay to
Landlord the unamortized amount (factored with a ten percent annual interest
rate) of the Allowance utilized by Tenant in the construction of the Leasehold
Improvements and any brokerage fees and commissions paid by Landlord in
conjunction with this Lease.
*1 the last day of the seventh (7th) lease year
*2 no less than nine (9) months prior to the Early Termination Date
*3 three (3) monthly installments of Base Rent
<PAGE> 1
EXHIBIT 10.7
FOUR GREENSPOINT PLAZA
LEASE AGREEMENT
BY AND BETWEEN
GREENSPOINT PLAZA LIMITED PARTNERSHIP
(LANDLORD)
AND
ICARUS CORPORATION
(TENANT)
<PAGE> 2
TABLE OF CONTENTS
I.
<TABLE>
<S> <C>
LEASED PREMISES 1.1
INITIAL LEASEHOLD IMPROVEMENTS 1.2
II.
TERM 2.1
USE 2.2
BASE RENTAL 2.3
TENANT'S PROPORTIONATE SHARE OF BASIC COSTS 2.4
ADDITIONAL RENTAL 2.5
SECURITY DEPOSIT 2.6
III.
SERVICES 3.1
KEYS AND LOCKS 3.2
GRAPHICS 3.3
IMPROVEMENTS TO BE MADE BY LANDLORD 3.4
PEACEFUL ENJOYMENT 3.5
LIMITATION OF LANDLORD'S PERSONAL LIABILITY 3.6
PARKING 3.7
IV.
PAYMENTS BY TENANT 4.1
REPAIRS BY LANDLORD 4.2
REPAIRS BY TENANT 4.3
CARE OF THE LEASED PREMISES 4.4
ASSIGNMENT OR SUBLEASE 4.5
ALTERATIONS, ADDITIONS, IMPROVEMENTS 4.6
LEGAL USE AND VIOLATIONS OF INSURANCE COVERAGE 4.7
LAWS AND REGULATIONS; RULES OF BUILDING 4.8
ENTRY FOR REPAIRS AND INSPECTION 4.9
NUISANCE AND ODORS 4.10
SUBORDINATION TO MORTGAGE 4.11
ESTOPPEL CERTIFICATE OR THREE PARTY AGREEMENT 4.12
</TABLE>
ii
<PAGE> 3
V.
<TABLE>
<S> <C>
CONDEMNATION AND LOSS OR DAMAGE 5.1
DAMAGES FROM CERTAIN CAUSES 5.2
LIEN FOR RENT 5.3
LANDLORD'S RIGHT TO RELET 5.4
HOLDING OVER 5.5
CASUALTY 5.6
ATTORNEY'S FEES 5.7
ALTERATION 5.8
ASSIGNMENT BY LANDLORD 5.9
DEFAULT BY TENANT 5.10
NON-WAIVER 5.11
CASUALTY INSURANCE 5.12
LIABILITY INSURANCE 5.13
HOLD HARMLESS 5.14
WAIVER OF SUBROGATION RIGHTS 5.15
ENTIRE AGREEMENT, REPRESENTATIONS, ETC 5.16
TIME IS OF THE ESSENCE 5.17
BROKERS 5.18
NO WARRANTIES 5.19
REMEDIES CUMULATIVE 5.20
GOVERNING LAW 5.21
SUCCESSORS 5.22
NOTICES 5.23
SEVERABILITY 5.24
AUTHORITY 5.25
RELOCATION 5.26
RENEWAL OPTION 5.27
EXHIBITS
- --------
FLOOR PLAN EXHIBIT A
TENANT IMPROVEMENT WORK SCHEDULE EXHIBIT B
PARKING EXHIBIT C
BUILDING RULES AND REGULATIONS EXHIBIT D
BUILDING STANDARD IMPROVEMENTS EXHIBIT E
AIR CONDITIONING AND HEATING SERVICES EXHIBIT F
</TABLE>
iii
<PAGE> 4
INDEX OF DEFINED TERMS
The terms set forth below shall have the meanings given to
them in the Sections and/or Exhibits designated below.
BASE RATE. As defined in Exhibit F
BASE RENTAL. As defined in Section 2.3.
BASE YEAR. As defined in Section 2.4(a).
BASIC COSTS. As defined in Section 2.4(a)C.
BUILDING. As defined in Section 1.1.
COMMENCEMENT DATE. As defined in Section 2.1(a).
COMMON AREAS. As defined in Section 1.1.
EVENT OF DEFAULT. As defined in Section 5.10.
GARAGE. As defined in Exhibit C.
HIGH-RISK ITEMS. As defined in Exhibit B(4)(c).
HOLIDAYS. As defined in Exhibit F.
KILOWATT HOUR RATE. As defined in Exhibit F.
LANDLORD. As defined in the Preamble.
LANDLORD'S CONTRACTOR. As defined in Exhibit B(2)(a).
LEASE. As defined in the Preamble.
LEASED PREMISES. As defined in Section 1.1.
MAXIMUM RATE. As defined in Section 2.3.
MORTGAGEE. As defined in Section 4.11(a).
NET RENTABLE AREA. As defined in Section 1.1.
OPERATING EXPENSES. As defined in Section 2.4(c).
PRICING LETTER. As defined in Exhibit B(2)(a).
PRIME LANDLORD. As defined in Section 4.11(a).
PROJECT. As defined in Section 1.1.
RULES AND REGULATIONS. As defined in Section 4.8.
SEPARATE CONTRACTOR. As defined in Exhibit B(2)(b).
SERVICE AREAS. As defined in Section 1.1.
SHELL. As defined in Exhibit B(4)(b).
SUBSTANTIAL COMPLETION. As defined in Exhibit B(4)(a).
TENANT. As defined in the Preamble.
TENANT DELAY. As defined in Exhibit B(4)(c).
TENANT EXTRA IMPROVEMENTS. As defined in Exhibit B(1)(a).
TENANT IMPROVEMENTS. As defined in Exhibit B(1)(a).
TENANT PLANS. As defined in Exhibit B(1)(b).
TENANT'S PROPORTIONATE SHARE. As defined in Section 2.4(a).
TERM. As defined in Section 2.1(a).
TOWN CENTER. As defined in Section 1.1.
UNDERLYING LEASE. As defined in Section 4.11(a).
UNDERLYING MORTGAGE. As defined in Section 4.11(a).
1
<PAGE> 5
LEASE AGREEMENT
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
THIS LEASE AGREEMENT (this "Lease") is made and entered into
on this the ____ day of January, 1997, by and between GREENSPOINT PLAZA LIMITED
PARTNERSHIP, a Texas limited partnership whose address for purposes hereof is
2800 Post Oak Blvd., Houston, Texas 77056-6190 ("Landlord"), and ICARUS
CORPORATION, a Maryland corporation ("Tenant"). Tenant's address for purposes
hereof until commencement of the term of this Lease shall be One Central Plaza,
11300 Rockville Pike, Rockville, Maryland 20852 (Attn: Mr. Herbert G. Blecker,
President) and thereafter shall be at the Leased Premises (hereinafter
defined):
WITNESSETH:
I.
1.1 LEASED PREMISES. Subject to and upon the terms,
provisions and conditions hereinafter set forth, and each in consideration of
the duties, covenants and obligations of the other hereunder, Landlord does
hereby lease, demise and let to Tenant and Tenant does hereby lease and take
from Landlord those certain premises ("Leased Premises") in the building known
as Four Greenspoint Plaza located at 16945 Northchase Drive, Houston, Harris
County, Texas 77060 (the "Building"), which building is a part of the multi-use
development known as Greenspoint Plaza and/or Greenspoint Town Center (the
"Town Center") in the City of Houston, Harris County, Texas, such premises
being more particularly described as follows:
containing approximately four thousand five hundred and thirty five
(4,535) square feet of Net Rentable Area on Level 14 as reflected on
the floor plan of such premises attached hereto and made a part hereof
as Exhibit A.
The term "Net Rentable Area", as used herein, shall refer to
(i) in the case of a single tenancy floor, all floor area measured from the
inside surface of the outer glass or finished column wall of the Building to
the inside surface of the opposite outer wall excluding only the areas
("Service Areas") within the outside walls used for building stairs, fire
towers, elevator shafts, flues, vents, stacks, pipe shafts and vertical ducts,
but including any such service areas which are for the specific use of the
particular tenant such as special stairs or elevators plus an allocation of the
square footage
-1-
<PAGE> 6
of the Building's elevator and main mechanical and electrical rooms, management
office, other areas necessary to provide customary services to the Building and
public lobbies, and (ii) in the case of a floor to be occupied by more than one
tenant, all floor areas within the inside surface of the outer glass or
finished column walls enclosing the Leased Premises and measured to the
mid-point of the walls separating areas leased by or held for lease to other
tenants or from areas devoted to corridors, elevator foyers, rest rooms,
mechanical rooms, janitor closets, vending areas and other similar facilities
for the use of all tenants on the particular floor ("Common Areas"), but
including a proportionate part of the Common Areas located on such floor based
upon the ratio which the tenant's Net Rentable Area (excluding Common Areas) on
such floor bears to the aggregate Net Rentable Area (excluding Common Areas) on
such floor plus an allocation of the square footage of the Building's elevator
and main mechanical and electrical rooms, management office, and other areas
necessary to provide customary services to the Building and public lobbies. No
deductions from Net Rentable Area shall be made for columns or projections
necessary to the Building. The Net Rentable Area in the Leased Premises has
been calculated on the basis of the foregoing definition and is hereby
stipulated for all purposes hereof to be four thousand five hundred and thirty
five (4,535) square feet, whether the same should be more or less as a result
of minor variations resulting from actual construction and completion of the
Leased Premises for occupancy so long as such work is done in accordance with
the terms and provisions hereof.
The term "Project" means and includes the Building, the
Garage, the land upon which the Building and the Garage are located, and all
central plants, surface parking areas, plaza areas, driveways, walkways,
sidewalks and landscaped areas which are adjacent and/or related thereto,
together with such additional lands or improvements which may now or in the
future serve the Building and/or the Garage.
Subject to the terms of this Lease, Tenant, its agents,
employees and invitees shall be entitled to use the Common Areas, and shall
have access to the Leased Premises through them, during the Term and any
Renewal Option.
1.2 INITIAL LEASEHOLD IMPROVEMENTS. Landlord and Tenant
shall each comply with the provisions of the tenant improvement schedule
attached hereto and made a part hereof as Exhibit B.
II.
2.1 TERM.
(a) Subject to and upon the terms and conditions set forth
herein, and in each exhibit or addendum hereto, this Lease shall continue in
force for a term (the "Term") of 60 months, beginning on the 1st day of April,
1997 (the "Commencement Date"), and ending on the last day of the 60th full
calendar month following the Commencement Date.
-2-
<PAGE> 7
(b) In the event the Leased Premises should not be ready
for occupancy by the Commencement Date stated in Section 2.1(a) above, or in
the event the Commencement Date is delayed as a result of Landlord's acts or
otherwise, Landlord shall not be liable or responsible for any claims, damages
or liabilities in connection therewith or by reason thereof. As Tenant's sole
and exclusive remedy for any such delay, the term of this Lease shall not
commence until the Commencement Date occurs, and the rent provided for herein
shall not commence to be payable until the Commencement Date. At the request
of either party, a declaration of lease commencement in form and substance
reasonably acceptable to the parties will be executed specifying the
Commencement Date established above.
(c) This Lease shall survive the termination of any
underlying lease, provided such underlying landlord recognizes this Lease.
2.2 USE. The Leased Premises shall be used and occupied
by Tenant (and its permitted assignees and subtenants) solely as general,
administrative and executive offices (including such ancillary uses in
connection therewith as shall be reasonably required by Tenant in the operation
of its business); provided, that in no event shall any of the following be
permitted in the Leased Premises: (i) offices or agencies of a foreign
government or political subdivision thereof; (ii) offices of any governmental
bureau or agency of the United States or any state or political subdivision
thereof; (iii) personnel agencies; or (iv) customer service offices of any
public utility company. The following uses shall not be permitted in the
Leased Premises except to the extent they are ancillary to an otherwise
permitted use: (v) data processing activities; (vi) health care activities;
(vii) schools or other training or educational uses; (viii) clerical support
services; (ix) reservation centers for airlines or travel agencies; (x) retail
or restaurant use; (xi) studios for radio, television or other media; or (xii)
storage. The Leased Premises shall not be used for any purpose which would, in
Landlord's reasonable opinion, lower the first-class character of the Building
or any part thereof, create unreasonable or excessive elevator or floor loads,
interfere with any of the operations of the Building or any part thereof or the
proper and economic heating, air-conditioning, cleaning or other servicing of
the Building or any part thereof or unreasonably interfere with the use of the
other areas of the Building by any other tenants.
2.3 BASE RENTAL. Tenant hereby agrees to pay annual base
rental ("Base Rental") without deduction, offset or counterclaim in an amount
equal to the product of $19.56 per square foot of Net Rentable Area multiplied
by the Net Rentable Area of the Leased Premises, plus a management fee of 3% of
Tenant's Base Rental and Additional Rental. Base Rental shall be due and
payable, without notice or demand, in twelve (12) equal installments on the
first day of each calendar month during the Term, and any renewals or
extensions thereof at Landlord's address as provided herein (or such other
address as may be designated by Landlord from time to time). If the Term
commences on other than the first day of a month or terminates on other than
the last day of a month, then the installments of Base Rental for such month or
months shall be prorated and the installment or installments so prorated shall
be paid in advance. All past due installments of rent shall
-3-
<PAGE> 8
bear interest until paid at the lesser of (i) eighteen percent (18%) per annum
or (ii) the maximum lawful contract rate permitted by applicable law (the
"Maximum Rate").
2.4 TENANT'S PROPORTIONATE SHARE OF BASIC COSTS.
(a) There is established under this Lease a "Base Year",
which for these purposes is the calendar year 1996. In the event that the
Basic Costs (as hereinafter defined) of Landlord's ownership, maintenance and
operation of the Project during the first calendar year after the Base Year
shall differ from the Basic Costs of Landlord therefor during the Base Year,
Tenant shall pay its proportionate share of the year's increases in the Basic
Costs for such year in the proportion its Net Rentable Area bears to the
greater of 95% of the total Net Rentable Area of the Building leased or held
for lease for office and/or retail use or to the total Net Rentable Area in the
Building actually leased for office and/or retail use ("Tenant's Proportionate
Share"). If Tenant's Proportionate Share of any increase or projected increase
in Basic Costs is payable by Tenant for any partial calendar year, then such
amount shall be prorated for such partial calendar year of commencement,
expiration or termination so that Tenant pays an amount equal to Tenant's
Proportionate Share of the amount by which the Basic Costs exceed the Base
Year's Basic Costs, multiplied by a fraction, the numerator of which is the
number of days in such calendar year for which Tenant is obligated to pay
Tenant's Proportionate Share of any increase in Basic Costs in such calendar
year and the denominator is 365.
(b) For each calendar year during the Term following the
Base Year, Landlord shall provide Tenant a comparison of the Base Year's Basic
Costs and the projected Basic Costs for such year prior to January 1 of such
year, and Tenant shall thereafter pay Landlord an amount estimated by Landlord
for such year as Tenant's Proportionate Share of any projected increase in
Landlord's Basic Costs for the Project for such year over Base Year's Basic
Costs. The estimated amount of Tenant's Proportionate Share of any projected
increases in Basic Costs shall be due without notice, demand, deduction, offset
or counterclaim, and payable at the same place as Base Rental in twelve (12)
equal monthly installments on the first day of each calendar month during such
year. Landlord shall within the period of one hundred fifty (150) days (or as
soon thereafter as possible), after the close of each calendar year following
the first calendar year, provide Tenant a statement of such year's actual Basic
Costs showing the actual increase in Landlord's Basic Costs of operating the
Project from the Base Year. If the actual increase is greater than that
projected, Tenant shall pay Landlord, within thirty (30) days of Tenant's
receipt of such statement, Tenant's Proportionate Share of the difference. If
such year's projected Basic Costs are greater than the actual Basic Costs,
Landlord shall pay Tenant, within thirty (30) days of said statement's
issuance, Tenant's Proportionate Share of the difference; provided, however,
the rental owed by Tenant shall never be less than the Base Rental stated in
Section 2.3.
(c) "Basic Costs" as said term is used herein shall
consist of all operating expenses of the Project, and such additional
facilities in subsequent years as may be determined by Landlord to be
necessary. All operating expenses shall be computed on an accrual basis and
determined in accordance with generally accepted accounting principles which
shall be consistently applied. The
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term "operating expenses" as used herein shall mean all expenses, costs and
disbursements (but not replacement of capital investment items (other than
those described in subparagraph 9 below) nor specific costs especially billed
to and paid by specific tenants) of every kind and nature which Landlord shall
pay or become obligated to pay because of or in connection with the ownership,
maintenance and operation of the Project, including, but not limited to, the
following:
(1) Wages, salaries, benefits and related
expenses of all on-site employees and the allocable pro rata cost of such
expenses attributable to off-site personnel providing services to the Project
engaged in the operation, maintenance or access control of the Project and
personnel who may provide traffic control relating to ingress and egress to and
from the Project. All taxes, insurance and benefits relating to employees
providing these services shall be included.
(2) All costs and expenses of operating the
management administrative office for the Project.
(3) All supplies, tools, equipment, and materials
used in operation and maintenance of the Project.
(4) Cost of all utilities for the Project
including the cost of water and power, heating, lighting, air conditioning and
ventilating for the Project and the cost of operating any central plant that
may serve the Building.
(5) Cost of all maintenance and service
agreements for the Project and the equipment therein, including, but not
limited to, access control service, window cleaning, elevator maintenance,
cleaning and restriping.
(6) Cost of all insurance relating to the Project
including, but not limited to, the cost of casualty and liability insurance
applicable to the Project and Landlord's personal property used in connection
therewith.
(7) All taxes and assessments and governmental
charges whether federal, state, county or municipal, and whether they be by
taxing districts or authorities presently taxing the Leased Premises or by
others, subsequently created or otherwise, and any other taxes and assessments
attributable to the Project or its operation. It is agreed that Tenant will be
responsible for ad valorem taxes on its personal property and on the value of
Leasehold improvements to the extent that same exceed standard building
allowances.
(8) Cost of repairs and general maintenance
(excluding repairs and general maintenance paid by proceeds of insurance or by
Tenant or other third parties, and alterations attributable solely to tenants
of the Building other than Tenant).
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(9) Amortization (including a reasonable interest
charge) of the cost of installation of capital investment items which are
primarily for the purpose of reducing operating costs or which may be required
by governmental authority. All such costs shall be amortized over the
reasonable life of the capital investment items and added to Basic Costs, with
the reasonable life and amortization schedule being determined in accordance
with generally accepted accounting principles and in no event to extend beyond
the reasonable life of the Building. In the case of installations for the
purpose of reducing operating costs, Landlord shall have a cost justification
for its practicality.
(10) Landlord's central accounting and audit costs
applicable to the Project including the cost of audits by certified public
accountants.
(11) The Building's share of all expenses related
to the operation, ownership and maintenance of the Town Center, including, but
not limited to, ad valorem property taxes, property owner association
assessments and the cost of maintaining and operating the common facilities of
the Town Center.
Notwithstanding any other provision herein to the contrary, it
is agreed that in the event the Building is not fully occupied or provided with
Building Standard services during the Base Year or any subsequent year, the
Basic Costs shall be computed for such year as though the Building had been
fully occupied and had been provided with Building Standard services during
such year.
Anything in the foregoing provisions hereof to the contrary
notwithstanding, Operating Expenses shall not include the following:
(A) Costs of repairs, restoration, replacements
or other work occasioned by (1) fire, windstorm or other casualty of an
insurable nature (whether such destruction be total or partial) and paid by
insurance then in effect obtained by Landlord, (2) the exercise by any
governmental authority of the right of eminent domain, whether such taking be
partial or total, and (3) the gross negligence or willful misconduct of
Landlord, or its agents and employees.
(B) Leasing commissions, attorneys' fees, costs,
disbursements and other expenses incurred in connection with negotiations for
leases with tenants, other occupants, or prospective tenants or other occupants
of the Project, or similar costs incurred in connection with disputes with
tenants, other occupants, or prospective tenants or other occupants of the
Project.
(C) Allowances and other costs and expenses
(including permit, license and inspection fees) incurred in fixturing,
furnishing, renovating or otherwise improving, decorating or redecorating space
for tenants or prospective tenants of the Project, or vacant leasable space in
the Building (excluding normal maintenance, repair and replacement costs).
(D) The cost of all items, goods and services for
which Tenant, any other tenant or occupant of the Project or other third party
(including insurers) reimburses Landlord or for
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which Landlord is entitled to reimbursement to the extent of such entitlement
(other than through the payment of a tenant's share of Operating Expenses of
the Project).
(E) Costs which are to be capitalized in
accordance with generally accepted accounting principles not included under
subsection (9) above.
(F) Costs or expenses for services of a type or
quantity which Tenant is not entitled to receive (and does not receive) but
which are provided to another tenant or occupant of the Project.
(G) Any penalties or legal costs paid by Landlord
due to the violation by Landlord of the terms of any lease pertaining to the
Project.
(H) Payments of principal and interest or other
finance charges made on any debt (except as provided in subsection (9) above),
and rental payments made under any ground or underlying lease or leases, except
to the extent that a portion of such payments is expressly for ad valorem/real
estate taxes or insurance premiums on the Project.
(I) Landlord's general corporate overhead
relating solely to the internal organization and function of Landlord as a
business entity (i.e., trustee's fees and partnership organizational expenses)
(as opposed to the maintenance, ownership and operation of the Project).
(J) Any compensation paid to clerks, attendants
or other persons employed in commercial concessions operated by Landlord for a
profit in leasable space in the Building (but excluding any compensation paid
to clerks, attendants or other persons in operating the Garage).
(K) Payments for rented equipment, the cost of
which equipment would constitute a capital expenditure (as defined in
accordance with generally accepted accounting principles) if the equipment were
purchased (but excluding rented equipment described in subsection (9) above).
(L) Advertising and promotional costs associated
with the leasing of the Project.
(M) Cost of any political or charitable donations
or contributions.
(N) Costs of acquiring or maintaining (to the
extent the maintenance is in excess of Building standard maintenance) fine art
work in the Project.
2.5 ADDITIONAL RENTAL. Tenant shall be obligated to pay
at the same place as Base Rental all amounts due under this Lease, including,
without limitation, Tenant's Proportionate Share of any increase in Basic Costs
as set forth in Sections 2.4 (a) and (b) herein, without notice,
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demand, offset or counterclaim, and all such amounts shall constitute
additional rental ("Additional Rental") owed by Tenant to Landlord. Landlord
shall have the same remedies for default in the payment of Additional Rental as
are available to Landlord in the event of a default in the payment of Base
Rental.
Tenant, at its expense, shall have the right at all
reasonable times to audit Landlord's books and records relating to this Lease
for the Base Year and any year or years for which Tenant shall be obligated to
pay Tenant's Proportionate Share of any increase in Basic Costs as set forth in
Sections 2.4(a) and (b), or, at Landlord's sole discretion, Landlord will
provide an audit prepared by an independent certified public accountant. Any
such audit by Tenant must be conducted either by Tenant's own employees or by
an independent auditor as defined by generally accepted auditing standards.
Further, Tenant may exercise such audit rights for any calendar year only if
Tenant notifies Landlord of Tenant's intent to audit within ninety (90) days
after the date Tenant receives from Landlord the annual reconciliation
statement described in Section 2.4(b), and Tenant's audit rights shall in all
events expire as to any calendar year on December 31 of the calendar year
following such calendar year.
2.6 SECURITY DEPOSIT.
(a) Tenant shall pay to Landlord on the date this Lease is
executed by Tenant a security deposit equal to one (1) month of the Base Rental
due during the first twelve (12) months of the Term (without regard to any rent
concessions or holidays granted to Tenant by Landlord) and such other security
as Landlord may require. Upon the occurrence of any default by Tenant,
Landlord may, from time to time, without prejudice to any other remedy, use the
security deposit to the extent necessary to make good any arrears of rent, or
to pay any sums owed to Landlord under this Lease, or any damage, injury,
expense or liability caused to Landlord by such default. The security deposit
shall not be considered an advance payment of rent or a measure of Landlord's
damages in case of default by Tenant. Tenant shall not be entitled to receive
any interest on the security deposit, and Landlord may commingle the same with
other monies of Landlord. If Landlord shall from time to time apply the
security deposit to pay the sums described above, and if this Lease has not
been terminated, Tenant shall immediately deposit with Landlord an additional
security deposit equal to the amount so used. Tenant shall not assign or
encumber the security deposit in any manner, and Landlord shall not be bound by
any such assignment or encumbrance.
(b) If Tenant shall fully and faithfully comply with all
of the terms, provisions, covenants and conditions of this Lease, then the
security deposit shall be returned to Tenant (without regard to any assignment
or encumbrance of the same) within thirty (30) days after:
(i) the termination of this Lease (provided such
termination is not the result of a default by Tenant),
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(ii) delivery of possession of the Leased Premises
to Landlord in accordance with the provisions
of Section 4.4, and
(iii) payment of all sums due to Landlord
hereunder.
Upon sale or lease of the Building, Landlord shall transfer the security
deposit to the vendee or Tenant and Landlord shall be released by Tenant upon
said transfer from all liability for the return of such security deposit and
Tenant agrees to look solely to the new landlord for the return of the security
deposit. It is agreed that the provisions hereof shall apply to every transfer
or assignment made of the security deposit to a new landlord.
III.
SERVICES TO BE FURNISHED BY LANDLORD
Landlord covenants and agrees with Tenant:
3.1 SERVICES. Landlord shall use reasonable efforts to
furnish (as part of the Basic Costs of the Project) Tenant while occupying the
Leased Premises:
(a) Hot and cold water at those points of supply provided
for general use of other tenants in the Building; central heat and air
conditioning as provided in Exhibit F attached hereto; routine maintenance and
electric lighting service for all public areas and special service areas of the
Building in the manner and to the extent deemed by Landlord to be standard.
(b) Janitor service on a five (5)-day week basis at no
extra charge; provided, however, if Tenant's floor covering or other
improvements is other than Building Standard (as defined in Exhibit E attached
hereto), Tenant shall pay as Additional Rental the additional cleaning cost
attributable thereto, plus fifteen percent (15%) to cover overhead. Tenant
shall pay said Additional Rental upon presentation of a statement therefor by
Landlord, and Tenant's failure to pay shall constitute default hereunder after
Tenant's failure to pay within ten (10) days.
(c) Sufficient electrical capacity distributed to a panel
box located at the core of each floor of the Leased Premises to operate (A)
typewriters, voice writers, calculating machines and other machines of similar
low electrical consumption (120/208 volts) to the extent that the total design
load of low electrical voltage within the Leased Premises does not to exceed
two (2) watts per square foot of usable area, and (B) lighting and equipment of
standard high voltage electrical consumption (277/480 volt) to the extent that
the total design load of high electrical voltage within the Leased Premises
does not exceed two (2) watts per square of usable area. If the installation
of said electrical equipment requires additional air conditioning capacity
above that provided by the
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Building Standard system, then the additional air conditioning installation and
operating costs, plus fifteen percent (15%) to cover overhead, will be the
obligation of Tenant.
(d) All Building Standard fluorescent bulb replacement in
all areas and all incandescent bulb replacement in public areas, toilet and
rest room areas and stairwells.
(e) Access control to the Building during weekends and
after normal working hours during the week so as to provide Tenant with seven
day and twenty-four hour access to the Leased Premises; PROVIDED, HOWEVER, THAT
LANDLORD SHALL NOT BE LIABLE TO TENANT, ITS AGENTS, CONTRACTORS, CUSTOMERS,
EMPLOYEES, INVITEES, LICENSEES, SERVANTS OR VISITORS FOR ANY DAMAGES, LOSSES,
CLAIMS, OR CAUSES OF ACTION, ARISING OUT OF OR IN CONNECTION WITH PERSONAL
INJURY OR PROPERTY DAMAGE CAUSED BY OR DUE TO THEFT, BURGLARY OR PERSONS
GAINING ACCESS TO THE BUILDING, THE PROJECT OR THE LEASED PREMISES, EVEN IF
CAUSED BY THE NEGLIGENCE OF LANDLORD.
Failure by Landlord to any extent to furnish any services to
Tenant, the Leased Premises or the Project, or any cessation thereof, shall not
render Landlord liable in any respect for damages to person, property or
otherwise, nor be construed as an eviction of Tenant, nor work an abatement of
rent (except as expressly provided in this paragraph), nor relieve Tenant from
fulfillment of any covenant or agreement hereof; provided, however, that should
Landlord cease to furnish any of the aforementioned services or such services
are interrupted for reasons other than (i) curtailment in services imposed by
any governmental authority, (ii) failure of the public utilities to furnish
necessary services, or (iii) Tenant's negligence, gross negligence or willful
misconduct (a "Service Interruption"), and if, as a result of such Service
Interruption, the Leased Premises (or any part thereof) is untenantable such
that Tenant must vacate that portion of the Leased Premises affected and such
Service Interruption continues for a period of three (3) or more consecutive
Business Days (as defined below) after Landlord's receipt of written notice
from Tenant of such Service Interruption, then all rent including, without
limitation, Base Rental shall abate as to those portions of the Leased Premises
rendered untenantable, which abatement shall commence on the fourth (4th)
consecutive Business Day after Landlord's receipt of written notice from Tenant
of such Service Interruption and shall continue until such space is again
tenantable. The foregoing rental abatement rights shall constitute Tenant's
sole and exclusive remedies involving or with respect to a Service
Interruption. Notwithstanding the foregoing, if a Service Interruption occurs
as a result of or in connection with a fire or other casualty or a taking or
condemnation for a public purpose (or a conveyance in lieu thereof), the
foregoing rental abatement rights shall not be available to Tenant, and
Tenant's and Landlord's rights and obligations with respect thereto shall be
governed by Section 5.1 of this Lease in the case of a taking or condemnation
(or a conveyance in lieu thereof) or by Section 5.6 of this Lease in the case
of a fire or other casualty. Should any of the equipment or machinery utilized
in supplying the services listed herein break down, or for any cause cease to
function properly, Landlord shall use due diligence to repair same promptly.
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3.2 KEYS AND LOCKS. Landlord shall, at Landlord's
expense, furnish Tenant two (2) keys each for no more than two (2) corridor
doors entering the Leased Premises. Additional keys will be furnished at a
charge by Landlord on an order signed by Tenant or Tenant's authorized
representative. All such keys shall remain the property of Landlord. No
additional locks shall be allowed on any door of the Leased Premises without
Landlord's permission, and Tenant shall not make, nor permit to be made, any
duplicate keys, except those furnished by Landlord. Upon termination of this
Lease, Tenant shall surrender to Landlord all keys of the Leased Premises, and
give to Landlord the explanation of the combination of all locks for safes,
safe cabinets and vault doors, if any, remaining in the Leased Premises.
3.3 GRAPHICS. Landlord shall provide and install, at
Tenant's cost, all letters or numerals at Tenant's primary entrance door to the
Leased Premises; all such letters and numerals shall be in the Building
Standard graphics, and no others shall be used or permitted on the Leased
Premises. Landlord also agrees to provide and install, at Tenant's expense, a
listing on the Building directory board. All costs and expenses shall be
reasonable and agreed upon by the parties.
3.4 IMPROVEMENTS TO BE MADE BY LANDLORD. All
installations now or hereafter placed on the Leased Premises in excess of
Building Standard items shall be for Tenant's account and at Tenant's cost (and
Tenant shall pay ad valorem taxes and increased insurance thereon), which cost
shall be payable by Tenant to Landlord as Additional Rental hereunder promptly
upon being invoiced therefor provided all costs were preapproved by Tenant and
all installations properly made in accordance with all laws, and failure by
Tenant to pay same in full within thirty (30) days shall constitute an Event of
Default by Tenant hereunder and a breach of this Lease by Tenant giving rise to
all remedies available to Landlord under this Lease and at law for nonpayment
of rent.
3.5 PEACEFUL ENJOYMENT. That Tenant shall, and may
peacefully have, hold and enjoy the Leased Premises, subject to the other terms
hereof, provided that Tenant pays the rental and other sums herein recited to
be paid by Tenant and performs all of Tenant's covenants and agreements herein
contained. It is understood and agreed that this covenant and any and all
other covenants of Landlord contained in the Lease shall be binding upon
Landlord and its successors only with respect to breaches occurring during its
and their respective ownerships of the Landlord's interest hereunder.
3.6 LIMITATION OF LANDLORD'S PERSONAL LIABILITY. It is
understood and agreed by Landlord and Tenant that any and all covenants of
Landlord contained in this Lease shall be binding upon Landlord and its
successors only with respect to breaches occurring during the period of
Landlord's and its successor's respective ownership of the Landlord's interest
hereunder. Tenant specifically agrees to look solely to Landlord's interest in
the Building for the recovery of any judgment from Landlord, it being agreed by
Landlord and Tenant that Landlord's (or its successor's) partners,
shareholders, officers, directors and employees shall never be personally
liable for any such judgment. The provision contained in the foregoing sentence
is not intended to, and shall not, limit any right that Tenant might otherwise
have to obtain injunctive relief against
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Landlord or Landlord's successors in interest, or any other action not
involving the personal liability of Landlord. LANDLORD'S DUTIES AND WARRANTIES
ARE LIMITED TO THOSE EXPRESSLY STATED IN THIS LEASE AND SHALL NOT INCLUDE ANY
IMPLIED DUTIES OR IMPLIED WARRANTIES, NOW OR IN THE FUTURE. NO REPRESENTATIONS
OR WARRANTIES HAVE BEEN MADE BY LANDLORD OTHER THAN THOSE CONTAINED IN THIS
LEASE.
3.7 PARKING. Parking shall be provided as set forth in
Exhibit C attached hereto and made a part hereof.
IV.
Tenant covenants and agrees with Landlord:
4.1 PAYMENTS BY TENANT. Tenant shall pay all rent and
sums provided to be paid to Landlord hereunder at the times and in the manner
herein provided.
4.2 REPAIRS BY LANDLORD. Unless otherwise stipulated
herein, Landlord shall not be required to make any improvements to or repairs
of any kind or character on the Leased Premises during the Term, except such
repairs as may be deemed necessary by Landlord for normal maintenance
operations. The obligation of Landlord to maintain and repair the Common Areas
and the Leased Premises in good order and repair, including replacements, shall
be limited to Building Standard items, improvements, the exterior and
structural portions of the Building and those areas for which a tenant is not
responsible for the maintenance, repair or replacement of same. Non-Building
Standard items improvements will, at Tenant's written request, be maintained by
Landlord at Tenant's expense, at a cost or charge equal to the costs incurred
in such maintenance plus an additional charge of fifteen percent (15%) to cover
overhead.
