<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1998
REGISTRATION NO. 333-45957
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ICARUS INTERNATIONAL, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
MARYLAND
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
7372
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
52-2069941
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
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:
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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 ONE CENTRAL PLAZA LOCKE PURNELL RAIN HARRELL
L.L.P. 11300 ROCKVILLE PIKE (A PROFESSIONAL CORPORATION)
734 15TH STREET, N.W. ROCKVILLE, MARYLAND 20852 2200 ROSS AVENUE
12TH FLOOR (301) 881-9350 SUITE 2200
WASHINGTON, D.C. 20005 DALLAS, TEXAS 75201
(202) 347-0300 (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 this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 15, 1998
PROSPECTUS
2,500,000 SHARES
[LOGO]
ICARUS INTERNATIONAL, INC.
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
PUBLIC DISCOUNT(1) THE COMPANY(2)
- -------------------------------------------------------------------------------------------------------------
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Per Share........................ $ $ $
- -------------------------------------------------------------------------------------------------------------
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. or its agent.
---------------------
HOAK BREEDLOVE WESNESKI & CO.
, 1998
<PAGE> 3
[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."
i
<PAGE> 4
[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 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,
"ICARUS Project Scheduler" under Arrow 5, 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."]
ii
<PAGE> 5
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. The Company's
subsidiaries include ICARUS Corporation, ICARUS Services Limited, ICARUS Nippon
K.K. and ICARUS Marketing and Development Corporation. See "Business -- The
Company" and "Certain Transactions -- Pending Recapitalization." 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 is expected to total $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 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
3
<PAGE> 6
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. The planned products described above are expected to be released in
fiscal year 1999 and the Company has, as of January 31, 1998, incurred
substantially all of its share of the development expense related thereto
(although additional development expense will be required for certain
process-specific products). 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.
The primary source of the Company's revenues are single-year and multi-year
term license fees. At January 31, 1998, 66.3% of the Company's licenses had a
remaining life of one year or more. For the twelve-month period ended January
31, 1998, 71.7% 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 53.1% 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. The Company's World Wide Web site is located at
http://www.icarus-us.com. Information contained in the Company's Web site does
not constitute, and shall not be deemed to constitute, part of this Prospectus.
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"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.
4
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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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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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NINE MONTHS ENDED
YEAR ENDED APRIL 30, JANUARY 31,
------------------------ -----------------
1995 1996 1997 1997 1998
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(UNAUDITED)
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CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenue.................................... $5,058 $5,678 $7,339 $5,329 $6,775
Total operating expenses......................... 4,554 5,395 6,309 4,678 5,809
Income from operations........................... 504 283 1,030 651 966
Net income....................................... 300 193 656 411 660
Net income per share............................. 0.10 0.06 0.22 0.14 0.22
Weighted average common shares(2)................ 3,000 3,000 3,000 3,000 3,000
</TABLE>
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JANUARY 31, 1998
---------------------------
ACTUAL AS ADJUSTED(3)
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(UNAUDITED)
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CONSOLIDATED BALANCE SHEET DATA:
Working capital.................................. $ 794 $18,194
Total assets..................................... 5,193 22,593
Total liabilities................................ 3,413 3,413
Total stockholders' equity....................... 1,780 19,180
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(1) Excludes (i) 825,000 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, and (ii) 550,000 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."
(2) Computed as described in Note A of Notes to Consolidated Financial
Statements.
(3) 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."
5
<PAGE> 8
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. Total revenue from
renewed license agreements (including renewals that involved the substitution of
another ICARUS product) constituted 45.5% ($3.1 million) and 46.2% ($3.4
million) of total revenue for the nine months ended January 31, 1998 and for
fiscal 1997, respectively. 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 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
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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. Such past delays did not
have a material adverse effect on the Company's financial condition, results of
operations or liquidity. 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.
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
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<PAGE> 10
"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 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
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<PAGE> 11
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 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 78.8% and 70.4% of the Company's total
revenues for the nine-month period ended January 31, 1998 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 nine months ended January 31, 1998 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. The most recent event in this regard
involved the invasion of Kuwait by the military forces of Iraq in the fourth
calendar quarter of 1990, which resulted in the interruption of the flow of
petroleum from that country and in capital projects in the Middle East in
general. During that period, orders for the Company's products slowed
substantially. However, with the quick resolution of the Gulf War in the first
quarter of 1991, orders for software licenses recovered. Any such delays or
reductions in the future 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
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<PAGE> 12
revenues from the chemical and petroleum refining industries in the foreseeable
future. See "Business -- Strategy."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
For the nine months ended January 31, 1998 and for fiscal 1997, customers
located outside the United States (based on the customer's billing address)
accounted for 34.5% and 32.8% of the Company's total revenue, respectively. 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 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
10
<PAGE> 13
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 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 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 strategic alliances with SRI Consulting, Inc., Hyprotech, Ltd. and
Richardson Engineering Services, Inc., 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
11
<PAGE> 14
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. While the Company's Articles of Incorporation do not require stockholder
approval prior to the issuance of additional shares of the Company's capital
stock, the rules of the Nasdaq Stock Market generally require stockholder
approval for share issuances in a transaction not involving a public offering
that are below specified price levels and which equal or exceed 20% of the
number of or voting power of shares of the Company then issued and outstanding.
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.
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.
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."
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
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<PAGE> 15
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 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
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<PAGE> 16
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 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. The Principal Stockholders
do not currently contemplate requesting an early release from this contractual
restriction.
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As of the date of this Prospectus, the Company has reserved an aggregate of
825,000 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 550,000 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 $4.51 per share in net tangible book value per share of
the Common Stock. See "Dilution."
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<PAGE> 18
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.
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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CAPITALIZATION
The following table sets forth the (unaudited) capital lease obligation and
capitalization of the Company at January 31, 1998, 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>
JANUARY 31, 1998
-------------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Capital lease obligation, less current portion.............. $ 8 $ 8
------ -------
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......................................... 1,760 1,760
Cumulative foreign currency translation adjustment........ (20) (20)
------ -------
Total stockholders' equity............................. 1,780 19,180
------ -------
Total capitalization................................. $1,788 $19,188
====== =======
</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) 825,000 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) 550,000
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."
17
<PAGE> 20
DILUTION
At January 31, 1998, the unaudited net tangible book value of the Company
was $1.1 million or $0.38 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 January 31, 1998, 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 $19.2 million or $3.49 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 $4.51 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 January 31, 1998(1).... $0.38
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.................................................. 3.49
------
Dollar dilution per share to new investors.................. $4.51
======
Percentage dilution per share to new investors.............. 56.4%
======
</TABLE>
-------------------------
(1) Based upon 3,000,000 shares of Common Stock outstanding as of
January 31, 1998. Does not include 1,375,000 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."
The following table summarizes, on a pro forma basis as of January 31,
1998, 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."
18
<PAGE> 21
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 nine months ended January 31, 1997 and 1998 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 nine
months ended January 31, 1998 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>
NINE MONTHS
ENDED
YEAR ENDED APRIL 30, JANUARY 31,
------------------------ ---------------
1995 1996 1997 1997 1998
------ ------ ------ ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
Software license revenue.......................... $3,166 $3,812 $5,165 $3,814 $5,338
Maintenance fee and other revenue................. 1,892 1,866 2,174 1,515 1,437
------ ------ ------ ------ ------
Total revenue.................................. 5,058 5,678 7,339 5,329 6,775
Expenses:
Cost of software license revenue.................. 250 266 419 293 233
Cost of maintenance fee and other revenue......... 362 578 561 420 503
Selling and marketing............................. 1,710 2,220 2,626 1,951 2,498
Research and development.......................... 1,181 1,229 1,326 1,065 1,352
General and administrative........................ 1,051 1,102 1,377 949 1,223
------ ------ ------ ------ ------
Total operating expenses....................... 4,554 5,395 6,309 4,678 5,809
------ ------ ------ ------ ------
Income from operations............................ 504 283 1,030 651 966
Interest income, net.............................. 8 21 45 35 75
Other (expense) income............................ (9) -- -- -- (3)
------ ------ ------ ------ ------
Income before income taxes........................ 503 304 1,075 686 1,038
Provision for income taxes........................ 203 111 419 275 378
------ ------ ------ ------ ------
Net income..................................... $ 300 $ 193 $ 656 $ 411 $ 660
====== ====== ====== ====== ======
Net income per share.............................. $ 0.10 $ 0.06 $ 0.22 $ 0.14 $ 0.22
====== ====== ====== ====== ======
Weighted average common shares.................... 3,000 3,000 3,000 3,000 3,000
</TABLE>
<TABLE>
<CAPTION>
APRIL 30,
------------------------ JANUARY 31,
1995 1996 1997 1998
------ ------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................ $ 236 $ 496 $1,096 $ 794
Total assets........................................... 2,043 2,859 4,554 5,193
Total liabilities...................................... 1,762 2,397 3,427 3,413
Total stockholders' equity............................. 281 462 1,127 1,780
</TABLE>
19
<PAGE> 22
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 78.8% and 70.4% of
the Company's total revenues for the nine months ended January 31, 1998 and for
fiscal 1997, respectively. Maintenance fee, training, consulting and other
services accounted for 21.2% and 29.6% of the Company's revenues for the nine
months ended January 31, 1998 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 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.
20
<PAGE> 23
The following table sets forth the license terms remaining at January 31,
1998 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............................... 410 33.7%
12-23 Months...................................... 119 9.8
24-35 Months...................................... 96 7.9
36-47 Months...................................... 295 24.2
48-59 Months...................................... 290 23.9
60 or More Months................................. 6 0.5
</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 January 31,
1998, 71.7% 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 53.1% 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, 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 effective date of this provision of the statement has been
deferred for one year. The Company currently recognizes
21
<PAGE> 24
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 nine months ended January 31, 1998 or for fiscal years 1997,
1996 or 1995.
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>
NINE MONTHS
ENDED
YEAR ENDED APRIL 30, JANUARY 31,
----------------------------- -----------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue
Software license revenue................. 62.6% 67.1% 70.4% 71.6% 78.8%
Maintenance fee and other revenue........ 37.4 32.9 29.6 28.4 21.2
----- ----- ----- ----- -----
Total revenue.......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses
Cost of software license revenue......... 4.9 4.7 5.7 5.5 3.4
Cost of maintenance fee and other
revenue................................ 7.2 10.2 7.7 7.9 7.4
Selling and marketing.................... 33.8 39.1 35.8 36.6 36.9
Research and development................. 23.3 21.6 18.1 20.0 20.0
General and administrative............... 20.8 19.4 18.7 17.8 18.0
----- ----- ----- ----- -----
Total operating expenses............... 90.0 95.0 86.0 87.8 85.7
----- ----- ----- ----- -----
Income from operations..................... 10.0 5.0 14.0 12.2 14.3
Interest income, net....................... .2 .4 .6 .7 1.1
Other (expense) income..................... (.2) -- -- -- --
----- ----- ----- ----- -----
Income before income taxes................. 10.0 5.4 14.6 12.9 15.4
Provision for income taxes................. 4.1 2.0 5.7 5.2 5.6
----- ----- ----- ----- -----
Net income................................. 5.9% 3.4% 8.9% 7.7% 9.8%
===== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED JANUARY 31, 1998 COMPARED TO NINE MONTHS ENDED JANUARY 31,
1997
Total Revenue. Total revenue for the nine months ended January 31, 1998
increased $1.5 million or 27.1% to $6.8 million from $5.3 million for the nine
months ended January 31, 1997. 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 40.0% from $3.8
million for the nine months ended January 31, 1997 to $5.3 million for the nine
months ended January 31, 1998. The increase in software license revenue for the
nine-month period ending January 31, 1998 as compared to the same nine-month
period in 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 fees and
revenue derived from
22
<PAGE> 25
training, consulting services and other services. Maintenance fee and other
revenue decreased 5.2% to $1.4 million for the nine months ended January 31,
1998 from $1.5 million for the nine months ended January 31, 1997. The decrease
was primarily attributable to a reduction in the number of on-site training
courses conducted and a reduction in the training staff due to reassignment.