4.3 REPAIRS BY TENANT. Tenant shall, at its own cost and
expense, to repair or replace any damage or injury done to the Project, or any
part thereof, caused by Tenant or Tenant's agents, employees, invitees, or
visitors and which are not covered by any casualty insurance maintained or
required to be maintained by Landlord hereunder; provided, however, if Tenant
fails to make such repairs or replacement promptly after receipt of written
notice to cure, Landlord may, at its option, make repairs or replacements, and
Tenant shall repay the cost thereof, plus fifteen percent (15%) to cover
overhead, to the Landlord on demand, subject to Section 5.15.
4.4 CARE OF THE LEASED PREMISES. Tenant shall not commit,
or allow to be committed, any waste or damage on any portion of the Leased
Premises, and at the termination of this Lease, by lapse of time or otherwise,
to deliver up said Leased Premises to Landlord in as good condition as at date
of possession by Tenant, ordinary wear and tear excepted, and upon such
termination of this Lease, Landlord shall have the right to re-enter and resume
possession of the Leased Premises.
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4.5 ASSIGNMENT OR SUBLEASE. In the event Tenant should
desire to assign this Lease or sublet the Leased Premises or any part thereof,
Tenant shall give Landlord written notice of such desire at least sixty (60)
days in advance of the date on which Tenant desires to make such assignment or
sublease. Landlord shall then have a period of thirty (30) days following
receipt of such notice within which to notify Tenant in writing that Landlord
elects either (1) to terminate this Lease as to the space so affected as of the
date so specified by Tenant in which event Tenant will be relieved of all
further obligations under this Lease as to such space which occur after the
date of such termination, or (2) to permit Tenant to assign this Lease or
sublet such space, subject, however, to (i) written approval of the proposed
assignee or subtenant by Landlord and (ii) the requirement that Tenant enter
into written agreements with Landlord, and with assignee or subtenant, that any
profit realized by Tenant as a result of such assignment or sublease with
respect to the use and occupancy of the Leased Premises (meaning, in the case
of an assignment, the consideration agreed upon between Tenant and assignee or,
in the case of a sublease, the difference between the rental rate agreed upon
between Tenant and subtenant and the rent then required to be paid under this
Lease multiplied by the number of months in the term of the sublease) shall, to
the extent such profit is immediate, be due and payable by Tenant to Landlord
upon the execution of an assignment or sublease, and, to the extent such profit
is deferred, be payable to Landlord by assignee or subtenant as it accrues, or
(3) to refuse to consent to Tenant's assignment of this Lease or sublease of
such space and to continue this Lease in full force and effect as to the entire
Leased Premises. If Landlord should fail to notify Tenant in writing of such
election within the stated thirty (30) day period, Landlord shall be deemed to
have elected option (3) above. No consent by Landlord to any assignment or
sublease shall be deemed to be consent to a use not permitted under this Lease,
to any act in violation of this Lease, or to any other or subsequent assignment
or sublease, and no assignment or sublease by Tenant shall relieve Tenant of
any obligation under this Lease. Any sublease or assignment shall be subject
to all the terms and conditions of this Lease. Any attempted assignment or
sublease by Tenant in violation of the terms and covenants of this paragraph
shall be void.
Notwithstanding anything to the contrary contained in this
Section 4.5, the consent of Landlord need not be obtained for (i) any
assignment or subletting to an Affiliate (defined below) of Tenant, (ii) any
assignment of this Lease made in connection with the merger or consolidation of
Tenant with or into any other corporation or entity, and (iii) an assignment of
this Lease made in connection with a sale or transfer of a majority of the
assets and liabilities of Tenant, so long as, with respect to clauses (i), (ii)
and (iii), (1) the assignee or sublessee shall be engaged in the same field of
services as Tenant, (2) the assignee or sublessee is engaged in a business
customarily acceptable for a tenant in a first class high-rise office building
in Town Center, (3) any assignee shall assume all of the obligations of Tenant
under this Lease, (4) at the time of such assignment or subletting, this Lease
is in full force and effect and there is no breach under this Lease on the part
of Tenant, (5) the assignee's or sublessee's proposed use of the Leased
Premises is not in violation of this Lease, and (6) any assignee's
shareholders' equity or net worth, as applicable, is equal to or greater than
Tenant's shareholders' equity or net worth, as applicable, as of the
Commencement Date (determined in accordance with generally accepted accounting
principles) (such assignee or sublessee in clause
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(i), (ii) and (iii) complying with clauses (1), (2), (3), (4), (5) and (6),
hereinafter a "Permitted Affiliate"). At least ten (10) days prior to the
effective date of any such assignment or sublease to a Permitted Affiliate,
Tenant agrees to furnish Landlord with notice of such assignment or sublease
and copies of the instruments effecting any such assignment or sublease.
Additionally, within thirty (30) days after the effective date of any such
assignment or sublease to a Permitted Affiliate, Tenant agrees to furnish
Landlord with copies of the fully executed instruments effecting any such
assignment or sublease and documentation establishing Tenant's satisfaction of
the requirements set forth above applicable to any such sublease or assignment.
Any such assignee of Tenant must assume and agree in writing to fully perform
and observe all of the obligations and agreements of Tenant under this Lease
and any such sublessee shall sublease such portion of the Leased Premises
subject to the provisions of this Lease. No such assignment or subletting
shall relieve Tenant, any other tenant, or any guarantor of this Lease of any
covenants or obligations under this Lease or any such guaranty and Tenant, any
other tenant, and any guarantors of this Lease shall remain fully liable
hereunder and thereunder. Notwithstanding anything to the contrary set forth
in this Lease, the rights granted to Tenant under this paragraph of subsection
(a) as to assignments and subleases to Permitted Affiliates shall not be
assignable by Tenant, shall inure only to the benefit of Tenant and shall not
be enforceable by any assignee or sublessee of Tenant.
As used herein, "Affiliate" shall mean any person or entity
controlling, controlled by, or under common control with, another person or
entity. "Control" as used herein means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such controlled person or entity (the ownership, directly or indirectly, of at
least fifty-one percent (51%) of the voting securities of, or possession of the
right to vote, in the ordinary direction of its affairs, at least fifty-one
percent (51%) of the voting interest in, any person or entity shall be presumed
to constitute such control).
4.6 ALTERATIONS, ADDITIONS, IMPROVEMENTS. Tenant shall
not permit the Leased Premises to be used for any purpose other than that
stated in the use clause hereof, or make or allow to be made any alterations or
physical additions in or to the Leased Premises, or place signs on the Leased
Premises which are visible from outside the Leased Premises, without first
obtaining the written consent of Landlord, which consent (or denial thereof)
shall not be unreasonably withheld, conditioned or delayed if same do not
affect the Building structure or mechanical, electrical or plumbing systems and
are not visible outside the Premises. Any and all such alterations, physical
additions, or improvements, when made to the Leased Premises by Tenant, shall
at once become the property of Landlord and shall be surrendered to Landlord
upon termination of this Lease by lapse of time or otherwise; provided,
however, this clause shall not apply to movable equipment or furniture owned by
Tenant. Tenant agrees specifically that no food, soft drink or other vending
machine will be installed within the Leased Premises. Tenant shall not be
deemed to be the agent or representative of Landlord in making any such
alterations, physical additions or improvements to the Leased Premises, and
shall have no right, power or authority to encumber any interest in the
Building in connection therewith. However, should any mechanics' or other
liens be filed against any portion of the Building or any interest therein by
reason of Tenant's acts or omissions or because of a claim
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against Tenant or its contractors, Tenant shall cause the same to be cancelled
or discharged of record by bond or otherwise within fifteen (15) days after
notice by Landlord. If Tenant shall fail to cancel or discharge said lien or
liens, within said fifteen (15) day period, which failure shall be deemed to be
a default hereunder, Landlord may, at its sole option and in addition to any
other remedy of Landlord hereunder, cancel or discharge the same and upon
Landlord's demand, Tenant shall promptly reimburse Landlord for all reasonable
costs incurred in cancelling or discharging such lien or liens. Landlord shall
have the right at all times to post and keep posted on the Leased Premises any
notices permitted or required by law, or that Landlord shall deem proper for
the protection of Landlord, the Leased Premises, the Building, the Project and
any other party having an interest therein, from mechanics, materialman's and
other liens.
4.7 LEGAL USE AND VIOLATIONS OF INSURANCE COVERAGE.
(a) Tenant shall not occupy, use or permit any portion of
the Leased Premises to be occupied or used for any business or purpose that is
disreputable, illegal or creates a fire hazard, or permit anything to be done
within the Leased Premises that would increase the rate of insurance coverage
on the Building and/or its contents. If Tenant commits any act or permits any
use that increases the cost of any insurance policy required to be carried
hereunder, or that increases the cost to occupy or prepare the Leased Premises
for occupancy, then Tenant shall reimburse Landlord, upon demand, for any such
additional premiums or cost as certified by the insurance carrier as being
solely attributable to Tenant's use of the Leased Premises for other than
general office use. In connection with such demand for payment of such
increase, Landlord shall deliver to Tenant a written statement setting forth
the amount of any such cost increase and showing in reasonable detail the
manner in which the increase has been allocated to Tenant's acts within or use
of the Leased Premises.
(b) Prior to the Commencement Date and during the Term of
the Lease, except to the extent Landlord did not deliver the Leased Premises in
compliance with laws as of the Commencement Date, Tenant, at Tenant's sole cost
and expense, shall promptly comply with all present and future laws,
ordinances, orders, rules, regulations and requirements of all federal, state,
municipal and local governmental bodies exercising jurisdiction thereover, and
all orders, rules and regulations of any governmental body that may be
applicable to the Leased Premises (and all facilities used in connection
therewith, to the extent that such are reserved for the exclusive use of the
Tenant), whatever the nature of such regulations, including without limitation
environmental rules and regulations, and other governmental or Landlord-imposed
standards governing Tenant's use of, activity within or occupancy of the Leased
Premises for the purpose of insuring compliance with such applicable laws
except to the extent Landlord did not deliver the Leased Premises in compliance
with laws as of the Commencement Date Tenant shall further observe and comply
with the requirements of all policies of public liability, fire and all other
policies of insurance at any time in force with respect to the Building or any
part thereof. Tenant covenants not to use in, on or about the Leased Premises,
for original construction, or for maintenance, repairs, alterations,
improvements, additions or changes any material or substance prohibited for
such use or in any other similar application prohibited by any governmental
rule, regulation, ordinance, statute or order including, without limitation,
asbestos-
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containing materials. Tenant shall at all times defend, protect, indemnify,
save and keep harmless the Landlord, its partners, shareholders, directors,
officers, agents and employees from and against all claims, loss, cost, damage
or expense arising out of or from Tenant's breach of this provision. Tenant
further covenants and agrees that it will not use, keep or suffer to be kept,
or generate or store any hazardous substances, pollutants or contaminants
(collectively "Hazardous Substances") in, upon or about the Leased Premises or
the Building in violation of any applicable law or other than as customary for
an office building tenant. Tenant shall promptly remove and clean up any
Hazardous Substance brought on, to or about the Leased Premises or the
Building, by Tenant, its agents, employees, contractors, invitees or licensees
in violation of this provision. Tenant shall indemnify Landlord, its partners,
shareholders, directors, officers, agents and employees for all reasonable
costs and expenses incurred by Landlord to correct any violation of this
covenant, or to remove, neutralize or render harmless any Hazardous Substance,
or to comply with the requirements of any regulatory body having jurisdiction
over Hazardous Substances, or to contest the actions of any such regulatory
body with respect to the Leased Premises or the Building. Tenant's agreement
to indemnify Landlord, its partners, shareholders, directors, officers, agents
and employees shall survive the expiration of this Lease.
4.8 LAWS AND REGULATIONS; RULES OF BUILDING. Subject to
the provisions of Section 4.7(b), Tenant shall comply with all laws,
ordinances, rules and regulations (state, federal, municipal and other agencies
or bodies having any jurisdiction thereof) relating to the use, condition or
occupancy of the Leased Premises. Tenant will comply with the rules of the
Building adopted and altered by Landlord from time to time for the safety, care
and cleanliness of the Leased Premises and Building and for preservation of
good order therein (the "Rules and Regulations"), all of which will be sent by
Landlord to Tenant in writing and shall be thereafter carried out and observed
by Tenant. A copy of the current Rules and Regulations are attached hereto and
made a part hereof as Exhibit D for information purposes only and Landlord
specifically reserves the right in its sole discretion to modify such Rules and
Regulations from time to time as Landlord shall deem necessary and appropriate.
4.9 ENTRY FOR REPAIRS AND INSPECTION. Tenant shall permit
Landlord or its agents or representatives to enter into and upon any part of
the Leased Premises at all reasonable hours to inspect the same, clean or make
repairs, alterations or additions thereto, as Landlord may deem necessary or
desirable, or to show the same to current or prospective purchasers,
mortgagees, investors and/or tenants, provided Landlord does not interfere with
Tenant's use and occupancy of the Leased Premises to any greater extent than is
reasonably necessary, and Tenant shall not be entitled to any abatement or
reduction of rent by reason thereof.
4.10 NUISANCE AND ODORS. Tenant shall conduct its business
and control its agents, employees, invitees, and visitors in such manner as not
to create any nuisance, or interfere with, annoy or disturb any other tenant or
Landlord in its operation of the Building. Tenant shall not, during occupancy
of, remodeling or construction within the Leased Premises, cause or permit any
strong, unusual, offensive or objectionable odors, gases or vapors to be
produced within the Leased
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Premises whether such odors, gases or vapors are contained within the Leased
Premises or migrate from or are permitted by Tenant to be emitted outside of
the Leased Premises. Landlord, at its sole discretion, shall determine if any
such odors, gases or vapors are in violation of this provision.
4.11 SUBORDINATION TO MORTGAGE.
(a) This Lease is subject and subordinate to each mortgage
(an "Underlying Mortgage") and each underlying financing or ground lease (an
"Underlying Lease") which may now or subsequently affect Landlord's interest in
the Project. Tenant agrees, however, that the holder of the Underlying
Mortgage (the "Mortgagee") or the landlord under the Underlying Lease (the
"Prime Landlord") as applicable, may at its option, unilaterally elect to
subordinate, in whole or in part, by an instrument in form and substance
satisfactorily to such party, such Underlying Mortgage or Underlying Lease, as
applicable, to this Lease. Tenant agrees to execute promptly and to deliver to
Landlord or such party an instrument or instruments confirming the foregoing if
requested by Landlord or such party and agrees that if Tenant fails or refuses
to do so within fifteen (15) days after receipt of written request thereof by
Landlord or such party, such failure or refusal shall constitute a default by
Tenant under this Lease, but such failure or refusal shall in no way affect the
validity or enforceability of this Section 4.11. Landlord shall request for
Tenant a non-disturbance agreement from each Mortgagee and/or Prime Landlord in
form and substance reasonably acceptable to the parties, but shall have no
obligation if a Mortgagee or Prime Landlord refuses delivery of same.
(b) In the event of the enforcement by the Mortgagee of
the remedies provided for by law or by such Underlying Mortgage, or in the
event of the termination of an Underlying Lease, Tenant shall, upon request of
any person succeeding to the interest of the Mortgagee or upon the request of
the Prime Landlord, automatically become the tenant of such successor in
interest or the Prime Landlord as the case may be, without change in the terms
or provisions of this Lease provided, that neither such successor in interest
nor such Prime Landlord, as applicable, shall be (i) bound by any payment of
the Rent for more than one month in advance except prepayments in the nature of
security for the performance by Tenant of its obligations under this Lease;
(ii) bound by any amendment or modification of this Lease made without the
consent of the Mortgagee or Prime Landlord, as applicable; (iii) liable for any
act, warranty or omission of the prior Landlord under this Lease; (iv) subject
to the offsets, deductions or defenses which Tenant might have arising out of
acts or omissions of Landlord; (v) liable for the breach of any warranties or
obligations relating to construction of improvements for the Project or
leasehold improvements in the Leased Premises performed or to have been
performed by Landlord, or (vi) liable for the return of any security deposit
not delivered to such successor in interest or Prime Landlord, as the case may
be. At the request of Landlord, a Mortgagee, such successor in interest and/or
Prime Landlord, Tenant shall execute and deliver to such Mortgagee, successor
in interest and/or Prime Landlord a written instrument whereby Tenant confirms
the foregoing attornment. If Tenant shall fail or refuse to so execute and
deliver such instrument within fifteen (15) days after written request is made,
then Tenant shall be in default under this Lease, but such failure or refusal
shall in no way affect the validity or enforceability of this Section 4.11.
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Tenant agrees to give prompt written notice to each Mortgagee
and Prime Landlord who has given Tenant written notice of its address of any
default by Landlord under this Lease which would entitle Tenant to terminate or
cancel this Lease or abate the rent payable hereunder, and agrees that,
notwithstanding any provision of this Lease, no rental abatement or notice of
cancellation or termination on behalf of Tenant shall be effective unless all
such Mortgagees and Prime Landlords have received said notice and have failed
for thirty (30) days of receipt thereof to cure Landlord's default, or if the
default cannot be cured within thirty (30) days, have failed to commence and to
diligently pursue the cure of Landlord's default which gave rise to such right
of cancellation or abatement.
4.12 ESTOPPEL CERTIFICATE OR THREE PARTY AGREEMENT. Within
ten (10) business days after receipt of written request therefor by Landlord or
Tenant, the other party shall:
(a) execute estoppel certificates addressed to or enter
into a three-party agreement with (i) any mortgagee or prospective mortgagee or
ground lessor of Landlord, (ii) any purchaser or prospective purchaser of all
or any portion of, or interest in, the Project, or (iii) any investor in the
Project, or (iv) to any prospective purchaser of Tenant's business and/or an
assignee of the Lease or subtenant of the Lease Premises certifying to the best
of the certifying party's knowledge (i) that this Lease is unmodified and in
full force and effect (or if there have been modifications, identifying such
modifications and certifying that the Lease, as modified, is in full force and
effect); (ii) the dates to which the Base Rental and any and all Additional
Rental has been paid; (iii) that the Landlord or Tenant, as the case may be, is
not in default under any provision of this Lease (or if Landlord or Tenant, as
the case may be, is in default, specifying each such default); (iv) the address
to which notices to Landlord or Tenant shall be sent; and (v) other matters as
such mortgagee(s), purchaser(s) or investor may reasonably require; and
agreeing to such notice provisions and other matters as such third party may
reasonably require; and
(b) deliver to Landlord such information regarding the net
worth and financial condition of Tenant as Landlord may reasonably request in
connection with such mortgage, sale or investments to the extent available to
Tenant without incurring any material additional cost or expense to prepare
such information.
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V.
Landlord and Tenant mutually covenant and agree as follows:
5.1 CONDEMNATION AND LOSS OR DAMAGE. If the Leased
Premises shall be taken or condemned for any public purpose to such an extent
as to render a material portion of the Leased Premises untenantable, this
Lease shall, at the option of either party, forthwith cease and terminate.
Otherwise, this Lease shall not terminate on account of condemnation. All
proceeds from any taking or condemnation of the Leased Premises shall belong to
and be paid to Landlord except that Tenant shall be entitled to any element of
damage attributable to Tenant's business or injury thereto, Tenant Extra
Improvements (and other improvements made by or at the expense of Tenant)
and/or the relocation of Tenant provided that Landlord's award is not affected.
5.2 DAMAGES FROM CERTAIN CAUSES. Landlord shall not be
liable or responsible to Tenant for any loss or damage to any property or
person occasioned by theft, fire, act of God, public enemy, injunction, riot,
strike, insurrection, war, court order, requisition or order of governmental
body or authority, or for any damage or inconvenience which may arise through
repair or alteration of any part of the Building or failure to make any such
repairs unless due to the gross negligence or willful misconduct of Landlord,
its agents and/or employees.
5.3 LIEN FOR RENT. In consideration of the mutual
benefits arising under this Lease, Tenant hereby grants to Landlord a lien and
security interest on all tangible property of Tenant now or hereafter placed in
or upon the Leased Premises, and such property shall be and remain subject to
such lien and security interest of Landlord for payment of all rent and other
sums agreed to be paid by Tenant herein. The provisions of this paragraph
relating to said lien and security interest shall constitute a security
agreement under the Uniform Commercial Code as enacted in the State of Texas so
that Landlord shall have and may enforce a security interest on all tangible
property of Tenant now or hereafter placed in or on the Leased Premises,
including but not limited to all fixtures, machinery, equipment, furnishings
and other articles of personal property now or hereafter placed in or upon the
Leased Premises by Tenant. Tenant agrees to execute as debtor such financing
statement or statements as Landlord may now or hereafter reasonably request in
order that such security interest or interests may be protected pursuant to
said Code. Landlord may at its sole cost and expense and upon its election at
any time file a copy of this Lease as a financing statement. Landlord, as
secured party, shall be entitled to all of the rights and remedies afforded a
secured party under said Code in addition to and cumulative of the landlord's
liens and rights provided by law or by the other terms and provisions of this
Lease.
5.4 LANDLORD'S RIGHT TO RELET. In the event of default by
Tenant in any of the terms or covenants of this Lease or in the event the
Leased Premises are abandoned by Tenant, Landlord shall have the right, but not
the obligation, to relet same for the remainder of the Term, and if the rent
received through reletting does not at least equal the rent provided for
herein, Tenant shall pay and satisfy the deficiency between the amount of the
rent so provided for and that received through reletting, including, but not
limited to, the reasonable cost of renovating, altering and decorating for a
new occupant.
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Nothing herein shall be construed as in any way denying Landlord the right, in
the event of abandonment of said premises or other breach of this Lease by
Tenant, to treat the same as an entire breach and at Landlord's option to
terminate this Lease and/or immediately seek recovery for the entire breach of
this Lease and any and all damages which Landlord suffers thereby.
5.5 HOLDING OVER. In the event of holding over by Tenant
after expiration or termination of this Lease without the written consent of
Landlord, Tenant shall pay as rental during the holdover period double the
greater of (A) the Base Rental and Additional Rental payable immediately prior
to the expiration or termination, or (B) then prevailing market rental rate for
the Leased Premises. No holding over by Tenant after the Term shall be
construed to extend the Lease. In the event of any unauthorized holding over,
Tenant shall indemnify Landlord against all claims for damages by any tenant to
whom Landlord may have leased all or any part of the Leased Premises effective
upon the termination of this Lease and for any other reasonable loss, cost,
damage or expense (including reasonable attorneys' fees and costs of suit)
incurred by Landlord as a result of such holding over. Any holding over with
the consent of Landlord in writing shall thereafter constitute a lease from
month to month.
5.6 CASUALTY. In the event of a fire or other casualty in
the Leased Premises, Tenant shall immediately give notice thereof to Landlord.
If the Leased Premises shall be partially destroyed by fire or other casualty
so as to render the Leased Premises untenantable in whole or in part, the
rental provided for herein shall abate thereafter as to the portion of the
Leased Premises rendered untenantable until such time as the Leased Premises
are made tenantable and Landlord agrees to commence and prosecute such repair
work promptly and with all due diligence. Notwithstanding the foregoing, in
the event such destruction results in the Leased Premises being untenantable in
whole or in substantial part for a period reasonably estimated by a responsible
contractor selected by Landlord to be one year or longer after the casualty, or
in the event of total or substantial damage or destruction of the Building from
any cause (which shall mean any damage of greater than fifty (50%) of the
insurable value of the Building and/or any damage which requires more than one
year to repair), then Landlord shall have the right to terminate this Lease and
all rent owed up to the time of such destruction or termination shall be paid
by Tenant (it being understood that Tenant shall pay rent on all tenantable
space until termination of this Lease). Landlord shall give Tenant written
notice of its decisions, estimates or elections under this Section 5.6 within
sixty (60) days after any such damage or destruction. In the event of
destruction to the Leased Premises resulting in the same being untenantable in
whole or in substantial part for a period reasonably estimated by a responsible
contractor selected by Landlord to be one year or longer after the date of the
casualty and Landlord has not terminated this Lease as herein provided, then
Tenant shall have the right, within thirty (30) days after Landlord delivers
the estimate to Tenant of time to restore, to terminate this Lease by written
notice to Landlord. Notwithstanding anything contained in this Section 5.6,
Landlord shall be obligated to restore or rebuild only the portion of the
Leased Premises which consists of building standard improvements, and nothing
herein shall be construed to obligate Landlord under any circumstances to
repair or restore any other tenant finish work.
5.7 ATTORNEYS' FEES. In the event Tenant makes default in
the performance of any of the terms, covenants, agreements or conditions
contained in this Lease and Landlord places the
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enforcement of this Lease, or any part thereof, or the collection of any rent
due, or to become due hereunder or recovery of the possession of the Leased
Premises in the hands of an attorney, or files suit upon same, Tenant agrees to
pay Landlord reasonable attorneys' fees to Landlord plus court costs in the
event Landlord prevails in such matter. Moreover, Landlord agrees to pay
Tenant reasonable attorneys' fees and court costs in the event Tenant prevails
in any action against Landlord.
5.8 ALTERATION. This Lease may not be altered, changed or
amended, except by an instrument in writing signed by both parties hereto.
5.9 ASSIGNMENT BY LANDLORD. Landlord or any
successor-in-interest to Landlord shall have the right to transfer and assign,
in whole or in part, all its rights and obligations hereunder and in the
Project and property referred to herein, and in such event and upon the
transferee Landlord's assumption of transferor Landlord's obligations
thereafter accruing hereunder (any such transferee to have the benefit of, and
be subject to, the provisions of Section 3.6) no further liability or
obligation shall thereafter accrue against Landlord hereunder. Upon request by
transferor Landlord, Tenant agrees to execute a certificate certifying such
facts (if true) as transferor Landlord may reasonably require in connection
with any such assignment by transferor Landlord.
5.10 DEFAULT BY TENANT. If (i) default shall be made in
the payment of any sum to be paid by Tenant under this Lease, and default shall
continue for ten (10) days after delivery (or attempted but refused delivery)
of notice from Landlord (provided that Landlord shall only be obligated to give
Tenant notice of any monetary default twice in any twelve (12) month period,
and thereafter Tenant shall be deemed in default within ten (10) days after
failure to make such payment without requirement of notice from Landlord), or
(ii) default shall be made in the performance of any of the other covenants or
conditions that Tenant is required to observe and to perform, and such default
shall continue for twenty (20) days, or (iii) if the interest of Tenant under
this Lease shall be levied on under execution or other legal process, or (iv)
if any petition shall be filed by or against Tenant to declare Tenant a
bankrupt or to delay, reduce or modify Tenant's debts or obligations, or (v) if
any petition shall be filed or other action taken to reorganize or modify
Tenant's capital structure if Tenant be a corporation or other entity, or (vi)
if Tenant be declared insolvent according to law, or (vii) if any assignment of
Tenant's property shall be made for the benefit of creditors, or (viii) if a
receiver or trustee is appointed for Tenant or its property, or (ix) if Tenant
shall abandon the Leased Premises during the Term or any renewals or extensions
thereof (any of (i) through (ix) is herein called an "Event of Default"), then
Landlord may treat the occurrence of any one or more of the Events of Default
as a breach of this Lease (provided that no such levy, execution, legal
process, declaration, appointment or petition filed against Tenant shall
constitute a breach of this Lease if Tenant shall contest the same by
appropriate proceedings and shall remove or vacate the same within ninety (90)
days from the date of its creation, service or filing) and thereupon, at
Landlord's option, may have any one or more of the following described remedies
in addition to all other rights and remedies provided at law or in equity:
(a) Landlord may terminate this Lease and forthwith
repossess the Leased Premises and be entitled to recover forthwith as damages a
sum of money equal to the total of (i) the cost of
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recovering the Leased Premises, (ii) the unpaid rent earned at the time of
termination, plus interest thereon at the Maximum Rate thereon from the due
date, (iii) the balance of the rent for the remainder of the Term less the fair
market value of the Leased Premises for said period, as determined by Landlord
and (iv) any other sum of money and damages owed by Tenant to Landlord.
(b) Landlord may terminate Tenant's right of possession
(but not this Lease) and may repossess the Leased Premises by forcible entry or
detainer suit or otherwise, without demand or notice of any kind to Tenant and
without terminating this Lease, in which event Landlord may, but shall be under
no obligation to do so, relet the same for the account of Tenant for such rent
and upon such terms as shall be reasonably satisfactory to Landlord. For the
purpose of such reletting, Landlord is authorized to make any repairs, changes,
alterations or additions in or to the Leased Premises that may be necessary,
and (a) if Landlord shall fail or refuse to relet the Leased Premises, or (b)
if the same are relet and a sufficient sum shall not be realized from such
reletting after paying (i) the unpaid rent due hereunder earned but unpaid at
the time of reletting plus interest thereon at the Maximum Rate thereon, (ii)
the reasonable cost of recovering possession, (iii) all of the reasonable costs
and expenses of repairs, changes, alterations and additions and (iv) the
reasonable expense of such reletting and of the collection of the rent accruing
therefrom to satisfy the rent provided for in this Lease to be paid, then
Tenant shall pay to Landlord as damages a sum equal to the amount of the rental
reserved in this Lease for such period or periods, or if the Leased Premises
have been relet, the Tenant shall satisfy and pay any such deficiency upon
demand therefor from time to time and Tenant agrees that Landlord may file suit
to recover any sums falling due under the terms of this Section 5.10(b) from
time to time, and that no delivery to or recovery of any portion due Landlord
hereunder shall be any defense in any action to recover any amount not
theretofore reduced to judgment in favor of Landlord, nor shall such reletting
be construed as an election on the part of Landlord to terminate this Lease
unless a written notice of such intention be given to Tenant by Landlord.
Notwithstanding any such reletting without termination, Landlord may at any
time thereafter elect to terminate this Lease for such previous breach.
(c) Upon any such default by Tenant in the payment of rent
as required by this Lease, Landlord or Landlord's agent may change the door
lock of the Leased Premises. In such event, Landlord or its agent shall place
a written notice on Tenant's front door stating the name and the address or
telephone number of the individual or company from which the new key may be
obtained. The new key may be obtained (i) only during Tenant's regular
business hours and (ii) only upon payment in full of the delinquent rent.
Landlord may lock out Tenant in the event of any such default without being
deemed in any manner guilty of conversion, trespass, eviction, or forcible
entry or detainer, without incurring any liability for any damage, claim, or
cause of action resulting therefrom and without relinquishing any other right
or rights given to Landlord hereunder or by operation of law or in equity. If
Landlord shall violate the provisions of this subparagraph, Tenant's sole
remedy shall be to recover possession of the Leased Premises and Tenant
expressly waives any and all rights and remedies under Section 93.002(g) of the
Texas Property Code, as amended. As provided in Section 93.002(h) of the Texas
Property Code, the terms and provisions of this subparagraph of the Lease
supersede the terms and conditions of said Section 93.002 to the extent of any
conflict between the two provisions.
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(d) All past due rent and other amounts due hereunder
shall bear interest at the Maximum Rate.
5.11 NON-WAIVER. Failure of Landlord to declare any default
immediately upon occurrence thereof, or delay in taking any action in
connection therewith, shall not waive such default nor constitute a waiver of
any future default, but Landlord shall have the right to declare any such
default at any time and take such action as might be lawful or authorized
hereunder, either in law or in equity. Neither the acceptance by Landlord of
rent or any other payment hereunder, whether or not any default hereunder by
Tenant is then known to Landlord, nor any custom or practice followed in
connection with this Lease, shall constitute a waiver of any of Tenant's
obligations under this Lease.
5.12 CASUALTY INSURANCE.
(a) At all times during the Term, Landlord shall maintain,
or cause to be maintained, at Landlord's expense (which expense will be an
Operating Expense under Section 2.4(c) of this Lease), a policy or policies of
insurance with the premiums thereon fully paid in advance, issued by and
binding upon an insurance company of good financial standing authorized to do
business in Texas, insuring the Building and the Building Standard improvements
against loss or damage by fire or other insurable hazards and contingencies in
amounts selected by Landlord; provided, however, that Landlord shall not be
obligated to insure any furniture, equipment, machinery, goods or supplies not
covered by this Lease that Tenant may keep or maintain in the Leased Premises,
or any non-Building Standard improvements or alterations that Tenant may make
upon the Leased Premises. If the annual premiums charged Landlord for such
casualty insurance exceed the standard premium rates because the nature of
Tenant's operations result in extra-hazardous or higher than normal risk
exposure, then Tenant shall, upon receipt of appropriate premium invoices,
reimburse Landlord for such increases in premium. Any payments for losses
under Landlord's casualty insurance shall be made solely to Landlord and the
mortgagee.
(b) At all times during the Term, Tenant shall maintain
insurance coverage against loss or damage by fire and such other risks as are
from time to time included in a standard or special extended coverage
endorsement insuring the full insurable value of any non-Building Standard
improvements, any alterations, Tenant's trade fixtures, furnishings, equipment,
and all other items of personal property of Tenant. All policies required to
be carried by Tenant under this Section 5.12(b) shall be written with
financially responsible insurance companies authorized to do business in Texas
and with a Best & Company rating of "B+, IX" or better, and all evidence of
insurance provided to Landlord shall contain an endorsement naming Landlord as
an additional insured and at least thirty (30) days' prior written notice of
cancellation to Landlord. Tenant shall deliver to Landlord a certificate of
insurance outlining the insurance required herein at least fifteen (15) days
prior to the Commencement Date and fifteen (15) days prior to all renewals
thereof. Any self-insurance policies maintained by Tenant shall be subject to
Landlord's prior written approval. If Tenant fails to provide evidence of
insurance required hereunder, prior to commencement of the Term, and thereafter
during the Term, within fifteen (15) days prior to the expiration date of any
such coverage, Landlord shall be authorized (but not required) after written
notice of its intention to do so, and Tenant's failure to obtain such insurance
and provide reasonably evidence
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thereof to Landlord within one (1) business day after Tenant's receipt of such
notice, to procure such coverage in the amounts stated with all costs thereof
to be charged to Tenant and paid upon written invoice therefor as Additional
Rental.
5.13 LIABILITY INSURANCE. Landlord (with respect to the
Project) and Tenant (with respect to the Leased Premises and Project) shall
each maintain or cause to be maintained a policy or policies of commercial
general liability insurance (including contractual liability coverage) with the
premiums thereon fully paid in advance, issued by and binding upon an insurance
company of good financial standing, authorized to do business in Texas and
having a Best & Company rating of "B+, XIII" or better, such insurance to
afford a minimum protection of not less than One Million Dollars
($1,000,000.00) combined single limit bodily injury and property damage in any
one occurrence. Tenant's contractual liability insurance shall apply, without
limitation, to all of Tenant's indemnity obligations under this Lease.