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), printing of manuals and packaging, royalties
and license fees paid to third parties. Cost of software license revenue was
$233,000 and $293,000 for the nine months ended January 31, 1998 and 1997,
respectively. Expressed as a percentage of software license revenue, cost of
software license revenue was 4.4% and 7.7% in the first nine months of fiscal
years 1998 and 1997, respectively. The decrease in cost of software license
revenue was attributable to decreases in third party software and system Control
Device costs, as a result of lower costs associated with the renewal of software
licenses.
Cost of Maintenance Fee and Other Revenue. Cost of maintenance fee and
other revenue consists primarily of technical support, training, depreciation
and facility costs, consulting and other contract costs. Cost of maintenance fee
and other revenue was $503,000 and $420,000 for the nine months ended January
31, 1998 and 1997, respectively. Expressed as a percentage of maintenance fee
and other revenue, cost of maintenance fee and other revenue was 35.0% and 27.7%
for the nine months ended January 31, 1998 and 1997, respectively. Cost of
maintenance fee and other revenue grew because of the expansion of technical
support personnel required to support the increase in sales, as well as an
increase in equipment expense.
Selling and Marketing. Selling and marketing expense consists primarily of
personnel costs related to sales and marketing, including occupancy,
depreciation, travel, entertainment, telephone, promotional, trade show expenses
and direct sales force commissions. Selling and marketing expense was $2.5
million and $2.0 million in the nine months ended January 31, 1998 and 1997,
respectively. Selling and marketing expense, as a percentage of revenue was
36.9% and 36.6% for the nine months ended January 31, 1998 and 1997,
respectively. The increase in selling and marketing expense during the nine
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 participation in
exhibitions and related expenses.
Research and Development. Research and development expense consists
principally of personnel costs, equipment, depreciation and facility costs
incurred in the research, design, development and refinement of the Company's
products. Research and development expense was $1.4 million for the nine months
ended January 31, 1998 as compared to $1.1 million for the same period in fiscal
year 1997. Research and development as a percentage of total revenue was 20.0%
for each of the nine months ended January 31, 1998 and 1997. The increase in
research and development expense 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 expense of the Company. General and administrative expense
was $1.2 million and $949,000 for the nine months ended January 31, 1998 and
1997, respectively. General and administrative expense as a percentage of
revenue was 18.0% and 17.8% for the nine months ended January 31, 1998 and 1997,
respectively. The increase in general and administrative expense was chiefly
attributable to the establishment of a reserve, totaling approximately $125,000,
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.
Interest Income, net. Interest income, net increased $40,000 from $35,000
for the nine months ended January 31, 1997 to $75,000 for the same period in
fiscal year 1998 because of larger cash balances on deposit.
Provision (Benefit) for Income Taxes. The Company's effective tax rate was
36.4% and 40.1% for the nine months ended January 31, 1998 and 1997,
respectively.
23
<PAGE> 26
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
$419,000 and $266,000 in fiscal years 1997 and 1996, respectively. Expressed as
a percentage of software license revenue, cost of software license revenue was
5.7% and 7.0% in fiscal years 1997 and 1996, respectively.
Cost of Maintenance Fee and Other Revenue. Cost of maintenance fee and
other revenue was $561,000 and $578,000 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 25.8% and 31.0% 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 $2.6 million and
$2.2 million in fiscal years 1997 and 1996, respectively. However, as a
percentage of total revenues, selling and marketing expense was 35.8% and 39.1%
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 $1.3
million and $1.2 million in fiscal years 1997 and 1996, respectively. However,
research and development expense as a percentage of revenue was 18.1% and 21.6%
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.
General and Administrative. General and administrative costs were $1.4
million and $1.1 million in fiscal years 1997 and 1996, respectively. However,
general and administrative expense as a percentage of revenue was 19.0% and
19.4% 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
24
<PAGE> 27
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 6.4% from fiscal 1995 to $266,000 in fiscal 1996 and represented 7.0%
of software license revenue in fiscal 1996. Cost of software license revenue
increased chiefly due to royalties and license fees paid to third parties.
Cost of Maintenance Fee and Other Revenue. Cost of maintenance fee and
other revenue increased $216,000 or 59.7%, to $578,000 and represented 31.0% 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 29.8% from
fiscal 1995 to $2.2 million or 39.1% 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 4.1%
from fiscal 1995 to $1.2 million or 21.6% of total revenue in fiscal 1996.
General and Administrative. General and administrative costs increased
4.9% from fiscal 1995 to $1.1 million or 19.4% of revenue in fiscal 1996. The
increase was generally attributable to increases in depreciation, insurance
expense and office supplies.
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. 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, petroleum refining and other industries. Although no assurances
can be made, the Company believes that the recent economic problems in Asia will
not have a material adverse affect on the Company's operations. The Company's
future operating results may fluctuate as a result of the above 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."
25
<PAGE> 28
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 three 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, JANUARY 31,
1996 1996 1997 1997 1997 1997 1998
-------- ----------- ----------- --------- -------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue
Software license revenue............. $1,367 $1,105 $1,342 $1,351 $1,747 $1,472 $2,119
Maintenance fee and other revenue.... 476 614 425 659 531 510 396
------ ------ ------ ------ ------ ------ ------
Total revenue...................... 1,843 1,719 1,767 2,010 2,278 1,982 2,515
------ ------ ------ ------ ------ ------ ------
Expenses
Cost of software license revenue..... 95 56 143 125 112 100 21
Cost of maintenance fee and other
revenue............................ 124 144 151 142 135 171 197
Selling and marketing................ 673 592 686 675 745 820 933
Research and development............. 322 326 417 261 403 443 506
General and administrative........... 311 349 288 429 437 385 401
------ ------ ------ ------ ------ ------ ------
Total operating expenses........... 1,525 1,467 1,685 1,632 1,832 1,919(1) 2,058
------ ------ ------ ------ ------ ------ ------
Income from operations................. 318 252 82 378 446 63 457
Interest income, net................. 5 8 22 10 21 28 26
Other (expense) income............... (7) 7 -- -- 1 (1) (3)
------ ------ ------ ------ ------ ------ ------
Income before income taxes............. 316 267 104 388 468 90 480
Provision for income taxes............. 119 111 45 144 176 39 163
------ ------ ------ ------ ------ ------ ------
Net income............................. $ 197 $ 156 $ 59 $ 244 $ 292 $ 51(1) $ 317
====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------
FISCAL 1997 FISCAL 1998
------------------------------------------------ ------------------------------------
JULY 31, OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31,
1996 1996 1997 1997 1997 1997 1998
-------- ----------- ----------- --------- -------- ----------- -----------
(AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue
Software license revenue............. 74.2% 64.3% 75.9% 67.2% 76.7% 74.3% 84.3%
Maintenance fee and other revenue.... 25.8 35.7 24.1 32.8 23.3 25.7 15.7
----- ----- ----- ----- ----- ----- -----
Total revenue...................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- ----- ----- -----
Expenses
Cost of software license revenue..... 5.2 3.3 8.1 6.2 4.9 5.0 .8
Cost of maintenance fee and other
revenue............................ 6.8 8.4 8.6 7.1 5.9 8.6 7.9
Selling and marketing................ 36.5 34.5 38.8 33.6 32.7 41.4 37.1
Research and development............. 17.5 19.0 23.6 13.0 17.7 22.4 20.0
General and administrative........... 16.8 20.1 16.3 21.3 19.2 19.4 16.0
----- ----- ----- ----- ----- ----- -----
Total operating expenses........... 82.8 85.3 95.4 81.2 80.4 96.8(1) 81.8
----- ----- ----- ----- ----- ----- -----
Income from operations................. 17.2 14.7 4.6 18.8 19.6 3.2 18.2
Interest income, net................. 0.3 0.5 1.2 0.5 0.9 1.4 1.0
Other (expense) income............... (0.4) 0.4 -- -- -- -- (0.1)
----- ----- ----- ----- ----- ----- -----
Income before income taxes............. 17.1 15.6 5.8 19.3 20.5 4.6 19.1
Provision for income taxes............. 6.5 6.5 2.5 7.2 7.7 2.0 6.5
----- ----- ----- ----- ----- ----- -----
Net income............................. 10.6% 9.1% 3.3% 12.1% 12.8% 2.6%(1) 12.6%
===== ===== ===== ===== ===== ===== =====
</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.
26
<PAGE> 29
LIQUIDITY AND CAPITAL RESOURCES
During the nine-month period ended January 31, 1998 and fiscal years 1997
and 1996, the Company satisfied its cash needs through cash provided by
operations. Cash provided by operating activities during the nine months ended
January 31, 1998 and fiscal years 1997 and 1996 was approximately $627,000, $1.2
million and $519,000, respectively. At January 31, 1998 and at April 30, 1997
and 1996, the Company had working capital of $794,000, $1.1 million and
$496,000, respectively. The ratio of current assets to current liabilities at
January 31, 1998 and at April 30, 1997 and 1996 was 1.27 to 1, 1.39 to 1 and
1.25 to 1, respectively. The Company currently does not maintain a credit
facility.
Cash used in investing activities has been for the purchase of property and
equipment which amounted to $252,000, $250,000 and $215,000 for the nine months
ended January 31, 1998 and in fiscal years 1997 and 1996, respectively. The
Company intends to continue to invest in its core technology and develop new
technology to create innovative integrated AutoDE products, which will involve
increased staffing levels. Although the Company currently has no significant
commitments, it expects that purchases of property and equipment in fiscal 1998
and fiscal 1999 will meet or exceed expenditures for fiscal 1997 chiefly as a
result of increased staffing levels. The Company anticipates that capital
expenditures associated with the relocation of its domestic headquarters will
approximate $500,000 and will be incurred in the fourth quarter of fiscal 1998.
Cash used in financing activities for the nine months ended January 31,
1998 and during fiscal years 1997 and 1996 was $1,200, $107,000 and $0,
respectively. Cash used in financing activities for the nine months ended
January 31, 1998 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.
The Company has taken actions to make its software products Year 2000
compliant. The majority of the Company's products are currently designed to be
Year 2000 compliant and the remainder of its products is targeted to be Year
2000 compliant by December 1998. Year 2000 compliance activities will be
performed as part of the Company's normal development activity. The Company does
not believe it will incur any significant Year 2000 costs with its software
products. Consequently, Year 2000 compliance costs are not expected to result in
any material incremental costs to the Company. See "Risk Factors -- Year 2000
Compliance." The Company has been informed by its vendor that its accounting
software is Year 2000 compliant.
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.
27
<PAGE> 30
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 decision to proceed with a project has been made. These
products also facilitate construction scheduling and cost estimation for smaller
projects at existing plants.
ICARUS International, Inc. is a newly organized Maryland corporation formed
for the purpose of holding the voting stock of ICARUS Corporation, a Maryland
corporation which performs certain software development, sales and services
described herein, and of ICARUS Services Limited, a United Kingdom private
limited company engaged in the sale of software licenses and the performance of
certain services related thereto in Europe. The Company's other subsidiaries are
ICARUS Nippon K.K., a Japanese corporation engaged in the sale of software
licenses and the performance of certain services related thereto in Southeast
Asia, and ICARUS Marketing and Development Corporation, a Maryland corporation
formed to engage in strategic alliances with other companies. All references to
the "Company" or to "ICARUS" include ICARUS International, Inc. and its
predecessors and consolidated subsidiaries.
28
<PAGE> 31
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 is expected
to total $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.
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.
29
<PAGE> 32
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 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.
30
<PAGE> 33
- 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 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.
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
31
<PAGE> 34
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 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
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<PAGE> 35
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, 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 pulp and paper,
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
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compete for acquisition opportunities because of its leadership position in
process manufacturing CAE software and its knowledge of the market and potential
acquisition targets.
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.
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
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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."
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>
ORIGINAL CURRENT RELEASE
PRODUCT PLANT LIFECYCLE DESCRIPTION RELEASE (DATE/VERSION)
NAME STAGE OF PRODUCT DATE OPERATING SYSTEM
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
ICARUS Process Process Enables process engineers June (October 1997/Version
Evaluator Engineering to rapidly screen 1995 4.0) Microsoft Windows 95
("IPE") alternative chemical & NT
process designs for a
proposed major process
manufacturing project.
- ---------------------------------------------------------------------------------------------------
ICARUS 2000 Cost Enables engineering teams December (July 1997/Version 6.0)
Engineering in owner-operators and 1992 UNIX (August 1997/Version
E&C companies to quickly 6.0) Microsoft Windows NT
prepare engineering,
procurement and
construction estimates
for a proposed major
project.