Tenant's insurance required hereunder shall name Landlord as an additional
insured and shall contain endorsements and provisions stating that Tenant's
insurance is primary to any insurance otherwise carried by Landlord and that
Landlord will receive thirty (30) days' prior written notice of cancellation of
the policy. Tenant shall deliver to Landlord a certificate of insurance
outlining the insurance required herein at least fifteen (15) days prior to the
Commencement Date and fifteen (15) days prior to all renewals thereof. The
expense for Landlord's liability insurance will be an Operating Expense under
Section 2.4(c) of this Lease. Upon request of Tenant, Landlord shall provide
Tenant reasonable evidence that the insurance required to be maintained
hereunder by Landlord is in full force and effect.
5.14 HOLD HARMLESS. Landlord and any mortgagee of Landlord
shall not be liable to Tenant for any damage to person or property caused by
the intentional torts or negligence of Tenant, its agents or employees, and
Tenant agrees to indemnify and hold Landlord harmless from all liability and
claims for any such damage. Tenant shall not be liable to Landlord for any
damage to person or property caused by the intentional torts or negligence of
Landlord, its agents or employees, and Landlord agrees to indemnify and hold
Tenant harmless from all claims for such damage. In the event a claim or
damage is the result of the joint negligence or joint intentional torts of
Tenant, its agents or employees, on the one hand, and Landlord, its agents or
employees, on the other hand, the foregoing indemnities shall apply only to the
portion of the damage attributable to the negligence or intentional tort of the
applicable indemnifying party.
5.15 WAIVER OF SUBROGATION RIGHTS. Anything in this Lease
to the contrary notwithstanding, Landlord and Tenant each hereby waives any and
all rights of recovery, claim, action or cause of action, against the other,
its agents, officers, employees, partners, servants or shareholders for any
loss or damage that may occur to the Leased Premises, or any improvements
thereto or said Building of which the Leased Premises are a part, or any
improvements thereto, or any personal property of such party therein, by reason
of fire, the elements, or any other cause which is required to be insured
against under the terms of standard fire and extended coverage insurance
policies referred to in Section 5.12 hereof, regardless of cause or origin,
including negligence of the other party hereto, its agents, officers,
employees, partners, servants or shareholders and each party shall cause such
insurance policies to contain provisions or endorsements wherein each insurer
waives its rights of recovery against such parties.
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5.16 ENTIRE AGREEMENT, REPRESENTATIONS, ETC. This Lease
contains the entire agreement of the parties pertaining to the subject matter
hereof and supersedes all other prior and contemporaneous agreements and
understandings, both oral and written, of the parties in connection therewith.
No other written or oral promises or representations have been made and none
have been relied upon, and none shall be binding. This Lease supersedes and
replaces any previous Lease between the parties, including any renewals or
extensions thereunder. Landlord's agents do not and will not have authority to
(a) make exceptions, changes or amendments to this Lease or factual
representations not expressly contained in this Lease, (b) waive any right,
requirement, or provision of this Lease, or (c) release Tenant from all or part
of this Lease, unless such action is in writing. The parties executing this
Agreement expressly warrant and represent that, before executing this
Agreement, said parties have fully informed themselves of its terms, contents,
conditions, and effects, that in executing this Agreement the parties hereto
have had the benefit of advice of attorneys of their own choosing, and that no
promise or representation of any kind has been made to any parties hereto or
anyone acting for any parties hereto, except as is expressly stated in this
Agreement. The parties executing this Agreement have relied solely and
completely upon their own judgment and the advice of their own attorneys in
entering into this Agreement.
5.17 TIME IS OF THE ESSENCE. Time is of the essence and
all performance due dates, time schedules, and conditions precedent to
exercising a right shall be strictly adhered to without delay except where
otherwise expressly provided.
5.18 BROKERS. Tenant hereby warrants and represents that
it has not dealt with any other brokers or intermediaries entitled to any
compensation in connection with this Lease or Tenant's occupancy of space in
the Leased Premises except for Boyd, Page & Associates and for which Landlord
shall be responsible for any commission or fee due them. Each party hereby
agrees to hold the other party, its partners and representatives harmless from
any and all claims, liabilities, costs and expenses (including reasonable
attorneys' fees) arising from any claim for any commissions or other fees by
any other broker or agent acting or purporting to have acted on behalf of such
party.
5.19 NO WARRANTIES. TENANT HEREBY WAIVES ANY AND ALL
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PREMISES WHICH MAY
EXIST BY OPERATION OF LAW OR IN EQUITY, INCLUDING, WITHOUT LIMITATION, ANY
WARRANTY OF HABITABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
5.20 GOVERNING LAW. This Lease shall be construed under
the laws of the State of Texas.
5.21 SUCCESSORS. This Lease shall be binding upon and
inure to the benefit of Landlord, its successors and assigns, and shall be
binding upon and inure to the benefit of Tenant, its successors and, to the
extent assignment may be approved by Landlord or otherwise permitted hereunder,
its assigns.
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5.22 NOTICES. All notices, demands, consents and approvals
which may or are required to be given by either party to the other hereunder
shall be in writing and shall be deemed to have been fully given when
personally delivered or when deposited in the United States mail, certified or
registered, postage prepaid and addressed to the party to be notified at the
address for such party specified in this Lease, or to such other place as the
party to be notified may from time to time designate by at least fifteen (15)
days' notice to the notifying party.
5.23 SEVERABILITY. If any term or provision of this Lease,
or the application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby. Each provision of
this Lease shall be valid and shall be enforceable to the extent permitted by
law.
5.24 AUTHORITY. (a) Tenant represents to Landlord that
(a) Tenant is a corporation duly formed, validly existing and in good standing
under the laws of the State of Maryland, (b) that the person executing this
Lease on behalf of Tenant was authorized to do so, (c) all consents or
approvals required of third parties (including, but not limited to, its Board
of Directors or partners) for the execution, delivery and performance of this
Lease have been obtained and (d) upon request of Landlord, Tenant will deliver
to Landlord evidence of such person's authority to execute and deliver this
Lease on behalf of Tenant.
(b) Landlord represents to Tenant that (a) Landlord is a
partnership duly formed, validly existing and in good standing under the laws
of the State of Texas, (b) that the person executing this Lease on behalf of
Landlord was authorized to do so, and (c) all consents or approvals required of
third parties for the execution, delivery and performance of this Lease have
been obtained.
5.25 RELOCATION. Landlord shall have the one time option to
relocate the Tenant to alternative space in the Building, which alternative
space shall be of comparable size to or larger than the Leased Premises.
Landlord shall give Tenant not less than ninety (90) days prior written notice
of such relocation, which notice shall include the date on which the Tenant
shall be required to relocate or move and a description of the space to which
Tenant will be relocated. Landlord shall promptly pay all out-of-pocket costs
and expenses of relocating Tenant (and the cost of preparing such comparable
space for occupancy) including the construction of any Tenant leasehold
improvements to make such space comparable to the Leased Premises. However, if
Tenant is relocated prior to occupancy and fitting out the Leased Premises with
tenant improvements, Landlord shall only be required to pay the costs otherwise
agreed to be paid by Landlord under this Lease for construction of tenant
improvements plus costs and expenses incident to changes in the tenant
improvements as a result of such relocation in excess of those which would have
been borne by Tenant if there had been no relocation. In the event of such
relocation, such alternative space shall for all purposes be deemed the Leased
Premises hereunder and this Lease shall continue in full force and effect
without any change in the other terms or conditions hereof.
5.26 RENEWAL OPTION
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(a) So long as an Event of Default is not in existence and
subject to the provisions of this Section 5.26, Tenant is hereby granted a one
(1) time option to renew ("Renewal Option") the Initial Term as to all (but not
part) of the Leased Premises for a period of five (5) years (the "Renewal
Term"), such Renewal Term to commence at the expiration of the Initial Term.
Tenant must furnish Landlord with written notice of its to exercise the Renewal
Option twelve (12) months prior to the expiration of the Initial Term (the
"Renewal Intent Notice"). If Tenant timely delivers the Renewal Intent Notice
to Landlord, Landlord shall, no later than fifteen (15) days after Landlord's
receipt thereof, deliver to Tenant written notice (the "Rate Notice") of the
Market Base Rental Rate (defined below) and the Basic Parking Charge for the
Parking Permits (each as defined in Exhibit C) (if applicable pursuant to
Section 5.26 (b) (iii) below).
If Tenant objects to Landlord's determination of the Market
Base Rental Rate and the Basic Parking Charge, Landlord and Tenant shall work
diligently to attempt to resolve their differences as to the Market Base Rental
Rate within forty-five (45) days after Tenant's receipt of the Rate Notice (the
"Renewal Election Period"). If Landlord and Tenant agree in writing as to the
Market Base Rental Rate and the Basic Parking Charge prior to the expiration of
the Renewal Election Period, the Market Base Rental Rate so agreed to by
Landlord and Tenant shall be applicable if Tenant, in its sole discretion,
elects to exercise the Renewal Option prior to the expiration of the Renewal
Election Period. If Tenant timely furnishes the Renewal Intent Notice to
Landlord and Tenant, in its sole discretion, exercises the Renewal Option prior
to the expiration of the Renewal Election Period and prior to Landlord and
Tenant agreeing in writing as to the Market Base Rental Rate for the Renewal
Term, Tenant's exercise of the Renewal Option shall constitute Tenant's
irrevocable election to exercise the Renewal Option and irrevocable agreement
to Landlord's determination of the Market Base Rental Rate as contained in the
Rate Notice. Tenant must notify Landlord in writing (the "Election Notice")
prior to the expiration of the Renewal Election Period if Tenant elects to
exercise the Renewal Option. If Tenant timely delivers the Renewal Intent
Notice and the Election Notice to Landlord, but at any time prior to the
commencement of the Renewal Term an Event of Default occurs Landlord, at its
sole option during the continuance of such Event of Default, may terminate
Tenant's election to exercise the Renewal Option and the Renewal Option shall
expire and thereafter not be exercisable by Tenant. If Tenant fails to timely
exercise the Renewal Option by failing to timely deliver the Renewal Intent
Notice or the Election Notice as provided above, the Renewal Option shall
automatically terminate, and Tenant shall have waived forever its right to
renew and extend the Initial Term.
(b) The renewal of this Lease pursuant to the exercise of
the Renewal Option shall be upon the same terms and conditions of this Lease,
except:
(i) The Base Rental Rate for the Leased Premises
during the Renewal Term shall be the sum of (A) the Base Rental Rate for the
Leased Premises in effect for the year immediately preceding the commencement
of the Renewal Term, less the Tenant's Proportionate Share of the Base Year's
Basic Costs (on a per square foot of Net Rentable Area basis) determined in
accordance with the provisions of Section 2.4 (a); plus (B) the increase in the
Market Base Rental Rate over the rate in (A); plus, (C) the Expense Stop
(defined below) for the Renewal Period (as determined by clause (ii) below);
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provided, however, in the event the Market Base Rental Rate is less than or
equal to the rate in (A), the Base Rental Rate for the Leased Premises during
the Renewal Term shall be the sum of the amounts in (A) and (C). Additionally,
Tenant shall be obligated to pay as part of Base Rental a management fee of
three percent (3%) of Tenant's Base Rental and Additional Rental as provided in
Section 2.3. Tenant shall be obligated to pay the Additional Rental pursuant
to Section 2.4 and 2.5 of this Lease (taking into account the adjustments
pursuant to clause (ii) below).
(ii) For purposes of determining the Additional
Rental payable by Tenant after the expiration of the calendar year in which the
Renewal Term occurs, Section 2.4 (a) of this Lease shall be amended to
recognize that during the Renewal Term Tenant shall pay as Additional Rental
Tenant's Proportionate Share of all Basic Costs in excess of the Expense Stop
(defined below). As used in this clause (ii), "Expense Stop" shall mean
Landlord's good faith determination in accordance with generally accepted
accounting principles of the Basic Costs (on a per square foot of Net Rentable
basis) for the calendar year in which the Renewal Term commences.
(iii) Tenant shall lease the Parking Permits
determined in accordance with Exhibit C of this Lease at the commencement of
the Renewal Term, and Tenant shall pay Landlord, as the Basic Parking Charge, a
monthly amount equal to the rates then being charged by Landlord or the
operator of the Garage for parking in such location (taking into account
whether such parking spaces are for assigned or unassigned parking spaces) for
monthly contract parking in the Garage multiplied by the number of Parking
Permits leased by Tenant pursuant to this Lease, which Basic Parking Charge
shall be payable as provided in Exhibit C hereto.
(iv) Tenant shall have no option to renew this
Lease beyond the Renewal Term; and
(v) Subject to the terms of the Lease, the
leasehold improvements will be provided in their then-existing condition (on an
"as is" basis) at the time the Renewal Term commences and Tenant shall not be
entitled to any construction, buildout or other allowances with respect to the
Leased Premises during the Renewal Term.
(c) As used in this Lease, the term "Market Base Rental
Rate" shall mean the market annual net rental rate (exclusive of building or
project expense pass through additions, whether characterized as such or not,
and exclusive of any portion of "base rentals" attributable to building or
project expenses or to an "expense stop") per square foot of Net Rentable Area
of the applicable space and for the time period as to which such rate is being
determined, that a willing tenant would pay and a willing landlord would
accept, in arm's length bona fide negotiations (taking into consideration all
relevant factors including, without limitation, the following factors: rent
being charged in other first-class office buildings located within the
Greenspoint Town Center, for leases then being entered into for comparable
space to the Leased Premises in the comparable elevator bank for which the
Market Base Rental Rate is being determined; location, quality, amenities, age
and reputation of the buildings in which the space being compared is located;
use and size of the space under comparison; location and/or floor level of the
subject
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space and any comparison space within their respective buildings, including
view, elevator lobby exposure, etc.; definition of "net rentable area"
applicable to the spaces; distinction (if any) between "gross" and "net" rental
rates and rental rates and type, base year or dollar amount for escalation
purposes (both operating costs and real estate taxes) if the comparison is on a
"gross" lease basis; any other adjustments (including through use of an index)
to base rental; extent of services provided or to be provided; extent and
condition of leasehold improvements in the subject space and in any comparison
space; cost to tenant of relocating from the subject space to any alternative
space or savings from not moving to alternative space; abatements pertaining to
the subject space and to any comparison space (including with respect to base
rental, operating expenses and/or real estate taxes); inclusion of parking
charges in rental, if applicable; lease takeovers/assumptions by the landlord
of the comparison space, if applicable; moving allowances granted, if any;
relocation allowances granted, if any; club memberships granted, if any;
construction, refurbishment and repainting allowances granted, if any; any
other concessions or inducements; term or length of lease of subject space and
of any comparison space; overall creditworthiness of Tenant and tenants in
comparable space; the time the particular rental rate under consideration was
agreed upon and became or is to become effective; and payment of a leasing
commission, fees, bonuses or other compensation whether to Tenant's
representatives or to Landlord, or to any person or entity affiliated with
Tenant or Landlord, or otherwise). Landlord and Tenant agree that bona fide
written offers to lease comparable space located in the Building or the Project
from third parties may be used as a factor in determining the Market Base
Rental Rate.
(d) Tenant may not assign this Renewal Option and no
sublessee or assignee of Tenant may exercise this Renewal Option other than an
assignee which is a Permitted Affiliate (as defined in Section 4.5).
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IN WITNESS WHEREOF, the parties have executed this Lease as of
the date aforesaid.
LANDLORD: GREENSPOINT PLAZA LIMITED PARTNERSHIP
By: Houston Town Center LLC,
a Texas limited liability company, its general partner
By: Hines Acquisitions No. 1 Limited Partnership,
a Texas limited partnership, its manager
By: Hines Interests Limited Partnership,
a Delaware limited partnership, its general partner
By: Hines Holdings, Inc.,
a Texas close corporation, its general partner
By: /s/ E. Staman Ogilvie
---------------------------------------------------------
E. Staman Ogilvie, Executive Vice President
TENANT: ICARUS CORPORATION
By: /s/ Herbert G. Blecker 6 Feb 97
--------------------------------------------------------
Name: Herbert G. Blecker
--------------------------------------------------------
Title: President
--------------------------------------------------------
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EXHIBIT A
Floor Plan of Leased Premises
<PAGE> 36
EXHIBIT B
TENANT IMPROVEMENT WORK SCHEDULE
1. Preparation of Tenant Plans.
(a) Landlord shall provide and submit to Tenant for its
approval the Tenant Plans (hereinafter defined) necessary to price and
construct the Building Standard Improvements and any work in addition to
Building Standard Improvements ("Tenant Extra Improvements") desired by Tenant.
Building Standard Improvements and Tenant Extra Improvements are herein
referred to as "Tenant Improvements."
(b) "Tenant Plans" means complete sets (at least three
prints and one reproducible copy) of architectural, structural, mechanical,
electrical and plumbing working drawings for any and all Tenant Improvements
(which shall include such written instructions or specifications as may be
necessary to secure a building permit from the City of Houston and shall show
the full detailed scope of all Tenant Improvements). The Tenant Plans shall be
consistent with and shall conform to the Building plans and specifications and
all applicable laws, regulations, rules, ordinances and codes, which shall be
the obligation of Landlord. The structural, mechanical, electrical and
plumbing portions of the Tenant Plans shall be prepared (at Landlord's expense)
by Landlord's engineers.
(c) The cost of preparing the Tenant Plans, including any
changes thereto, shall be paid by Tenant; provided that Landlord shall
contribute thereto $1.50 per square foot of Net Rentable Area of the Leased
Premises toward the cost of Tenant Plans.
(d) The Tenant Plans must be completed on or prior to
February 3, 1997. Accordingly, Landlord shall submit the same for Tenant's
approval on or prior to February 3, 1997 and Tenant agrees to review the same
and respond to Landlord within five (5) days after the day of receipt thereof.
2. Pricing of Tenant Plans.
(a) Landlord shall promptly submit the Tenant Plans which
have been approved by Tenant to the Landlord's contractor ("Landlord's
Contractor") for pricing of the Tenant Improvements. Promptly following the
receipt by Landlord of such pricing by Landlord's Contractor, Landlord shall
submit to Tenant for its approval a pricing letter (the "Pricing Letter"),
including a detailed cost breakdown, based on the proposal of Landlord's
Contractor.
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(b) Tenant shall have two (2) days after the date of
submission within which to approve or disapprove the Pricing Letter. The
Pricing Letter shall be deemed approved unless Tenant gives notice of
disapproval within such two (2) day period. If the Pricing Letter is
disapproved, Tenant shall provide, with its notice of disapproval, such
information as may be required to revise the Tenant Plans for Tenant
Improvements to reduce the cost of performing the work of Tenant Extra
Improvements. The additional information shall be submitted to Landlord's
Contractor for a cost estimate, with Tenant again having a right to approve or
disapprove the same pursuant to the foregoing procedures. The process shall
continue for a reasonable time until revised Tenant Plans have been finalized
and completed in conjunction with approval of a Pricing Letter acceptable to
Tenant.
(c) The Pricing Letter must be approved and executed by
Tenant on or prior to February 10, 1997. If, however, such approval and
execution is not accomplished on or prior to February 10, 1997, Landlord shall
have the right, at its option, to terminate this Lease (without waiving any
other rights Landlord may have).
3. Construction of Tenant Improvements.
(a) After receipt and approval of Tenant's Plans and the
Pricing Letter, Landlord shall administer the construction of Tenant
Improvements in accordance with the approved construction documents and
proposal of Landlord's Contractor; provided, however, that no Tenant
Improvements shall be installed which do not conform to Building plans and
specifications or to any applicable regulations, laws, ordinances, codes and
rules. Such conformity shall be the obligation of Tenant.
(b) Landlord shall bear the cost of the construction of
Tenant Improvements. If Tenant accepts the Pricing Letter, Landlord shall
contribute $16.90 per square foot of Net Rentable Area to Tenant Improvements.
Such allowance shall be credited against amounts due Landlord under paragraph
3(b) of this Exhibit B for Tenant Improvements as the work progresses. The
credit given for Tenant Improvements covered by each monthly draw shall equal a
fraction thereof, the numerator of which is the total allowance provided by
Landlord and the denominator of which is the total cost of all Tenant
Improvements. All costs incurred in construction of Tenant Improvements shall
be increased by a charge, to be paid by Tenant, of ten percent (10%) to
reimburse Landlord for construction administration and coordination. Tenant
shall pay to Landlord all amounts payable by Tenant pursuant to this Exhibit B
within ten (10) days after completion of the Tenant Improvements.
(c) All Tenant Improvements shall be constructed by
Landlord's Contractor with the exception of telephone equipment and wiring
which may be installed by Tenant subject to the limitations contained herein.
All such equipment furnished and installed by Tenant shall be installed in a
manner which conforms with Landlord's Contractor's schedule, and the work or
installation shall be handled in such a manner as not to materially interfere
with or delay the work of Landlord's Contractor to any extent unsatisfactory to
Landlord. No portion of the work to be performed by Landlord's Contractor
shall be dependent upon completion of any work or construction or installation
to be performed by Tenant.
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(d) It is agreed that Tenant may authorize changes in the
Tenant Improvements, provided that any changes must meet the criteria set forth
in paragraph l(b) above. Tenant shall pay any net increase in cost and/or
credited with any savings (such credit be applied to Base Rental next becoming
due) which results from such changes (including the cost of all modifications
to Tenant Improvements which have theretofore been initiated or constructed and
any modifications required to the base building), plus ten percent (10%)
thereof as an administrative cost recovery fee.
4. Substantial Completion and Commencement Date.
(a) "Substantial Completion" of the Leased Premises shall
mean substantial completion of the Tenant Improvements in accordance with the
Tenant Plans, with a punch-list of uncompleted items which do not interfere in
any material respect with the use or enjoyment of the Leased Premises and which
permits Landlord to obtain any and all occupancy permits or authorizations
necessary to Tenant's use and occupancy of the Leased Premises.
(b) Notwithstanding Section 2.1(a) of this Lease, the
Commencement Date of the Term of this Lease shall be the earlier of (i) the
date of occupancy of the Leased Premises by Tenant, (ii) the date of
Substantial Completion of the Leased Premises (but in no event earlier than
April 1, 1997), or (iii) the date Substantial Completion would have occurred
but for Tenant Delay. If such a date is not that established as the
Commencement Date in Section 2.1 of this Lease, such date shall be revised
accordingly. In addition, if the Commencement Date is revised, in no event
shall the Lease expire later than April 30, 2002.
(c) "Tenant Delay", as used herein, means delays in
Substantial Completion of the Leased Premises to the extent resulting from (i)
Tenant's failure to meet the dates established in paragraphs 1 and 2 for
submission and approval of Tenant Plans and the Pricing Letter, (ii) High-risk
Items, as defined below, and (iii) any other delays caused by Tenant, its
architect, engineers, consultants, agents, contractors or subcontractors, in
completing the Tenant Improvements, including delays caused by changes
requested by Tenant. "High-risk Items" means Tenant Extra Improvements which
Landlord acting in good faith reasonably believes have a probability of not
being completed by the originally scheduled Commencement Date (due to limited
supplies or suppliers, length of time to be manufactured, delivered or
installed or otherwise and which have been identified as such with the
agreement of Tenant on the Tenant Plans). Landlord shall designate any
High-risk Items at or prior to the time of approval of the Pricing Letter (or
any revisions thereof on which the same appear).
(d) LANDLORD SHALL MAKE NO, AND DOES NOT MAKE ANY,
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE TENANT IMPROVEMENTS.
LANDLORD SHALL NOT BE RESPONSIBLE FOR ANY OF THE WARRANTIES OR COVENANTS FROM
ANY CONTRACTOR TO TENANT, BUT LANDLORD WILL ASSIST TENANT IN ENFORCING SUCH
WARRANTIES AND COVENANTS FROM CONTRACTORS AT TENANT'S COST AND EXPENSE. ALL
IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO THOSE OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE,
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<PAGE> 39
ARE EXPRESSLY NEGATED AND WAIVED. WITHOUT LIMITING THE FOREGOING, LANDLORD
SHALL NOT BE RESPONSIBLE FOR FAILURE OF THE TENANT IMPROVEMENTS TO BE COMPLETED
IN A TIMELY MANNER, TO BE COMPLETED IN ACCORDANCE WITH THE TENANT PLANS, OR
OTHERWISE.
(e) LANDLORD WILL NOT BE RESPONSIBLE FOR, AND WILL NOT
HAVE CONTROL OR CHARGE OF, CONSTRUCTION MEANS, METHODS, TECHNIQUES, SEQUENCES
OR PROCEDURES, OR FOR SAFETY PRECAUTIONS AND PROGRAMS IN CONNECTION WITH SUCH
TENANT IMPROVEMENTS, AND IT WILL NOT BE RESPONSIBLE FOR ANY CONTRACTOR'S
FAILURE TO CARRY OUT SUCH TENANT IMPROVEMENTS. LANDLORD WILL NOT BE
RESPONSIBLE FOR, OR HAVE CONTROL OR CHARGE OVER, THE ACTS OR OMISSIONS OF
TENANT'S CONTRACTORS, OR THEIR AGENTS OR EMPLOYEES. LANDLORD IS ACTING SOLELY
AS A CONSULTANT TO TENANT WITH RESPECT TO ADMINISTERING SUCH WORK, BUT IS NOT
ACTING AS A CONTRACTOR, AND IS NOT GUARANTEEING THE PERFORMANCE OF SUCH WORK.
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<PAGE> 40
EXHIBIT C
FOUR GREENSPOINT PLAZA
(THE "BUILDING")
GREENSPOINT PLAZA LIMITED PARTNERSHIP
(THE "LANDLORD")
AND
ICARUS CORPORATION
(THE "TENANT")
Tenant shall at all times during the Term lease between six
(6) and eleven (11) permits to park vehicles in the following garage (the
"Garage") which serves the Building: Four Greenspoint Plaza. No specific
spaces in the Garage are to be assigned to Tenant, but Landlord will issue to
Tenant the aforesaid number of parking permits, each of which will authorize
parking in the Garage of a vehicle on an unassigned basis. Landlord may
designate the area within which each such vehicle may be parked, and Landlord
may change such designations from time to time. Landlord may make, modify and
enforce reasonable rules and regulations relating to the parking of vehicles in
the Garage, and Tenant will abide by such rules and regulations. From time to
time, Landlord may, without notice to Tenant, open visitor parking into areas
of the Garage designated for Tenant's parking spaces.
As the Basic Parking Charge, Tenant covenants and agrees to
pay Landlord during the Term, as Additional Rental hereunder, the sum of $40.00
per month, plus applicable sales tax thereon, for each of the parking permits
to be issued by Landlord as herein provided, such sum to be payable monthly in
advance on the first day of each and every calendar month during the Term, and
a pro rata portion of such sum shall be payable for any partial calendar month
during the Term commences on a date other than the first day of a calendar
month. Tenant's obligation to pay the Parking Charge, and applicable sales tax
thereon, shall be considered an obligation to pay rent for all purposes
hereunder and shall be secured in like manner as is Tenant's obligation to pay
rent under the Lease. Default in payment of any amounts due hereunder or
failure by Tenant to comply with the rules and regulations promulgated by
Landlord or the operator of the Garage shall be deemed a default under the
Lease.
<PAGE> 41
EXHIBIT D
BUILDING RULES AND REGULATIONS
1. Sidewalks, doorways, skyways, vestibules, halls, stairways and other
similar areas shall not be obstructed by tenants or used by any tenant
for any purpose other than ingress and egress to and from the leased
premises and for going from one part of the building to another.
2. Plumbing fixtures and appliances shall be used only for the purpose
for which designated, and no sweeping, rubbish, rags, or other
unsuitable material including toxic or flammable products shall be
thrown or placed therein. All water lines installed for above
building standard use such as coffee bars, ice makers, water
filtration units etc. must be made of copper piping with compression
type fittings only. Damage resulting from any such fixtures or
appliances from misuse by a tenant shall be paid by him, and Landlord
shall not in any case be responsible therefore.
3. No sign, advertisements or notices shall be painted or affixed on or
to any windows or doors or other parts of the building visible from
the exterior or any common area or public areas of the building. No
part of the building may be defaced by tenants.
4. Landlord will provide and maintain an alphabetical directory board for
all tenants of the building, in the first floor main lobby of the
building. The size, design and location is subject to Landlord's
review and consent, and no other directory shall be allowed.
5. No tenant shall place any additional lock or locks on any door in its
leased area without Landlord's written consent, not to be
unreasonably withheld, delayed, denied or conditioned. Keys to the
locks on the doors in each tenant's leased area shall be furnished to
each tenant per the lease agreement. Additional keys can only be
obtained through the Hines Interests Limited Partnership Property
Management Office.
6. All tenants will refer all contractors, contractors' representatives
and installation technicians tendering any service to them to Landlord
for Landlord's supervision, approval and control before the
performance of any contractor services. This provision shall apply to
all work performed in the building, including, but not limited to,
installation of telephones, telegraph equipment, electrical devices
and attachments, and any and all installations of every nature
affecting floors, walls, woodwork, trim, windows, ceilings, equipment
and any other physical portion of the building.
7. After initial occupancy, movement in or out of the building of
furniture or office equipment, or dispatch or receipt of tenants of
any bulky material, merchandise or material which requires use of
elevators shall be restricted to the use of freight elevators only.
Absolutely no carts or dollies
-1-
<PAGE> 42
are allowed through the main entrances or on passenger elevators. All
non-hand carried items must be delivered via the appropriate loading
dock and freight elevator.
Deliveries requiring multiple hoists, such as the movement of
quantities of furniture or office equipment shall be under the
supervision of the Landlord and in the manner agreed between the
tenant and Landlord by prearrangement before performance. Such
prearrangement initiated by a tenant will include after hours
scheduling by Landlord, and subject to his reasonable decision and
control, as to the exact time, method, and routing of movement and as
to limitations for safety or other concern which may prohibit any
article, equipment or any other item from being brought into the
building. The tenants are to assume all risks as to the damage to
articles moved and injury to persons or public engaged or not engaged
in such movement, including equipment, property and personnel of
Landlord if damaged or injured as a result of an act in connection
with carrying out this service for a tenant from time of entering
property to completion of work; and Landlord shall not be liable for
an act of any persons engaged in, or any damage or loss of any of said
property or persons resulting from any act in connection with such
service performed for a tenant.
8. Landlord shall prescribe the weight and position of safes and other
heavy equipment, which shall in all cases, to distribute weight, stand
on supporting devices reasonably approved by Landlord. All damages
done to the building by taking in or putting out any property of a
tenant, or done by a tenant's property while in the building, shall be
repaired at the expense of such tenant.
9. A tenant shall notify the building manager when safes or other heavy
equipment are to be taken in or out of the building, and the moving
shall be done under the supervision of the building manager, after
written permit from the Landlord reasonably and timely issued.
Persons employed to move such property must be acceptable to Landlord
in Landlord's reasonable discretion.
10. Corridor doors, when not in use, shall be kept closed.
11. Each tenant shall cooperate with Landlord's employees in keeping its
leased area neat and clean. No tenant shall employ any person for the
purpose of cleaning other than the building's cleaning and maintenance
personnel without prior approval by Landlord. Landlord shall be in no
way responsible to the tenants, their agents, employees or invitees
for any loss of property from the Premises or public areas or for any
damages to any property therein from any cause whatsoever, other than
due to the gross negligence or willful misconduct of Landlord, its
agents and/or employees.
12. To insure orderly operation of the building, no ice, mineral or water,
towels, newspapers, etc. shall be delivered to any leased area except
by persons appointed or approved by the Landlord in writing.
13. Should a tenant require a telegraphic, telephonic, annunciator or
other communication service, Landlord will direct the electricians
where and how wires are to be introduced and placed and
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<PAGE> 43
none shall be introduced or placed except as Landlord shall reasonably
approve. Electric current shall not be used for power or heating
without Landlord's prior written permission.
14. Tenants shall not make or permit any improper noises in the building
or otherwise interfere in any way with other tenants or persons having
business with them.
15. Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairways. No birds or animals (except seeing eye dogs)
shall be brought into or kept in, on or about any tenant's area.
16. No machinery of any kind other than normal office equipment shall be
operated by any tenant on its leased area without the prior written
consent of Landlord which consent shall not be unreasonably withheld,
delayed, denied or conditioned, nor shall any tenant use, or keep in
the building, any flammable or explosive fluid or substance, except in
accordance with local fire codes and procedures approved by Landlord.
17. No portion of any tenant's lease area shall at any time be used or
occupied as sleeping or lodging quarters.
18. Landlord will not be responsible for lost or stolen personal property,
money or jewelry from tenant's leased area or public areas regardless
of whether such loss occurs when area is locked against entry or not
unless due to the gross negligence or willful misconduct of Landlord,
its agents and/or employees.
19. Tenant will not tamper with or attempt to adjust temperature control
thermostats in the Premises.
20. The carrying of firearms of any kind in any leased premises, the
building in which such premises are situated, any related garage, or
any related complex of buildings of which the foregoing are a part, or
any sidewalks, drives, or other common areas related to any of the
foregoing, is prohibited except in the case of unconcealed firearms
carried by licensed security personnel hired or contracted for by
tenants for security of their premises as permitted by such tenants'
leases or otherwise consented to by Landlord in writing.
21. Landlord reserves the right to rescind any of these rules and
regulations and to make such other and further reasonable rules and
regulations as in its judgment shall, from time to time, be needed for
the safety, protection, care and cleanliness of the building, the
operation thereof, the preservation of good order therein and the
protection and comfort of the tenants and their agents, employees, and
invitees, which rules and regulations, when made and written notice
thereof is given to a tenant, shall be binding upon it in like manner
as if originally herein prescribed.
-3-
<PAGE> 44
EXHIBIT E
BUILDING STANDARD IMPROVEMENTS
Building Standard Improvements shall consist of the following,
in the quantities set forth below.
(1) Heating, Ventilation, Air Conditioning.
Building Standard air-conditioning in a Building
Standard configuration throughout the Leased Premises.
(2) Partitions.
One (1) linear foot of Building Standard partitioning
per twelve (12) square feet of Net Rentable Area.
(3) Ceiling.
Building Standard ceiling throughout the Leased
Premises.
(4) Doors, Door Frames and Hardware.
One (1) Building Standard door, door frame and latch
set per three-hundred (300) square feet of Net Rentable Area, with a closer and
lockset on corridor doors required by code.
(5) Lighting Fixtures.
Building Standard light fixtures as required, not to
exceed one per eighty (80) square foot of Net Rentable Area.