- ---------------------------------------------------------------------------------------------------
ICARUS Project Construction Enables project managers May (June 1997/Version 3.0)
Manager Scheduling to create cost estimates 1995 Microsoft Windows 3.1, 95
and automatically develop and NT
planning and construction
schedules for small
projects, revamps and
renovations.
- ---------------------------------------------------------------------------------------------------
Questimate Operations and Enables cost estimators November (May 1997/Version 12.0)
Maintenance at operating plants to 1986 Microsoft Windows 3.1, 95
quickly evaluate the cost and NT
impact of proposed plant
modifications and
maintenance.
- ---------------------------------------------------------------------------------------------------
</TABLE>
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 year 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.
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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 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 Project Scheduler ("IPS"). IPS will be designed to develop
Primavera Project Planner ("P3") engineering and construction scheduling
networks using ICARUS 2000's project estimate results. IPS will produce a
detailed P3 project schedule containing a complete Precedence Diagramming Method
("PDM") network of engineering and construction activities, precedence
relationships, resources and activity codes. IPS also will be designed to
produce detailed engineering and procurement activities allowing a customer to
choose whether the engineering network begins with basic engineering or with
detailed engineering. IPS will provide the customer with an opportunity to unify
the basis for the engineering, procurement, and construction estimate and
schedule, thereby enabling the customer to better schedule and control projects
during the engineering, procurement, and construction phases.
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 January 31, 1998, 23 of the Company's employees were directly
involved in internal product development. The Company's product development
expenditures for the nine months ended January 31, 1998
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and for the year ended April 30, 1997 were $1.4 million and $1.3 million,
representing 20.0% and 18.1% 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 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
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Company expects to increase the scope and depth of its consulting services in
the future. See "Business -- Strategy."
The provision of services by the Company to its customers for the nine
months ended January 31, 1998 and the year ended April 30, 1997 represented
approximately 7.4% and 7.7% 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 customers.
Agrium, Inc.
Air Products and Chemicals, Inc.
ARCO Chemical Company
Bayer Corporation
BOC Process Plants
Chevron Chemical Company
Cytec Industries, Inc.
Dow North America
Eastman Chemical Company
Elf Atochem
North America, Inc.
FMC Corporation
GE Plastics
Hercules Incorporated
Hoechst Celanese 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
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
Campbell Soup Company
Kvaerner Metals
ARCO Products Company
Chevron U.S.A., Inc.
Ecopetrol
Marathon Oil Company
Mobil Technology Company
Pennzoil Products Company
Phillips Petroleum Company
Qatar General Petroleum Corp.
Saudi Arabian Oil Company
Shell Oil Company
Texaco Refining &
Marketing, Inc.
The Mead Corporation
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 nine months ended January 31, 1998 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
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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 January 31, 1998,
consisted of 17 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,
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 January 31, 1998, 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 $706,000 for the nine months ended January 31, 1998 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 Company's primary competition currently comes from
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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
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
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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 January 31, 1998, the Company had a total of 57 full-time and 3
part-time employees, including 30 in sales, marketing and technical support and
training, 23 in product development and 7 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 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.
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<PAGE> 45
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 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 $125,000 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 April 30, 1998. The Company anticipates relocating to larger quarters located
at 600 Jefferson Plaza, Rockville, Maryland, during May 1998, pursuant to a new
ten (10) year lease dated December 31, 1997, as amended March 30, 1998, 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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<PAGE> 46
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.......... 62 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. 68
Steinberger.............. 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.
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
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<PAGE> 47
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 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
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<PAGE> 48
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 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.
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 $500 for each committee meeting attended and are reimbursed for their
out-of-pocket expenses
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<PAGE> 49
arising from attendance at a Board or committee meeting. Directors who are also
employees receive no compensation for attending such meetings other than their
base salaries. It is anticipated that options to purchase shares of Common Stock
will be issued to the Company's non-employee directors immediately following the
Annual Meeting of Stockholders to be held in 1998, and that such directors will
thereafter be entitled to receive additional stock options under the Company's
Stock Option Plan. See "-- Stock Plans -- 1998 Stock Option Plan."
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the two other most highly compensated executive
officers of the Company (collectively, the "Named Executive Officers") for the
fiscal year ended April 30, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- ------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION(3) OPTIONS($) COMPENSATION
--------------------------- --------- -------- --------------- ------------ ------------
<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 immediately prior
to the Offering. 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 immediately prior to the
Offering. 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.
47
<PAGE> 50
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").
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-
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<PAGE> 51
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 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
825,000 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
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<PAGE> 52
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.
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 550,000 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 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
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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.
CERTAIN TRANSACTIONS
PENDING RECAPITALIZATION
The Company was organized under the laws of the State of Maryland on
December 2, 1997. 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.
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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.
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.
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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.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 10, 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.............................. -- -- -- --
All directors and executive officers as a
group (seven persons)....................
</TABLE>
- ---------------
(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, 13355 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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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.
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
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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 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
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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 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.
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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 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.
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
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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. The Principal
Stockholders do not currently contemplate requesting an early release from this
contractual restriction.
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 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.
58
<PAGE> 61
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 shares of Common
Stock are released for sale to the public, 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 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
59
<PAGE> 62
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.
Pursuant to an understanding between the Company and the Representative,
the Representative has the right to approve the addition of two independent
directors to the Company's Board of Directors. The Representative approved the
nomination of Messrs. Beck and Byrne to the Board, neither of which had any
prior relationship with the Company.
The Representative was formed in 1996 by the combination of two investment
banks. The founders and senior professionals of the Representative have
substantial backgrounds in investment banking, principal investing and corporate
management. The Representative has served as a co-manager of several other
public offerings.
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.
60
<PAGE> 63
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.
61
<PAGE> 64
ICARUS INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheet as of April 30, 1997, and
Unaudited Consolidated Balance Sheet as of January 31,
1998...................................................... F-3
Consolidated Statements of Operations for the Years Ended
April 30, 1996 and 1997 and Unaudited Consolidated
Statements of Operations for the Nine Months Ended January
31, 1997 and 1998......................................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended April 30, 1996 and 1997, and Unaudited
Consolidated Stockholders' Equity for the Nine Months
Ended January 31, 1998.................................... 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 Nine Months Ended January
31, 1997 and 1998......................................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 65
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.
/s/ GRANT THORNTON LLP
Vienna, Virginia
July 8, 1997
F-2
<PAGE> 66
ICARUS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1997 1998
---------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $1,716,371 $2,081,345
Accounts receivable, net.................................. 1,992,571 1,414,387
Prepaid expenses and other current assets................. 174,721 200,914
---------- ----------
Total Current Assets................................... 3,883,663 3,696,646
Property and Equipment, net................................. 401,899 524,694
Deferred Offering Costs..................................... 245,160 638,787
Other Noncurrent Assets..................................... 23,376 332,819
---------- ----------
Total Assets........................................... $4,554,098 $5,192,946
---------- ----------
Current Liabilities
Accounts payable.......................................... $ 178,677 $ 348,933
Accrued payroll and related costs......................... 439,581 559,658
Other accrued liabilities................................. 49,926 --
Current maturities under capital lease obligations........ 1,630 1,797
Income taxes payable...................................... 165,840 354,416
Deferred income taxes..................................... 284,417 132,017
Deferred revenue.......................................... 1,667,453 1,506,156
---------- ----------
Total Current Liabilities.............................. 2,787,524 2,902,977
Deferred Revenue, less current portion...................... 634,033 501,333
Capital Lease Obligations, less current portion............. 5,159 8,378
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 1,760,313
Cumulative translation adjustment......................... (13,415) (20,413)
---------- ----------
Total Stockholders' Equity............................. 1,127,382 1,780,258
---------- ----------
Total Liabilities and Stockholders' Equity............. $4,554,098 $5,192,946
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 67
ICARUS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED APRIL 30, JANUARY 31,
----------------------- -----------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue
Software license revenue.................... $3,811,905 $5,164,907 $3,813,989 $5,338,377
Maintenance fee and other revenue........... 1,866,088 2,174,124 1,515,320 1,436,987
---------- ---------- ---------- ----------
Total Revenue................................. 5,677,993 7,339,031 5,329,309 6,775,364
Operating Expenses
Cost of software license revenue............ 266,296 419,059 293,411 232,820
Cost of maintenance fee and other revenue... 577,542 561,642 419,773 502,781
Selling and marketing....................... 2,219,696 2,625,840 1,951,298 2,498,055
Research and development.................... 1,228,686 1,325,881 1,065,105 1,351,499
General and administrative.................. 1,102,308 1,376,951 948,520 1,223,636
---------- ---------- ---------- ----------
Total Operating Expenses...................... 5,394,528 6,309,373 4,678,107 5,808,791
---------- ---------- ---------- ----------
Income from Operations........................ 283,465 1,029,658 651,202 966,573
---------- ---------- ---------- ----------
Interest Income, net.......................... 20,649 45,575 35,000 74,885
Other (Expense) Income........................ (150) -- -- (3,230)
---------- ---------- ---------- ----------
Income Before Income Taxes.................... 303,964 1,075,233 686,202 1,038,228
Provision for Income Taxes.................... 111,024 418,804 275,000 378,354
---------- ---------- ---------- ----------
Net Income.................................... $ 192,940 $ 656,429 $ 411,202 $ 659,874
---------- ---------- ---------- ----------
Net Income Per Share.......................... $ 0.06 $ 0.22 $ 0.14 $ 0.22
---------- ---------- ---------- ----------
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> 68
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).................. -- -- -- -- (6,998) (6,998)
Net Income (unaudited)......... -- -- -- 659,874 -- 659,874
-- ------- ------- ---------- -------- ----------
Balance at January 31, 1998
(unaudited).................. $1 $30,000 $10,357 $1,760,313 $(20,413) $1,780,258
-- ------- ------- ---------- -------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 69
ICARUS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED APRIL 30, JANUARY 31,
------------------------ -----------------------
1996 1997 1997 1998
--------- ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Increase (Decrease) in Cash and Cash
Equivalents
Cash Flows from Operating Activities
Net income................................ $ 192,940 $ 656,429 $ 411,202 $ 659,874
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization.......... 174,372 182,362 127,238 129,267
Loss on disposal of property........... -- -- -- 3,193
Deferred income taxes.................. 59,700 222,839 (21,009) (158,820)
Changes in assets and liabilities
Accounts receivable.................... (442,312) (360,404) 122,288 582,440
Prepaid expenses and other current
assets.......................... (64,328) (365,315) (63,570) (723,566)
Accounts payable and accrued
expenses........................ 193,115 20,727 68,201 239,821
Income taxes payable.............. (10,007) 131,241 231,139 190,565
Deferred revenue.................. 415,515 723,866 253,170 (295,542)
--------- ------------ ---------- ----------
Net Cash Provided by Operating Activities... 518,995 1,211,745 1,128,659 627,232
--------- ------------ ---------- ----------
Cash Flows from Investing Activities
Purchase of property and equipment........ (215,476) (249,635) (96,892) (269,737)
Proceeds from sale of property and
equipment.............................. -- -- -- 17,817
--------- ------------ ---------- ----------
Net Cash Used in Investing Activities....... (215,476) (249,635) (96,892) (251,920)
--------- ------------ ---------- ----------
Cash Flows from Financing Activities
Issuance of common stock.................. 200 -- -- --
Capital lease payments.................... (431) (1,681) (443) (1,223)
Repayment of notes payable................ -- (105,375) (105,375) --
--------- ------------ ---------- ----------
Net Cash Used in Financing Activities....... (231) (107,056) (105,818) (1,223)
--------- ------------ ---------- ----------
Effect of Exchange Rate Changes on Cash..... (22,648) 49,626 (10,694) (9,115)
--------- ------------ ---------- ----------
Net Increase in Cash and Cash Equivalents... 280,640 904,680 915,255 364,974
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 $1,726,946 $2,081,345
--------- ------------ ---------- ----------
Supplemental Disclosure of Cash Flow
Information
Cash paid for income taxes.................. $ 61,331 $ 63,522 $ 53,732 $ 347,304
--------- ------------ ---------- ----------
Cash paid for interest...................... $ -- $ 4,922 $ -- $ --
--------- ------------ ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 70
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 L), 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 January 31, 1998,
and for the nine months ended January 31, 1997, and 1998, 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.