(6) Light Switches.
One (1) single pole, rocker type light switch with
cover plate mounted at standard height in Building Standard partition for each
three hundred (300) square feet of Net Rentable Area.
-1-
<PAGE> 45
(7) Electrical Outlets.
One (1) duplex convenience outlet with cover plate
mounted in Building Standard partition at standard height for each one hundred
twenty (120) square feet of Net Rentable Area, plus one (1) dedicated circuit
per 2,500 square feet of Net Rentable Area.
(8) Telephone/Computer Outlets.
One (1) telephone/computer outlet box with cover
plate and pull string through the Building Standard partition to the ceiling
plenum above, mounted at standard height for each two hundred ten (210) square
feet of Net Rentable Area.
(9) Floor Covering.
Building Standard carpet or vinyl composition tile
throughout the Leased Premises.
-2-
<PAGE> 46
OPTIONAL ITEMS FOR BUILDING STANDARD IMPROVEMENTS
Fire Sprinkler Heads.
Flush ceiling-mounted fire sprinkler heads [ALTERNATE: with
white cover plates] in quantities and in locations necessary to meet light
hazard occupancy design criteria for the partition layout shown on the Tenant
Plans.
Heating, Ventilation, Air Conditioning.
Heating, ventilation and air conditioning will be supplied
from central air handling units located on each floor. The conditioned air
will be distributed by ductwork to constant volume fan-powered terminal units
which are connected to light fixture diffusers and perimeter air slots.
Lighting Fixtures.
One (1) 2' X 4' recessed fluorescent low-glare lighting
fixture per one hundred (100) square feet of Net Rentable Area. Common Areas
shall have lighting selected by landlord.
Partitions.
One (1) linear foot of ceiling height partition per twelve
(12) square feet of Net Rentable Area. Partitions will be 5/8" gypsum board on
2-1/2" metal studs erected 24" on center, finished with two coats of eggshell
latex enamel paint. All partitions will receive 2 1/2" straight vinyl base.
Doors, Door Frames and Hardware.
One (1) full height, solid core, stained oak [ALTERNATE: teak,
mahogany; walnut] veneered door in an extruded aluminum frame with satin
[ALTERNATE: polished] finish chromium lever handle latch set per three hundred
(300) square feet of Net Rentable Area.
Ceiling.
A random-fissured, mineral fiber, 2' X 2' lay-in tile
supported by an exposed "fine line" grid throughout the Leased Premises.
-1-
<PAGE> 47
EXHIBIT F
AIR CONDITIONING AND HEATING SERVICES
Subject to the provisions of Section 3.1(a), Landlord will furnish
Building standard air conditioning and heating between 8:00 A.M. and 6:00 P.M.
from Monday through Friday and, if requested, between 8:00 A.M. and 1:00 P.M.
Saturdays, all exclusive of Holidays (as defined below). Upon request of
Tenant, made in accordance with the rules and regulations for the Building,
Landlord will furnish air conditioning and heating at other times (that is, at
times other than the times specified above) in which event Tenant shall
reimburse Landlord for the cost of furnishing such services. Landlord agrees
to maintain (subject to events of force majeure) the condition of the Leased
Premises during the above-described hours between 72 and 76 at less than 65%
relative humidity.
The following dates shall constitute "HOLIDAYS" as said term is
used in this Lease:
1. New Year's Day
2. Good Friday
3. Memorial Day
4. Independence Day
5. Labor Day
6. Thanksgiving Day
7. Friday following Thanksgiving Day
8. Christmas Day
9. Any other holiday recognized and taken by tenants
occupying at least one-half ( 1/2) of the office space of
the Building.
If a different day shall be observed in the case of any Holiday
set forth in 1 through 9 above other than the day set forth above, than that
day which constitutes the day observed by the national banks in Houston, Texas
on account of such Holiday shall constitute the Holiday under this Lease.
Notwithstanding any other provisions herein to the contrary,
Landlord and Tenant agree that Tenant shall reimburse Landlord at the rate of
Twenty-Five And No/100 Dollars ($25.00) per hour per air handler unit when air
conditioning or heating is furnished at times other than those stated above.
However, such rate is based upon the Kilowatt Hour Rate (as hereinafter
defined) for electricity as of the Commencement Date (the "BASE RATE") and if
and when the Kilowatt Hour Rate increases over the Base Rate, the aforesaid
rate of Twenty-Five and No/100 Dollars ($25.00) per hour per air handler shall
automatically increase proportionately. The "KILOWATT HOUR RATE" shall mean
the actual average cost per kilowatt hour charged by the public utilities
providing electricity to the Building, or, if said public utilities shall cease
charging for electricity on the basis of a kilowatt
-1-
<PAGE> 48
hour, then the Kilowatt Hour Rate shall mean the actual average cost per unit
of measurement substituted therefore by said public utilities. The Base Rate
is hereby stipulated to be $.0705 per kilowatt hour based on the cost of
electrical service in the Building as of the Commencement Date.
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<PAGE> 49
SCHEDULE I
Floor Plan - Fifth Floor
600 Jefferson Plaza
Rockville, MD
<PAGE> 1
EXHIBIT 10.8
DATED 19th April 1993
WAYBORN LEASING LIMITED
and
ICARUS SERVICES LIMITED
Original/
UNDERLEASE
relating to Units 3 & 4, 4th Floor
The Graftons,
Stamford New Road,
Altrincham,
Greater Manchester.
NEIL MYERSON AND CO
Solicitors,
Altrincham.
<PAGE> 2
IN THE ALTRINCHAM COUNTY COURT Plaint No.
IN THE MATTER OF The Landlord and Tenant Act 1954 as
amended by Section 5 of the Law of
Property Act 1969
AND IN THE MATTER OF A proposed Underlease of offices on the
4th floor and a License of three car
parking spaces on the Car Deck of The
Graftons Stamford New Road Altrincham
Greater Manchester
BETWEEN WAYBORN LEASING LIMITED
First Applicant
and
ICARUS SERVICES LIMITED
Second Applicant
UPON THE JOINT APPLICATION of the Applicants
IT IS ORDERED pursuant to Section 38 (4) of the Landlord and Tenant Act 1954
(as amended by Section 5 of the Law of Property Act 1969 that the Applicants be
authorized to enter into an agreement to exclude the provisions of Section 24
to 28 (inclusive) of the Landlord and Tenant Act 1954 as are set out in Clause
(7) of the proposed Underlease and in Clause 10 of the proposed License of the
above mentioned property intends to be granted by the First Applicant to the
Second Applicant a draft whereof is annexed to the original Originating
Application herein
Dated this 29 day of May 1992.
- -----------------------
<PAGE> 3
THIS UNDERLEASE made as a Deed the 19th day of April 1993 BETWEEN WAYBORN
LEASING LIMITED whose registered office is a Graftons Stamford New Road
Altrincham Greater Manchester ("the Landlord" which expression where the
context admits includes person for the time being entitled to the reversion
immediately expectant on the determination of the term hereby created) of the
one part and ICARUS SERVICES LIMITED whose registered office 100 Chalk Farm
Road London NW1 8EH ("the Tenant" which expression where the context admits
includes its successors in title of the other part
WITNESSETH:
1. IN this Lease
(1) All reference to statute (whether to a particular statute or
generally) include reference to any re-enactment or modification thereof for
the time being in force and to any bye-laws rules regulations and statutory
instruments made thereunder
(2) "the Building" means the building known as Office Tower The Graftons
Altrincham Greater Manchester
2. THE LANDLORD demises unto the Tenant ALL THOSE rooms or offices forming
part of the Fourth Floor area of the Building more particularly delineated and
edged red for the purpose of identification only on the plan annexed hereto
(all of which premises hereby demised are hereinafter called "the demised
premises" which expression includes all alterations and additions to and
rebuilding of the demised premises) being premises comprised in a Lease
(hereinafter called "the Head Lease") dated the 19th day of April 1993 and made
between Co-operative Insurance Society Limited (hereinafter called "the
Superior Landlord") of the one part and the Landlord of the other part TOGETHER
WITH the Landlord's fixtures and fittings in and upon the demised premises
("the Landlord's fixtures") AND TOGETHER WITH (in common with the Landlord and
all other persons entitled thereto) the right:
(a) for the purpose of gaining access to and from the demised premises to
use the entrance way stairs lifts and passages in the Building leading
from Stamford New Road and George Street to the demised premises
(b) a right of way for all purposes over the passageway shown hatched red
on the plan annexed hereto
(c) to use the lavatories and washing facilities on the 4th floor (or such
other floor as the Landlord may from time to time reasonably allocate)
of the Building but subject to such regulations as the Landlord may
from time to time reasonably determine
(d) as a means of escape in case of emergency to use the fire escape
staircase serving the Building
<PAGE> 4
(e) of support and the passage of all water soil gas electricity telephone
and other channels pipes drains sewers wires and cables now or at any
time during the term hereby created ("the term") upon through or under
other parts of the Building
EXCEPT AND RESERVING unto the Landlord the Superior Landlord and its lessees
tenants and licensees and other occupiers for the time being of other parts of
the Building the right:
(a) to the free and uninterrupted passage of water soil gas electricity
telephone and other services through and the right to connect with all
channels pipes drains sewers wires and cables now or at any time
during the term in or passing through or under the demised premises
for the supply of services to or the drainage of other parts of the
Building
(b) of entry into and upon the demised premises (but except in case of
emergency only at reasonable times in the daytime upon 24 hours
notice) with all necessary workmen contractors equipment tools and
appliances for the purpose of exercising the right aforesaid and for
the purpose of inspecting cleansing repairing altering maintaining
renewing and improving any channels pipes drains sewers wires and
cables nor or at any time during the term in or under the demised
premises and serving other parts of the Building and for the purpose
of repairing altering maintaining improving rebuilding and
reconstructing other parts of the Building and for the purpose of
carrying out any works comprised within the Landlord's and the
Superior Landlords obligations hereunder or (whether or not so
comprised) for which the Tenant is liable to make a contribution THE
Landlord the Superior Landlord or other persons exercising such rights
as soon as reasonably practicable making good to the reasonable
satisfaction of the Tenant all damage thereby occasioned to the
demised premises
(c) to build on or otherwise develop any adjacent or neighbouring land and
to rebuild or alter any adjacent or neighbouring building in any manner
and to let the same for any purpose and otherwise deal therewith
notwithstanding that the access of light or air to the demised premises
is thereby interfered with and
(d) of support and all other easements now or hereafter during the term
belonging to or enjoyed by other parts of the Building
(e) of entry into and through the demised premises in case of emergency
only for access to the fire escape serving the Building
TO HOLD unto the Tenant from the 10th day of May 1992 for a term expiring on
the 8th day of May 2002 (determined as hereinafter mentioned) SUBJECT to all
rights and easements or reputed easements (if any) which now affect the demised
premises or any part thereof YIELDING AND PAYING yearly and proportionately for
any fraction of a year
<PAGE> 5
the rent ("the initial rent") of pound sterling 17,150.00 to be paid by equal
quarterly payments in advance the first payment being made on the date hereof
for the period from the 10th day of May 1992 to the quarter day next following
and ALSO YIELDING AND PAYING therefor the rent ("the additional rent")
calculated and to be paid in accordance with Clause 3 AND ALSO YIELDING AND
PAYING by way of service rent ("the service rent") 41% of the costs and
expenses reasonably and properly incurred attributed to the 4th floor of the
Building and levied on the Landlord in that respect by the Superior Landlord as
certified from time to time by the Superior Landlord's Agent or Management
Surveyor in complying with the covenants on its part contained in Clause 5(3)
of the Head Lease and otherwise in providing the services and in respect of the
matters set out in the First Schedule hereto such sums to be paid in arrear on
the quarter day next following each demand therefor by the Landlord ALSO
YIELDING AND PAYING by way of insurance rent ("the insurance rent")
(a) a fair and proper proportion as certified from time to time by the
Superior Landlord's Agents or Management Surveyor of the sum or sums
which the Superior Landlord may from time to time pay for insuring and
keeping insured the fourth floor of the Building and the Landlord's
fixtures therein and thereon against loss or damage by fire lightning
explosion storm tempest flood bursting or overflowing of water tanks
apparatus or pipes riot civil commotion strikes locked-out workers or
persons taking part in labor disturbances malicious persons aircraft
or other aerial devices and/or articles dropped therefrom earthquake
and impact and such other perils as the Superior Landlord may from
time to time reasonably deem necessary (subject only in the case of
each risk now or hereafter insured against to such exclusions and
limitations as may from time to time be usual in the case of insurance
on property in the nature of the Building) and the fixed plate glass
(if any) in the windows and doors of the Building against breakage
(all which risks are herein called "the insured risks") in the full
reinstatement value thereof and in a sum to cover the cost of shoring
demolition and site clearance and the fees of architects surveyors
clerks of works engineers and consultants calculated on such full
value at the current scales for the time being of the appropriate
professional bodies concerned and
(b) the whole of the cost of maintaining insurance against loss of the
initial rent and the additional rent or any part thereof by reason of
the insured risks in a sum equal to three times such rents
The insurance rent to be paid on the quarter day next following the
date upon which the premium or premiums in respect of such insurance
have been paid by the Landlord AND if the Superior Landlord (being an
insurance company) effects any such insurance with itself the premiums
therefor will be deemed to be the sums which it would from time to
time normally require if such insurance were effected by the Tenant
with the Superior Landlord ALL WHICH rents hereinbefore reserved are
herein together called "the rents"
<PAGE> 6
3. (1) IN this Clause the following expressions have the meanings
respectively assigned to them:
(a) "rent period" means the period from the end of the fifth year of the
term until the date of expiration of the term;
(b) "revision date" means the date of commencement of the rent period;
and
(c) "yearly rental value" means the yearly rack rent at which the demised
premises could be let as a whole with vacant possession in the open
market:
(i) without taking any fine or premium;
(ii) disregarding any goodwill attached to the demised premises by
reason of any trade or business carried on there by the Tenant
or any sub-tenants and any authorized improvements made or
permitted by the Tenant other than in pursuance of an
obligation to the Landlord;
(iii) upon the assumption (whether or not a fact):
A. that the Tenant has complied in all respects with the
covenants on its part contained in this Lease;
and
B. that the Tenant can recover fully all input Value Added
Tax (or any similar additional or substituted tax from time to
time) which may be payable or chargeable on the rents or any
other payments arising under this Lease;
(iv) for a term of 10 years; and
(v) subject to all other terms of this Lease other than the amount
of the initial rent but including this present clause
(2) The additional rent payable under the rent period will be a yearly
rent the amount (if any) by which the yearly rental value of the demised
premises at the revision date exceeds the initial rent
(3) When the additional rent in respect of the rent period has been
ascertained the Landlord will serve upon the Tenant a notice demanding payment
thereof from the revision date to the quarter day next following the date of
service of the notice (credit being given for any additional rent already paid
in respect of the period) and the payment of the
<PAGE> 7
additional rent to which the notice relates will together with interest thereon
at the rate specified in Clause 4(19) from the revision date to the date of
service of the notice be due and payable immediately upon the service thereof
and thereafter until or the expiration of the term the additional rent will be
payable in advance by equal quarterly payments on the four usual quarter days
in each year
(4) In default of agreement as to the yearly rental value at the revision
date or as to any of the sums or proportions relating to the service rent or
the insurance rent certified in accordance with this Lease the same will be
determined by a valuer who will act as an expert and not as an arbitrator and
whose costs will be within his award who will receive and consider any written
submissions which may be made by either of the parties and whose decision will
be binding on the Landlord and the Tenant and who will be appointed by them or
in default of appointment will be nominated at the request of either of them by
the President for the time being of the Royal Institution of Chartered
Surveyors
4. THE TENANT covenants with the Landlords:
(1) To pay the rents at the times and in the manner aforesaid
(2) Punctually to pay and discharge all rates taxes charges duties
assessments outgoings and impositions (whether or not in the nature of those
now in being) now or at any time during the term payable in respect of the
demised premises or any part thereof or the Landlord's or the Superior
Landlord's fixtures or payable by the owner or occupier of the demised premises
except tax payable as a result of any dealing with the reversion immediately
expectant on the determination of the term
(3) As to the Landlord's and the Superior Landlord's fixtures and the
internal work of the demised premises in the first fifth and in the last year
of the term to paint in a proper and workmanlike manner with two coats of good
quality and suitable paint all parts thereof usually painted and at such times
otherwise to treat well and appropriately all other parts thereof as previously
or usually treated in a proper and workmanlike manner with good and suitable
materials
(4) (a) To keep in good and tenantable repair and condition the
Landlord's and the Superior Landlord's fixtures and the interior of
the demised premises including the plaster and surface coverings of
the walls and ceilings and the floors (other than the structural slab
or beams on which the floors are laid or to which the ceilings are
attached) non-load bearing internal walls the windows and the glass
therein (other than external windows) the doors of and entrance doors
to the demised premises and all drainage soil sanitary water gas
electricity telephone and other service pipes wires cables and
apparatus in and outside the demised premises so far as the same serve
only the demised premises
<PAGE> 8
PROVIDED that this paragraph does not have effect where damage results
from any of the insured risks and no insurance moneys are rendered
irrecoverable by the act neglect or default of the Tenant
(b) Upon being so required by the Landlord or the Superior
Landlord except in so far as the same falls within the service rent to
contribute a reasonable proportion of the costs and expenses of
executing the work of constructing repairing renewing rebuilding and
cleansing party walls fences gutters sewers drains roads pavements
staircases pipes wires cables apparatus and other things the use of
which is common to the demised premises and other premises or other
parts of the Building
(5) Not to make any structural alteration or addition in or to the demised
premises
(6) Except with the license in writing of the Landlord and the Superior
Landlord and in accordance with plans elevations and specifications previously
submitted to and approved by them and to their reasonable satisfaction not to:
(a) make any non-structural alteration or addition in or to the
demised premises nor make any alteration in the plan construction or
architectural appearance thereof
(b) cut or remove (except for the purpose of making good any
defect) the main walls or timbers or structural members of the
Building
(c) exhibit or suffer to be exhibited any advertisement as defined
by the Planning Acts (as hereinafter defined) upon or so as to be
visible from the exterior of the Building
(7) At its own expense to do or cause to be done upon or in respect of the
demised premises and the Landlord's and the Superior Landlord's fixtures all
works and things and give all notifications which are or may be necessary for
compliance with the requirements of all general or local Acts of Parliament for
the time being in force or which are or may be by any competent authority
directed or required to be done whether by the owner landlord tenant or
occupier of the demised premises AND in each case to indemnify the Landlord
against all actions proceedings costs claims and demands in respect thereof
PROVIDED that this sub-clause shall not place on the Tenant any obligation to
provide a fire escape from the Demised Premises
(8) Upon the receipt from a competent authority of any notice proposal for
a notice order requisition direction or other thing whether served directly on
the Tenant or not and affecting or likely to affect the demised premises or the
Landlord's or the Superior Landlord's fixtures or their interest in either of
them forthwith to deliver a copy thereof to the Landlord and at the request and
cost of the Landlord to make or join in making such objections and
representations in respect thereof as it may reasonably require
<PAGE> 9
(9) In relation to the Planning Acts (which expression means the Town and
Country Planning Acts 1990 and includes all orders plans and directions made
and permissions licenses and consents given thereunder):
(a) not to do or omit or suffer to be done or omitted anything on
or in connection with the demised premises which contravenes the
Planning Acts or any conditions imposed thereunder
(b) not without the Landlords written consent (which will not be
withheld or delayed unreasonably) to apply for any permission under
the Planning Acts which affects the demised premises or its use
(c) if the Landlord consents to an application being made under
the Planning Acts:
(i) to give notice to the Landlord of the granting or
refusal of permission on the receipt thereof
(ii) if permission is granted subject to terms or
conditions to give the Landlord full particulars thereof and
not to do or permit anything pursuant to such permission
without the Landlord's written consent which will not be
unreasonably withheld
and
(iii) if the relevant authorities will agree to grant
permission only if the application is modified to give the
Landlord full particulars and if the Landlord reasonably
considers such modifications unacceptable to withdraw the
application
(d) In the event of such Planning Permission being granted to bear
the cost of all works or other things authorized thereby if and when
carried out
(e) to produce to the Landlord all plans documents or other
evidence which it may reasonably require in order to satisfy itself
that this sub-clause has been complied with
(f) to indemnify the Landlord against all actions proceedings
costs claims and demands arising out of or in connection with any of
the matters referred to in this sub-clause
(10) (a) Not to use or suffer to be used the demised premises except as
offices with ancillary storage accommodation PROVIDED that
notwithstanding the foregoing provisions of this paragraph the
Landlord does not give any warranty or make any
<PAGE> 10
representation that either the said use is or any use to which the
Landlord may hereafter consent will be a permitted use within the
Planning Acts
(b) Not without the consent in writing of the Landlord to hold or
suffer to be held on the demised premises any sale by auction or any
public meeting or public exhibition
(c) Not to install or suffer to be installed on the demised
premises any machinery which is noisy or causes dangerous vibrations
or overloading of the floors walls or ceilings of the demised premises
(d) Not to do or suffer to be done on the demised premises
anything which is noisy or which may be or become an annoyance
nuisance or inconvenience to the Landlord or to the tenants or
occupiers of other parts of the Building or of adjoining or
neighboring premises
(e) Not to do or suffer to be done anything whereby any policy of
insurance on the Building against the insured risks may become void or
voidable or the rate of premium thereon may be increased and to repay
to the Landlord on demand all sums paid by way of increased premium
and expenses incurred by the Superior Landlord in or about the renewal
of any such policy rendered necessary by a breach of this covenant all
which payments will be included in the insurance rent
(f) Not to obstruct or leave any rubbish on any part of the
Building or any entrance thereto used by the Tenant in common with the
other occupiers of the Building
(g) Not to require access to the Building except between such
hours and on such days as may from time to time reasonably be
designated by the Landlord the Superior Landlord or their Agents and
at other times and on other days as may from time to time be
reasonably approved by the Landlord and the Superior Landlord and on
such reasonable conditions as they may require
(11) To permit the Landlord the Superior Landlord and their surveyors
agents workmen and others authorized by them at all reasonable hours in the
daytime (but except in case of emergency only upon 24 hours prior notice) to
enter upon the demised premises to:
(a) examine the state and condition thereof and of the Landlord's
and the Superior Landlord's fixtures and to give or leave notice in
writing at or upon the demised premises requiring the Tenant forthwith
to execute all repairs which are the liability of the Tenant
(b) ascertain whether any unauthorized additions or alterations
have been made therein or thereto and also whether any authorized
additions or alterations have been
<PAGE> 11
carried out in accordance with the consents given by the Landlord the
Superior Landlord and any competent authority
(c) execute all repairs which the Tenant has failed to execute
within a reasonable time after a notice so to do given by the Landlord
or the Superior Landlord and the costs and expenses of such repairs
will be payable by the Tenant to the Landlord on the quarter day
following a demand therefor and will (in addition to any other
remedies available to the Landlord) be recoverable as rent in arrear
and
(d) take inventories of the Landlords and the Superior Landlord's
fixtures
(12) At the expense of the Tenant to:
(a) remove any erections additions or alterations made without or
not in accordance with the Landlord's and the Superior Landlord's
consent or in respect of which planning permission is revoked or
lapses
(b) comply with every order of any competent authority requiring
the removal of or other work in connection with such erections
additions or alterations and
(c) make good in all such eases all damage caused by such removal
or other work and to reinstate all parts of the demised premises
affected thereby
(13) Immediately upon becoming aware of the same to give notice to the
Landlord of any defect in or lack of repair of the demised premises or the
structural parts of the Building within or surrounding the demised premises
which might give rise to an obligation on the Landlord to do anything in order
to comply with its obligations under this Lease or the duty of care imposed on
the Landlord by the Defective Premises Act 1972 and to indemnify and keep
indemnified the Landlord from and against all actions proceedings costs claims
and demands which may arise as a result of the Tenant's failure to comply with
this sub-clause
(14) (a) To permit the Superior Landlord to exhibit on the exterior of the
demised premises:
(i) at any time during the term a notice board or notice
that the freehold reversion of the Building is for sale and
(ii) during the last 6 months of the term a notice board
or notice that the demised premises are to let
PROVIDED that such notice boards or notices will not be
affixed to the demised premises so as to interfere with the
business carried on there by the Tenant or any permitted
sub-tenant
<PAGE> 12
(b) During such periods to permit all persons authorized in
writing by the Superior Landlord or its agents to view the demised
premises at reasonable hours in the daytime after giving not less than
24 hours written notice
(15) (a) To preserve and maintain all existing rights of light passage
drainage and other easements belonging to or used with the demised
premises
(b) Not knowingly or negligently to suffer any encroachment on or
new right or easement over the demised premises and forthwith upon
becoming aware thereof to notify the Landlord of any threatened
encroachment or attempt to acquire a new right or easement
(16) As often as may be necessary (but not less frequently than monthly) to
clean the inside of all the windows in the external walls of the demised
premises
(17) (a) Not to underlet or part with or share possession or occupation
of the whole or any part of the demised premises nor assign part only
thereof
(b) Not without the consent in writing of the Landlord and the
Superior Landlord (which will not be withheld unreasonably) to assign
the whole of the demised premises
PROVIDED that every permitted assignment (or the Landlord's and the
Superior Landlords license therefor) must contain a covenant by the
assignee not further to assign the demised premises without the
written consent of the Landlord and the Superior Landlord and to
observe and perform the covenants (including the covenant to pay the
rents) and the agreements in this Lease contained
(c) On an assignment to a limited company or other incorporated
body if the Landlord and the Superior Landlord reasonably so require
to procure that at least 2 Directors of the Company or body or some
other person or persons reasonably acceptable to the Landlord and the
Superior Landlord enter into direct covenants with the Landlord and
the Superior Landlord in the form set out in the Second Schedule
(d) Every application for a consent under paragraph (b) of this
sub-clause must be in writing and be accompanied by the following
relating to the proposed assignee:
(i) a bankers reference and an accountants or other
professional reference
(ii) if he has previously traded 2 trade references or in
the case of a company the then most recent audited
trading accounts
<PAGE> 13
(iii) if he has not previously traded 2 references given by
responsible persons or bodies
(e) Within one month after any permitted assignment of the demised
premises to produce to the Landlord's and the Superior Landlord's
Solicitors for registration a certified copy of the instrument
effecting such assignment and to pay to the Landlord and the Superior
Landlord a registration fee of pound sterling 15 in respect of each
such instrument or counterpart
(18) (a) To pay all costs charges and expenses (including those of
Solicitors Counsel and Surveyors) reasonably incurred by the Landlord
in connection with the recovery of arrears of rent or for the purposes
of or incidental to the preparation and service of any notices or
proceedings under Section 146 or Section 147 of the Law of Property
Act 1925 notwithstanding that forfeiture is avoided otherwise than by
relief granted by the Court
(b) To pay all costs charges and expenses of the Landlord and the
Superior Landlord (including those of Solicitors Counsel Architects
and Surveyors) reasonably incurred in connection with any application
for a consent or license under this Lease whether such consent or
license is granted or properly refused or the application therefor is
withdrawn
(19) In the case of any rent or other money payable hereunder by the Tenant
to the Landlord which is not paid within 14 days after the same is due and
payable to pay to the Landlord on demand from the due date until the date of
actual payment in addition to such rent or other money interest (calculated on
a daily basis) upon the amount thereof for the time being unpaid (as well after
as before any Judgment) at the rate of 4% above National Westminster Bank PLC
Base Lending Rate (or any similar lending rate which may replace the same) from
time to time in force Provided that this sub-Clause is without prejudice to the
right of re-entry herein contained or any other right or remedy available to
the Landlord
(20) To pay to the Landlord in addition to the rents and the fees and other
payments which may be payable by the Tenant pursuant to this Lease all Value
Added Tax (and any additional or substituted tax of a similar nature) at the
rate from time to time in force which may at any time be payable or charged in
respect of such rents fees and other payments
(21) In the event of a breach of any of the covenants agreements and
provisions herein contained or referred to by any person holding the demised
premises forthwith to take all steps and institute all proceedings necessary to
remedy such breach
(22) To indemnify the Landlord against all liability to any person or
authority incurred by reason of and all actions proceedings costs claims
expenses and demands relating to any of the following matters caused or
permitted by the Tenant:
<PAGE> 14
(a) any defect in or the execution of any repairs or alterations
to or demolition or rebuilding of the demised premises or the
Landlord's and the Superior Landlord's fixtures
(b) the alleged interference with or obstruction of any right or
easement existing or alleged to exist for the benefit of other
premises over the demised premises
(c) the stoppage of any drains used in common with other parts of
the Building
(23) To comply with all reasonable regulations from time to time made by
the Superior Landlord or its Agents for the management or running of the
Building or the provision of facilities therefor
(24) At the determination of the term quietly to yield up to the Landlord
the demised premises and the Landlord's and the Superior Landlord's fixtures in
accordance in all respects with the Tenant's covenants herein contained and
with all locks keys and fastenings complete
5. THE LANDLORD covenants with the Tenant:
(1) That the Tenant paying the rents and performing and observing the
Tenant's covenants and the conditions and agreements herein contained may
peaceably hold the demised premises during the term without any interruption by
the Landlord or any person rightfully claiming under or in trust for it
(2) To indemnify and keep indemnified the Tenant against all claims and
demands which may be made against the Tenant by the Superior Landlord pursuant
to the covenants given by the Landlord to the Superior Landlord in the License
dated the 19th day of April 1993 save always insofar as the same arise from any
breach by the Tenant of the covenants on the part of the Tenant herein
contained
(3) To use its best endeavors to procure that the Superior Landlord
observes and performs its obligations or covenants conditions and agreements
more particularly mentioned in the Head Lease
(4) To take such action as the Tenant may reasonably require to ensure
performance and observance by the Superior Landlord of the Superior Landlord's
obligations covenants conditions and agreements on the part of the Superior
Landlord in the Head Lease or to recover any loss arising from any breach
thereof the Tenant bearing the costs or a reasonable proportion of the costs of
any such action so required
(5) To notify the Tenant of any breach of the obligations of the Superior
Landlord (as soon as the same comes to the Landlord's attention) relating to
the demised premises and
<PAGE> 15
(without prejudice to the generality of the foregoing) in particular of any
failure of the Superior Landlord to maintain insurance in respect of the
demised premises
6. IT IS AGREED that: -
(1) If the rents or any part thereof are unpaid for 14 days after becoming
payable (whether formally demanded or not) or if the Tenant fails to perform or
observe any of the covenants conditions and agreements on its part herein
contained or if the tenant for the time being:
(a) being an individual becomes bankrupt
(b) has a receiver appointed of the whole or any part of the
property assets or undertaking of the Tenant or
(c) being a company enters into liquidation whether compulsory or
voluntary (except in voluntary liquidation for the purpose of
reconstruction or amalgamation) or becomes the subject of an
Administration Order or is struck off the Registrar of Companies
(d) enters into any arrangement or composition for the benefit of
the tenant's creditors or
(e) suffers any distress or execution to be levied on the demised
promises
then and in any of such cases it will be lawful for the Landlord or
any person or persons duly so authorized by it to re-enter upon the
demised premises or any part thereof in the name of the whole and
thereupon this demise will absolutely determine but without prejudice
to any right of action or remedy of the Landlord in respect of any
breach of the covenants on the Tenant's part herein contained
(2) The Landlord does not give any warranty or make any representation
that the Landlord's and the Superior Landlord's fixtures are in good working
order and condition and free from defects and the Tenant will in such respects
rely upon its own inspection and knowledge
(3) If the Building or the demised premises or any part thereof are
destroyed or damaged by any of the insured risks so as to render the demised
premises or any part thereof unfit for use then unless payment of any moneys
payable under any policy of insurance is refused either in whole or in part by
reason of the act neglect or default of the Tenant the rents or a fair
proportion thereof according to the nature and extent of the damage sustained
will be suspended until the demised premises are again rendered fit for use
<PAGE> 16
(4) Notwithstanding anything herein contained the Landlord and all persons
authorized by it will have power without obtaining any consent from or making
any compensation to the Tenant to deal as it or they may think fit with any of
the premises adjacent or near to the demised premises and to erect or suffer to
be erected upon such adjacent or nearby premises any buildings whatsoever
whether or not such buildings affect or diminish the light and air which may
now or at any time during the term be enjoyed by the Tenant or other the
6 occupiers of the demised premises
(5) Section 196 of the Law of Property Act 1925 as amended by the Recorded
Delivery Service Act 1962 applies to all notices served hereunder
(6) If any dispute for the determination of which no express provision is
hereby made arises between the parties concerning their respective rights or
liabilities or the construction or effect of this Lease or otherwise in
connection with the demised premises then such dispute will at the request of
either of the parties be referred for the decision of a single arbitrator who
(if the parties are unable to agree upon one) will be nominated by the
President for the time being of the Royal Institution of Chartered Surveyors in
accordance with the Arbitration Acts 1950 and 1979
(7) Having been authorized to do so by an Order of the Altrincham County
Court on the 29th day of May 1992 under the provisions of Section 38(4) of the
Landlord and Tenant Act 1954 the parties hereto agree that the provisions of
Sections 24 to 28 (inclusive) of that Act shall be excluded in relation to the
Lease hereby created
(8) (a) The Tenant may determine the term by not less than 7 months
written notice to the Landlord to expire on the 10th day of May 1997
and upon the expiration of such Notice under this sub-Clause this
Lease and everything herein contained will cease and determine but
without prejudice to any claim by either party in respect of any
antecedent breach of this Lease
(b) The Landlord may determine this Lease by not less than 6
months written notice to the Tenant to expire on the 10th day of May
1997 and upon the expiration of such Notice under this sub-Clause this
Lease and everything herein contained will cease and determine but
without prejudice to any claim by either party in respect of any
antecedent breach of this Lease
IN WITNESS whereof the parties hereto have caused their respective
Common Seals to be affixed the day and year first before written
<PAGE> 17
THE FIRST SCHEDULE before referred to
1. STAFF
(1) The provision of such non-resident caretaking and security
staff as the Superior Landlord may reasonably consider to be necessary either
by direct or contract labor including the cost of wages National Insurance
Contributions and other statutory payments and pension scheme payments
(2) The cost of providing non-residential accommodation for staff
including rent rates electricity heating repairs maintenance decoration
telephone water rates and other payments in respect of such accommodation
(3) The cost of providing staff with proper and adequate uniforms
protective clothing and equipment to enable them to fulfil effectively the
duties allocated to them
2. EXTERIOR AND STRUCTURE
(1) The maintenance repair and renewal of the exterior the main structure
the foundations and the roof of the Building the internal load bearing walls
the floor and ceiling slabs or joists load bearing pillars window frames and
glass therein main drains and boundary walls
(2) External redecoration including where appropriate external cleaning
(3) The inspection of and obtaining or reports upon the Building
(including the foundations)
3. COMMON PARTS
(1) The cost of keeping free of obstruction cleaning lighting heating
maintaining insuring repairing redecorating and improving the interior common
parts of the Building together with the cost of any necessary equipment and
materials including all floor and wall coverings and the cost of accommodation
for the storage of such materials and all flowers plants and other suitable
decorative objects and materials
(2) The cleaning maintenance repair and renewal of all common mains
services drains pipes sewers cables wires and apparatus
(3) The cost of providing towels toilet requisites and other necessary
sanitary equipment to the toilets in the Building used in common by the
occupiers
<PAGE> 18
4. LIFTS
The cost of providing lifts and hoists including the insurance maintenance and
repair renewal and decoration of the same and of fall shafts plant and
machinery related thereto
5. HEATING
The cost of heating and providing hot water for the demised premises the fuel
consumed and the cost of insuring maintaining repairing renewing and
redecorating the ducting plant machinery and equipment including boilers pipes
and radiators related thereto
6. FIRE AND SECURITY PRECAUTIONS
The cost of providing maintaining testing repairing and renewing such fire
fighting and protection equipment and security equipment as may be necessary
for the Building including fire alarms fire hoses sprinklers extinguishers and
other equipment together with if necessary the cost of supplying water thereto
7. STATUES
The cost of complying with the provisions of the Fire Precautions Act 1971 the
Health and Safety at Work Etc.Act 1974 and any similar present or future
enactments insofar as they relate to the common parts or the lower ground floor
of the Building (including the maintenance of window cleaning cradles and
related equipment and the provision of eyebolts)
8. WINDOW CLEANING
The cost of cleaning all outside surfaces of the glass in the windows of the
Building and the inside and outside surfaces of the glass in the windows of the
common parts
9. REFUSE DISPOSAL
The cost of storage collection and removal of trade and other refuse from the
Building
10. RESERVE FUND
A reasonable and proper provision for the equalization of any expenditure
arising other than annually in respect of any of the matters referred to in
this Schedule
11. WATER METERS
The cost of providing where necessary water meters and of reading the same
together with the cost of water consumed and charged to the Superior Landlord's
meters
<PAGE> 19
12. PEST CONTROL
The cost of controlling pests and preventing infestation of any kind
13. MANAGEMENT FEES
The proper fees of the Superior Landlord's Agents (or if the Superior Landlord
manages the Building itself such reasonable fees as Agents would be entitled to
charge) for the management of the Building
14. MISCELLANEOUS
All other expenses reasonably and properly incurred by the Superior Landlord in
or incidental to or for the purpose of providing and maintaining the existing
and additional services facilities and amenities of the Building
15. ACCOUNTS
All costs fees and expenses reasonably and properly incurred in providing such
accounts relating to and explanations of the amounts of the service rent as may
from time to time be required by the tenants of the Building
16. VALUE ADDED TAX
All Value Added Tax or other similar tax payable by the Superior Landlord or
for which the Superior Landlord is accountable in respect of any amounts
payable under this Schedule
17. INTERPRETATION
Unless the contrary is stated no expression or provision in this Schedule is
intended to limit or to be limited by any other expression or provision hereof
THE SECOND SCHEDULE before referred to
THE Sureties Jointly and severally covenant with the Landlord that:
(1) The Assignee will pay the rents on the days and in manner provided by
the Lease and will perform and observe all the tenant's covenants and the
Conditions and agreements therein contained
(2) In case of default in such payments performance or observance as
aforesaid the Sureties will on demand pay and make good to the Landlord all
losses and damages suffered
<PAGE> 20
and costs and expenses incurred by the Landlord by reason of any such default
PROVIDED that any neglect or forbearance of the Landlord in endeavoring to
obtain any such payment or enforcing such observance or performance and any
time which the Landlord may give to the Assignee will not release or in any way
affect the liability of the Sureties under this covenant
(3) If the Assignee enters into liquidation and the liquidator disclaims
the Lease and if the Landlord within three months after such disclaimer by
notice in writing so requires the Sureties will accept a Lease of the demised
premises for a term commencing on the date of such disclaimer and expiring on
the date on which the term of the Lease would have expired by effluxion of time
and at the like rents and containing the like covenants conditions and
agreements in all respects
(4) Sub-Clauses (1) and (2) of this Clause will also have effect after the
expiration of the term of the Lease throughout any period during which the
Assignee occupies the demised premises and they will also relate to any sums
greater than the rents which the Assignee may become liable to pay in respect
of any such period for use and occupation of the demised premises
THE COMMON SEAL of
WAYBORN LEASING LIMITED
was hereunto affixed
in the presence of: -
Director.