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.
F-7
<PAGE> 71
ICARUS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
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:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
-------------------- -----------
<S> <C>
Computer equipment.......................................... 3-5 Years
Purchased software programs................................. 3 Years
Furniture and fixtures...................................... 7 Years
Leasehold improvements...................................... Life of Lease
</TABLE>
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.
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 January 31, 1998.
Research and Development Costs
The Company expenses research and development costs as incurred, including
costs relating to strategic technology arrangements.
F-8
<PAGE> 72
ICARUS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
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.
Recently Issued Accounting Standards
The Financial Accounting Standards Board recently issued four 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. Under SFAS No. 132, companies will be required
to revise current disclosure relating to employers' pension and other retiree
benefits. Implementation of this disclosure standard will not affect the
Company's financial position or results of operations. SFAS No. 128 is effective
for the Company's fiscal year 1998, and SFAS Nos. 130, 131, and 132 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
F-9
<PAGE> 73
ICARUS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
sold separately or the price for the element established by management being the
relevant authority. The effective date of this provision of the statement has
been deferred for one year. 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 prior year amounts have been reclassified to conform to 1997
presentations.
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, JANUARY 31,
1997 1998
---------- -----------
<S> <C> <C>
Trade receivables........................................... $2,109,745 $1,443,408
Other receivables........................................... 1,621 8,305
Less allowance for returns and uncollectible accounts....... (118,795) (37,326)
---------- ----------
$1,992,571 $1,414,387
========== ==========
</TABLE>
F-10
<PAGE> 74
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, JANUARY 31,
1997 1998
----------- -----------
<S> <C> <C>
Furniture and fixtures..................................... $ 865,365 $ 932,158
Computer equipment......................................... 904,092 1,070,589
Leasehold improvements..................................... 35,874 35,846
----------- -----------
1,805,331 2,038,593
Accumulated depreciation................................... (1,403,432) (1,513,899)
----------- -----------
Net property and equipment................................. $ 401,899 $ 524,694
----------- -----------
</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 nine months ended January 31, 1998, was
approximately $129,000.
NOTE D -- OTHER NONCURRENT ASSETS
The following is a summary of other Noncurrent Assets:
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1997 1998
--------- -----------
<S> <C> <C>
Lease Deposit............................................... $ -- $300,000
Other....................................................... 23,376 32,819
-------- --------
$ 23,376 $332,819
-------- --------
</TABLE>
NOTE E -- ACCRUED PAYROLL AND RELATED COSTS
The following is a summary of accrued payroll and related costs:
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1997 1998
--------- -----------
<S> <C> <C>
Accrued leave............................................... $399,522 $513,491
Other payroll-related costs................................. 40,059 46,167
-------- --------
$439,581 $559,658
-------- --------
</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.
NOTE F -- 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.
F-11
<PAGE> 75
ICARUS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G -- 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 H -- COMMITMENTS
Operating Leases
The Company has various operating lease commitments expiring through August
2002 for office space and rental equipment. The Company's headquarters lease
expired on March 31, 1998 and was extended to April 30, 1998. See also Note L.
Future commitments on operating leases as of April 30, 1997 are 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:
<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
F-12
<PAGE> 76
ICARUS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE H -- COMMITMENTS -- (CONTINUED)
the Company during the year ended April 30, 1997, and the nine months ended
January 31, 1998, were $-0- and approximately $126,000, respectively. Revenue
and commissions totaling $5,860 have been earned by the Company through January
31, 1998.
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 I -- 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 methods 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:
<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>
YEAR ENDED APRIL 30, NINE MONTHS
--------------------- ENDED
1996 1997 JANUARY 31, 1998
--------- --------- ----------------
<S> <C> <C> <C>
Current
Federal......................................... $ 29,564 $169,147 $ 306,000
State........................................... 9,526 37,589 67,010
Foreign......................................... 12,234 (10,771) 164,164
-------- -------- ---------
51,324 195,965 537,174
Deferred
Federal......................................... (47,000) (28,000) 6,000
State........................................... (8,000) (5,000) 27,000
Foreign......................................... 114,700 255,839 (191,820)
-------- -------- ---------
59,700 222,839 (158,820)
-------- -------- ---------
$111,024 $418,804 $ 378,354
-------- -------- ---------
</TABLE>
F-13
<PAGE> 77
ICARUS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE I -- INCOME TAXES -- (CONTINUED)
The provision for income taxes differs from the federal statutory rate
because of the following:
<TABLE>
<CAPTION>
YEAR ENDED
APRIL 30, NINE MONTHS
----------- ENDED
1996 1997 JANUARY 31, 1998
---- ---- ----------------
<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 (2.2)
---- ---- ----
Provision for income taxes................................ 36.5% 38.9% 36.4%
---- ---- ----
</TABLE>
NOTE J -- REVENUE
The following is a summary of revenue:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED APRIL 30, JANUARY 31,
----------------------- ------------
1996 1997 1998
---------- ---------- ------------
<S> <C> <C> <C>
Software license revenue......................... $3,880,190 $5,621,988 $5,382,529
Maintenance fees and other revenue............... 1,866,088 1,825,365 1,436,987
Less sales returns and allowances................ (68,285) (108,322) (44,152)
---------- ---------- ----------
$5,677,993 $7,339,031 $6,775,364
---------- ---------- ----------
</TABLE>
NOTE K -- GEOGRAPHIC INFORMATION
The Company's operations are based worldwide through offices in the United
States, the United Kingdom and Japan.
F-14
<PAGE> 78
ICARUS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE K -- GEOGRAPHIC INFORMATION -- (CONTINUED)
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,
----------------------- JANUARY 31,
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
Revenue
United States.......................................... $4,672,554 $5,795,198 $5,779,624
United Kingdom......................................... 833,131 1,267,119 713,407
Japan.................................................. 172,308 276,714 282,333
---------- ---------- ----------
Total revenue............................................ $5,677,993 $7,339,031 $6,775,364
---------- ---------- ----------
Income from operations
United States.......................................... $ 27,073 $ 558,360 $ 742,391
United Kingdom......................................... 226,851 584,228 118,971
Japan.................................................. 29,541 (112,930) 105,211
---------- ---------- ----------
Total income from operations............................. $ 283,465 $1,029,658 $ 966,573
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
APRIL 30,
----------------------- JANUARY 31,
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
Identifiable assets
United States.......................................... $2,258,740 $3,048,361 $3,329,510
United Kingdom......................................... 594,401 1,209,418 1,444,911
Japan.................................................. 271,455 296,319 418,525
---------- ---------- ----------
$3,124,596 $4,554,098 $5,192,946
---------- ---------- ----------
</TABLE>
NOTE L -- 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
F-15
<PAGE> 79
ICARUS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE L -- SUBSEQUENT EVENTS -- (CONTINUED)
825,000 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.
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
550,000 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 or before May 1, 1998 and
expires in 2008. Base rent on the lease is approximately $571,000 and is subject
to annual escalations.
F-16
<PAGE> 80
[INSIDE BACK COVER]
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE> 81
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 6
Use of Proceeds....................... 16
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 18
Selected Consolidated Financial
Data................................ 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 28
Management............................ 44
Certain Transactions.................. 51
Principal Stockholders................ 53
Description of Capital Stock.......... 54
Shares Eligible for Future Sale....... 57
Underwriting.......................... 59
Legal Matters......................... 60
Experts............................... 60
Available Information................. 61
Index to Financial Statements......... F-1
</TABLE>
------------------
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> 82
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 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-1
<PAGE> 83
(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.
(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,
II-2
<PAGE> 84
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 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:
(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.
II-3
<PAGE> 85
(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 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.
II-4
<PAGE> 86
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, 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 Corporation's Articles of
Incorporation, which provisions are incorporated herein with the same
affect as if they were set forth herein.
II-5
<PAGE> 87
(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.
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 expenses............................ 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.
ITEM 27. EXHIBITS.
The Exhibits attached hereto are as follows:
<TABLE>
<C> <S>
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.*
</TABLE>
II-6
<PAGE> 88
<TABLE>
<C> <S>
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 SRI Consulting Inc., 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.
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 Agreement.
10.14 Amendment, dated March 30, 1998, to lease for 600 Jefferson
Plaza, Rockville, Maryland, by and between Allstate Life
Insurance Company and the Company, dated December 31, 1997.
10.15 Amendment, dated January 21, 1998, to lease for One Central
Plaza, 11300 Rockville Pike, Rockville, Maryland, by and
between the Company and One Central Plaza Limited
Partnership.+
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.*
27.1 Financial data schedule.*
</TABLE>
- ---------------
* Previously filed.
** 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.
+ To be filed by amendment.
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.
II-7
<PAGE> 89
(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.
(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-8
<PAGE> 90
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 Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned, in
the City of Rockville, State of Maryland on April 14, 1998.
ICARUS INTERNATIONAL, INC.
By: /s/ HERBERT G. BLECKER
------------------------------------
HERBERT G. BLECKER
CHAIRMAN OF THE BOARD, PRESIDENT
CHIEF EXECUTIVE OFFICER
------------------------
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ HERBERT G. BLECKER Chairman of the Board, President April 14, 1998
- ------------------------------------------------ and Chief Executive Officer
HERBERT G. BLECKER (Principal executive officer)
/s/ MARK S. KINGSLEY Controller and Chief Financial April 14, 1998
- ------------------------------------------------ Officer; (Principal Accounting
MARK S. KINGSLEY Officer and Principal Financial
Officer)
/s/ EUNICE E. BLECKER Director, Secretary and April 14, 1998
- ------------------------------------------------ Treasurer
EUNICE E. BLECKER
/s/ HERBERT G. BLECKER* Director and Vice Chairman of April 14, 1998
- ------------------------------------------------ the Board
JAMES J. BYRNE
/s/ WILLIAM F. GERITZ, III Director and Executive Vice April 14, 1998
- ------------------------------------------------ President
WILLIAM F. GERITZ, III
/s/ HERBERT G. BLECKER* Director April 14, 1998
- ------------------------------------------------
GARY M. ROUSH
/s/ HERBERT G. BLECKER* Director April 14, 1998
- ------------------------------------------------
J. EDWARD BECK
</TABLE>
- ---------------
* Herbert G. Blecker has signed on behalf of each individual indicated in the
capacities stated as their attorney-in-fact.
II-9
<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. "Unit Cost Estimating Software" means a computer program
which uses quantities of Project Components (as hereinafter
defined) [*] by users which are then multiplied by unit costs
for such Project Components accessed from RICHARDSON Database
Products and/or other cost databases in order to produce cost
estimates [*].
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
A. ICARUS agrees to pay RICHARDSON a royalty fee for [*] software
product licensed by ICARUS Marketing Channels to customers, that
contains Original RICHARDSON Source Code and/or Modified RICHARDSON
Source Code, which royalty shall be based upon the [*] of Authorized
Simultaneous Users ("ASU's"). Royalty fees due hereunder shall be [*]
the royalty fee of (i), (ii), or (iii) set forth below:
(i) a royalty of [*] for [*] ASU, a royalty fee of [*] for [*]
ASU's, a royalty fee of [*] for [*] ASU's, a royalty fee of [*]
for [*] ASU's plus [*] ASU over [*] ASU's; or
(ii) [*] of the [*] price for the [*] of ASU's for such RICHARDSON
Software as described on the [*] RICHARDSON Price Schedule; or
(iii) [*] of the [*] price charged by RICHARDSON to its customers
for RICHARDSON Software according to RICHARDSON'S [*].
B. Each party shall remit payment to the other party for amounts due
within thirty (30) days of the last report as described in paragraph
11 of this Agreement.
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.