/s/
- --------------------------
Secretary.
/s/
- --------------------------
<PAGE> 21
DATED 19th April 1993
WAYBORN LEASING LIMITED
to
ICARUS SERVICES LIMITED
Original/
UNDERLEASE
of First Floor Storeroom,
The Graftons, Stamford New Road, Altrincham,
Greater Manchester.
NEIL MYERSON AND CO
Solicitors,
Altrincham.
<PAGE> 22
IN THE ALTRINCHAM COUNTY COURT Plaint No.
IN THE MATTER OF The Landlord and Tenant Act 1954 as
amended by Section 5 of the Law of
Property Act 1969
AND IN THE MATTER OF A proposed Underlease of the First
Floor Storeroom at The Graftons
Stamford New Road Altrincham Greater
Manchester
BETWEEN WAYBORN LEASING LIMITED
First Applicant
and
ICARUS SERVICES LIMITED
Second Applicant
UPON The JOINT APPLICATION of the Applicants
IT IS ORDERED pursuant to Section 38 (4) of the Landlord and Tenant Act 1954
(as amended by Section 5 of the Law of Property Act 1969 that the Applicants be
authorized to enter into an agreement to exclude the provisions of Section 24
to 28 (inclusive) of the Landlord and Tenant Act 1954 as is set out in Clause
(7) of the proposed Underlease of the above mentioned property intended to be
granted by the First Applicant to the Second Applicant a draft whereof is
annexed to the original Originating Application herein
Dated this 21st day of October 1992.
Registrar. /s/
--------------------
<PAGE> 23
THIS LEASE made as a Deed the 19th day of April 1993 BETWEEN WAYBORN LEASING
LIMITED whose registered office is at The Graftons Stamford New Road Altrincham
Greater Manchester WA14 1DQ ("the Landlord" which expression where the context
admits includes the person for the time being entitled to the reversion
immediately expectant on the determination of the term hereby created) of the
one part and ICARUS SERVICES LIMITED whose registered office is 100 Chalk Farm
Road London NW1 8EA ("the Tenant" which expression where the context admits
includes its successors in title) of the other part
WITNESSETH: -
1. IN this Lease
(1) All references to statute (whether to a particular statute or
generally) include reference to any re-enactment or modification thereof for
the time being in force and to any bylaws rules regulations and statutory
instruments made thereunder
(2) "the Building" means the buildings comprising The Graftons Shopping
Precinct Altrincham Greater Manchester
2. THE Landlord demises unto the Tenant ALL THAT the storeroom at first floor
level forming part of the Building edged red on the plan annexed hereto All
which premises hereby demised are herein called "the Demised Premises" (which
expression includes all alterations and additions to and rebuilding of the
Demised Premises comprised in a Lease (hereinafter called "the Headlease" dated
the 19th day of April 1993 and made between Co-operative Insurance Society
Limited (hereinafter called "the Head Landlord" of the one part and the
Landlord of the other part TOGETHER WITH the Landlord's and Head Landlord's
fixtures and fittings in and upon the Demised Premises ("the Landlord's
fixtures") AND TOGETHER WITH (in common with the Landlord Head Landlord and all
other persons entitled thereto) the right: -
(a) for the purpose of gaining access to and from the Demised Premises on
foot only to use the entrance way stairs lifts and passages in the
Building leading from Stamford New Road and George Street to the
Demised Premises
(b) in connection with the permitted use of the Demised Premises to use
with vehicles only the ramp bridge and service area at the first floor
level of the Building
(c) to the free and uninterrupted use of and the right to connect with all
water soil gas electricity telephone and other channels pipes drains
sewers wires and cables now or at any time during the term hereby
created ("the term") upon through or under other parts of the building
<PAGE> 24
(d) of entry into and upon other parts of the Building (but except in case
of emergency only at reasonable times in the daytime upon 48 hours
notice) with all necessary workmen contractors equipment tools and
appliances for the purpose of inspecting cleansing repairing altering
maintaining renewing and improving any channels pipes drains sewers
wires and cables serving exclusively the Demised Premises and now or
at any time during the term in or under other parts of the Building
and for the purpose of carrying out any works comprised within the
Tenant's obligations herein contained which cannot otherwise be
carried out the Tenant causing as little inconvenience as possible to
the other occupiers of the Building and as soon as possible making
good to the reasonable satisfaction of the Landlord the Head Landlord
and the occupiers of such parts of the Building all damage occasioned
thereby and
(e) of support for the demised premises
EXCEPTING AND RESERVING unto the Landlord the Head Landlord and its lessees
tenants and licensees and other occupiers for the time being of the other parts
of the Building the right: -
(a) to the free and uninterrupted passage of water soil gas electricity
telephone and other services through and the right to connect with all
channels pipes drains sewers wires and cables now or at any time
during the term in or passing through or under the Demised Premises
for the supply of services to or the drainage of other parts of the
Building
(b) of entry into and upon the Demised Premises (but except in case of
emergency only at reasonable times in the daytime upon 24 hours
notice) with all necessary workmen contractors equipment tools and
appliances for the purpose of exercising the rights aforesaid and for
the purpose of inspecting cleansing repairing altering maintaining
renewing and improving any channels pipes drains sewers wires and
cables now or at any time during the term in or under the Demised
Premises and serving other parts of the Building and for the purpose
of repairing altering maintaining improving rebuilding and
reconstructing other parts of the Building and for the purpose of
carrying out any works comprised within the Landlord's obligations
hereunder or (whether or not so comprised) for which the Tenant is
liable to make a contribution THE Landlord the Head Landlord or other
person exercising such rights as soon as reasonably practicable making
good to the reasonable satisfaction of the Tenant all damage thereby
occasioned to the Demised Premises
(c) to build on or otherwise develop any adjacent or neighboring land and
to rebuild or alter any adjacent or neighboring building in any manner
and to let the same for any purpose and otherwise deal therewith
notwithstanding that the access of light or air to the Demised
Premises is thereby interfered with and
<PAGE> 25
(d) of support and all other easements now or hereafter during the term
belonging to or enjoyed by other parts of the Building
TO HOLD unto the Tenant from the 10th day of May 1992 for a term of years
expiring on the 2nd day of March 1997 SUBJECT to all rights and easements or
reputed easements (if any) which now affect the Demised Premises or any part
thereof YIELDING AND PAYING yearly and proportionately for any fraction of a
year the rent ("the Rent") of pound sterling 1,850.00 (inclusive of all Service
Charges and buildings insurance) to be paid by equal quarterly payments in
advance the first payment being made on the date hereof for the period from the
day of 1992 to the quarter day next following the date hereof and subsequent
payments to be made on the four usual quarter days in each year
3. THE Tenant covenants with the Landlord: -
(1) To pay the Rent at the times and in the manner aforesaid
(2) Punctually to pay and discharge all rates taxes charges duties
assessments outgoings and impositions (whether or not in the nature of those
now in being) now or at any time during the term payable in respect of the
Demised Premises or any part thereof or the Landlord's fixtures or payable by
the owner or occupier of the Demised Premises except tax payable as a result of
any dealing with the reversion immediately expectant on the determination of
the term
(3) As to the Landlord's fixtures and the internal work of the Demised
Promises in the last year of the term to paint in a proper and workmanlike
manner with two coats of good quality and suitable paint all parts thereof
usually painted and at such time otherwise to treat well and appropriately all
other parts thereof as previously or usually treated in a proper and
workmanlike manner with good and suitable materials
(4) (a) To keep in good and tenantable repair and condition the
Landlord's fixtures and the interior of the Demised Premises including
the plaster and surface coverings of the walls and ceilings and the
floors (other than the structural slab or beams on which the floors
are laid or to which the ceilings are attached) non-load bearing
internal walls the windows and the glass therein (other than external
windows) the doors of and entrance doors to the Demised Premises and
all drainage soil sanitary water gas electricity telephone and other
service pipes wires cables and apparatus in and outside the Demised
Premises so far as the same serve only the Demised Premises PROVIDED
that this paragraph does not have effect where damage results from any
of the Insured Risks covered by the buildings insurance effected by
the Head Landlord and no Insurance moneys are rendered irrevocable by
the act neglect or default of the Tenant
(b) Upon being so required by the Landlord to contribute a
reasonable proportion of the costs and expenses of executing the work
of constructing repairing renewing
<PAGE> 26
rebuilding and cleansing party walls fences gutters sewers drains
roads pavements staircases pipes wires cables apparatus and other
things the use of which is common to the Demised premises and other
premises or other parts of the Building
(5) Not to: -
(a) make any alteration or addition in or to the Demised premises
nor make any alteration in the plan or construction thereof
(b) cut or remove (except for the purpose of making good any
defect) the main walls or timbers or structural members of the
Building
(c) exhibit or suffer to be exhibited any advertisement as defined
by the Planning Acts (as hereinafter defined) upon or so as to be
visible from the exterior of the Building
(6) At its own expense to do or cause to be done upon or in respect of the
Demised Premises and the Landlord's fixtures all works and things and give all
notifications which are or may be necessary for compliance with the
requirements of all general or local Acts of Parliament for the time being in
force or which are or may be by any competent authority directed or required to
be done whether by the owner landlord tenant or occupier of the Demised
Premises AND in each case to indemnify the Landlord against all actions
proceedings costs claims and demands in respect thereof
(7) Upon the receipt from a competent authority of any notice proposal for
a notice order requisition direction or other thing whether served directly on
the Tenant or not and affecting or likely to affect the Demised Premises or the
Landlord's fixtures or the Landlord's or Head Landlord's interest in either of
them forthwith to deliver a copy thereof to the Landlord and at the request and
cost of the Landlord to make or join in making such objections and
representations in respect thereof as it may reasonably require
(8) In relation to the Planning Acts (which expression means the Town and
Country Planning Act 1990 the Planning (Listed Buildings and Conservation
Areas) Act 1990 the Planning (Hazardous Substances) Act 1990 and the Planning
and Compensation Act 1991 and includes all orders plans and directions made and
permissions licenses and consents given thereunder): -
(a) not to do or omit or suffer to be done or omitted anything on
or in connection with the Demised Premises which contravenes the
Planning Acts or any conditions imposed thereunder
(b) not to apply for any permission under the Planning Acts which
affects the Demised Premises or its use
<PAGE> 27
(c) to indemnify the Landlord against all actions proceedings
costs claims and demands arising out of or in connection with any of
the matters referred to in this sub-clause
(9) (a) Not to use or suffer to be used the Demised Premises except as
storage accommodation PROVIDED that notwithstanding the foregoing
provisions of this paragraph the Landlord does not give any warranty
or make any representation that either the said use is or any use to
which the Landlord may hereafter consent will be a permitted use
within the Planning Acts
(b) Not to hold or suffer to be held on the Demised Premises any
sale by auction or any public meeting or public exhibition
(c) Not to install or suffer to be installed on the Demised
Premises any machinery which is noisy or causes dangerous vibrations
or overloading of the floors walls or ceilings of the Demised Premises
(d) Not to do or suffer to be done on the Demised Premises
anything which is noisy or which may be or become an annoyance
nuisance or inconvenience to the Landlord or to the tenants or
occupiers of other parts of the Building or of adjoining or
neighbouring premises
(e) Not to do or suffer to be done anything whereby any policy of
insurance on the Building against the Insured Risks may become void or
voidable or the rate of premium thereon may be increased and to repay
to the Landlord on demand all sums paid by way of increased premium
and expenses incurred by the Landlord in or about the renewal of any
such policy rendered necessary by a breach of this covenant
(f) Not to obstruct or leave any rubbish on any part of the
Building or any entrance thereto used by the Tenant in common with the
other occupiers of the Building
(g) Not to require access to the common parts of the Building
except between such hours and on such days as may from time to time
reasonably be designated by the Landlord or its Agents and at other
times and on other days as may from time to time be reasonably
approved by the Landlord and on such reasonable conditions as the
Landlord may require
(10) To permit the Landlord the Head Landlord their surveyors agents
workmen and others authorized by them at all reasonable hours in the daytime
(but except in case of emergency only upon 24 hours prior notice) to enter upon
the Demised Premises to:-
<PAGE> 28
(a) examine the state and condition thereof and of the Landlord's fixtures
and to give or leave notice in writing at or upon the Demised Premises
requiring the Tenant forthwith to execute all repairs which are the
liability of the Tenant
(b) ascertain whether any unauthorized additions or alterations have been
made therein or thereto and also whether any authorized additions or
alterations have been carried out in accordance with the consents
given by the Landlord and any competent authority
(c) execute all repairs which the Tenant has failed to execute within a
reasonable time after a notice so to do given by the Landlord and the
costs and expenses of such repairs will be payable by the Tenant to
the Landlord on the quarter day following a demand therefor and will
(in addition to any other remedies available to the Landlord) be
recoverable as rent in arrear and
(d) take inventories of the Landlord's fixtures
(11) At the expense of the Tenant to: -
(a) remove any erections additions or alterations made without or
not in accordance with the Landlord's consent or in respect of which
Planning Permission is revoked or lapses
(b) comply with every order of any competent authority requiring
the removal of or other work in connection with such erections
additions or alterations and
(c) make good in all such cases all damage caused by such removal
or other work and to reinstate all parts of the Demised Premises
affected thereby
(12) Immediately upon becoming aware of the same to give notice to the
Landlord of any defect in or lack of repair of the Demised Premises or the
structural parts of the Building within or surrounding the Demised Premises
which might give rise to an obligation on the Landlord to do anything in order
to comply with its obligations under this Lease or the duty of care imposed on
the Landlord by the Defective Premises Act 1972
(13) During the last six months of the term to permit all persons
authorised in writing by the Landlord the Head Landlord or their agents to view
the Demised Premises at reasonable hours in the daytime after giving not less
than 24 hours written notice
(14) (a) To preserve and maintain all existing rights of light passage
drainage and other easements belonging to or used with the Demised
Premises
(b) Not knowingly or negligently to suffer any encroachment on or
new right or easement over the Demised Premises and forthwith upon
becoming aware thereof
<PAGE> 29
to notify the Landlord of any threatened encroachment or attempt to
acquire a new right or easement
(15) As often as may be necessary (but not less frequently than monthly) to
clean the inside and outside of the window in the Demised Premises
(16) (a) Not to assign underlet or part with or share possession or
occupation of part only of the Demised Premises
(b) Not without the consent in writing of the Landlord and the
Head Landlord (which will not be withheld unreasonably) to assign
underlet or part with or share possession or occupation of the whole
of the Demised Premises PROVIDED that every Underlease or Tenancy
Agreement or other document permitting possession or occupation
(howsoever remote) must:-:-
(i) be granted without taking any fine or premium and be at the
open market rental value at the date thereof and
(ii) (unless the same is contained in the Landlord's license
therefor) contain a covenant expressed to be made with the Landlord to
observe and perform the Tenant's covenants (except for payment of
rent) and the agreements in this Lease contained including in
particular a covenant not without the Landlord's written consent to
assign underlet or part with or share possession or occupation of the
Demised Premises
AND PROVIDED that every permitted Assignment (or the Landlord's and Head
Landlord's License therefor) must contain a covenant by the assignee not further
to assign the Demised Premises without the written consent of the Landlord and
the Head Landlord and to observe and perform the covenants (including the
covenant to pay the rents) and the agreements in this Lease contained
(c) On an Assignment to a Limited Company or other incorporated
body if the Landlord reasonably so requires to procure that two
Directors of the Company or body or some other person or persons
reasonably acceptable to the Landlord enter into direct covenants with
the Landlord in the form set out in the Schedule hereto
(d) Every application for a consent under paragraph (b) of this
sub-clause must be in writing and be accompanied by the following
relating to the proposed assignee underlessee tenant or grantee:-
(i) a bankers reference and an accountants or other
professional reference
(ii) if he has previously traded two trade references or
in the case of a Company the then most recent audited trading
accounts
<PAGE> 30
(iii) if he has not previously traded two references given
by responsible persons or bodies
(e) Within one month after any permitted assignment or howsoever
remote) any underlease or parting with or sharing of possession or
occupation or any devolution of the Demised Premises to produce to the
Landlord's Solicitor for registration a certified copy of the
instrument effecting such assignment underletting or parting with or
sharing of possession or occupation or devolution and to pay to the
Landlord a registration fee of pound sterling 15 in respect of each
such instrument or counterpart
(17) (a) To pay all costs charges and expenses (including those of
Solicitors Counsel and Surveyors) reasonably incurred by the Landlord
in connection with the recovery of arrears of rent or for the purposes
of or incidental to the preparation and service of any notices or
proceedings under Section 146 or Section 147 of the Law of Property
Act 1925 notwithstanding that forfeiture is avoided otherwise than by
relief granted by the Court
(b) To pay all costs charges and expenses of the Landlord
(including those of Solicitors Counsel Architects and Surveyors)
reasonably incurred in connection with any application for a consent
or license under this Lease whether such consent or license is granted
or properly refused or the application therefor is withdrawn
(18) In the case of any rent or other money payable hereunder by Tenant to
the Landlord which is not paid within 14 days after the same is due and payable
to pay to the Landlord on demand from the due date until the date of actual
payment in addition to such rent or other money interest (calculated on a daily
basis) upon the amount thereof for the time being unpaid (as well after as
before any judgment) at the rate of 2% above National Westminster Bank Plc Base
Lending Rate (or any similar lending rate which may replace the same) from time
to time in force PROVIDED that this sub-clause is without prejudice to the
right of re-entry herein contained or any other right or remedy available to
the Landlord
(19) To pay to the Landlord in addition to the Rent and the fees and other
payments which may be payable by the Tenant pursuant to this Lease all Value
Added Tax (and any additional or substituted tax of a similar nature) at the
rate from time to time in force which may at any time be payable or charged in
respect of such rent fees and other payments
(20) In the event of a breach of any of the covenants agreements and
provisions herein contained or referred to by any person holding the Demised
Premises or any part thereof as underlessee tenant or licensee of the Tenant
forthwith to take all steps and institute all proceedings necessary to remedy
such breach
<PAGE> 31
(21) To indemnify the Landlord against all liability to any person or
authority incurred by reason of and all actions proceedings costs claims
expenses and demands relating to any of the following matters caused or
permitted by the Tenant: -
(a) any defect in or the execution of any repairs or alterations
to or demolition or rebuilding of the Demised Premises or the
Landlord's fixtures
(b) the alleged interference with or obstruction of any right or
easement existing or alleged to exist for the benefit of other
premises over the Demised Premises
(c) the stoppage of any drains used in common with other parts of
the Building
(22) To comply with all reasonable regulations from time to time made by
the Landlord the Head Landlord or other Agents for the management or running of
the Building or the provision of facilities therefor
(23) At the determination of the term quietly to yield up to the Landlord
the Demised Premises and the Landlord's fixtures in accordance in all respects
with the Tenant's covenants herein contained and with all locks keys and
fastenings complete
4. THE Landlord covenants with the Tenant:-
(1) That the Tenant paying the Rent and performing and observing the
Tenant's covenants and the conditions and agreements herein contained may
peaceably hold the Demised Premises during the term without any interruption by
the Landlord or any person rightfully claiming under or in trust for it
(2) To indemnify and keep indemnified the Tenant against all claims and
demands which may be made against the Tenant by the Superior Landlord pursuant
to the covenants given by the Landlord to the Superior Landlord in a License
dated the 19th day of April 1993 save always insofar as the same arise from any
breach by the Tenant of the covenants on the part of the Tenant herein
contained
(3) To use its best endeavors to procure that the Superior Landlord
observes and performs its obligations or covenants conditions and agreements
more particularly mentioned in the Head Lease
(4) To take such action as the Tenant may reasonably require to ensure
performance and observance by the Superior Landlord of the Superior Landlord's
obligations covenants conditions and Agreements on the part of the Superior
Landlord in the Head Lease or to recover any loss arising from any breach
thereof the Tenant bearing the costs or reasonable proportion of the costs of
any such action so required
<PAGE> 32
(5) To notify the Tenant of any breach of the obligations of the Head
Landlord (as soon as the same comes to the Landlord's attention) relating to
the Demised Premises and (without prejudice to the generality of the foregoing)
in particular of any failure of the Superior Landlord to maintain Insurance in
respect of the Demised Premises
5. IT IS AGREED that:-
(1) If the Rents or any part thereof are unpaid for 14 days after becoming
payable (whether formally demanded or not) or if the Tenant fails to perform or
observe any of the covenants conditions and agreements on its part herein
contained or if the tenant for the time being:-
(a) being an individual becomes bankrupt
(b) has a receiver appointed of the whole or any part of the
property assets or undertaking of the Tenant or
(c) being a Company enters into liquidation whether compulsory or
voluntary (except a voluntary liquidation for the purpose of
reconstruction or amalgamation) or becomes the subject of an
Administration Order or is struck off the Register of Companies or
(d) enters into any arrangement or composition for the benefit of
the Tenant's creditors or
(e) suffers any distress or execution to be levied on the Demised
Premises
then and in any of such case it will be lawful for the Landlord or any person
or persons duly so authorized by it to re-enter upon the Demised Premises or
any part thereof in the name of the whole and thereupon this demise will
absolutely determine but without prejudice to any right of action or remedy of
the Landlord in respect of any breach of the covenants on the Tenant's part
herein contained
(2) The Landlord does not give any warranty or make any representation
that the Landlord's fixtures are in good working order and condition and free
from defects and the Tenant will in such respects rely upon its own inspection
and knowledge
(3) If the Building or the Demised Premises or any part thereof are
destroyed or damaged by any of the Insured Risks so as to render the Demised
Premises or any part thereof unfit for use then unless payment of any moneys
payable under any Policy of Insurance is refused either in whole or in part by
reason of the act neglect or default of the Tenant the Rent or a fair
proportion thereof according to the nature and extent of the damage sustained
will be suspended until the Demised Premises are again rendered fit for use
<PAGE> 33
(4) Section 196 of the Law of Property Act 1925 as amended by the Recorded
Delivery Service Act 1962 applies to all notices served hereunder
(5) If any dispute for the determination of which no express provision is
hereby made arises between the parties concerning their respective rights or
liabilities or the construction or effect of this Lease or otherwise in
connection with the Demised Premises then such dispute will at the request of
either of the parties be referred for the decision of a single arbitrator who
(if the parties are unable to agree upon one) will be nominated by the
President for the time being of the Royal Institution of Chartered Surveyors in
accordance with the Arbitration Acts 1950 and 1979
(6) (a) In the event of the loss or destruction of or substantial
damage to the Building from whatever cause the Landlord may determine
the term by three months notice to expire at any time
(b) If the Head Landlord wishes to demolish or reconstruct the
Building or the Demised Premises or part thereof or to carry out work
of construction or refurbishment on the Building or the Demised
Premises the Landlord may determine the term by not less than five
months notice to the Tenant to expire on or at any time after the 24th
June 1994
AND upon the expiration of any notice under this sub-clause this Lease and
everything herein contained will cease and determine but without prejudice to
any claim by either party in respect of any antecedent breach of this Lease
6. HAVING been authorized so to do by an Order of the Manchester County Court
(No. 9206974) made on the 21st day of October 1992 under the provisions of the
Landlord and Tenant Act 1954 Section 38 (4) the parties agree that the
provisions of Sections 24 to 28 (inclusive) of that Act as amended are excluded
in relation to the tenancy created by this Lease
THE SCHEDULE before referred to
THE Sureties jointly and severally covenant with the Landlord that:-
(1) The Assignee will pay the rents on the days and in manner provided by
the Lease and will perform and observe all the Tenant's covenants and the
conditions and agreements therein contained
(2) In case of default in such payments performance or observance as
aforesaid the Sureties will on demand pay and make good to the Landlord all
losses and damages suffered and costs and expenses incurred by the Landlord by
reason of any such default PROVIDED that any neglect or forbearance of the
Landlord in endeavoring to obtain any such payment or enforcing such observance
or performance and any time which the Landlord may give to
<PAGE> 34
the Assignee will not release or in any way affect the liability of the
Sureties under this covenant
(3) If the Assignee enters into liquidation and the liquidator disclaims
the Lease and if the Landlord within three months after such disclaimer by
notice in writing so requires the Sureties will accept a lease of the Demised
Premises for a term commencing on the date of such disclaimer and expiring on
the date on which the term of the Lease would have expired by effluxion of time
and at the like rents and containing the like covenants conditions and
agreements in all respects
(4) Sub-clauses (1) and (2) of this Clause will also have effect after the
expiration of the term of the Lease through any period during which the
Assignee occupies the Demised Premises and they will also relate to any sums
greater than the rents which the Assignee may become liable to pay in respect
of any such period for use and occupation of the Demised Premises
<PAGE> 35
THE COMMON SEAL of
WAYBORN LEASING LIMITED
was hereunto affixed in the
presence of:-
Director. /s/
-----------------------
Secretary. /s/
-----------------------
<PAGE> 36
DATED 19TH APRIL 1992
WAYBORN LEASING LIMITED
and
ICARUS SERVICES LIMITED
Original/
CAR PARKING LICENCE
- -------------------
relating to car spaces numbered 33, 34, and 55 on the car deck level of The
Office Tower at The Graftons, Stamford New Road, Altrincham, Greater
Manchester.
NEIL MYERSON AND CO
Solicitors,
Altrincham.
<PAGE> 37
THIS LICENCE is made the 19th day of April 1993 BETWEEN WAYBORN LEASING LIMITED
whose registered office is situated at the Graftons Stamford New Road
Altrincham Greater Manchester ("the Owner") of the one part and ICARUS
SERVICES LIMITED whose registered office is at 100 Chalk Farm Road London NW1
8EH ("the Licensee") of the other part
WITNESSETH:-
1. The owner permits the Licensee to use exclusively the car spaces numbered
33, 34 and 55 or such other equivalent spaces as the Owner may from time to
time by written notice reasonably substitute therefor on the car deck level of
the Office Tower at the Graftons Altrincham aforesaid (the car deck which
expression includes the ramps giving access to the car deck level)
2. This licence will endure from the 10th day of May 1992 for a period of
five years
3. During the continuance of this Licence the Licensee will pay to Owner:-
(1) A licence fee ("the Licence fee") of L1275.00 per annum ( and
proportionately for any fraction of a year) quarterly in advance on the four
usual quarter days the first payment being due on the date hereof for the
period from the such date to the next following quarter day and
(2) Within fourteen days after a written demand therefor three fifty-thirds of
the cost from time to time (as certified by the Accountants or Agents to the
Co-operative Insurance Society Limited or its successors in title ("the
Landlord") whose certificate will in the absence of manifest error be binding
on the Owner and the Licensee) of maintaining repairing cleaning and lighting
the car deck and any Value Added Tax payable on the making of such payments
("the Service Charge")
4. It is agreed and declared that:-
(1) It is not the intention of the Owner and the Licensee to create
between them the relation of landlord and tenant
(2) Legal possession and control of the spaces and the car deck will at
all times remain vested in the Owner and the Licensee will not acquire
any estate or interest therein
(3) This License will be suspended during such periods as the Owner may
from time to time reasonably require to carry out repairs to the
spaces and the car deck reasonable prior written notice of the
suspension having been given to the Licensee
5. The Licensee covenants with the Owner:-
1
<PAGE> 38
(1) Punctually to pay all rates taxes charges duties assessments outgoings
and imposition now or at any time during the continuance of this
Licence payable in respect of the spaces or (if not separately
assessed) to pay to the Owner on demand a fair proportion (certified
as before mentioned) of the amounts thereof paid by the Owner in
respect of the spaces and the car deck
(2) Th comply with all statutory and other requirements and all bylaws
rules and regulations made by any competent authority so far as the
smae relate to or affect the spaces or the parking of motor vehicles
therein
(3) Not to use or suffer to be used the spaces except for the parking in
an orderly mannder of one private motor car in each of the spaces
(4) To use its best endeavours to prevent the dripping of petrol oil or
grease from any motor cars parked in the spaces
(5) Not to store or suffer to be stored any fuel other than that contained
in the fuel tanks of the motor cars parked in the spaces
(6) Not to deposit or suffer to be deposited any article whatsoever or any
rubbish or litter on the spaces or the car deck not to suffer the
spaces to become or untidy or in a dangerous condition
(7) Not to carry out or suffer to be carried out to any motor cars parked
in the spaces any repairs overhauls or maintenance and not to use or
suffer to be used any shoe pipe for cleaning such motor cars
(8) Not to do or suffer to be done on the spaces anything which may be or
become a nuisance or annoyance to the Owner or the tenants licensees
or occupiers of any part of The Graftons or the car deck
(9) To comply with all reasonable regulations made and directions given by
the Owner or by the Landlord from time to time concerning the car deck
and the spaces and the use thereof
(10) Except by prior arrangement with the Owner and/or the Landlord not to
use the spaces on Sundays or any bank or general holiday nor before
8.30 a.m. or after 6 p.m. on Mondays to Fridays nor before 8.30 a.m.
or after 1.30 p.m. on Saturdays
(11) Not at any time to obstruct or cause to be obstructed the free
movement of vehicles on the car deck or the entrance to or exit from
the car deck
(12) To indemnify and keep indemnified the Owner from and against all
actions proceedings costs claims and demands in respect of any damage
caused by or liability
2
<PAGE> 39
arising from the act neglect or default of the Licensee or any person
who may be on the car deck or the spaces at the invitation express or
implied of the Licensee
(13) In the case of any license fee or other money payable hereunder by the
Licensee to the Owner which is not paid within 13 days after the same
is due and payable to pay to the Owner on demand from the due date
until the date of actual payment and addition to such License fee or
other money interest (calculated on a daily basis) upon the amount
thereof for the time being unpaid at the rate of four per centum above
the base rate of National Westminster Bank PLC (or other similar
lending rate which may replace the same) from time to time in force
6. Without prejudice to the general right of the Owner to enter upon the
spaces the Owner and its agents and all persons authorized by either of them
may at any time and from time to time inspect the spaces to ascertain whether
the provisions of this License are being complied with and the Licensee will
forthwith remedy any breach thereof upon being required so to do
7. This License is personal to the Licensee and is not assignable
8. On the determination of this License howsoever occasioned the Licensee
will deliver up the spaces in a good and tidy condition
9. This License will be voidable at the option of the Owner and all
rights of the Licensee hereunder will cease if at any time during its
subsistence:-
(1) The Licensee refuses or neglects to pay the whole or any part of the
License Fee or the Service Charge within 14 days after the same become
due and payable; or
(2) The Licensee fails to observe or perform any of the obligations of
agreements on its part herein contained or
(3) An Underlease of even date herewith and made between the Owner (1) and
the Licensee (2) of part of the second floor of The Graftons aforesaid
is determined by forfeiture or otherwise
AND in any of such events the Owner may (without prejudice to any right in
respect of an antecedent breach by the Licensee of such covenants or
agreements) give to the Licensee one week's notice to vacate the spaces and
upon the expiration of such notice the Licensee will forthwith vacate the
spaces and remove therefrom all motor cars and all other things belonging to
the Licensee
10. Having been authorized to do so by an Order of the Altrincham County
Court made on the 29th day of May, 1992 under the provisions of Section 38 (4)
of the landlord and
3
<PAGE> 40
Tenant Act 1954 the parties hereto agree that the provisions of Sections 24 to
28 of that Act shall be excluded in relation to the Tenancy hereby created
11. Section 196 of the Law of Property Act 1925 as amended by the Recorded
Delivery Service Act 1962 applies to all notices served under this License as
though for this purpose (but for no other purpose) the Owner and the Licensee
were lessor and lessee respectively
IN WITNESS whereof the parties hereto have caused their respective Common Seals
to be affixed the day and year first before written
THE COMMON SEAL of WAYBORN )
LEASING LIMITED was hereunto )
affixed in the presence of:- )
)
)
Director.
Secretary
4
<PAGE> 1
EXHIBIT 10.9
Translation (subtract) of Office Agreement
This agreement is made between the owner "Soburo Ikeda" and the tenant "ICARUS
Nippon K.K."
Article 1
Details of the office to be rented to the tenant shall be as below.
Name of the bldg.
Address
Structure
Floor
Office space
Article 2
The premise shall be used solely for the use of the office of the tenant.
Article 3
The terms of the rent of the premise shall be from January 20, 1996 to January
10, 1998. The period shall be renewed with the consent of the owner, subject
to the written notice of the tenant by the end of at least 8 months prior to
the expiration date.
Article 4
The monthly rent of the premise shall be yen: 800,000 exclusive of consumption
tax.
Article 5
Utility charges per month, exclusive of electricity, water, gas and other
direct charges which shall be chargeable and payable directly by the tenant,
other than above Article 4 shall be yen 60,000.
Article 6
Guarantee deposit of the sum of yen 1,800,000 shall be deposited by the tenant
to the owner on the date of this agreement.
The deposit shall bear no interest and shall be charged for the delayed rent
payment and claim for the damage, if such are the cases.
<PAGE> 2
Article 7
Rent and utility charges shall be subject to review in every two years
interval. Despite of this provision, in cases when extraordinary economic
fluctuation aries and the owners is in belief of the unfairness of the level of
the current rent and utility charges, the owner shall amend them at any time,
after consultation with the tenant.
Article 8
Renewal charge of the sum equal to month rent shall be payable to the owner
when this agreement is to be renewed upon maturity.
Article 9
Cancellation notice by the tenant shall be given 6 months prior to the
designated effective, and 8 months when the cancellation is by the owner.
By paying a cancellation fee equal to 2 months rent and utility charges to the
tenant, the owner shall be entitled to cancel this agreement at any time.
Article 10
When this agreement is cancelled by any reason, a part of the guarantee deposit
equal to 2 months of the rent, shall be amortized.
Provided there are any unsettled sum due by the tenant, the sum shall be
deducted from the deposit.
Article 11
Guarantee deposit, after deducting the sum mentioned above article, shall be
refunded to the tenant at whichever is earlier of (1) after 3 months of the
termination of this agreement, or (2) when an another new deposit is deposited
from a new tenant.
Article 12
The tenant shall not sub-rent the promise to any other person nor co-use it
with any other person.
Article 13
When he tenant is in need of modifying and premise as it wishes, the tenant is
obliged to ask for a written consent of the owner prior to the commencement of
the work by submitting a clear plan of the work.
<PAGE> 3
Article 14
The tenant is responsible to compensate any damages to its premise made by the
tenant or its related person by fault.
Article 15
The tenant is not responsible for any damages made by fire, burglar or any
other reason not attributable to the tenant.
Article 16
The owner is entitled to enter into the premise at any time when the owner is
in need to do so.
Article 17 not translated as immaterial
Article 18
Article 19
Article 20
Article 21
The owner is entitled to cancel this agreement at any time when the cases
listed below arises.
(1) delayed payment of the rent and utility for more than 2 months
(2) improper use of the premise violating this agreement
(3) violation of Article 12
(4) bankruptcy or any other similar legal affair occurs
(5) threatening of serious damage to the premise
(6) any other serious violation against this agreement
Article 22
The tenant is obliged to restore the premise to the state of conditions as it
was when this agreement is to be terminated.
The cost for restoring the premise shall be met by the tenant.
Article 23 not translated as immaterial
Article 24
Article 25
<PAGE> 4
Article 26
Any dispute between the owner and the tenant shall be resolved with a friendly
consultation as the first instance.
Article 27
Any dispute not resolved by Article 26 shall be taken up to the Tokyo District
Court.
Article 28 not translated
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated this 22nd day of January, 1998, between
ICARUS International, Inc., a Maryland corporation and ICARUS Corporation, a
Maryland Corporation both companies referred to herein collectively as (both
companies referred to herein collectively as the "Corporation"), and Herbert G.
Blecker (the "Executive").
WITNESSETH
WHEREAS, the Executive is presently the Chairman of the Board,
President and Chief Executive Officer of the Corporation who, in accordance
with the policies established by the Board of Directors of the Corporation (the
"Board"), develops and oversees the implementation of the goals and objectives
of the Corporation (the "Employer"); and
WHEREAS, the Employer desires to be ensured of the Executive's
continued active participation in the business of the Employer; and
WHEREAS, in consideration of the Executive's agreement that any base
salary in excess of amounts actually paid in cash from the years 1981 to the
date hereof shall not be paid to the Executive by the Corporation and/or any
Subsidiary, and in order to induce the Executive to remain in the employ of the
Employer and in consideration of the Executive's agreement to remain in the
employ of the Employer pursuant to the terms and conditions hereof, the parties
desire to specify the terms and conditions of Executive's continuing employment
with the Corporation and to provide certain severance benefits which shall be
due the Executive in the event that his employment with the Employer is
terminated under specified circumstances;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS. The following words and terms shall have the
meanings set forth below for the purposes of this Agreement:
(a) AFFILIATES. "Affiliates" of the Corporation, or a person
"affiliated" with the Corporation, are any persons or entities which, directly
or indirectly, through one or more intermediaries, controls or are controlled
by or are under common control with, the persons or entities specified.
(b) AVERAGE ANNUAL COMPENSATION. The Executive's "Average Annual
Compensation" for purposes of this Agreement shall be deemed to mean the
average level of compensation paid to the Executive by the Employer or any
subsidiary thereof during the most recent five taxable years preceding the Date
of Termination (or such shorter period
<PAGE> 2
Blecker Employment Agreement
Page 2
as the Executive was employed), including Base Salary and bonuses or other
compensation under any employee benefit plans of the Employer.
(c) BASE SALARY. "Base Salary" shall have the meaning set forth
in Section 3(a) hereof.
(d) CAUSE. Termination of the Executive's employment for "Cause"
shall mean termination because of willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order or material breach of any
provision of this Agreement. For purposes of this paragraph, no act or failure
to act on the Executive's part shall be considered "willful" unless done, or
omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best interest of the
Employer. Cause shall be determined in good faith by the affirmative vote of a
majority of the whole Board of Directors (excluding the Executive) after the
Executive has been provided the opportunity to make a presentation to the Board
which presentation to the Board may be with counsel.
(e) CHANGE IN CONTROL OF THE CORPORATION. "Change in Control of
the Corporation" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended
("Exchange Act"), or any successor thereto, whether or not the Corporation is
registered under Exchange Act; provided that, without limitation, such a change
in control shall be deemed to have occurred if (i) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) other than the
Executive or the Corporation, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing 25% or more of the combined voting power of the
Corporation's then outstanding securities; or (ii) during any period of twenty
four consecutive months, individuals who at the beginning of such period
constitute the Board of Directors of the Corporation cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by stockholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at
the beginning of the period.
(f) CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(g) DATE OF TERMINATION. "Date of Termination" shall mean (i) if
the Executive's employment is terminated for Cause, Disability or for
Retirement, the date specified in the Notice of Termination, and (ii) if the
Executive's employment is terminated for any other reason, the date on which a
Notice of Termination is given or as specified in such Notice.
<PAGE> 3
Blecker Employment Agreement
Page 3
(h) DISABILITY. Termination by the Employer of the Executive's
employment based on "Disability" shall mean termination because of any physical
or mental impairment which qualifies the Executive for disability benefits
under the applicable long-term disability plan maintained by the Employer or
any subsidiary or, if no such plan applies, which would qualify the Executive
for disability benefits under the Federal Social Security System.
(i) GOOD REASON. Termination by the Executive of the Executive's
employment for "Good Reason" shall mean termination by the Executive following
a Change in Control of the Corporation based on:
(i) Without the Executive's express written consent, the
failure to elect or to re-elect or to appoint or to
re-appoint the Executive to the offices of Chairman
of the Board, President and Chief Executive Officer
of the Employer or a material adverse change made by
the Employer in the Executive's functions, duties or
responsibilities as Chairman of the Board, President
and Chief Executive Officer of the Employer;
(ii) Without the Executive's express written consent, a
material reduction by the Employer in the Executive's
Base Salary as the same may be increased from time to
time or, except to the extent permitted by Section
3(b) hereof, a material reduction in the package of
fringe benefits provided to the Executive, taken as a
whole;
(iii) Without the Executive's express written consent, the
Employer requires the Executive to work in an office
which is more than 30 miles from the location of the
Employer's current principal executive office, except
for required travel on business of the Employer to an
extent substantially consistent with the Executive's
business travel obligations prior to the Change in
Control;
(iv) Any purported termination of the Executive's
employment for Cause, Disability or Retirement which
is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (k) below;
or
(v) The failure by the Employer to obtain the assumption
of and agreement to perform this Agreement by any
successor as contemplated in Section 13 hereof.
(j) IRS. IRS shall mean the Internal Revenue Service.
<PAGE> 4
Blecker Employment Agreement
Page 4
(k) NOTICE OF TERMINATION. Any purported termination of the
Executive's employment by the Employer for any reason, including without
limitation for Cause, Disability or Retirement, or by the Executive for any
reason, including without limitation for Good Reason, shall be communicated by
a written "Notice of Termination" to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a dated notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision
so indicated, (iii) specifies a Date of Termination, which shall be not less
than thirty (30) nor more than ninety (90) days after such Notice of
Termination is given, except in the case of the Employer's termination of
Executive's employment for Cause for which the Date of Termination may be the
date of the notice; and (iv) is given in the manner specified in Section 10
hereof.
(l) RETIREMENT. "Retirement" shall mean voluntary termination by
the Executive in accordance with the Employer's retirement policies, including
early retirement, generally applicable to the Employer's salaried employees.
(m) SUBSIDIARY. "Subsidiary" shall mean any subsidiary of the
Corporation.
2. TERM OF EMPLOYMENT.
(a) The Employer hereby employs the Executive as Chairman of the
Board, President and Chief Executive Officer, and Executive hereby accepts said
employment and agrees to render such services to the Employer, on the terms and
conditions set forth in this Agreement. Unless extended as provided in this
Section 2, this Agreement shall terminate five (5) years after the date first
above written; provided, however, this Agreement shall be automatically renewed
on its anniversary date ("Annual Renewal Date") each year for one (1)
additional year so that this Agreement shall continue in effect for a period
ending five (5) years from each Annual Renewal Date unless either party shall
give written notice of non-renewal, in accordance with Section 14 hereof to the
other party at least thirty (30) days prior to an Annual Renewal Date, in
which event this Agreement shall continue in effect for a term ending on the
fifth consecutive Annual Renewal Date immediately following such notice.
Reference herein to the term of this Agreement shall refer both to the initial
term and any successive term as the context requires.
(b) During the term of this Agreement, the Executive shall perform
such executive services for the Employer as is consistent with his title of
President and Chief Executive Officer and as directed, from time to time, by
the Board of Directors, including but not limited to, the supervision of the
Corporation's day-to-day operations. The Executive shall devote his full time,
attention and energies to the business of the Corporation and shall not, during
the term hereof (as defined in Section 2(a)), be employed or involved in any
other
<PAGE> 5
Blecker Employment Agreement
Page 5
business activity, whether or not such activity is pursued for gain, profit or
other pecuniary advantage, except for (i) volunteer services for or on behalf
of such religious, educational, non-profit and/or other eleemosynary
organization as Executive may wish to serve, (ii) service as a director of as
many as three (3) for-profit business activities, and (iii) such other
activities as may be specifically approved by the Board of Directors (without
the Executive's participation or vote). This restriction shall not, however,
preclude the Executive from employment in any capacity with affiliates of the
Corporation, nor shall any remuneration from such affiliates be considered in
calculating the Base Salary (as defined in Section 3(a)) due to Executive
hereunder.
3. COMPENSATION AND BENEFITS.
(a) For services rendered hereunder by the Executive, the Employer
shall compensate and pay Executive for his services during the term of this
Agreement at a minimum base salary of two hundred fifty thousand dollars
($250,000.00) per year ("Base Salary"), which may be increased from time to time
in such amounts as may be determined by the Board of Directors of the Employer.
In addition to his Base Salary, the Executive shall receive during the term of
this Agreement such bonus payments as may be determined by the Board of
Directors of the Employer. In addition to any bonus paid or should the Board of
Directors not provide any bonus to Executive for any year, the Executive's
Base Salary shall automatically be increased by the amount of the prior
year's increase in the "Consumer Price Index for all Urban Consumers
(1982-84=100), Washington, D.C. Area, All Items," as published by the United
States Department of Labor, Bureau of Labor Statistics (the "CPI"). With
respect to prior years, the Executive hereby agrees that the Corporation shall
not be required to pay to him any "basic annual compensation" (i.e., salary) in
excess of amounts actually paid in cash from the year 1981 to the date hereof.
(b) During the term of the Agreement, Executive shall be entitled
to participate in and receive the benefits of any pension or other retirement
benefit plan, the 401(k) plan, profit sharing, stock option, employee stock
ownership, or other plans, benefits and privileges given to employees and
executives of the Employer, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Employer. The
Employer shall not make any changes in such plans, benefits or privileges which
would adversely affect Executive's rights or benefits thereunder, unless such
change occurs pursuant to a program applicable to all executive officers of the
Employer and does not result in a proportionately greater adverse change in the
rights of or benefits to Executive as compared with any other executive officer
of the Employer. Nothing paid to Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the base salary payable to Executive pursuant to Section 3(a) hereof.
<PAGE> 6
Blecker Employment Agreement
Page 6
(c) During the term of this Agreement, Executive shall be entitled
to four (4) weeks (20 working days) paid vacation in each calendar year to be
taken and determined in accordance with the vacation policies and procedures as
established from time to time by the Board of Directors of the Employer.
Executive shall also be entitled to all paid holidays to which similarly
situated executives and key management employees of the Corporation are
entitled. The Executive shall be entitled to paid leave due to physical
illness in each calendar year to be taken and determined in accordance with the
policies and procedures as established from time to time by the Board of
Directors. Executive shall not be entitled to receive any additional
compensation from the Employer for failure to take a vacation, or failure to
use "sick days," nor shall Executive be able to accumulate unused vacation or
"sick" time from one year to the next, except to the extent authorized by the
Board of Directors of the Employer.
(d) The Corporation shall provide the Executive with secretarial
and support staff and furnished offices and conference facilities in Rockville,
Maryland, and in such other location, if any, in which the Executive hereafter
agrees to perform services on behalf of the Corporation, all of which shall be
consistent with the Executive's duties as the Chairman of the Board, President
and Chief Executive Officer of the Corporation and sufficient for the efficient
performance of those duties. Nothing in this Agreement shall be construed to
require the Executive to perform or discharge his duties to the Corporation at
any office or location outside of Rockville, Maryland.
4. EXPENSES. The Employer shall reimburse Executive or otherwise
provide for or pay for all reasonable expenses incurred by Executive in
furtherance of, or in connection with the business of the Employer, including,
but not by way of limitation, traveling expenses, and all reasonable
entertainment expenses (whether incurred at the Executive's residence, while
traveling or otherwise), subject to such reasonable documentation and other
limitations as may be established by the Board of Directors of the Employer.
The Employer shall furnish to the Executive a new leased automobile comparable
in class and style to Executive's current vehicle every three (3) years and
shall pay for all gas, oil, repairs, maintenance, insurance and other related
costs of such vehicle's operation. If such expenses are paid in the first
instance by Executive, the Employer shall reimburse the Executive therefor.
5. TERMINATION.
(a) The Employer shall have the right, at any time upon prior
Notice of Termination, to terminate the Executive's employment hereunder for
any reason, including without limitation termination for Cause, Disability or
Retirement, and Executive shall have the right, upon prior Notice of
Termination, to terminate his employment hereunder for any reason.
<PAGE> 7
Blecker Employment Agreement
Page 7
(b) In the event that (i) Executive's employment is terminated by
the Employer for Cause or (ii) Executive terminates his employment hereunder
other than for Good Reason, Executive shall have no right pursuant to this
Agreement to compensation or other benefits for any period after the applicable
Date of Termination.
(c) In the event that (i) Executive's employment is terminated by
the Employer for other than Cause, including termination due to Disability,
Retirement or the Executive's death, or (ii) such employment is terminated by
the Executive due to a material breach of this Agreement by the Employer, which
breach has not been cured within fifteen (15) days after a written notice of
non-compliance has been given by the Executive to the Employer, then the
Employer shall, subject to the provisions of Section 6 hereof, if applicable,
(A) Pay to the Executive, in a lump sum or in thirty-six
(36) equal monthly installments (at the Executive's option) beginning with the
first business day of the month following the Date of Termination, a cash
severance amount equal to three (3) times the Executive's Average Annual
Compensation, and
(B) Maintain and provide for a period ending at the
earlier of (i) the expiration of the remaining term of employment pursuant
hereto prior to the Notice of Termination or (ii) the date of the Executive's
full-time employment by another employer (provided that the Executive is
entitled under the terms of such employment to benefits substantially similar
to those described in this subparagraph (B)), at no cost to the Executive, the
Executive's continued participation in all group insurance, life insurance,
health and accident, disability and other employee benefit plans, programs and
arrangements in which the Executive was entitled to participate immediately
prior to the Date of Termination (other than stock option and restricted stock
plans of the Employer), provided that in the event that the Executive's
participation in any plan, program or arrangement as provided in this
subparagraph (B) is barred or during such period any such plan, program or
arrangement is discontinued or the benefits thereunder are materially reduced,
the Employer shall arrange to provide the Executive with benefits substantially
similar to those which the Executive was entitled to receive under such plans,
programs and arrangements immediately prior to the Date of Termination.
(d) In the event that Executive's employment is terminated by the
Executive for Good Reason subsequent to Change in Control, then the Employer
shall:
(A) Pay to the Executive, in a lump sum payable within
five business days following the Date of Termination, a cash severance amount
equal to five (5) times the Executive's Average Annual Compensation, and
<PAGE> 8
Blecker Employment Agreement
Page 8
(B) Maintain and provide for a period ending at the
earlier of (i) the expiration of the remaining term of employment pursuant
hereof prior to the Notice of Termination or (ii) the date of the Executive's
full-time employment by another employer (provided that the Executive is
entitled under the terms of such employment to benefits substantially similar
to those described in this subparagraph (B)), at no cost to the Executive, the
Executive's continued participation in all group insurance, life insurance,
health and accident, disability and other employee benefit plans, programs and
arrangements in which the Executive was entitled to participate immediately
prior to the Date of Termination (other than stock option and restricted stock
plans of Employer), provided that in the event the Executive's participation in
any plan, program or arrangement is discontinued or the benefit thereunder are
materially reduced, the Employer shall arrange to provide the Executive with
benefits substantially similar to those which the Executive was entitled to
receive under such plans, programs and arrangements immediately prior to the
Date of Termination.
6. ADDITIONAL BENEFITS UNDER CERTAIN CIRCUMSTANCES.
(a) If the Executive becomes liable, in any taxable year, for the
repayment of an excise tax under Section 4999 of the Code on account of any
payments to the Executive pursuant to Section 5, and the Employer chooses not
to contest the liability or has exhausted all administrative and judicial
appeals contesting the liability, the Employer shall pay the Executive (i) an
amount equal to the excise tax for which the Executive is liable under Section
4999 of the Code, (ii) the federal, state, and local income taxes, and interest
if any, for which the Executive is liable on account of the payments pursuant
to item (i), and (ii) any additional excise tax under Section 4999 of the Code
and any federal, state and local income taxes for which the Executive is liable
on account of payments made pursuant to items (i) and (ii).
(b) This Section 6(b) applies if the amount of payments to the
Executive under Section 6(a) has not been determined with finality by the
exhaustion of administrative and judicial appeals. In such circumstances, the
Employer and the Executive shall, as soon as
<PAGE> 9
Blecker Employment Agreement
Page 9
practicable after the event or series of events have occurred giving rise to
the imposition of the excise tax, cooperate in determining the amount of the
Executive's excise tax liability for purposes of paying the estimated tax. The
Executive shall thereafter furnish to the Employer or its successors a copy of
each tax return which reflects a liability for an excise tax under Section 4999
of the Code at least thirty (30) days before the date on which such return is
required to be filed with the IRS. The liability reflected on such return
shall be dispositive for the purposes hereof unless, within twenty (20) days
after such notice is given, the Employer furnishes the Executive with a letter
of the auditors or tax advisor selected by the Employer indicating a different
liability or that the matter is not free from doubt under the applicable laws
and regulations and that the Executive may, in such auditor's or advisor's
opinion, cogently take a different position, which shall be set forth in the
letter with respect to the payments in question. Such letter shall be
addressed to the Executive and state that he is entitled to rely thereon. If
the Employer furnishes such a letter to the Executive, the position reflected
in such letter shall be dispositive for purposes of this Agreement, except as
provided in Section 6(c) below.
(c) Notwithstanding anything in this Agreement to the contrary, if
the Executive's liability for the excise tax under Section 4999 of the Code for
a taxable year is subsequently determined to be less than the amount paid by
the Employer pursuant to Section 6(a), the Executive shall repay the Employer
at the time that the amount of such excise tax liability is finally determined,
the portion of such income and excise tax payments attributable to the
reduction (plus interest on the amount of such repayment at the rate provided
on Section 1274(b)(2)(B) of the Code) and if the Executive's liability for the
excise tax under Section 4999 of the Code for a taxable year is subsequently
determined to exceed the amount paid by the Employer pursuant to Section 6(a),
the Employer shall make an additional payment of income and excise taxes in the
amount of such excess, as well as the amount of any penalty and interest
assessed with respect thereto at the time that the amount of such excess and
any penalty and interest is finally determined.
7. MITIGATION; EXCLUSIVITY OF BENEFITS.
(a) The Executive shall not be required to mitigate the amount of
any benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Executive as a result of employment by another employer after the Date of
Termination or otherwise.
(b) The specific arrangements referred to herein are not intended
to exclude any other benefits which may be available to the Executive upon a
termination of employment with the Employer pursuant to employee benefit plans
of the Employer or otherwise.
<PAGE> 10
Blecker Employment Agreement
Page 10
8. WITHHOLDING. All payments required to be made by the Employer
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Employer may
reasonably determine should be withheld pursuant to any applicable law or
regulation.
9. NON-SOLICITATION OF CUSTOMERS AND EMPLOYEES.
(a) The Executive hereby acknowledges and recognizes the highly
competitive nature of the business of the Corporation and accordingly agrees
that, during the term of this Agreement and, in consideration of the receipt of
any payment pursuant to this Agreement, for a period of two years following the
date of termination of the Executive's employment under this Agreement, unless
otherwise agreed to in writing by the Corporation, the Executive shall not,
either directly or indirectly, in any manner or capacity, whether as principal,
agent, partner, officer, director, employee, joint venturer, salesman, or
corporate shareholder or otherwise for the benefit of any Person (as defined
below), (i) render services to, or solicit the rendering of services to, any
Person in competition with the business of the Corporation, which then is, or
at any time during a period of one year prior to the termination of the
Executive's employment under this Agreement (the "Termination Date"), was a
Customer (as defined below) of the Corporation, or (ii) solicit the rendering
of services to any Person of any kind whatsoever which is then or has been at
any time during a period of one year prior to the Termination Date a Customer,
employee, salesperson, agent or representative of the Corporation in any manner
which interferes or might interfere with the relationship of the Corporation
with such Person, or in an effort to obtain such Person as a customer,
supplier, employee, salesperson, agent or representative of any business in
competition with the Corporation, or (iii) for a period of two years following
the Termination Date, hire or participate in the hiring by any Person of an
employee of the Corporation. In order to assure strict compliance with the
foregoing, and in recognition of the compensation to be paid by Employer to
Executive on the termination of this Agreement, Executive grants to Employer
the sole and absolute right to determine whether any employment or services
anticipated to be undertaken by Executive during said period of time as
outlined above, is or may be in violation of the foregoing provisions and
Executive agrees to notify Employer, in writing, fourteen (14) days prior to
undertaking any employment or services within the said time period, regardless
of the nature thereof, of the name and address of any such intended employer,
proposed job title, proposed job description and salary, and the business of
the prospective employer. If, within such fourteen (14) day period, Employer
shall object on reasonable grounds to such anticipated employment in writing to
Executive, Executive agrees not to accept the same or in any manner directly or
indirectly render services to any such prospective employer.
"Person" means any individual, trust, partnership, corporation,
limited liability company, association, or other legal entity.
<PAGE> 11
Blecker Employment Agreement
Page 11
"Customer" means any Person with which the Corporation or any
subsidiary is currently engaged to provide goods or services, has been engaged
to provide goods or services within twelve (12) months prior to the Termination
Date, or actively marketed, discussed a project with, negotiated with, provided
a bid to or otherwise communicated with in an effort to obtain an engagement to
provide goods or services sold by the Corporation or any subsidiary within
twelve (12) months prior to the Termination Date.
(b) It is expressly understood and agreed that although the
Executive and the Corporation consider the restrictions contained in Section
9(a) of this Agreement reasonable for the purpose of preserving for the
Corporation its good will and other proprietary rights, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in Section 9(a) of this Agreement is an
unreasonable or otherwise unenforceable restriction against the Executive, the
provisions of Section 9(a) of this Agreement shall not be rendered void but
shall be deemed amended to apply as to such maximum time and territory and to
such other extent as such court may judicially determine or indicate to be
reasonable.
10. DISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive
acknowledges that the Corporation's trade secrets, as they may exist from time
to time, and confidential information concerning its products, programs,
technical information, procurement and sales activities and procedures,
identity of customers and potential customers, business plans, promotion and
pricing techniques, and credit and financial data concerning customers are
valuable, special and unique assets of the Corporation. In light of the highly
competitive nature of the industry in which the Corporation's business is
conducted, the Executive agrees that all knowledge and information described in
the preceding sentence not in the public domain and heretofore or in the future
obtained by the Executive shall be considered confidential information.
Executive agrees that he will not disclose any or such secrets, processes or
information to any Person or other entity for any reason or purpose whatsoever,
except as necessary in the performance of his duties as an employee of or
consultant to the Corporation and then only upon a written confidentiality
agreement in such form and content as requested by the Corporation from time to
time, nor shall the Executive make use of any such secrets, processes or
information (other than information in the public domain) for his own purposes
or for the benefit of himself, any Person or other entity (except the Company
and its subsidiaries) under any circumstances. The provisions contained in
this Section 10 shall also apply to information obtained by the Executive with
respect to any future subsidiary of the Corporation.
11. BUSINESS INFORMATION. Upon the termination of his employment
with the Corporation, Executive (or, as appropriate, his personal
representatives) shall deliver to the Corporation (without retaining copies of
the same), all plans, source codes, designs, customer lists, correspondence,
records, documents, accounts and papers of any description
<PAGE> 12
Blecker Employment Agreement
Page 12
and any other property of the Corporation within the possession or under the
control of Executive (or, as appropriate, his personal representatives) and
relating to the affairs and business of the Corporation, whether drafted,
created or compiled by Executive or received by Executive from other
individuals or entities (whether employees of or affiliated with the
Corporation).
12. REMEDIES. The Executive acknowledges and agrees that the
Company's remedy at law for a breach or threatened breach of any of the
provisions of Section 9, Section 10 or Section 11 of this Agreement would be
inadequate and, in recognition of this fact, in the event of a breach or
threatened breach by the Executive of any of the provisions of Section 9,
Section 10 or Section 11 of this Agreement, it is agreed that, in addition to
any remedy at law, the Corporation shall be entitled to without posting any
bond, and the Executive agrees not to oppose the Corporation's request in the
nature of specific performance, temporary restraining order, temporary or
permanent injunction, or any other equitable relief or remedy which may then be
available, provided, however, nothing herein shall be deemed to relieve the
Corporation of its burden to prove grounds warranting such relief nor preclude
the Executive from contesting such grounds or facts in support thereof.
Nothing herein contained shall be construed as prohibiting the Corporation from
pursuing any other remedies available to it for such breach or threatened
breach.
13. ASSIGNABILITY. The Employer shall assign this Agreement and
its rights and obligations hereunder in whole, but not in part, to any
corporation or other entity with or into which the Employer may hereafter merge
or consolidate or to which the Employer may transfer all or substantially all of
its assets, if in any such case said corporation or other entity shall by
operation of law or expressly in writing assume all obligations of the Employer
hereunder as fully as if it had been originally made a party hereto, but may not
otherwise assign this Agreement or its rights and obligations hereunder. The
Executive may not assign or transfer this Agreement or any rights or obligations
hereunder.
14. NOTICE. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
To the Employer: Board of Directors
ICARUS International, Inc.
One Central Plaza
11300 Rockville Pike
Rockville, Maryland 20852
<PAGE> 13
Blecker Employment Agreement
Page 13
With copies to: Lawrence H. Fischer, Esq.
Deckelbaum Ogens & Fischer
1140 Connecticut Avenue, N.W.
Suite 703
Washington, DC 20036
and
Jeffrey A. Koeppel, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
To the Executive: Herbert G. Blecker
10129 Sorrel Avenue
Potomac, Maryland 20854
15. AMENDMENT; WAIVER. This Agreement supersedes and replaces the
Contract of Employment by and between the Executive and the Employer dated
August 1, 1981, which shall be, upon the execution of this Agreement,
terminated, null and void as of the date hereof. This Agreement represents the
entire agreement of the parties relating to subject matter hereof. No
provisions of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by the
Executive and such officer or officers as may be specifically designated by the
Board of Directors of the Employer to sign on its behalf. No waiver by any
party hereto at any time of any breach by any other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
16. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Maryland.
17. NATURE OF OBLIGATIONS. The obligations of the Employer
hereunder are unsecured and the Executive represents a general creditor of the
Corporation for compensation which may be due and owing. Nothing contained
herein shall create or require the Employer to create a trust of any kind to
fund any benefits which may be payable hereunder, and to the extent that the
Executive acquires a right to receive benefits from the Employer hereunder,
such right shall be no greater than the right of any unsecured general creditor
of the Employer.
<PAGE> 14
Blecker Employment Agreement
Page 14
18. INTERPRETATION AND HEADINGS. This Agreement shall be
interpreted in order to achieve the purposes for which it was entered into.
The section headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
19. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect. With respect to Section 9 of this Agreement, in the event any court of
competent jurisdiction determines that such provisions are unreasonable or
contrary to law with respect to their time or geographic restriction, or both,
the parties hereto authorize such court to substitute restrictions as it deems
appropriate without invalidating such paragraph or this Agreement.
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
Attest: ICARUS INTERNATIONAL, INC.
/s/ By: /s/
- -------------------------- -------------------------------
Name:
-----------------------------
Title:
--------------------------
ICARUS CORPORATION
By: /s/
-------------------------------
Name:
-----------------------------
Title:
----------------------------
EXECUTIVE
By: /s/
-------------------------------
Herbert G. Blecker
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated this 22nd day of January, 1998, between
ICARUS International, Inc., a Maryland corporation and ICARUS Corporation, a
Maryland Corporation both companies referred to herein collectively as (both
companies referred to herein collectively as the "Corporation"), and William F.
Geritz, III (the "Executive").
WITNESSETH
WHEREAS, the Executive is presently the Executive Vice President of the
Corporation who, in accordance with the policies established by the Board of
Directors of the Corporation (the "Board"), is responsible for the business
development, sales and marketing for the Corporation (the "Employer"); and
WHEREAS, the Employer desires to be ensured of the Executive's
continued active participation in the business of the Employer; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Employer and in consideration of the Executive's agreement to remain in the
employ of the Employer pursuant to the terms and conditions hereof, the parties
desire to specify the terms and conditions of Executive's continuing employment
with the Corporation and to provide certain severance benefits which shall be
due the Executive in the event that his employment with the Employer is
terminated under specified circumstances;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS. The following words and terms shall have the
meanings set forth below for the purposes of this Agreement:
(a) AFFILIATES. "Affiliates" of the Corporation, or a person
"affiliated" with the Corporation, are any persons or entities which, directly
or indirectly, through one or more intermediaries, controls or are controlled
by or are under common control with, the persons or entities specified.
(b) AVERAGE ANNUAL COMPENSATION. The Executive's "Average Annual
Compensation" for purposes of this Agreement shall be deemed to mean the
average level of compensation paid to the Executive by the Employer or any
subsidiary thereof during the most recent five taxable years preceding the Date
of Termination (or such shorter period as the Executive was employed),
including Base Salary and bonuses or other compensation under any employee
benefit plans of the Employer.
<PAGE> 2
Geritz Employment Agreement
Page 2
(c) BASE SALARY. "Base Salary" shall have the meaning set forth
in Section 3(a) hereof.
(d) CAUSE. Termination of the Executive's employment for "Cause"
shall mean termination because of willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order or material breach of any
provision of this Agreement. For purposes of this paragraph, no act or failure
to act on the Executive's part shall be considered "willful" unless done, or
omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best interest of the
Employer. Cause shall be determined in good faith by the affirmative vote of a
majority of the whole Board of Directors (excluding the Executive) after the
Executive has been provided the opportunity to make a presentation to the Board
which presentation to the Board may be with counsel.