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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 ICARUS IPE: ICARUS [*] ICARUS Process Evaluator ("IPE")
[*] ICARUS [*] PROCESS-PRODUCT [*] PROCESS-PRODUCT [*] such Customers [*]
PROCESS-PRODUCT [*] to same. In conjunction therewith, ICARUS shall be entitled
to offer PROCESS-PRODUCT as a [*] IPE Product(s) [*] by each Customer, for the
[*] Customer's [*] IPE [*] without [*] charge to the Customer and/or [*] other
[*] as will [*] for the Existing Customer [*] PROCESS-PRODUCT. With respect to
such [*] the pricing, commissions and revenue sharing referred to in Sections 6
and 7 above [*] Existing Customer of ICARUS [*] and [*] an [*] PROCESS-PRODUCT
and if the [*] or [*] under an [*] is [*] to said Customer, then no such [*]
shall be due. In addition, with respect to any subsequent renewals of a license
agreement by said Customer, ICARUS [*] the [*] shown on Schedule A attached
hereto, [*] to or more consistent with the [*] for the Customer [*]
PROCESS-PRODUCT, in which event [*] and [*] rather than those [*].
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 During the term of this Agreement and for a period of [*]
following the expiration or earlier termination thereof, neither party [*] that
[*] with the other [*], i.e., ICARUS Products or HYPROTECH Products [*] of
execution of this Agreement.
11.3 The parties further agree that Jointly Developed Products [*]
with HYPROTECH Products [*] ICARUS Products, unless the parties mutually agree
to same. HYPROTECH acknowledges that HYSIS-IPE [*] and agrees that [*] shall
not be [*] HYPROTECH, and HYPROTECH further warrants to ICARUS that [*] by
HYPROTECH
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that [*] with equipment selection, equipment sizing, cost estimating,
scheduling, CAE and/or CAD. HYPROTECH agrees that [*] will be incorporated [*]
Jointly Developed Products. The parties acknowledge that PROCESS-PRODUCT [*]
with IPE, but except to [*], the parties have not agreed, as of the date hereof,
to develop any Jointly Developed Products which will be [*] with HYPROTECH
Products or ICARUS Products. The foregoing shall not preclude either party from
the development or marketing of software and/or the providing of services,
individually or with others, which products or services [*] either HYPROTECH
Products, ICARUS Products, and/or Jointly Developed Products [*], provided
however, any products [*] Jointly Developed Products, or the [*] Products.
Furthermore, [*] preclude ICARUS from developing custom or customized software
systems for individual Customers (as distinguished from commercially available
products) that integrate ICARUS Technology with the Customer's software or other
software from third parties [*] process simulation software available from third
parties [*] HYPROTECH [*] from developing custom or customized software systems
for [*] other than ICARUS, notwithstanding that in both such instances, the
custom or customized software systems may be [*] to Jointly Developed Products
or ICARUS Products or HYPROTECH Products. In the event either party shall desire
to provide custom or customized services to its respective Customer(s), to the
extent any such services primarily involve utilization of the other party's
technology, Section 11.4 below shall apply.
11.4 [*] Each party hereby agrees that it is in their mutual
respective interests to [*] to the other party that is within said other
party's [*] with respect to [*] offered by either party to its respective
Customers. Therefore, during the term of this Agreement, if one party [*] from
a Customer(s) [*] which involve the [*], the party receiving [*] from its
Customer [*] shall notify the other party [*] in writing of same, including
all material details necessary to the application of this subsection. Such
notification shall be transmitted by the [*] within [*] following receipt of
the Customer's [*], whether such [*] is made in writing, orally and/or by other
means. The [*] shall [*] to the [*]. To the extent the services to be provided
under said [*] involve, to any material degree, services within the [*]
Technology, then the [*] shall be deemed to have the [*] to [*] such services
to the [*] Customer under the [*]. In consideration thereof, the [*] shall
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receive from the [*] of the total Customer [*] for such [*], or if the [*] to
be provided by the [*] comprise only part of the [*] to be provided to the
Customer, then [*] of the value or price allocated to such [*], all as
determined by the [*]. Payment shall be due to the [*] only after [*] are
provided by the [*], and payments are received by the [*] from the [*]. The [*]
shall be entitled to retain the [*] of the [*] allocation, as the case may be.
The [*] shall have [*] from receipt of its copy of the [*] within which to
exercise such [*] herein set forth, and to validly exercise same it must notify
the [*] in writing which must be received within the [*] period. Failure to
exercise same within the time period herein set forth shall be deemed an
election not to [*]. Additionally, if at any time a Customer refuses to accept
the [*] as [*] in performance of the [*], then the [*] shall have [*] under
this subsection, and the [*] shall be free to perform the [*] and/or with
others. With respect to any such [*] the provision of which the [*]
participates as herein set forth, all [*] by the [*] during the performance of
the [*] shall be deemed a [*] and both parties to this Agreement shall retain
the rights applicable to same to the extent set forth in this Agreement,
subject, however, to the ownership and other rights of the [*] or [*] by the
[*].
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
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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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whether any of such rights arise under the laws of the United States or any
other state, country or jurisdiction.
i. "JOINTLY DEVELOPED PRODUCT" means a software end product that is
developed by SRIC and ICARUS and that contains portions of the PEP Knowledge
Base or other SRIC Technology and portions of ICARUS Technology and that is
marketed by the SRIC Marketing Channels and the ICARUS Marketing Channels.
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.
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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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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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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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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
- ---------------------
[*] This information has been omitted pursuant to a request for
confidential treatment.
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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. Fees and Revenue Sharing. The price
schedule, marketing fees and revenue sharing between SRIC and ICARUS will be
determined for each Jointly Developed Product [*]. Notwithstanding the
foregoing, the parties have already agreed that the marketing fee for Business
Model and Project Model will be [*] of the product price or license fee [*] of
product development and [*] years. The parties further anticipate that each
party will receive [*] of the revenue from each Jointly Developed Product sale,
license and/or other distribution [*] will be payable to the party who [*],
license or other distribution of a Jointly Developed Product.
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. [*] given by one party to the other that
result in business for the other party will entitle the originating party to
payment of a [*] on the [*] base product price for an [*] or the [*] of an [*].
ii. [*] If one party receives a [*] for an [*]
approved by [*] or an [*] for an [*] approved by [*] or product payment for the
products [*], the party [*] or [*] will be [*] to
- --------------------
[*] This information has been omitted pursuant to a request for
confidential treatment.
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[*] on the [*] for an [*] or the [*] for an [*] in lieu of the [*] described in
subsection 8(i) above. Neither party will be entitled to [*] on [*] from [*] of
[*] products, nor will either party be entitled to marketing fees based on
revenues [*] of the other party [*].
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.
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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
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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
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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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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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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
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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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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
22
<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.
23
<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:
24
<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
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<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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<PAGE> 3
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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<PAGE> 4
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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<PAGE> 5
[*]
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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[*] This information has been omitted pursuant to a request for
confidential treatment.
- 5 -
<PAGE> 6
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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<PAGE> 7
[*]
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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[*] This information has been omitted pursuant to a request for
confidential treatment.
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<PAGE> 8
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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<PAGE> 9
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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<PAGE> 10
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
- --------------
[*] This information has been omitted pursuant to a request for
confidential treatment.
- 11 -
<PAGE> 12
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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<PAGE> 13
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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<PAGE> 14
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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<PAGE> 15
(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
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<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
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<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
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<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.
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<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.
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<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
-------------------
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<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.
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<PAGE> 1
EXHIBIT 10.5
REAL ESTATE CENTRAL, INC.
MARKETERS OF BUSINESS AND INVESTMENT PROPERTIES
ONE CENTRAL PLAZA
113000 ROCKVILLE PIKE
ROCKVILLE, MARYLAND 20852
301-770-7500
LEASE AGREEMENT
THIS AGREEMENT OF LEASE made this 15th day of October, 1976, by and
between Mach I - Research Associates, or successor in title (hereinafter called
"Lessor"), and Icarus Corporation whose principal place office will be located
Rockville, Maryland (hereinafter called "Lessee").
WITNESSETH:
1. Lessor, for and in consideration of the rents, covenants,
agreements and conditions herein contained on the part of Lessee to be paid,
kept, observed and performed, does hereby lease to Lessee, and Lessee does
hereby lease from Lessor, subject to the terms and conditions of this lease,
the space (hereinafter referred to as the "demised premises") in the office
building (hereinafter referred to as the "building") located at 11300 Rockville
Pike, Rockville, Maryland 20852. Lessor reserves the right to change the name
of the building, at any time or from time to time, without notice to, or the
consent of, the Lessee. The demised premises are outlined in red on the floor
plan attached hereto and made part hereof as Exhibit "A", and contain
approximately seven thousand one hundred sixty seven (7167) gross square feet.
The floor plan attached as Exhibit "A" sets forth only the general layout and
proposed manner of development of the demised premises and it is not and shall
not be deemed to be a warranty, representation, agreement or undertaking on the
part of Lessor that any prospective or existing tenant designated thereon shall
actually become or remain, as the case may be, a
<PAGE> 2
tenant of the building. Lessor may from time to time change or alter the size,
configuration, partitions or office designations of all or any of the offices or
stores in the commercial area of the building, if any, without the consent of,
or notice to, Lessee.
2. Subject to the provisions of this Lease, the term of this Lease
shall commence on January 1, 1977 (hereinafter referred to as the "date of
commencement") and shall expire at midnight on the last day of the month which
completes -63- months (hereinafter referred to as the "expiration date") after
the date of commencement.
3. Lessee covenants and agrees to pay to Lessor, throughout the term
of this lease, the Minimum Annual Rent provided in subparagraphs 3(a) and 3(b).
All rent payable by Lessee shall be paid to Lessor, without notice or demand
and without deduction, abatement or set off of any kind, at the office of Real
Estate Central, Inc. ("Agent"), its successor or assigns, presently located at
11300 Rockville Pike, Rockville, Maryland 20852, or at such other place or to
such other person, firm or corporation as Lessor may, from time to time,
designate in writing.
(a) A Minimum Annual Rental of fifty four thousand four hundred eight
and 00/100 - - - - - - - - - - - - - - - - - - Dollars ($54,408.00 ), shall
be payable in twelve (12) equal monthly installments of four thousand five
hundred thirty four and 00/100 - - - - - - - - - - - - - Dollars ($4,534,00
) with the first monthly installment, per above stated amount, to be due and
payable on April 1, 1977 and each subsequent monthly installment to be due and
payable on the first day of each and every month thereafter during the term of
this lease, subject to adjustment as hereinafter set forth in subparagraph
3(a), 43 and 3(b). If the date of commencement of the term hereof is a date
other than the first day of a month, rent (including
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all additional rents payable pursuant to the terms of this lease) for the period
commencing with and including the date of commencement of the term hereof until
the first day of the following month shall be pro-rated on the basis of the
actual number of days in such period and shall be paid on the date of
commencement of the term hereof.*, per above stated amount,
(b) Commencing on the first day of the second lease year, and
continuing thereafter on the first day of each succeeding lease year during the
term of this lease, the Minimum Annual Rental payable pursuant to subparagraph
3(a) shall be adjusted to reflect changes in the cost of living, if any, in the
manner hereinafter set forth: The Minimum Annual Rental payable for the second
lease year shall be increased to an amount which equals the product of (i) The
Minimum Annual Rental payable during the first lease year, multiplied by (ii) a
fraction, the numerator of which is the CPI for the Adjustment Month and the
denominator of which is the CPI for the Base Month. The Minimum Annual Rental
payable for each subsequent lease year shall be increased to an amount which
equals the product of (i) the Minimum Annual Rental payable during the
immediately preceding lease year, multiplied by (ii) a fraction, the numerator
of which is the CPI for the Adjustment Month and the denominator of which is
the CPI for the Base Month.
(i) "CPI" shall be the Consumer Price Index for the Urban
Wage Earners and Clerical Workers, All Items (Base 1967=100), Washington, D.C.,
as published by the Bureau of Labor Statistics, U.S. Department of Labor. If
such index shall be discontinued with no successor or comparable successor
index, then Lessor shall have the right to substitute another similar index,
generally recognized as authoritative, by reconciling the base thereof with
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the base of the CPI.
(ii) The "first lease year" shall be the period commencing
on the date of commencement and terminating on the first anniversary of the
date of commencement. The "second lease year" shall be the period commencing
on the first anniversary of the date of commencement and terminating on the
second anniversary of the date of commencement. Each subsequent lease year
during the term hereof shall commence on the day immediately following the last
day of the preceding lease year and shall terminate on the next succeding
anniversary of the date of commencement, except that the last lease year during
the term hereof shall terminate on the expiration date or on the date this
lease otherwise terminates.
(iii) The "Base Month" shall be the calendar month of
issuance of the CPI nearest to the month of January of the calendar year
immediately preceding the calendar year during which a rent adjustment is to be
made pursuant to subparagraph 3(b).