(e) CHANGE IN CONTROL OF THE CORPORATION. "Change in Control of
the Corporation" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended
("Exchange Act"), or any successor thereto, whether or not the Corporation is
registered under Exchange Act; provided that, without limitation, such a change
in control shall be deemed to have occurred if (i) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) other than the
Executive or the Corporation, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing 25% or more of the combined voting power of the
Corporation's then outstanding securities; or (ii) during any period of twenty
four consecutive months, individuals who at the beginning of such period
constitute the Board of Directors of the Corporation cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by stockholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at
the beginning of the period.
(f) CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(g) DATE OF TERMINATION. "Date of Termination" shall mean (i) if
the Executive's employment is terminated for Cause, Disability or for
Retirement, the date specified in the Notice of Termination, and (ii) if the
Executive's employment is terminated for any other reason, the date on which a
Notice of Termination is given or as specified in such Notice.
(h) DISABILITY. Termination by the Employer of the Executive's
employment based on "Disability" shall mean termination because of any physical
or mental impairment which qualifies the Executive for disability benefits
under the applicable long-term disability plan
<PAGE> 3
Geritz Employment Agreement
Page 3
maintained by the Employer or any subsidiary or, if no such plan applies, which
would qualify the Executive for disability benefits under the Federal Social
Security System.
(i) GOOD REASON. Termination by the Executive of the Executive's
employment for "Good Reason" shall mean termination by the Executive following
a Change in Control of the Corporation based on:
(i) Without the Executive's express written consent, the
failure to elect or to re-elect or to appoint or to
re-appoint the Executive to the office of Executive
Vice President of the Employer or a material adverse
change made by the Employer in the Executive's
functions, duties or responsibilities as
Executive Vice President of the Employer;
(ii) Without the Executive's express written consent, a
material reduction by the Employer in the Executive's
Base Salary as the same may be increased from time to
time or, except to the extent permitted by Section
3(b) hereof, a material reduction in the package of
fringe benefits provided to the Executive, taken as a
whole;
(iii) Without the Executive's express written consent, the
Employer requires the Executive to work in an office
which is more than 30 miles from the location of the
Employer's current principal executive office, except
for required travel on business of the Employer to an
extent substantially consistent with the Executive's
business travel obligations prior to the Change in
Control;
(iv) Any purported termination of the Executive's
employment for Cause, Disability or Retirement which
is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (k) below;
or
(v) The failure by the Employer to obtain the assumption
of and agreement to perform this Agreement by any
successor as contemplated in Section 13 hereof.
(j) IRS. "IRS" shall mean the Internal Revenue Service.
(k) NOTICE OF TERMINATION. Any purported termination of the
Executive's employment by the Employer for any reason, including without
limitation for Cause, Disability or Retirement, or by the Executive for any
reason, including without limitation for Good Reason, shall be communicated by
a written "Notice of Termination" to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a dated notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for
<PAGE> 4
Geritz Employment Agreement
Page 4
termination of Executive's employment under the provision so indicated, (iii)
specifies a Date of Termination, which shall be not less than thirty (30) nor
more than ninety (90) days after such Notice of Termination is given, except in
the case of the Employer's termination of Executive's employment for Cause for
which the Date of Termination may be the date of the notice; and (iv) is given
in the manner specified in Section 10 hereof.
(l) RETIREMENT. "Retirement" shall mean voluntary termination by
the Executive in accordance with the Employer's retirement policies, including
early retirement, generally applicable to the Employer's salaried employees.
(m) SUBSIDIARY. "Subsidiary" shall mean any subsidiary of the
Corporation.
2. TERM OF EMPLOYMENT.
(a) The Employer hereby employs the Executive as Executive Vice
President, and Executive hereby accepts said employment and agrees to
render such services to the Employer, on the terms and conditions set forth in
this Agreement. Unless extended as provided in this Section 2, this Agreement
shall terminate five (5) years after the date first above written; provided,
however, this Agreement shall be automatically renewed on its anniversary date
("Annual Renewal Date") each year for one (1) additional year so that this
Agreement shall continue in effect for a period ending five (5) years from each
Annual Renewal Date unless either party shall give written notice of
non-renewal, in accordance with Section 14 hereof to the other party at least
thirty (30) days prior to an Annual Renewal Date, in which event this Agreement
shall continue in effect for a term ending on the fifth consecutive Annual
Renewal Date immediately following such notice. Reference herein to the term
of this Agreement shall refer both to the initial term and any successive term
as the context requires.
(b) During the term of this Agreement, the Executive shall perform
such executive services for the Employer as is consistent with his title of
Executive Vice President and as directed, from time to time, by the Board of
Directors and/or the President and Chief Executive Officer, including but not
limited to, the supervision of the Corporation's business development,
marketing and sales operations. The Executive shall devote his full time,
attention and energies to the business of the Corporation and shall not, during
the term hereof (as defined in Section 2(a)), be employed or involved in any
other business activity, whether or not such activity is pursued for gain,
profit or other pecuniary advantage, except for (i) volunteer services for or
on behalf of such religious, educational, non-profit and/or other eleemosynary
organization as Executive may wish to serve, (ii) service as a director of as
many as three (3) for-profit business activities, and (iii) such other
activities as may be specifically approved by the Board of Directors (without
the Executive's participation or vote). This restriction shall not, however,
preclude the Executive from employment in any capacity with affiliates of the
Corporation, nor shall any remuneration from such affiliates
<PAGE> 5
Geritz Employment Agreement
Page 5
be considered in calculating the Base Salary (as defined in Section 3(a)) due
to Executive hereunder.
3. COMPENSATION AND BENEFITS.
(a) For services rendered hereunder by the Executive, the Employer
shall compensate and pay Executive for his services during the term of
this Agreement at a minimum base salary of one hundred twenty-five thousand
dollars ($125,000.00) per year ("Base Salary"), which may be increased from
time to time in such amounts as may be determined by the Board of Directors of
the Employer. In addition to his Base Salary, the Executive shall receive a
cash bonus for fiscal 1998, payable in May 1998 (on a date in May 1998
determined by management) in the amount of one hundred twenty-five thousand
dollars ($125,000.00) and a cash bonus for the fiscal years 1999, 2000 and 2001
to be based upon performance objectives to be determined by and between the
Board of Directors (or the Compensation Committee thereof) and the Executive
prior to the commencement of each such fiscal year, using quarterly goals and
based upon targeted revenue and earnings growth of the Corporation, strategic
alliances or acquisitions and the Executive's management of the Corporation's
affairs, payable quarterly throughout the fiscal year, provided that the goals
are successfully attained. In addition to any bonus paid or should the Board of
Directors not provide any bonus to Executive for any year, the Executive's
Base Salary shall automatically be increased by the amount of the prior
year's increase in the "Consumer Price Index for all Urban Consumers
(1982-84=100), Washington, D.C. Area, All Items," as published by the United
States Department of Labor, Bureau of Labor Statistics (the "CPI").
(b) During the term of the Agreement, Executive shall be entitled
to participate in and receive the benefits of any pension or other retirement
benefit plan, the 401(k) plan, profit sharing, stock option, employee stock
ownership, or other plans, benefits and privileges given to employees and
executives of the Employer, to the extent commensurate with his then duties and
responsibilities, as fixed by the Board of Directors of the Employer. The
Employer shall not make any changes in such plans, benefits or privileges which
would adversely affect Executive's rights or benefits thereunder, unless such
change occurs pursuant to a program applicable to all executive officers of the
Employer and does not result in a proportionately greater adverse change in the
rights of or benefits to Executive as compared with any other executive officer
of the Employer. Nothing paid to Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the base salary payable to Executive pursuant to Section 3(a) hereof.
(c) During the term of this Agreement, Executive shall be entitled
to four (4) weeks (20 working days) paid vacation in each calendar year to be
taken and determined in accordance with the vacation policies and procedures as
established from time to time
<PAGE> 6
Geritz Employment Agreement
Page 6
by the Board of Directors of the Employer. Executive shall also be entitled to
all paid holidays to which similarly situated executives and key management
employees of the Corporation are entitled. The Executive shall be entitled to
paid leave due to physical illness in each calendar year to be taken and
determined in accordance with the policies and procedures as established from
time to time by the Board of Directors. Executive shall not be entitled to
receive any additional compensation from the Employer for failure to take a
vacation, or failure to use "sick days," nor shall Executive be able to
accumulate unused vacation or "sick" time from one year to the next, except to
the extent authorized by the Board of Directors of the Employer.
4. EXPENSES. The Employer shall reimburse Executive or otherwise
provide for or pay for all reasonable expenses incurred by Executive in
furtherance of, or in connection with the business of the Employer, including,
but not by way of limitation, traveling expenses, and all reasonable
entertainment expenses (whether incurred at the Executive's residence, while
traveling or otherwise), subject to such reasonable documentation and other
limitations as may be established by the Board of Directors of the Employer.
If such expenses are paid in the first instance by Executive, the Employer
shall reimburse the Executive therefor.
5. TERMINATION.
(a) The Employer shall have the right, at any time upon prior
Notice of Termination, to terminate the Executive's employment hereunder for
any reason, including without limitation termination for Cause, Disability or
Retirement, and Executive shall have the right, upon prior Notice of
Termination, to terminate his employment hereunder for any reason.
(b) In the event that (i) Executive's employment is terminated by
the Employer for Cause or (ii) Executive terminates his employment hereunder
other than for Good Reason, Executive shall have no right pursuant to this
Agreement to compensation or other benefits for any period after the applicable
Date of Termination.
(c) In the event that (i) Executive's employment is terminated by
the Employer for other than Cause, including termination due to Disability,
Retirement or the Executive's death, or (ii) such employment is terminated by
the Executive due to a material breach of this Agreement by the Employer, which
breach has not been cured within fifteen (15) days after a written notice of
non-compliance has been given by the Executive to the Employer, then the
Employer shall, subject to the provisions of Section 6 hereof, if applicable,
(A) Pay to the Executive, in a lump sum or in thirty-six
(36) equal monthly installments (at the Executive's option) beginning with the
first business day of the month following the Date of Termination, a cash
severance amount equal to three (3) times the Executive's Average Annual
Compensation, and
<PAGE> 7
Geritz Employment Agreement
Page 7
(B) Maintain and provide for a period ending at the
earlier of (i) the expiration of the remaining term of employment pursuant
hereto prior to the Notice of Termination or (ii) the date of the Executive's
full-time employment by another employer (provided that the Executive is
entitled under the terms of such employment to benefits substantially similar
to those described in this subparagraph (B)), at no cost to the Executive, the
Executive's continued participation in all group insurance, life insurance,
health and accident, disability and other employee benefit plans, programs and
arrangements in which the Executive was entitled to participate immediately
prior to the Date of Termination (other than stock option and restricted stock
plans of the Employer), provided that in the event that the Executive's
participation in any plan, program or arrangement as provided in this
subparagraph (B) is barred or during such period any such plan, program or
arrangement is discontinued or the benefits thereunder are materially reduced,
the Employer shall arrange to provide the Executive with benefits substantially
similar to those which the Executive was entitled to receive under such plans,
programs and arrangements immediately prior to the Date of Termination.
(d) In the event that Executive's employment is terminated by the
Executive for Good Reason subsequent to Change in Control, then the Employer
shall:
(A) Pay to the Executive, in a lump sum payable within
five business days following the Date of Termination, a cash severance amount
equal to five (5) times the Executive's Average Annual Compensation, and
(B) Maintain and provide for a period ending at the
earlier of (i) the expiration of the remaining term of employment pursuant
hereof prior to the Notice of Termination or (ii) the date of the Executive's
full-time employment by another employer (provided that the Executive is
entitled under the terms of such employment to benefits substantially similar
to those described in this subparagraph (B)), at no cost to the Executive, the
Executive's continued participation in all group insurance, life insurance,
health and accident, disability and other employee benefit plans, programs and
arrangements in which the Executive was entitled to participate immediately
prior to the Date of Termination (other than stock option and restricted stock
plans of Employer), provided that in the event the Executive's participation in
any plan, program or arrangement is discontinued or the benefit thereunder are
materially reduced, the Employer shall arrange to provide the Executive with
benefits substantially similar to those which the Executive was entitled to
receive under such plans, programs and arrangements immediately prior to the
Date of Termination.
6. ADDITIONAL BENEFITS UNDER CERTAIN CIRCUMSTANCES.
(a) If the Executive becomes liable, in any taxable year, for the
repayment of an excise tax under Section 4999 of the Code on account of any
payments to the Executive pursuant to Section 5, and the Employer chooses not
to contest the liability or has exhausted
<PAGE> 8
Geritz Employment Agreement
Page 8
all administrative and judicial appeals contesting the liability, the Employer
shall pay the Executive (i) an amount equal to the excise tax for which the
Executive is liable under Section 4999 of the Code, (ii) the federal, state,
and local income taxes, and interest if any, for which the Executive is liable
on account of the payments pursuant to item (i), and (ii) any additional excise
tax under Section 4999 of the Code and any federal, state and local income
taxes for which the Executive is liable on account of payments made pursuant to
items (i) and (ii).
(b) This Section 6(b) applies if the amount of payments to the
Executive under Section 6(a) has not been determined with finality by the
exhaustion of administrative and judicial appeals. In such circumstances, the
Employer and the Executive shall, as soon as practicable after the event or
series of events have occurred giving rise to the imposition of the excise tax,
cooperate in determining the amount of the Executive's excise tax liability for
purposes of paying the estimated tax. The Executive shall thereafter furnish
to the Employer or its successors a copy of each tax return which reflects a
liability for an excise tax under Section 4999 of the Code at least thirty (30)
days before the date on which such return is required to be filed with the IRS.
The liability reflected on such return shall be dispositive for the purposes
hereof unless, within twenty (20) days after such notice is given, the Employer
furnishes the Executive with a letter of the auditors or tax advisor selected
by the Employer indicating a different liability or that the matter is not free
from doubt under the applicable laws and regulations and that the Executive
may, in such auditor's or advisor's opinion, cogently take a different
position, which shall be set forth in the letter with respect to the payments
in question. Such letter shall be addressed to the Executive and state that he
is entitled to rely thereon. If the Employer furnishes such a letter to the
Executive, the position reflected in such letter shall be dispositive for
purposes of this Agreement, except as provided in Section 6(c) below.
(c) Notwithstanding anything in this Agreement to the contrary, if
the Executive's liability for the excise tax under Section 4999 of the Code for
a taxable year is subsequently determined to be less than the amount paid by
the Employer pursuant to Section 6(a), the Executive shall repay the Employer
at the time that the amount of such excise tax liability is finally determined,
the portion of such income and excise tax payments attributable to the
reduction (plus interest on the amount of such repayment at the rate provided
on Section 1274(b)(2)(B) of the Code) and if the Executive's liability for the
excise tax under Section 4999 of the Code for a taxable year is subsequently
determined to exceed the amount paid by the Employer pursuant to Section 6(a),
the Employer shall make an additional payment of income and excise taxes in the
amount of such excess, as well as the amount of any penalty and interest
assessed with respect thereto at the time that the amount of such excess and
any penalty and interest is finally determined.
<PAGE> 9
Geritz Employment Agreement
Page 9
7. MITIGATION; EXCLUSIVITY OF BENEFITS.
(a) The Executive shall not be required to mitigate the amount of
any benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Executive as a result of employment by another employer after the Date of
Termination or otherwise.
(b) The specific arrangements referred to herein are not intended
to exclude any other benefits which may be available to the Executive upon a
termination of employment with the Employer pursuant to employee benefit plans
of the Employer or otherwise.
8. WITHHOLDING. All payments required to be made by the Employer
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Employer may
reasonably determine should be withheld pursuant to any applicable law or
regulation.
9. NON-SOLICITATION OF CUSTOMERS AND EMPLOYEES.
(a) The Executive hereby acknowledges and recognizes the highly
competitive nature of the business of the Corporation and accordingly agrees
that, during the term of this Agreement and, in consideration of the receipt of
any payment pursuant to this Agreement, for a period of two years following the
date of termination of the Executive's employment under this Agreement, unless
otherwise agreed to in writing by the Corporation, the Executive shall not,
either directly or indirectly, in any manner or capacity, whether as principal,
agent, partner, officer, director, employee, joint venturer, salesman, or
corporate shareholder or otherwise for the benefit of any Person (as defined
below), (i) render services to, or solicit the rendering of services to, any
Person in competition with the business of the Corporation, which then is, or
at any time during a period of one year prior to the termination of the
Executive's employment under this Agreement (the "Termination Date"), was a
Customer (as defined below) of the Corporation, or (ii) solicit the rendering
of services to any Person of any kind whatsoever which is then or has been at
any time during a period of one year prior to the Termination Date a Customer,
employee, salesperson, agent or representative of the Corporation in any manner
which interferes or might interfere with the relationship of the Corporation
with such Person, or in an effort to obtain such Person as a customer,
supplier, employee, salesperson, agent or representative of any business in
competition with the Corporation, or (iii) for a period of two years following
the Termination Date, hire or participate in the hiring by any Person of an
employee of the Corporation. In order to assure strict compliance with the
foregoing, and in recognition of the compensation to be paid by Employer to
Executive on the termination of this Agreement, Executive grants to Employer
the sole and absolute right to determine whether any employment or services
anticipated to be undertaken by Executive during said period of time as
outlined above, is or may be in violation of the foregoing provisions and
Executive agrees to notify Employer, in writing, fourteen (14) days prior to
undertaking any
<PAGE> 10
Geritz Employment Agreement
Page 10
employment or services within the said time period, regardless of the nature
thereof, of the name and address of any such intended employer, proposed job
title, proposed job description and salary, and the business of the prospective
employer. If, within such fourteen (14) day period, Employer shall object on
reasonable grounds to such anticipated employment in writing to Executive,
Executive agrees not to accept the same or in any manner directly or indirectly
render services to any such prospective employer.
"Person" means any individual, trust, partnership, corporation,
limited liability company, association, or other legal entity.
"Customer" means any Person with which the Corporation or any
subsidiary is currently engaged to provide goods or services, has been engaged
to provide goods or services within twelve (12) months prior to the Termination
Date, or actively marketed, discussed a project with, negotiated with, provided
a bid to or otherwise communicated with in an effort to obtain an engagement to
provide goods or services sold by the Corporation or any subsidiary within
twelve (12) months prior to the Termination Date.
(b) It is expressly understood and agreed that although the
Executive and the Corporation consider the restrictions contained in Section
9(a) of this Agreement reasonable for the purpose of preserving for the
Corporation its good will and other proprietary rights, if a final judicial
determination is made by a court having jurisdiction that the time or territory
or any other restriction contained in Section 9(a) of this Agreement is an
unreasonable or otherwise unenforceable restriction against the Executive, the
provisions of Section 9(a) of this Agreement shall not be rendered void but
shall be deemed amended to apply as to such maximum time and territory and to
such other extent as such court may judicially determine or indicate to be
reasonable.
10. DISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive
acknowledges that the Corporation's trade secrets, as they may exist from time
to time, and confidential information concerning its products, programs,
technical information, procurement and sales activities and procedures,
identity of customers and potential customers, business plans, promotion and
pricing techniques, and credit and financial data concerning customers are
valuable, special and unique assets of the Corporation. In light of the highly
competitive nature of the industry in which the Corporation's business is
conducted, the Executive agrees that all knowledge and information described in
the preceding sentence not in the public domain and heretofore or in the future
obtained by the Executive shall be considered confidential information.
Executive agrees that he will not disclose any or such secrets, processes or
information to any Person or other entity for any reason or purpose whatsoever,
except as necessary in the performance of his duties as an employee of or
consultant to the Corporation and then only upon a written confidentiality
agreement in such form and content as requested by the Corporation from time to
time, nor shall the Executive make use of any such secrets, processes or
information (other than information in the public domain) for his own purposes
or for the benefit of himself, any Person or other
<PAGE> 11
Geritz Employment Agreement
Page 11
entity (except the Company and its subsidiaries) under any circumstances. The
provisions contained in this Section 10 shall also apply to information
obtained by the Executive with respect to any future subsidiary of the
Corporation.
11. BUSINESS INFORMATION. Upon the termination of his employment
with the Corporation, Executive (or, as appropriate, his personal
representatives) shall deliver to the Corporation (without retaining copies of
the same), all plans, source codes, designs, customer lists, correspondence,
records, documents, accounts and papers of any description and any other
property of the Corporation within the possession or under the control of
Executive (or, as appropriate, his personal representatives) and relating to
the affairs and business of the Corporation, whether drafted, created or
compiled by Executive or received by Executive from other individuals or
entities (whether employees of or affiliated with the Corporation).
12. REMEDIES. The Executive acknowledges and agrees that the
Company's remedy at law for a breach or threatened breach of any of the
provisions of Section 9, Section 10 or Section 11 of this Agreement would be
inadequate and, in recognition of this fact, in the event of a breach or
threatened breach by the Executive of any of the provisions of Section 9,
Section 10 or Section 11 of this Agreement, it is agreed that, in addition to
any remedy at law, the Corporation shall be entitled to without posting any
bond, and the Executive agrees not to oppose the Corporation's request in the
nature of specific performance, temporary restraining order, temporary or
permanent injunction, or any other equitable relief or remedy which may then be
available, provided, however, nothing herein shall be deemed to relieve the
Corporation of its burden to prove grounds warranting such relief nor preclude
the Executive from contesting such grounds or facts in support thereof.
Nothing herein contained shall be construed as prohibiting the Corporation form
pursuing any other remedies available to it for such breach or threatened
breach.
13. ASSIGNABILITY. The Employer may assign this Agreement and its
rights and obligations hereunder in whole, but not in part, to any corporation
or other entity with or into which the Employer may hereafter merge or
consolidate or to which the Employer may transfer all or substantially all of
its assets, if in any such case said corporation or other entity shall by
operation of law or expressly in writing assume all obligations of the Employer
hereunder as fully as if it had been originally made a party hereto, but may
not otherwise assign this Agreement or its rights and obligations hereunder.
The Executive may not assign or transfer this Agreement or any rights or
obligations hereunder.
14. NOTICE. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
<PAGE> 12
Geritz Employment Agreement
Page 12
To the Employer: Board of Directors
ICARUS International, Inc.
One Central Plaza
11300 Rockville Pike
Rockville, Maryland 20852
Attn: Herbert G. Blecker, Chairman
With copies to: Lawrence H. Fischer, Esq.
Deckelbaum, Ogens & Fischer
1140 Connecticut Avenue, N.W.
Suite 703
Washington, DC 20036
and
Jeffrey A. Koeppel, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
To the Executive: William F. Geritz, III
5304 Woodnote Lane
Columbia, MD 21044
15. AMENDMENT; WAIVER. This Agreement supersedes and replaces the
Contract of Employment by and between the Executive and the Employer dated
August 1, 1981, which shall be, upon the execution of this Agreement,
terminated, null and void as of the date hereof. This Agreement represents the
entire agreement of the parties relating to subject matter hereof. No
provisions of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by the
Executive and such officer or officers as may be specifically designated by the
Board of Directors of the Employer to sign on its behalf. No waiver by any
party hereto at any time of any breach by any other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
16. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Maryland.
17. NATURE OF OBLIGATIONS. The obligations of the Employer
hereunder are unsecured and the Executive represents a general creditor of the
Corporation for compensation which may be due and owing. Nothing contained
herein shall create or require the Employer to create a trust of any kind to
fund any benefits which may be
<PAGE> 13
Geritz Employment Agreement
Page 13
payable hereunder, and to the extent that the Executive acquires a right to
receive benefits from the Employer hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Employer.
18. INTERPRETATION AND HEADINGS. This Agreement shall be
interpreted in order to achieve the purposes for which it was entered into.
The section headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
19. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect. With respect to Section 9 of this Agreement, in the event any court of
competent jurisdiction determines that such provisions are unreasonable or
contrary to law with respect to their time or geographic restriction, or both,
the parties hereto authorize such court to substitute restrictions as it deems
appropriate without invalidating such paragraph or this Agreement.
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
Attest: ICARUS INTERNATIONAL, INC.
/s/ By: /s/
- -------------------------- -------------------------------------------
Name: Herbert G. Blecker
Title: President and Chief Executive Officer
ICARUS CORPORATION
By: /s/
-------------------------------------------
Name: Herbert G. Blecker
Title: President and Chief Executive Officer
EXECUTIVE
By: /s/
-------------------------------------------
William F. Geritz, III
<PAGE> 1
EXHIBIT 10.12
ICARUS INTERNATIONAL, INC.
1998 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
ICARUS International, Inc. (the "Corporation") hereby establishes this
1998 Stock Option Plan (the "Plan") upon the terms and conditions hereinafter
stated.
ARTICLE II
PURPOSE OF THE PLAN
This Plan is intended to secure for the Corporation, any Subsidiary
Companies thereof and its stockholders the benefits arising from ownership of
the Corporation's Common Stock, by those selected Officers and other key
Employees of the Corporation and any Subsidiary Company thereof who will be
responsible for its future growth. The Plan is designed to help attract and
retain superior personnel for positions of substantial responsibility with the
Corporation and to provide key Employees with an additional incentive to
contribute to the success of the Corporation. All Incentive Stock Options
issued under the Plan are intended to comply with the requirements of Section
422 of the Code, and the regulations thereunder, and all provisions under the
Plan relating to Incentive Stock Options shall be read, interpreted and applied
with that purpose in mind. Capitalized terms are defined in Article III, below.
ARTICLE III
DEFINITIONS
3.01 "Award" means an Option granted pursuant to the terms of this
Plan.
3.02 "Board" means the Board of Directors of the Corporation.
3.03 "Change in control of the Corporation" shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act,
whether or not the Corporation in fact is required to comply with Regulation
14A thereunder; provided that, without limitation, such a change in control
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than Mr. Herbert G.
Blecker or the Corporation, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Corporation representing [25%] or more of the combined voting power of the
Corporation's then outstanding securities, (ii) during any period of two
consecutive years individuals who at the beginning of such period constitute
the Board of the Corporation cease for any reason to constitute
<PAGE> 2
at least a majority thereof, unless the election, or the nomination for
election by the Corporation's stockholders, of each director who was not a
director at the date of grant has been approved in advance by directors
representing at least two-thirds of the directors then in office who were
directors at the beginning of the period, (iii) the stockholders of the
Corporation approve a merger or consolidation of the Corporation with any other
entity, other than a merger or consolidation that would result in the voting
securities of the Corporation outstanding immediately subsequent thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Corporation outstanding
immediately after such merger or consolidation; or (iv) the stockholders of the
Corporation approve a plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets. If any of the events enumerated
in clauses (i) through (iv) occur, the Board shall determine the effective date
of the Change in Control resulting therefrom for purposes of the Plan.
3.04 "Code" means the Internal Revenue Code of 1986, as amended.
3.05 "Committee" means a committee of two or more directors appointed
by the Board pursuant to Article IV hereof each of whom shall be a Non-Employee
Director as defined in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor
thereto.
3.06 "Common Stock" means shares of the common stock, $0.01 par value
per share, of the Corporation.
3.07 "Disability" means any physical or mental impairment which
qualifies an individual for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company, or, if
no such plan applies, which would qualify such individual for disability
benefits under the long-term disability plan maintained by the Corporation, if
such individual were covered by that plan.
3.08 "Effective Date" means the day upon which the Board approves this
Plan.
3.09 "Employee" means any person who is employed by the Corporation or
a Subsidiary Company, or is an Officer of the Corporation or a Subsidiary
Company, but not including directors who are not also Officers of or otherwise
employed by the Corporation or a Subsidiary Company.
3.10 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2
<PAGE> 3
3.11 "Fair Market Value" shall be equal to the fair market value per
share of the Corporation's Common Stock on the date an Award is granted. For
purposes hereof, if the Common Stock is publicly traded, the Fair Market Value
of a share of Common Stock shall be the closing sale price of a share of Common
Stock on the date in question (or, if such day is not a trading day in the U.S.
markets, on the nearest preceding trading day), as reported with respect to the
principal market (or the composite of the markets, if more than one) or
national quotation system in which such shares are then traded, or if no such
closing prices are reported, the mean between the high bid and low asked prices
that day on the principal market or national quotation system then in use, or
if no such quotations are available, the fair market value on the date in
question of a share as determined by a majority of the Board in good faith.
3.12 "Incentive Stock Option" means any Option granted under this Plan
which the Board intends (at the time it is granted) to be an incentive stock
option within the meaning of Section 422 of the Code or any successor thereto.
3.13 "Non-Employee Director" means a member of the Board of the
Corporation who is not an Officer or Employee of the Corporation or any
Subsidiary Company.
3.14 "Non-Qualified Option" means any Option granted under this Plan
which is not an Incentive Stock Option.
3.15 "Offering" means the initial public offering of Common Stock by
the Corporation.
3.16 "Officer" means an Employee whose position in the Corporation or
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.17 "Option" means a right granted under this Plan to purchase Common
Stock.
3.18 "Optionee" means an Employee or Non-Employee Director or former
Employee or Non-Employee Director to whom an Option is granted under the Plan.
3.19 "Retirement" means a termination of employment which constitutes
a "retirement" under any applicable qualified pension benefit plan maintained
by the Corporation or a Subsidiary Company, or, if no such plan is applicable,
which would constitute "retirement" under the Corporation's pension benefit
plan, if such individual were a participant in that plan, or under any
applicable policy of the Corporation.
3.20 "Subsidiary Company" or "Subsidiary Companies" means those
subsidiaries of the Corporation which meet the definition of "subsidiary
corporations" set forth in Section 425(f) of the Code, at the time of granting
of the Option in question.
3
<PAGE> 4
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 DUTIES OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority to adopt,
amend and rescind such rules, regulations and procedures as, in its opinion,
may be advisable in the administration of the Plan, including, without
limitation, rules, regulations and procedures which (i) deal with satisfaction
of an Optionee's tax withholding obligation pursuant to Section 12.02 hereof,
(ii) include arrangements to facilitate the Optionee's ability to borrow funds
for payment of the exercise or purchase price of an Award, if applicable, from
securities brokers and dealers, and (iii) include arrangements which provide
for the payment of some or all of such exercise or purchase price by delivery
of previously-owned shares of Common Stock or other property and/or by
withholding some of the shares of Common Stock which are being acquired. The
interpretation and construction by the Committee of any provisions of the Plan,
any rule, regulation or procedure adopted by it pursuant thereto or of any
Award shall be final and binding in the absence of action by the Board.
4.02 APPOINTMENT AND OPERATION OF THE COMMITTEE. The members of the
Committee shall be appointed by, and will serve at the pleasure of, the Board.
The Board from time to time may remove members from, or add members to, the
Committee, provided the Committee shall continue to consist of two or more
members of the Board, each of whom shall be a Non-Employee Director, as defined
in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor thereto. In
addition, each member of the Committee shall be an "outside director" within
the meaning of Section 162(m) of the Code and regulations thereunder at such
times as is required under such regulations. The Committee shall act by vote
or written consent of a majority of its members. Subject to the express
provisions and limitations of the Plan, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the conduct of its
affairs. It may appoint one of its members to be chairman and any person,
whether or not a member, to be its secretary or agent. The Committee shall
report its actions and decisions to the Board at appropriate times but in no
event less than one time per calendar year.
4.03 REVOCATION FOR MISCONDUCT. The Board or the Committee may by
resolution immediately revoke, rescind and terminate any Option, or portion
thereof, to the extent not yet vested, previously granted or awarded under this
Plan to an Employee who is discharged from the employ of the Corporation or a
Subsidiary Company for cause, which, for purposes hereof, shall mean
termination because of the Employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order. Options granted to a Non-Employee Director who
is removed for cause pursuant to the Corporation's Articles of Incorporation
and Bylaws shall terminate as of the effective date of such removal.
4
<PAGE> 5
4.04 LIMITATION ON LIABILITY. Neither the members of the Board nor
any member of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan, any rule, regulation or procedure
adopted by it pursuant thereto or any Awards granted under it in accordance
with the provisions of the Articles of Incorporation of the Corporation. If a
member of the Board or the Committee is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of anything
done or not done by him in such capacity under or with respect to the Plan, the
Corporation shall, subject to the requirements of the Corporation's Articles of
Incorporation and/or Bylaws and of applicable laws and regulations, indemnify
such member against all liabilities and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in the best
interests of the Corporation and/or its Subsidiary Companies and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
4.05 COMPLIANCE WITH LAW AND REGULATIONS. All Awards granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as may
be required. The Corporation shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the completion of any
registration or qualification of or obtaining of consents or approvals with
respect to such shares under any federal or state law or any rule or regulation
of any government body, which the Corporation shall, in its sole discretion,
determine to be necessary or advisable. Moreover, no Option may be exercised
if such exercise would be contrary to applicable laws and regulations.
4.06 RESTRICTIONS ON TRANSFER. The Corporation may place a legend
upon any certificate representing shares acquired pursuant to an Award granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Incentive Stock Options may be granted to such Employees of the
Corporation and its Subsidiary Companies as may be designated from time to time
by the Board or the Committee. Non-Employee Directors and consultants, agents
or advisors to the Corporation or any Subsidiary thereof shall be eligible to
receive only Non-Qualified Options pursuant to Section 8.02 of the Plan.
5
<PAGE> 6
ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 OPTION SHARES. The aggregate number of shares of Common Stock
which may be issued pursuant to this Plan, subject to adjustment as provided in
Article IX, shall be 760,500, which is equal to 15.0% of the shares of Common
Stock issued and outstanding immediately subsequent to the Offering. None of
such shares shall be the subject of more than one Award at any time, but if an
Option as to any shares is surrendered before exercise, or expires or
terminates for any reason without having been exercised in full, or for any
other reason ceases to be exercisable, the number of shares covered thereby
shall again become available for grant under the Plan as if no Awards had been
previously granted with respect to such shares.
6.02 SOURCE OF SHARES. The shares of Common Stock issued under the
Plan may be authorized but unissued shares, treasury shares or shares purchased
by the Corporation on the open market or from private sources for use under the
Plan.
ARTICLE VII
DETERMINATION OF AWARDS
7.01 DETERMINATION OF AWARDS. The Board or the Committee shall, in
its discretion, determine from time to time which Employees will be granted
Awards under the Plan, the number of shares of Common Stock subject to each
Award, whether each Option will be an Incentive Stock Option or a Non-Qualified
Stock Option and the exercise price of an Option. In making all such
determinations there shall be taken into account the duties, responsibilities
and performance of each respective Employee, his present and potential
contributions to the growth and success of the Corporation, his salary and such
other factors deemed relevant to accomplishing the purposes of the Plan.
ARTICLE VIII
OPTIONS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 STOCK OPTION AGREEMENT. The proper Officers on behalf of the
Corporation and each Optionee shall execute a Stock Option Agreement which
shall set forth the total number of shares of Common Stock to which it
pertains, the exercise price, whether it is a Non-Qualified Option or an
Incentive Stock Option, and such other terms, conditions, restrictions and
privileges as the Board or the Committee in each instance shall deem
appropriate, provided they are not inconsistent with the terms, conditions and
provisions of this Plan. Each Optionee shall receive a copy of his executed
Stock Option Agreement.
6
<PAGE> 7
8.02 GRANTS TO NON-EMPLOYEE DIRECTORS. Commencing on the date of the
first annual meeting of the Corporation's stockholders to be held following the
closing of the Offering, and on the date of each annual meeting of the
stockholders thereafter, each person who is a Non-Employee Director of the
Board immediately following each such annual meeting will be automatically
granted a Non-Qualified Option to purchase 4,200 shares of the Corporation's
Common Stock. If on any date upon which Options are to be granted under this
Plan the number of shares of Common Stock remaining available under the Plan
are less than the number of shares required for all grants to be made on such
date, then Options to purchase a proportionate amount of such available number
of shares of Common Stock shall be granted to each eligible Non-Employee
Director.
8.03 OPTION EXERCISE PRICE.
(a) INCENTIVE STOCK OPTIONS. The per share price at which the
subject Common Stock may be purchased upon exercise of an Incentive Stock
Option shall be no less than one hundred percent (100%) of the Fair Market
Value of a share of Common Stock at the time such Incentive Stock Option is
granted, except as provided in Section 8.10(b).
(b) NON-QUALIFIED OPTIONS. The per share price at which the
subject Common Stock may be purchased upon exercise of a Non-Qualified Option
shall be established by the Committee at the time of grant, but in no event
shall be less than eighty-five percent (85%) of the Fair Market Value of a
share of Common Stock at the time such Non-Qualified Option is granted.
8.04 VESTING AND EXERCISE OF OPTIONS.
(a) GENERAL RULES. Incentive Stock Options and Non-Qualified
Options granted to Employees shall become vested and exercisable at the rate of
20% per year on each annual anniversary of the date the Option was granted, and
the right to exercise shall be cumulative, or as otherwise determined by the
Committee. Notwithstanding the foregoing, no vesting shall occur on or after
an Employee's employment or service, or a Non-Employee Director's service, with
the Corporation and all Subsidiary Companies is terminated for any reason other
than his death or Disability. In determining the number of shares of Common
Stock with respect to which Options are vested and/or exercisable, fractional
shares will be rounded up to the nearest whole number if the fraction is 0.5 or
higher, and down if it is less.
(b) ACCELERATED VESTING. Unless the Committee shall
specifically state otherwise at the time an Option is granted, all Options
granted under this Plan shall become vested and exercisable in full on the date
an Optionee terminates his employment with the Corporation or a Subsidiary
Company, or service as a Non-Employee Director, because of his death or
Disability. All Options hereunder shall become immediately vested and
exercisable in full on the date an Optionee terminates his employment with the
Corporation
7
<PAGE> 8
or a Subsidiary Company, or service as a Non-Employee Director, due to
Retirement or as the result of a Change in Control of the Corporation if, as of
such date of such Retirement or Change in Control of the Corporation, such
treatment is either authorized or is not prohibited by applicable laws and
regulations.
8.05 DURATION OF OPTIONS.
(a) GENERAL RULE. Except as provided in Sections 8.05(b) and
8.10, each Option or portion thereof granted to an Optionee shall be
exercisable at any time on or after it vests and becomes exercisable until the
earlier of (i) ten (10) years after its date of grant or (ii) three (3) months
after the date on which the Optionee ceases to be employed by the Corporation
and all Subsidiary Companies or serve as a Non-Employee Director, unless the
Board or the Committee in its discretion decides at the time of grant or
thereafter to extend such period of exercise upon termination of employment or
service from three (3) months to a period not exceeding five (5) years.
(b) EXCEPTIONS. If an Employee dies while in the employ of
the Corporation or a Subsidiary Company or terminates employment with the
Corporation or a Subsidiary Company as a result of Disability without having
fully exercised his Options, the Optionee or the executors, administrators,
legatees or distributees of his estate shall have the right, during the
twelve-month period following the earlier of his death or termination due to
Disability, to exercise such Options. If a Non-Employee Director dies while
serving as a Non-Employee Director or terminates his service to the Corporation
or a Subsidiary Company as a result of Disability without having fully
exercised his Options, the Non-Employee Director or the executors,
administrators, legatees or distributees of his estate shall have the right,
during the twelve-month period following the earlier of his death or
termination due to Disability, to exercise such Options. In no event, however,
shall any Option be exercisable more than ten (10) years from the date it was
granted. In the event of Retirement, an Employee or Non-Employee Director
shall be entitled to the same time period set forth above in this Section
8.05(b) to exercise an Option if, as of the date of such Retirement, such
treatment is either authorized or is not prohibited by applicable laws and
regulations.
8.06 NONASSIGNABILITY. Options shall not be transferable by an
Optionee except by will or the laws of descent or distribution, and during an
Optionee's lifetime shall be exercisable only by such Optionee or the
Optionee's guardian or legal representative. Notwithstanding the foregoing, or
any other provision of this Plan, an Optionee who holds Non-Qualified Options
may transfer such Options to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Options so transferred may thereafter be transferred only
to the Optionee who originally received the grant or to an individual or trust
to whom the Optionee could have initially transferred the Option pursuant to
this Section 8.06. Options which are transferred pursuant to this Section 8.06
shall be exercisable by the transferee according to the same terms and
conditions as applied to the Optionee.
8
<PAGE> 9
8.07 MANNER OF EXERCISE. Options may be exercised in part or in whole
and at one time or from time to time. The procedures for exercise shall be set
forth in the written Stock Option Agreement provided for in Section 8.01 above.
8.08 PAYMENT FOR SHARES. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of any Option shall
be made to the Corporation upon exercise of the Option. All shares sold under
the Plan shall be fully paid and nonassessable. Payment for shares may be made
by the Optionee in cash or, at the discretion of the Board or the Committee, by
delivering shares of Common Stock (including shares acquired pursuant to the
exercise of an Option) or other property equal in Fair Market Value to the
purchase price of the shares to be acquired pursuant to the Option, by
withholding some of the shares of Common Stock which are being purchased upon
exercise of an Option, or any combination of the foregoing.
8.09 VOTING AND DIVIDEND RIGHTS. No Optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded
on the Corporation's stockholder ledger as the holder of record of such shares
acquired pursuant to an exercise of an Option.
8.10 ADDITIONAL TERMS APPLICABLE TO INCENTIVE STOCK OPTIONS. All
Options issued under the Plan as Incentive Stock Options will be subject, in
addition to the terms detailed in Sections 8.01 to 8.09 above, to those
contained in this Section 8.10.
(a) Notwithstanding any contrary provisions contained
elsewhere in this Plan and as long as required by Section 422 of the Code, the
aggregate Fair Market Value, determined as of the time an Incentive Stock
Option is granted, of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by the Optionee during any calendar
year under this Plan, and stock options that satisfy the requirements of
Section 422 of the Code under any other stock option plan or plans maintained
by the Corporation (or any parent or Subsidiary Company), shall not exceed
$100,000.
(b) LIMITATION ON TEN PERCENT STOCKHOLDERS. The price at
which shares of Common Stock may be purchased upon exercise of an Incentive
Stock Option granted to an individual who, at the time such Incentive Stock
Option is granted, owns, directly or indirectly, more than ten percent (10%) of
the total combined voting power of all classes of stock issued to stockholders
of the Corporation or any Subsidiary Company, shall be no less than one hundred
and ten percent (110%) of the Fair Market Value of a share of the Common Stock
of the Corporation at the time of grant, and such Incentive Stock Option shall
by its terms not be exercisable after the earlier of the date determined under
Section 8.04 or the expiration of five (5) years from the date such Incentive
Stock Option is granted.
(c) NOTICE OF DISPOSITION; WITHHOLDING; ESCROW. An Optionee
shall immediately notify the Corporation in writing of any sale, transfer,
assignment or other disposition (or action constituting a disqualifying
disposition within the meaning of Section
9
<PAGE> 10
421 of the Code) of any shares of Common Stock acquired through exercise of an
Incentive Stock Option, within two (2) years after the grant of such Incentive
Stock Option or within one (1) year after the acquisition of such shares,
setting forth the date and manner of disposition, the number of shares disposed
of and the price at which such shares were disposed of. The Corporation shall
be entitled to withhold from any compensation or other payments then or
thereafter due to the Optionee such amounts as may be necessary to satisfy any
withholding requirements of federal or state law or regulation and, further, to
collect from the Optionee any additional amounts which may be required for such
purpose. The Committee may, in its discretion, require shares of Common Stock
acquired by an Optionee upon exercise of an Incentive Stock Option to be held
in an escrow arrangement for the purpose of enabling compliance with the
provisions of this Section 8.10(c).
8.11 RIGHT OF FIRST REFUSAL. If at the time an Optionee wishes
to sell Common Stock purchased with an Option granted hereunder, and if at such
time the Common Stock is not publicly traded, then the Corporation shall have
the right to purchase such Common Stock from the Optionee at a price equal to
its Fair Market Value. If the Corporation does not choose to purchase the
Common Stock from an Optionee, then the other Common Stock shareholders shall
have the right to purchase such Common Stock at a price equal to its Fair
Market Value on a "first-come, first-serve" basis.
ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any outstanding Award relates,
the maximum number of shares that can be covered by Award to each Employee and
each Non-Employee Director and the exercise price per share of Common Stock
under any outstanding Option shall be proportionately adjusted for any increase
or decrease in the total number of outstanding shares of Common Stock issued
subsequent to the effective date of this Plan resulting from a split,
subdivision or consolidation of shares or any other capital adjustment, the
payment of a stock dividend, or other increase or decrease in such shares
effected without receipt or payment of consideration by the Corporation. If,
upon a merger, consolidation, reorganization, liquidation, recapitalization or
the like of the Corporation, the shares of the Corporation's Common Stock shall
be exchanged for other securities of the Corporation or of another corporation,
each recipient of an Award shall be entitled, subject to the conditions herein
stated, to purchase or acquire such number of shares of Common Stock or amount
of other securities of the Corporation or such other corporation as were
exchangeable for the number of shares of Common Stock of the Corporation which
such optionees would have been entitled to purchase or acquire except for such
action, and appropriate adjustments shall be made to the per share exercise
price of outstanding Options. Notwithstanding any provision to the contrary,
the exercise price of shares subject to outstanding Awards may be
proportionately adjusted upon the payment of a special large and nonrecurring
dividend that has the effect of a return of capital to the stockholders.
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<PAGE> 11
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan
with respect to any shares of Common Stock as to which Awards have not been
granted, subject to any required stockholder approval or any stockholder
approval which the Board may deem to be advisable for any reason, such as for
the purpose of obtaining or retaining any statutory or regulatory benefits
under tax, securities or other laws or satisfying any applicable stock exchange
listing requirements. The Board may not, without the consent of the holder of
an Award, alter or impair any Award previously granted or awarded under this
Plan as specifically authorized herein.
ARTICLE XI
EMPLOYMENT AND SERVICE RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any action
taken by the Committee or the Board in connection with the Plan shall create
any right on the part of any Employee or Non-Employee Director to continue in
such capacity.
ARTICLE XII
WITHHOLDING
12.01 TAX WITHHOLDING. The Corporation may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Corporation may require the Optionee to pay to the
Corporation the amount required to be withheld as a condition to delivering the
shares acquired pursuant to an Award. The Corporation also may withhold or
collect amounts with respect to a disqualifying disposition of shares of Common
Stock acquired pursuant to exercise of an Incentive Stock Option, as provided
in Section 8.10(c).
12.02 METHODS OF TAX WITHHOLDING. The Board or the Committee is
authorized to adopt rules, regulations or procedures which provide for the
satisfaction of an Optionee's tax withholding obligation by the retention of
shares of Common Stock to which the Employee would otherwise be entitled
pursuant to an Award and/or by the Optionee's delivery of previously-owned
shares of Common Stock or other property.
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<PAGE> 12
ARTICLE XIII
EFFECTIVE DATE OF THE PLAN; TERM
13.01 EFFECTIVE DATE OF THE PLAN. This Plan shall become effective on
the Effective Date, and Awards may be granted hereunder no earlier than the
date that this Plan is approved by stockholders of the Corporation and prior to
the termination of the Plan, provided that this Plan is approved by
stockholders of the Corporation pursuant to Article XIV hereof.
13.02 TERM OF THE PLAN. Unless sooner terminated, this Plan shall
remain in effect for a period of ten (10) years ending on the tenth anniversary
of the Effective Date. Termination of the Plan shall not affect any Awards
previously granted and such Awards shall remain valid and in effect until they
have been fully exercised or earned, are surrendered or by their terms expire
or are forfeited.
ARTICLE XIV
STOCKHOLDER APPROVAL
The Corporation shall submit this Plan to stockholders for approval at a
meeting of stockholders, or by the unanimous written consent of the
stockholders, of the Corporation held within twelve (12) months following the
Effective Date in order to meet the requirements of (i) Section 422 of the Code
and regulations thereunder, and (ii) Section 162(m) of the Code and regulations
thereunder, and (iii) the National Association of Securities Dealers, Inc. for
quotation of the Common Stock on the Nasdaq Stock Market's National Market or
any other securities market or exchange, if applicable.
ARTICLE XV
MISCELLANEOUS
15.01 GOVERNING LAW. To the extent not governed by federal law, this
Plan shall be construed under the laws of the State of Maryland.
15.02 PRONOUNS. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
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<PAGE> 1
EXHIBIT 10.13
ICARUS INTERNATIONAL, INC.
RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 ICARUS International, Inc. (the "Corporation") hereby
establishes a Recognition and Retention Plan (the "Plan") and Trust (the
"Trust") upon the terms and conditions hereinafter stated in this Management
Recognition Plan and Trust Agreement (the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the
Trust assets existing on the date of this Agreement and all additions and
accretions thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to retain personnel of experience
and ability in key positions by providing Employees and Non-Employee Directors
of the Corporation and any Subsidiary thereof with a proprietary interest in
the Corporation as compensation for their contributions to the Corporation and
any Subsidiary and as an incentive to make such contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement with an
initial capital letter, unless the context clearly indicates otherwise, shall
have the meanings set forth below or as otherwise defined herein. Wherever
appropriate, the masculine pronouns shall include the feminine pronouns and the
singular shall include the plural.
3.01 "Beneficiary" means the person or persons designated by a
Recipient to receive any benefits payable under the Plan in the event of such
Recipient's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time
to time by similar written notice to the Committee. In the absence of a
written designation, the Beneficiary shall be the Recipient's surviving spouse,
if any, or if none, his estate.
3.02 "Board" means the Board of Directors of the Corporation.
<PAGE> 2
3.03 "Change of Control of the Corporation" means a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, or
any successor thereto, whether or not the Corporation in fact is required to
comply with Regulation 14A thereunder.
3.04 "Code" means the Internal Revenue Code of 1986, as amended.
3.05 "Committee" means the committee appointed by the Board
pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock, $.01 par
value per share, of the Corporation.
3.07 "Disability" means any physical or mental impairment which
qualifies an Employee for disability benefits under the applicable long-term
disability plan maintained by the Corporation or any Subsidiary or, if no such
plan applies, which would qualify such Employee for disability benefits under
the Federal Social Security System.
3.08 "Effective Date" means the day upon which the Board approves
this Plan.
3.09 "Employee" means any person who is employed by the
Corporation, or any Subsidiary, or is an officer of the Corporation, or any
Subsidiary, including officers or other employees who may be directors of the
Corporation.
3.10 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.11 "Non-Employee Director" means a member of the Board who is not
an Employee, and shall include any individual who, at any time after the date
of adoption of the Plan, serves the Board in an advisory or emeritus capacity.
3.12 "Plan Shares" or "Shares" means shares of Common Stock held in
the Trust which may be distributed to a Recipient pursuant to the Plan.
3.13 "Plan Share Award" or "Award" means a right granted under this
Plan to receive a distribution of Plan Shares upon completion of the service
requirements described in Article VII.
3.14 "Recipient" means an Employee or Non-Employee Director who
receives a Plan Share Award under the Plan.
3.15 "Retirement" means a termination of employment upon or after
attainment of age sixty-five (65) or such earlier age as may be specified in
applicable plans or policies of the Corporation, a Subsidiary or in a
Recipient's Plan Share Award.
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<PAGE> 3
3.16 "Subsidiary" means any subsidiary of the Corporation which,
with the consent of the Board, agrees to participate in this Plan.
3.17 "Trustee" means such firm, entity or persons nominated by the
Committee and approved by the Board pursuant to Sections 4.01 and 4.02 to hold
legal title to the Plan for the purposes set forth herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Committee, which shall consist of two or more members of the
Board, none of whom shall be an officer or employee of the Corporation and each
of whom shall be a "Non-Employee Director" within the meaning of Rule
16b-3(b)(3)(i) under the Exchange Act. The Committee shall have all of the
powers allocated to it in this and other Sections of the Plan. The
interpretation (including the ability to determine the date of a Change in
Control) and construction by the Committee of any provisions of the Plan or of
any Plan Share Award granted hereunder shall be final and binding. The
Committee shall act by vote or written consent of a majority of its members.
Subject to the express provisions and limitations of the Plan, the Committee
may adopt such rules, regulations and procedures as it deems appropriate for
the conduct of its affairs. The Committee shall report its actions and
decisions with respect to the Plan to the Board at appropriate times, but in no
event less than one time per calendar year. The Committee shall recommend to
the Board a firm or other entity to act as Trustee in accordance with the
provisions of this Plan and Trust and the terms of Article VIII hereof.
4.02 ROLE OF THE BOARD. The members of the Committee and the
Trustee shall be appointed or approved by, and will serve at the pleasure of,
the Board. The Board may in its discretion from time to time remove members
from, or add members to, the Committee, and may remove or replace the Trustee,
provided that any directors who are selected as members of the Committee shall
not be officers or employees of the Corporation and shall be "disinterested
persons" within the meaning of Rule 16b-3 promulgated under the Exchange Act.
4.03 LIMITATION ON LIABILITY. Neither the members of the Board nor
any member of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any rule, regulation or
procedure adopted pursuant thereto, or any Plan Shares or Plan Share Awards
granted under it in accordance with the provisions of the Articles of
Incorporation of the Corporation. If a member of the Board or the Committee is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of anything done or not done by him in such
capacity under or with respect to the Plan, the Corporation shall, subject to
the requirements of applicable laws and regulations, indemnify such member
against all liabilities and expenses (including attorneys' fees), judgments,
fines
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<PAGE> 4
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in the best interests of the
Corporation and any Subsidiaries and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
4.04 COMPLIANCE WITH LAWS AND REGULATIONS. All Awards granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as may
be required.
ARTICLE V
CONTRIBUTIONS
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall determine
the amount (or the method of computing the amount) and timing of any
contributions by the Corporation and any Subsidiaries to the Trust established
under this Plan. Such amounts may be paid in cash or in shares of Common Stock
and shall be paid to the Trust at the designated time of contribution. No
contributions by Employees or Non-Employee Directors shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS; NUMBER OF PLAN SHARES. Subject to
Section 8.02 hereof, the Trustee shall invest all of the Trust's assets
primarily in Common Stock. The aggregate number of Plan Shares available for
distribution pursuant to this Plan shall be ______ shares of Common Stock,
which shares shall be purchased from the Corporation and/or from stockholders
thereof by the Trust with funds contributed by the Corporation.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 AWARDS TO EMPLOYEES AND NON-EMPLOYEE DIRECTORS. Plan Share
Awards may be made to such Employees and Non-Employee Directors as may be
selected by the Committee. In selecting those Employees to whom Plan Share
Awards may be granted and the number of Shares covered by such Awards, the
Committee shall consider the duties, responsibilities and performance of each
respective Employee and Non-Employee Director, his present and potential
contributions to the growth and success of the Corporation, his salary and such
other factors as the Committee shall deem relevant to accomplishing the
purposes of the Plan. The Committee may but shall not be required to request
the written recommendation of the Chief Executive Officer of the Corporation
other than with respect to Plan Share Awards to be granted to him.
6.02 FORM OF ALLOCATION. As promptly as practicable after a
determination is made pursuant to Section 6.01 that a Plan Share Award is to be
issued, the Committee shall notify
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<PAGE> 5
the Recipient in writing of the grant of the Award, the number of Plan Shares
covered by the Award, and the terms upon which the Plan Shares subject to the
Award shall be distributed to the Recipient. The date on which the Committee
makes the determination with respect to the grant of Plan Share Awards shall be
considered the date of grant of the Plan Share Award. The Committee shall
maintain records as to all grants of Plan Share Awards under the Plan.
6.03 ALLOCATIONS NOT REQUIRED TO ANY SPECIFIC EMPLOYEE.
Notwithstanding anything to the contrary in Sections 6.01 or 6.02 hereof, nor
Employee not Non-Employee Director shall have any right or entitlement to
receive a Plan Share Award hereunder, such Awards being at the total discretion
of the Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Subject to the terms hereof, Plan
Share Awards shall be earned by a Recipient at the rate of twenty percent (20%)
of the aggregate number of Shares covered by the Award as of each annual
anniversary of the date of grant of the Award. If the employment of an
Employee or service as a Non-Employee Director is terminated prior to the fifth
(5th) annual anniversary of the date of grant of a Plan Share Award for any
reason (except as specifically provided in subsections (b) and (c) below), the
Recipient shall forfeit the right to any Shares subject to the Award which have
not theretofore been earned. In the event of a forfeiture of the right to any
Shares subject to an Award, such forfeited Shares shall become available for
allocation pursuant to Section 6.01 hereof as if no Award had been previously
granted with respect to such Shares. No fractional shares shall be distributed
pursuant to this Plan.
(b) EXCEPTION FOR TERMINATIONS DUE TO DEATH, DISABILITY
OR RETIREMENT. Notwithstanding the general rule contained in Section 7.01(a),
all Plan Shares subject to a Plan Share Award held by a Recipient whose
employment with or service to the Corporation or any Subsidiary terminates due
to death or Disability shall be deemed earned as of the Recipient's last day of
employment with or service to the Corporation or any Subsidiary prior to his
death or Disability and shall be distributed as soon as practicable thereafter;
provided, however, that Awards shall be distributed in accordance with Section
7.03(a). In addition, in the event that a Recipient's employment with or
service to the Corporation or any Subsidiary terminates due to Retirement, all
Plan Shares subject to a Plan Share Award held by a Recipient shall be deemed
earned as of the Recipient's last day of employment with or service to the
Corporation or any Subsidiary and shall be distributed as soon as practicable
thereafter; provided, however, that Awards shall be distributed in accordance
with Section 7.03(a) and, as of the date of such Retirement, such treatment is
either authorized or is not prohibited by applicable laws and regulations.
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<PAGE> 6
(c) EXCEPTION FOR TERMINATIONS AFTER A CHANGE IN CONTROL
OF THE CORPORATION. Notwithstanding the general rule contained in Section
7.01(a), all Plan Shares subject to a Plan Share Award held by a Recipient
shall be deemed to be earned in the event of, and as of the date of, a Change
in Control of the Corporation if, as of the date of such Change in Control of
the Corporation, such treatment is either authorized or is not prohibited by
applicable laws and regulations.
(d) REVOCATION FOR MISCONDUCT. Notwithstanding anything
hereinafter to the contrary, the Board may by resolution immediately revoke,
rescind and terminate any Plan Share Award, or portion thereof, previously
awarded under this Plan, to the extent Plan Shares have not been distributed
hereunder, whether or not yet earned, in the case of an Employee who is
discharged from the employ of the Corporation or any Subsidiary for cause (as
hereinafter defined). Termination for cause shall mean termination because of
the Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order. Plan Share
Awards, to the extent Plan Shares have not been distributed hereunder, granted
to a Non-Employee Director who is removed for cause pursuant to the
Corporation's Articles of Incorporation, as amended, shall terminate as of the
effective date of such removal.
7.02 DISTRIBUTION OF DIVIDENDS. Any cash dividends or stock
dividends declared in respect of each unearned Plan Share Award will be held by
the Trust for the benefit of the Recipient on whose behalf such Plan Share
Award is then held by the Trust and such dividends, including any interest
thereon, will be paid out by the Trust proportionately to the shares earned to
the Recipient thereof as soon as practicable after the Plan Share Awards become
earned. Any cash dividends or stock dividends declared in respect of each
earned Plan Share held by the Trust will be paid by the Trust, as soon as
practicable after the Trust's receipt thereof, to the Recipient on whose behalf
such Plan Share is then held by the Trust.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Plan Shares
shall be distributed to the Recipient or his Beneficiary, as the case may be,
as soon as practicable after they have been earned, provided, however, that no
Plan Shares shall be distributed to the Recipient or Beneficiary pursuant to a
Plan Share Award within six months from the date on which that Plan Share Award
was granted to such person.
(b) FORM OF DISTRIBUTIONS. All Plan Shares, together
with any Shares representing stock dividends, shall be distributed in the form
of Common Stock. One share of Common Stock shall be given for each Plan Share
earned and distributable. Payments representing cash dividends shall be made
in cash.
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<PAGE> 7
(c) WITHHOLDING. The Trustee may withhold from any cash
payment or Common Stock distribution made under this Plan sufficient amounts to
cover any applicable withholding and employment taxes, and if the amount of a
cash payment is insufficient, the Trustee may require the Recipient or
Beneficiary to pay to the Trustee the amount required to be withheld as a
condition of delivering the Plan Shares. The Trustee shall pay over to the
Corporation or any Subsidiary which employs or employed such Recipient any such
amount withheld from or paid by the Recipient or Beneficiary.
(d) RESTRICTIONS ON SELLING OF PLAN SHARES. Plan Share
Awards may not be sold, assigned, pledged or otherwise disposed of prior to the
time that they are earned and distributed pursuant to the terms of this Plan.
Following distribution, the Committee may require the Recipient or his
Beneficiary, as the case may be, to agree not to sell or otherwise dispose of
his distributed Plan Shares except in accordance with all then applicable
federal and state securities laws, and the Committee may cause a legend to be
placed on the stock certificate(s) representing the distributed Plan Shares in
order to restrict the transfer of the distributed Plan Shares for such period
of time or under such circumstances as the Committee, upon the advice of
counsel, may deem appropriate.
7.04 VOTING OF PLAN SHARES. All Plan Shares which have not yet
been earned and allocated shall be voted by the Trustee in its sole discretion.
ARTICLE VIII
TRUST
8.01 TRUST. The Trustee shall receive, hold, administer, invest
and make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 MANAGEMENT OF TRUST. It is the intent of this Plan and Trust
that the Trustee shall have complete authority and discretion with respect to
the arrangement, control and investment of the Trust, and that the Trustee
shall invest all assets of the Trust in Common Stock to the fullest extent
practicable, except to the extent that the Trustee determine that the holding
of monies in cash or cash equivalents is necessary to meet the obligations of
the Trust. In performing their duties, the Trustee shall have the power to do
all things and execute such instruments as may be deemed necessary or proper,
including the following powers:
(a) To invest up to one hundred percent (100%) of all
Trust assets in Common Stock without regard to any law now or hereafter in
force limiting investments for trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and in
making such investment, the Trustee is authorized to
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<PAGE> 8
purchase Common Stock from the Corporation or from any other source, and such
Common Stock so purchased may be outstanding, newly issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested in
accordance with (a) above, in such deposit accounts, and certificates of
deposit, obligations of the United States Government or its agencies or such
other investments as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any
property at any time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be
registered in the name of a nominee, without the addition of words indicating
that such security is an asset of the Trust (but accurate records shall be
maintained showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may
in the opinion of the Trustee be reasonable for the proper operation of the
Plan and Trust.
(f) To employ brokers, agents, custodians, consultants
and accountants.
(g) To hire counsel to render advice with respect to
their rights, duties and obligations hereunder, and such other legal services
or representation as the Trustee deems desirable.
(h) To hold funds and securities representing the amounts
to be distributed to a Recipient or his Beneficiary as a consequence of a
dispute as to the disposition thereof, whether in a segregated account or held
in common with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
8.03 RECORDS AND ACCOUNTS. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Committee.
8.04 EXPENSES. All costs and expenses incurred in the operation
and administration of this Plan shall be borne by the Corporation.
8.05 INDEMNIFICATION. Subject to the requirements of applicable
laws and regulations and to Section 4.03 hereof, the Corporation shall
indemnify, defend and hold the Trustee harmless against all claims, expenses
and liabilities arising out of or related to the
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<PAGE> 9
exercise of the Trustee's powers and the discharge of its duties hereunder,
unless the same shall be due to the Trustee's gross negligence or willful
misconduct.
ARTICLE IX
MISCELLANEOUS
9.01 ADJUSTMENTS FOR CAPITAL CHANGES. The aggregate number of Plan
Shares available for distribution pursuant to the Plan Share Awards and the
number of Shares to which any Plan Share Award relates shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the effective date of the Plan resulting
from any split, subdivision or consolidation of shares or other capital
adjustment, or other increase or decrease in such shares effected without
receipt or payment of consideration by the Corporation.
9.02 AMENDMENT AND TERMINATION OF PLAN. The Board may, by
resolution, at any time amend or terminate the Plan, subject to any required
stockholder approval or any stockholder approval which the Board may deem to be
advisable for any reason, such as for the purpose of obtaining or retaining any
statutory or regulatory benefits under tax, securities or other laws or
satisfying any applicable stock exchange listing requirements. The Board may
not, without the consent of the Recipient, alter or impair his Plan Share Award
except as specifically authorized herein. Upon termination of the Plan, the
Recipient's Plan Share Awards shall be distributed to the Recipient in
accordance with the terms of Article VII hereof. Notwithstanding anything
contained in this Plan to the contrary, the provisions of Articles VI and VII
of this Plan shall not be amended more than once every six months, other than
to comport with changes in the Code, the Employee Retirement Income Security
Act of 1974, as amended, or the rules and regulations promulgated under such
statutes.
9.03 NONTRANSFERABLE. Plan Share Awards and rights to Plan Shares
shall not be transferable by a Recipient, and during the lifetime of the
Recipient, Plan Shares may only be earned by and paid to a Recipient who was
notified in writing of an Award by the Committee pursuant to Section 6.01. No
Recipient or Beneficiary shall have any right in or claim to any assets of the
Plan or Trust, nor shall the Corporation or any Subsidiary be subject to any
claim for benefits hereunder. Any assets held by the Trust will be subject to
the claims of the Company's general creditors under federal and state law in
the event of the Company's insolvency. The Company shall be considered
"insolvent" for purposes of this Trust if (i) either the Company is unable to
pay its debts as they become due, or (ii) the Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
9.04 EMPLOYMENT OR SERVICE RIGHTS. Neither the Plan nor any grant
of a Plan Share Award or Plan Shares hereunder nor any action taken by the
Trustee, the Committee or the Board in connection with the Plan shall create
any right on the part of any Employee or Non-Employee Director to continue in
such capacity.
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<PAGE> 10
9.05 VOTING AND DIVIDEND RIGHTS. No Recipient shall have any
voting or dividend rights or other rights of a stockholder in respect of any
Plan Shares covered by a Plan Share Award, except as expressly provided in
Sections 7.02 and 7.04 above, prior to the time said Plan Shares are actually
earned and distributed to him.
9.06 GOVERNING LAW. To the extent not governed by federal law, the
Plan and Trust shall be governed by the laws of the State of Maryland.
9.07 EFFECTIVE DATE. This Plan shall be effective as of the
Effective Date, and Awards may be granted hereunder as of or after the
Effective Date and as long as the Plan remains in effect.
9.08 TERM OF PLAN. This Plan shall remain in effect until the
earlier of (1) ten (10) years from the Effective Date, (2) termination by the
Board, or (3) the distribution to Recipients and Beneficiaries of all assets of
the Trust.
9.09 TAX STATUS OF TRUST. It is intended that the trust
established hereby be treated as a Grantor Trust of the Corporation under the
provisions of Section 671 et seq. of the Code, as the same may be amended from
time to time.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and the corporate seal to be affixed
and duly attested, and the initial Trustee of the Trust established pursuant
hereto have duly and validly executed this Agreement, all on this 22nd day of
January 1998.
ICARUS INTERNATIONAL, INC.
By: /s/
-------------------------------------
Herbert G. Blecker
President and Chief Executive Officer
ATTEST:
By: /s/
------------------------------
[ ]
--------------
Corporate Secretary
TRUSTEE:
/s/
-----------------------------------------
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EXHIBIT 21.1
Subsidiaries of Small Business Issuer
<TABLE>
<CAPTION>
Jurisdiction of Name Under which
Name Incorporation Subsidiary Does Business
- ------------------------ --------------------------- --------------------------
<S> <C> <C>
ICARUS Corporation Maryland, U.S.A. (Same as name)
ICARUS Services, Limited United Kingdom (Same as name)
ICARUS Nippon KK Japan (Same as name)
ICARUS Development and Maryland, U.S.A. (Same as name)
Marketing Corporation
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the Registration Statement and the Prospectus included therein. In
giving the foregoing consent, we do not admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations promulgated thereunder.
/s/ ELIAS, MATZ, TIERNAN & HERRICK LLP
Washington, D.C.
February 10, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated July 8, 1997, accompanying the
consolidated financial statements of ICARUS International, Inc., contained in
the Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in the Registration Statement and Prospectus, and to the
use of our name as it appears under the captions "Selected Consolidated
Financial Data" and "Experts."
/s/ GRANT THORNTON LLP
-----------------------
Grant Thornton LLP
Vienna, Virginia
February 10, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF INCARUS INTERNATIONAL, INC. AND QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM SB2.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
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<FISCAL-YEAR-END> APR-30-1999 APR-30-1998
<PERIOD-START> MAY-01-1996 MAY-01-1997
<PERIOD-END> APR-30-1997 OCT-31-1997
<CASH> 1,716 2,218
<SECURITIES> 0 0
<RECEIVABLES> 2,111 1,878
<ALLOWANCES> (119) (28)
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<CURRENT-ASSETS> 3,884 4,359
<PP&E> 1,805 1,989
<DEPRECIATION> (1,403) (1,513)
<TOTAL-ASSETS> 4,554 5,271
<CURRENT-LIABILITIES> 2,788 3,181
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0 0
0 0
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<INCOME-CONTINUING> 656 343
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<NET-INCOME> 656 343
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