(iv) The "Adjustment Month" shall be the calendar month of
issuance of the CPI nearest to the month of January of the calendar year during
which a rent adjustment is to be made pursuant to subparagraph 3(b).
(v) The foregoing provisions shall in no way act to reduce
the Minimum Annual Rental for a lease year below the Minimum Annual Rental for
the immediately preceding lease year.
(c) Wherever it is provided in this lease that Lessee is required
to make any payment to Lessor, such payment shall be deemed to be additional
rent and all remedies applicable to the non-payment of rent shall be applicable
thereto.
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4.(a) Lessee shall, throughout the term of this lease, pay to
Lessor, as additional rent which shall not be deducted from the Minimum Annual
Rent, Lessee's pro-rata share of the amount by which (i) the Real Estate Taxes
for the then current real estate tax year, exceed (ii) the Real Estate Taxes
for the Base Year, whether such excess results from a higher tax rate, an
increase in assessed valuation, the imposition of special assessments or
otherwise, except that Lessee shall not be liable for any excess attributable
to an increase in the tax assessment resulting from an expansion, renovation or
redesign of the building by Lessor. Lessee's pro-rata share shall be -2.9-% of
such excess. Lessee shall pay, in full, its share of such excess, if any, to
Lessor within thirty (30) days after Lessor has rendered a bill therefor
(accompanied by a statement showing the computation of Lessee's share thereof).
(b) For the purposes of this Paragraph: (i) the term "Real Estate
Taxes" means the total of all taxes and assessments, general and special,
ordinary or extraordinary, foreseen or unforeseen, including assessments for
public improvements and betterments, assessed, levied or imposed with respect
to the land and the building and other improvements located on the land, except
that if at any time during the term of this lease, a tax or excise on rents or
other tax, however described, is levied or assessed against Lessor or the land
and building on account of or measured by, in whole or in part, the Minimum
Annual Rent payable under this lease, as a substitute for or addition to, in
whole or in part, the Real Estate Taxes, such tax or excise on rents or other
tax shall be deemed to be Real Estate Taxes; (ii) the term "Base Year" shall
mean the real estate tax year in which the date of commencement of the lease
occurs; and (iii) the term "real estate tax year" shall mean the fiscal year of
the taxing authority in which the building is first fully assessed as a
completed structure and each corresponding twelve-month period
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<PAGE> 6
thereafter, irrespective of the period or periods which may from time to time in
the future be established by competent authority for the purpose of levying or
imposing Real Estate Taxes.
(c) Reasonable expenses incurred by Lessor in obtaining or
attempting to obtain a reduction of any Real Estate Taxes shall be added to and
included in the amount of any such Real Estate Taxes. Real Estate Taxes which
are being contested by Lessor shall nevertheless be included for purposes of
computing Lessee's liability under the subparagraph 4(a), but if Lessee shall
have paid any amount of additional rent pursuant to his Paragraph and Lessor
shall thereafter receive a refund of any portion of any Real Estate Taxes on
which such payment shall have been based, Lessor shall pay to Lessees its
pro-rata share of such refund. Lessor shall have no obligation to contest,
object to or litigate the levy or imposition of any Real Estate Taxes and may
settle, compromise, consent to, waive or otherwise determine in its discretion
any Real Estate Taxes without the consent or approval of Lessee.
(d) If the expiration date of this lease shall not coincide with
the end of a real estate tax year, then in computing the amount payable under
this Paragraph for the period between the commencement of the real estate tax
year within which this lease terminates and the expiration date, the Real
Estate Taxes for the Base Year shall be deducted from the Real Estate Taxes for
the last full real estate tax year ending prior to the expiration date and, if
there shall be a difference, such difference, pro-rated on a daily basis, shall
be payable by Lessee to Lessor. Lessee's obligation under this subsection
shall survive the expiration of the term of this lease.
(e) In the event any governmental authority includes in the tax
base upon which the Real Estate Taxes are levied or assessed the value of any
improvements made by
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Lessee, or of any machinery, equipment, fixtures, inventory or other personal
property as assets of Lessee, then Lessee shall pay the entire portion of the
Real Estate Taxes attributable to or based upon such items in addition to the
portion of any increases in the Real Estate Taxes payable by Lessee as otherwise
provided in this Paragraph.
5.(a) Lessee shall use and occupy the demised premises for
the following purposes only, and for no other purpose: engineering, consulting,
computer services and general offices.
(b) Lessee shall use and occupy the demised premises solely for
the conduct of a business under the trade name Icarus Corporation, which trade
name shall be used by Lessee throughout the entire term of this lease. Lessee
shall not use, trade under or advertise itself under any other name, style or
designation. Such trade name shall not be changed without Lessor's prior
written notification, and shall be in keeping with a first class office
building.
6. Lessee shall, at its own expense, comply (and Lessee shall not
permit a failure in compliance on the demised premises) with all laws, orders,
ordinances and regulations of federal, state, county and municipal authorities
and with directions of public officers thereunder, and notices from Lessor's
mortgagee and any ground lessor, respecting all matters of occupancy, condition
or maintenance of the demised premises and the recording of this lease, whether
such orders or directions shall be directed to Lessee or Lessor, and Lessee
shall hold Lessor harmless from any cost or expenses on account thereof.
7. Lessee will not use or permit the demised premises or any part
thereof to be used for any disorderly, unlawful or extra hazardous purpose nor
for any other purpose than hereinbefore specified, and will not manufacture any
commodity therein without the prior written
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consent of Lessor.
8. Lessee agrees to keep demised premises and the fixtures therein
clean and in good order and repair and will, at the expiration or other
termination of the term hereof, surrender and deliver up the same broom clean
and in like good order and repair, as the same now is or shall be at the date
of commencement, ordinary wear and tear, and damage by the elements excepted.
9. (a) Neither Lessee, nor its successors or assigns, shall
transfer, assign, mortgage or encumber this lease by operation of law or
otherwise, or sublet or permit the demised premises, or any part thereof to be
used by others, including concessionaires or licensees or Lessee, without the
prior written consent of Lessor in each instance, which consent shall not be
unreasonably withheld, or for a use other than the use specified in paragraph
5(a). Any attempted transfer, assignment, subletting, mortgaging or
encumbering of this lease in violation of the foregoing sentence shall be void
and confer no rights upon any third person. No permitted assignment or
subletting shall relieve Lessee of any of its obligations under this lease. If
Lessor consents to any such transfer, assignment or subletting, the same shall
not be effective unless and until (i) Lessee gives written notice thereof to
lessor, and (ii) such transferee, assignee or sublessee shall deliver to Lessor
(A) a written agreement in form and substance satisfactory to Lessor (A) a
written agreement in form and substance satisfactory to Lessor pursuant to
which such transferee, assignee or sublessee assumes all of the obligations and
liabilities of Lessee hereunder, and (B) a certified copy of the assignment
agreement or sublease.
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<PAGE> 9
(b) If, without such prior written consent, this lease is
transferred or assigned by Lessee, or if the demised premises, or any part
thereof, are sublet or occupied by anybody other than Lessee, whether as a
result of any act or omission by Lessee, or by operation of law or otherwise,
Lessor, whether before or after the occurrence of an event of default, may, in
addition to, and not in diminution of or substitution for, any other rights and
remedies under this lease or pursuant to law to which Lessor may be entitled as
a result thereof, collect rent from the transferee, assignee, subtenant or
occupant and apply the net amount collected to the rent herein reserved, but no
such transfer, assignment, subletting, occupancy or collection shall be deemed
a waiver of the provisions of this subparagraph or the acceptance of the
transferee, assignee, subtenant, or occupant as Lessee, or a release of Lessee
from the further performance by Lessee of its obligations under this lease.
(c) Neither the consent by Lessor to any transfer, assignment or
subletting nor the references in any provision of this lease or in any rules
and regulations to concessionaires and licensees shall in anywise be construed
to relieve Lessee from obtaining, in each instance, the express consent in
writing of Lessor to any further transfer, assignment or subletting or to the
granting of any concession or license for the use of any part of the demised
premises.
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10. (a) Lessee, at Lessee's sole cost and expense, shall obtain and
maintain in effect at all times during the term of this lease, policies
providing the following insurance coverages:
(1) A policy of insurance covering Lessee's fixtures and
equipment installed and located on the demised premises, and covering all
of the contents in the demised premises, in an amount not less than 80%
of the full replacement cost of said items, insuring against any and all
perils included within the classification "fire and extended coverage"
under insurance industry practice in the State of Maryland, together with
insurance against vandalism, malicious mischief, theft and sprinkler
damage.
(2) A policy of plate glass insurance, or personal liability in
lieu thereof, insuring against all risks, in amounts satisfactory to
Lessor, covering the full cost of repairing and/or restoring all of the
plate glass in, at or about the demised premises, for damage caused by
Lessee, its employees, agents or invitees.
(3) A policy of comprehensive public liability insurance, naming
Lessor and any mortgagee of the building as additional insureds,
protecting Lessor, Lessee and any such mortgagee against any liability
for bodily injury, death or property damage occurring upon, in or about
any part of the building, the demised premises or any appurtenances
thereto, or arising from any of the items set forth in subparagraph 10(d)
against which Lessee is required to indemnify Lessor, with such policies
to afford protection to the limit of not less than $300,000 with respect
to bodily injury or death to any one person, to the limit of not less
than $500,000.00 with respect to any one accident, and to the limit of
not less than $100,000.00 with respect to damage to the
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<PAGE> 11
property of any one owner.
(b) All insurance policies required to be procured by Lessee
under this lease (i) shall be issued by responsible insurance companies
licensed to do business in the State of Maryland and satisfactory to Lessor;
(ii) shall be written as primary policy coverage and not contributing with or
in excess of any coverage which Lessor may carry; and (iii) in the case of the
policy referred to in subparagraph 10(a)(1), shall contain an express waiver of
any right of subrogation by the insurance company against Lessor. Neither the
insurance of any insurance policy required under this lease, nor the minimum
limits specified herein with respect to Lessee's insurance coverage, shall be
deemed to limit or restrict in any way Lessee's liability arising under or out
of this lease. With respect to each and every one of the insurance policies
required to be procured by Lessee under this Paragraph, on or before the date
of commencement of the term hereof, and at least 30 days before the expiration
of the expiring policies or certificates previously furnished, Lessee shall
deliver to Lessor certificates of insurance for, certified copies of, or
duplicate originals of, each such policy or renewal thereof, as the case may
be, together with evidence of payment of all applicable premiums. Each and
every insurance policy required to be carried hereunder by or on behalf of
Lessee shall provide (and any certificate evidencing the existence of each such
insurance policy shall certify) that such insurance policy shall not be
cancelled unless Lessor shall have received 10 days' prior written notice of
cancellation.
(c) Lessee shall not do or permit to be done any act or thing
upon the demised premises that will invalidate or be in conflict with fire
insurance policies covering the building or any part thereof, or fixtures and
property therein, or any other insurance policies or coverage
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<PAGE> 12
referred to in this Paragraph, and shall comply with all rules, orders,
regulations or requirements of the Board of Fire Underwriters having
jurisdiction, or any other similar body, in the case of such fire insurance
policies, and the applicable insurance rating bureau or similar body in the case
of all other such insurance policies, and shall not do, or permit anything to be
done, in or upon the demised premises, or bring or keep anything therein, which
shall increase the rate of fire insurance on the building or on any property
located therein, or increase the rate or rates of any other insurance referred
to hereinabove. If, by reason of the failure of Lessee to comply with the
provisions of this subparagraph, the fire insurance rate, or the rate or rates
of any other insurance coverage referred to in this Paragraph, shall at any time
be higher than it otherwise would be, and if Lessor at such time, is obligated
to obtain and maintain in effect any such insurance coverage, then Lessee shall
reimburse Lessor on demand, as additional rent, for that part of all premiums
for any insurance coverage that shall have been charged because of such
violation by Lessee and which Lessor shall have paid on account of an increase
in the rate or rates in its own policies of insurance. In any action or
proceeding wherein Lessor and Lessee are parties, a schedule or "makeup" of
rates for the building or demised premises issued by the Fire Insurance Exchange
having jurisdiction, or other body establishing fire insurance rates for the
demised premises, in the case of the aforesaid fire insurance policies, and the
respective body or bureau establishing rates in the case of all of the other
aforesaid insurance policies, shall be conclusive evidence of the facts therein
stated and of the several items and charges in the fire insurance rate and other
insurance rates then applicable to the demised premises.
(d) Lessee hereby agrees to indemnify and hold harmless Lessor
from and against any and all claims, other than those caused by negligence of
Lessor that (i) arise from
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<PAGE> 13
or are in connection with the possession, use, occupation, management, repair,
maintenance or control of the demised premises, or any portion thereof, or (ii)
arise from or are in connection with any act or omission of Lessee or Lessee's
agents, employees or invitees, or (iii) result from any default, breach,
violation or nonperformance of this lease or any provision herein by Lessee, or
(iv) result in injury or death to persons or damage to property sustained in or
about the demised premises. Lessee shall, at its own cost and expense, defend
any and all actions, suits and proceedings which may be brought against Lessor
with respect to the foregoing or in which Lessor may be impleaded. Lessee shall
pay, satisfy and discharge any and all judgments, orders and decrees which may
be recovered against Lessor in connection with the foregoing. It is agreed,
however, that Lessee shall not be liable hereunder for damage compensation when
any such compensation is covered by a valid and collectable insurance policy.
11. Lessee will not make any alterations, installations, changes,
replacements, additions, or improvements, structural or otherwise, in or to the
demised premises or any part thereof, without the prior written consent of
Lessor.
It is distinctly understood that all alterations, installations, changes,
replacements, additions to or improvements upon the demised premises (whether
or without Lessor's consent) shall at the election of Lessor remain upon the
demised premises and be surrendered with the demised premises at the expiration
of this lease without disturbance, molestation or injury. Should Lessor elect
that alterations, installations, changes, replacements, additions to or
improvements upon demised premises be removed, upon termination of this lease
or upon termination of any renewal period hereof, Lessee hereby agrees to cause
same to be removed at Lessee's sole cost and expense and deliver up the demised
premises in accordance with the
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<PAGE> 14
standard set forth in Paragraph 8 hereof; and should Lessee fail to remove and
restore the same, then and in such event, Lessor shall cause same to be removed
at Lessee's expense and Lessee hereby agrees to reimburse Lessor for the cost of
such removal and restoration together with any and all damages which Lessor may
suffer and sustain by reason of failure of Lessee to remove and restore the
same.
12. Lessee agrees that no sign, advertisement or notice shall be
inscribed, painted or affixed on any part of the outside or inside of demised
premises or building, except on the directories and doors of office, and then
only in such size, color and style as Lessor shall approve, that Lessor shall
have the right to prohibit any such advertisement of any Lessee which in the
Lessor's opinion tends to impair the reputation of the building or its
desirability as a building for offices or for financial, insurance or other
institutions and businesses of like nature, and upon written notice from the
Lessor, Lessee shall refrain from and discontinue such advertisement. Lessor
shall have the right to prescribe the weight and method of installation and
position of safes or other heavy fixtures or equipment, and all damages done to
the building by taking in or removing safe or any other articles of Lessee's
office equipment, or due to its being in the demised premises, shall be
repaired at the expense of Lessee. No freight, furniture or other bulky matter
of any description will be received into the building or carried in the
elevators, except as approved by Lessor. All moving of furniture, material and
equipment shall be under the direct control and supervision of Lessor, who
shall, however, not be responsible for any damage to or charges for moving
same. Lessee agrees promptly to remove from the public area adjacent to said
building any of Lessee's merchandise there delivered or deposited.
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<PAGE> 15
13. Lessee will not install or operate in the demised premises any
electrically operated equipment or other machinery, other than type-writers or
adding machines, and such other electrically operated office machinery and
equipment normally used in modern offices, which may include computer terminal
equipment which units do not require other than normal utility and/or
electricity service, without first obtaining the prior consent in writing of
Lessor, which consent shall not be unreasonably withheld, who may condition
such consent upon the payment by Lessee of additional rent in compensation for
such excess consumption of water and/or electricity or wiring as may be
occasioned by the operation of said equipment or machinery; nor shall Lessee
install any other equipment whatsoever which will or may necessitate any
changes, replacements or additions to or require the use of the water system,
plumbing system, heating system, air conditioning system or the electrical
system of the demised premises without the prior written consent of Lessor.
14. Lessee further agrees that it will allow Lessor, its agent or
employees, to enter the demised premises at all times to examine, inspect or to
protect the same or prevent damage or injury to the same, or to make such
alterations and repairs as Lessor may deem necessary, or to exhibit the same to
prospective tenants during the last three (3) months of the term of this lease.
15. Lessee covenants that the following rules and regulations, and such
other and further rules and regulations as Lessor may, from time to time, make
and which in Lessor's judgment are needful for the general well being, safety,
care and cleanliness of the demised premises and the building of which they are
a part together with their appurtenances, shall be faithfully kept, observed
and performed by Lessee, and by its agents, servants, employees and
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<PAGE> 16
guests unless waived in writing by Lessor.
(a) Sidewalks, entries, passages, elevators and staircases and
other parts of the building which are not occupied by Lessee shall not be
obstructed or used for any other purpose than ingress or egress.
(b) Lessee shall not install or permit the installation of any
awnings, shades, draperies, blinds and the like other than those approved by
lessor in writing. Venetian blinds are to be kept in a down position.
(c) No additional locks shall be placed upon any doors of demised
premises without the prior written consent of Lessor; and doors leading to the
corridors or main halls shall be kept closed during business hours except as
they may be used for ingress or egress.
(d) Lessee shall not construct, maintain, use or operate within
said demised premises or elsewhere in the building of which demised premises
form a part or on the outside of the building, any electrical device, wiring or
apparatus in connection with a loud speaker system or other sound system unless
Lessee shall have first obtained the prior written consent of Lessor, except
that this restriction shall not apply to radios, television sets, or dictating
machines, but there shall be no exterior antennae.
16. All injury to the demised premises or the building of which they
are a part, caused by moving property of Lessee into, in or out of, said
building and all breakage done by Lessee, or the agents, servants, employees
and visitors of Lessee, shall fail so to do, then Lessor shall have the right
to make such necessary repairs, alterations and replacements, structural, non-
structural or otherwise and any charge or cost so incurred by Lessor shall be
paid by Lessee as additional rent, payable with the installment of rent next
becoming due or thereafter falling due
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<PAGE> 17
under terms of the lease. This provision shall be construed as an additional
remedy granted to Lessor and not in limitation of any rights and remedies which
Lessor has or may have in said circumstances.
17. Lessor shall not be liable to Lessee, its employees, agents,
business invitees, licensees, customers, clients, family members, guests or
trespassers for any damage, compensation or claim arising from the necessity of
repairing any portion of the building, the interruption in the use of the
demised premises, accident or damage resulting from the use or operation (by
Lessor, Lessee, or any other person or persons whatsoever) of elevators, or
heating, cooling, electrical or plumbing equipment or apparatus, or the
termination of this lease by reason of the destruction of the demised premises,
or from any fire, robbery, theft, and/or any other casualty, or from any
leakage in any part or portion of the demised premises or the building, or from
water, rain or snow that may leak into, or flow from, any part of the demised
premises or the building, or from drains, pipes or plumbing work in the
building, or from any other cause whatsoever, unless such damage is proximately
caused by Lessor's negligence. The Lessee covenants to save the Lessor
harmless and indemnified from any loss, cost, expense or liability incurred or
claimed by reason of neglect or use of the demised premises and the building of
Lessee, its employees, agents, business invitees, licensees, customers,
clients, family members, guests or trespassers. Lessee shall give Lessor
prompt notice of any accident to or defect in the pipes, heating or air
conditioning apparatus, or electric wires or system in order that the same may
be remedied by Lessor, subject, however, to the provisions of Paragraph 8, 11
and 14 hereof.
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<PAGE> 18
18. All personal property of the Lessee in the demised premises or in
the building shall be at the sole risk of the Lessee. Lessor assumes no
liability or responsibility whatever with respect to the conduct and operation
of the business to be conducted in demised premises nor for any loss or damage
of whatsoever kind or by whomsoever caused, to personal property, documents,
records, monies, or goods of Lessee or to anyone in or about the demised
premises by consent of Lessee, unless proximately caused by negligence on the
part of Lessor.
19. Lessor shall furnish customary electric current, water, lavatory
supplies, light bulbs and tube replacements, and automatically operated
elevator service during normal business hours and normal and usual cleaning and
char service after business hours, without additional cost to Lessee. Lessor
further agrees to furnish heat and air conditioning by means of electrically
operated combination heating and cooling incremental units, where installed,
and/or by means of a central air conditioning system during normal and usual
business hours, which hours are 8:00 AM to 6:00 PM Monday through Friday and
8:00 AM to 1:00 PM Saturday, (exclusive of Saturdays and Sundays and holidays)
during such seasons of the year when such services are normally and usually
furnished in modern office buildings in the area in which demised premises is
located; provided, however, that Lessor shall not be liable for failure to
furnish or for suspension or delay in furnishing any of such services caused by
breakdown, maintenance or repair work or shortages of supplies or energy
shortages, or strike, riot, civil commotion, energy crisis, labor shortages, or
any other cause or reason whatever beyond control of Lessor. Overtime HVAC
service, when requested, shall be provided by Lessor at as reasonable a charge
as possible to Lessee.
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<PAGE> 19
20. During the period of this lease, Lessor shall allocate three (3)
parking spaces for the use of the Lessee, at no additional cost; and up to
nineteen (19) additional spaces, as requested by Lessee, at the then monthly
cost per space.
21. If at any time during the term hereby demised, a petition shall be
filed, either by or against Lessee, in any court or pursuant to any Federal,
State or municipal statute whether in bankruptcy, insolvency, for the
appointment of a receiver of Lessee's property, or because of any general
assignment made by Lessee or Lessee's property for the benefit of Lessee's
creditors, then immediately upon the happening of any such event, unless
discharged within sixty (60) days, and without any entry or other act by
Lessor, this lease, at Lessor's option, shall cease and come to an end with the
same force and effect as if the date of the happening of any such event were
the date herein fixed for the expiration of the term of this lease. It is
further stipulated and agreed that, in the event of termination of the term of
this lease by the happening of any such event lessor shall forthwith, upon such
termination, and any other provisions of this lease to the contrary
notwithstanding, become entitled to recover as and for liquidated damages
caused by such breach of the provisions of this lease an amount equal to the
difference between the then cash value of the rent reserved hereunder for the
unexpired portion of the term and then cash rental value of demised premises
for such unexpired portion of term hereby demised, unless the statute which
governs or shall govern the proceeding in which such damages are to be proved
limits or shall limit the amount of such claim capable of being so proved, in
which case Lessor shall be entitled to prove as and for liquidated damages an
amount equal to that allowed by or under any such statute. The provisions of
this Paragraph of this lease shall be without prejudice to Lessor's right to
prove in full damages for rent accrued prior to termination of this lease, but
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<PAGE> 20
not paid. This provision of this lease shall be without prejudice to any
rights given Lessor by any pertinent statute to prove for any amounts allowed
thereby.
In making any such computation, the then cash rental value of the demised
premises shall be deemed prima facia to be the rental realized upon any
reletting, if such reletting can be accomplished by Lessor within a reasonable
time after such termination of this lease, and the then present cash value of
the future rents hereunder reserved to Lessor for the unexpired portion of the
term hereby demised shall be deemed to be such sum, if invested at eight per
centum (8%) simple interest, as will produce the future rent over the period of
time in question. Lessor shall employ reasonable efforts to mitigate any
damages.
22. If Lessee shall fail to pay any monthly installment of Minimum
Annual Rent or additional rent as and when the same becomes due and payable
pursuant to the terms of this lease (although no legal or formal demand has
been made therefor), or shall violate or fail to perform any of the other
conditions, covenants or agreements herein made by Lessee, and such failure to
pay rent or such violation or failure shall continue for a period of seven (7)
days after written notice thereof to Lessee by Lessor, then and in any of said
events this lease shall, at the option of Lessor, cease and terminate and shall
operate as a notice to quit -- any notice to quit, or of Lessor's intention to
re-enter, being hereby expressly waived -- and Lessor may proceed to recover
possession under and by virtue of the provisions of the laws of the State of
Maryland, or by such other proceedings, including re-entry and possession, as
may be applicable. In the event any such failure to pay rent or other default
on the part of Lessor occurs more than two (2) times in any twelve (12) month
period, Lessor shall not be required during the remainder of the term of this
lease to send written notice before proceeding with its remedies under this
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<PAGE> 21
Paragraph 22. If Lessor elects to terminate this lease everything herein
contained on the part of Lessor to be done and performed shall cease without
prejudice, however, to the right of Lessor to recover from Lessee all rental
accrued up to the time of termination or recovery of possession by Landlord,
whichever is later. The acceptance by the Lessor of any rent, or any part
thereof due to Lessor, shall not affect a prior termination of this lease by
the Lessor, nor shall it affect the Lessor's option to terminate the lease
where the Lessee tenders his payment more than seven (7) days after the
Lessee's receipt of written notice from the lessor that the Lessee's rent or
additional rent is due. Should this lease be terminated before the expiration
of the term of this lease by reason of Lessee's default as hereinabove
provided, or if Lessee shall abandon or vacate the demised premises before the
expiration or termination of the term of this lease, the demised premises may
be relet by Lessor for such rent and upon such terms as are not unreasonable
under the circumstances and, if the full rentals hereinabove provided shall not
be realized by Lessor, Lessee shall be liable for all damages sustained by
Lessor, including, without limitation, deficiency in rent, reasonable
attorneys' fees, brokerage and leasing fees, and expenses of placing the
demised premises in substantially the same condition as extant at the time of
commencement of this lease, reasonable wear and tear excepted. Any damage or
loss of rental sustained by Lessor may be recovered by Lessor, at Lessor's
option, at the time or reletting, or in separate actions, from time to time, as
said damage shall have been made more easily ascertainable by successive
relettings, or, at Lessor's option, may be deferred until the expiration of the
term of this lease, in which event the cause of action shall not be deemed to
have accrued until the date of expiration of said term. The provisions
contained in this Paragraph shall be in addition to and shall not prevent the
enforcement of any claim Lessor may
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<PAGE> 22
have against Lessee for anticipatory breach of the unexpired term of this lease.
All rights and remedies of Lessor under this lease shall be cumulative and shall
not be exclusive of any other rights and remedies provided to Lessor under
applicable law. Lessee shall be given thirty (30) days to cure any non-monetary
default; with Lessor providing written notice to Lessee indicating the specific
curative action required.
If under the provision hereof Lessor shall institute proceedings and/or a
compromise or settlement thereof shall be made, the same shall not constitute a
waiver of any covenant herein contained nor of any of Lessor's rights
hereunder. No waiver by Lessor of any breach of any covenant, condition or
agreement herein contained shall operate as a waiver of such covenant,
condition, or agreement itself, or of any subsequent breach thereof. No
payment by Lessee or receipt by Lessor of a lesser amount than the monthly
installments of Minimum Annual Rent and additional rent herein stipulated shall
be deemed to be other than on account of the earliest stipulated rent nor shall
any endorsement or statement on any check or letter accompanying a check for
payment or rent be deemed an accord and satisfaction and Lessor may accept such
check or payment without prejudice to Lessor's right to recover the balance of
such rent or to pursue any other remedy provided in this lease. No re-entry by
Lessor, and no acceptance by Lessor of keys from Lessee, shall be considered an
acceptance of a surrender of the lease.
23. (a) If the demised premises, or any part thereof, shall be
damaged or destroyed by fire or other casualty, and if the Lessor does not
elect to terminate this lease in accordance with the provisions of subparagraph
23(b), the Lessor shall restore, repair and replace the demised premises, as
nearly as possible to their condition immediately prior to such damage or
destruction, and until such repairs have been completed the Minimum Annual
Rental
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<PAGE> 23
and all additional rent shall be abated in proportion to the part of the demised
premises which shall be abated in proportion to the part of the demised premises
which is rendered untenantable; provided, however, that the foregoing provisions
shall not require the Lessor to repair, restore or rebuild any part of the
demised premises, or of Lessee's fixtures, equipment or appurtenances therein as
described or provided for in Exhibit A. Such restoration, repairs and
replacement shall be commenced with due diligence and in good faith as soon as
practicable after the occurrence of the casualty (due allowance being made for
the time taken for settlement of the insurance claims, the time required by
Lessor to obtain the permission of governmental authorities to make such
restoration, repair and replacement and other delays due to causes beyond
Lessor's reasonable control), shall be prosecuted with due diligence and in good
faith and, subject to delays caused by circumstances beyond Lessor's reasonable
control, shall be completed within six (6) months from the date of occurrence of
the casualty.
(b) If a substantial part of the demised premises or a
substantial part of the building, or any part thereof, shall be damaged or
destroyed by fire or other casualty, then Lessor shall have the right, by
giving written notice to Lessee within ninety (90) days after the occurrence of
the casualty, to terminate this lease. If Lessor elects to terminate this
lease pursuant to this subsection, the term of this lease cease and terminate
as of the date of giving the occurrence of the casualty shall be refunded by
Lessor, and neither party shall have any further liability under this lease for
any period of time after the date of termination. If such damage is not
corrected by Lessor within ninety (90) days, due to Lessor responsibility, and
Lessee is unable to conduct his business, then Lessee may terminate this Lease
upon thirty (30) days prior written notice to Lessor.
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<PAGE> 24
(c) Lessee hereby releases Lessor and its officers, directors,
agents and employees, from any and all liability or responsibility to Lessee
(or to anyone claiming through or under Lessee by way of subrogation or
otherwise) for any loss or damage to Lessee's property covered by a valid and
collectible fire insurance policy with extended coverage endorsement, even is
such fire or other casualty shall have been caused by the fault or negligence
of the Lessor or anyone for whom the Lessor may be responsible.
24. This lease and Lessee's interest hereunder is and shall be subject
and subordinate to the lien of any mortgage or mortgages now or hereafter
placed upon the fee of the land and/or building of which the demised premises
is a part (including any and all mortgages securing Metropolitan Life Insurance
Company ["Metropolitan"]) and to any ground lease, and Lessee agrees that
immediately upon the request of any mortgagee or Lessor in writing, without
charge therefor, it will, from time to time, execute and deliver any further
instruments of subordination in recordable form required by the holder of any
mortgage or any ground lessor to subordinate this lease and Lessee's interest
in the demised premises to the lien of any such mortgage or to any such ground
lease. In the event of the enforcement by the Trustees or Metropolitan of the
remedies provided by law or by any mortgage securing Metropolitan or any
foreclosure sale or proceeding in lieu thereof or final determination for
possession in favor of the ground lessor, Lessee will, upon request of any
person succeeding to the interest of lessor, as the result of said enforcement,
automatically become the lessee of any successor in interest, without changing
the terms or other provisions of this lease; provided, however, that said
successor in interest shall not (i) be liable for any previous act or omission
of Lessor under this lease, (ii) be subject to any offset which shall
theretofore have accrued to Lessee against the Lessor, (iii) have any
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<PAGE> 25
obligation with respect to any security deposited under this lease unless such
security shall have been physically delivered to the mortgagee or ground lessor
or their successors in interest, or (iv) be bound by any previous modification
of this lease or by any previous payment in fixed rent for a period greater
than one (1) month, unless such modification or prepayment shall have been
expressly approved in writing by the mortgagee or ground lessor or their
successors in interest. Lessee shall, upon request by any person succeeding to
the interest if Lessor, execute and deliver an instrument or instruments
confirming its attornment.
Wherever the terms "mortgage" or "mortgagee" are used in this lease, they
shall be deemed to mean and include, respectively, (i) mortgages, deeds of
trust or other similar instruments and modifications, consolidation,
extensions, renewals, replacements and substitutes thereof and all advances
thereunder; and (ii) the holder of such mortgage. Wherever the terms "ground
lease" or "ground lessor" are used in this lease, they shall be deemed to mean
and include, respectively, (i) any lease of the entire fee of the land upon
which the building is located or a lease of the said land together with any
part of the improvements on said land, and all amendments, modifications,
extensions and substitutes thereof; and (ii) the landlord of any such ground
lease. Lessee hereby irrevocably constitutes and appoints Lessor as Lessee's
attorney-in-fact to execute, acknowledge and deliver any and all such
instruments for and on behalf of Lessee.
25. If the whole or a substantial part of the demised premises shall be
taken or condemned by any governmental authority for any public or quasi-public
use or purpose (including sale under threat of such a taking), then the term of
this lease shall cease and terminate as of the date when title vests in such
governmental authority, and the Minimum
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<PAGE> 26
Annual Rental shall be abated on the date when such title vests in such
governmental authority. If less than a substantial part of the demised premises
is taken or condemned by any governmental authority for any public or
quasi-public use or purpose, the rent and additional rent shall be equitably
adjusted on the date when title vests in such governmental authority and the
lease shall otherwise continue in full force and effect. Lessee shall have no
claim against Lessor (or otherwise) for any portion of the amount that may be
awarded as damages as a result of any governmental taking or condemnation (or
sale under threat of such taking or condemnation) or for the value of any
expired term of the lease.
26. It is further understood and agreed by and between the parties
hereto that, in the event Lessee shall not immediately surrender said premises
on the day after the expiration date, then Lessee shall, by virtue of this
lease, become a tenant by the month at twice the rental per month of the
monthly installment of Minimum Annual Rental and all additional rent due for
the last month of the last lease year, commencing said monthly tenancy with the
first day next after the expiration date; and said Lessee as a monthly tenant
shall be subject to all conditions and covenants of this lease insofar as the
same are applicable, or as the same shall be adjusted, to a month-to-month
tenancy; and said Lessee shall give to Lessor at least thirty (30) days'
written notice of any intention to quit said premises, and Lessee shall be
entitled to thirty (30) days' written notice to quit said premises, except in
the event of non-payment of rent in advance or of breach of any other covenant
by said Lessee, in which event said Lessee shall not be entitled to any notice
to quit, the usual thirty (30) days' notice to quit being hereby expressly
waived; provided, however, that in the event Lessee shall hold over after the
expiration of the term hereby created, and if Lessor shall desire to regain
possession of said premises promptly at the
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<PAGE> 27
expiration date, then at any time prior to Lessor's acceptance of rent from
Lessee as a monthly tenant hereunder, Lessor, at its option, may forthwith
reenter and take possession of said premises without process, or by any legal
process in force in the State, City or County in which subject property is
located.
27. If Lessor shall be unable to give possession of demised premises on
the date of commencement by reason of the fact that the demised premises are
located in a building being constructed and which has not been sufficiently
completed to make the premises ready for occupancy or if Lessor is unable to
give possession of demised premises on the date of commencement by reason of
holding over or retention of possession of any tenant or occupant, or if
repairs, improvements or decoration of the building of which demised premises
form a part, are not completed, or for any other reason, Lessor shall not be
subject to any liability for failure to give possession on said date. Under
such circumstances rent reserved and covenanted to be paid herein shall not
commence until possession of demised premises is given or premises are
available for occupancy by Lessee, and no such failure to give possession on
the date of commencement shall in any other respect affect the validity of this
lease or the obligations of Lessee hereunder, nor shall same be construed in
anywise to extend the term of the lease beyond the expiration date hereof. If
permission is given to Lessee to enter into possession of the demised premises
or to occupy premises other than the demised premises prior to the date of
commencement, Lessee covenants and agrees that such occupancy shall be deemed
to be under all the terms, covenants, conditions and provisions of this lease.
28. If Lessor shall incur any charge or expense on behalf of Lessee
under the terms of this lease or through a separate agreement relating to the
demised premises, including but not
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<PAGE> 28
limited to tenant work, such charge or expense shall be considered additional
rent hereunder; in addition to and not in limitation of any other rights and
remedies which Lessor may have in case of the failure by Lessee to pay such sums
when due, such non-payment shall entitle Lessor to the remedies available to it
hereunder for non-payment of rent. All such charges or expenses shall be paid to
Agent at its office or its place and to such other person as Lessor may from
time to time designate in writing.
30. In the event of the employment of an attorney by either party
because of the violation of any term or provision of this lease, including
non-payment of rent as due, the losing party shall pay and hereby agrees to pay
such reasonable attorney's fee and all other cost incurred therein by the
prevailing party.
31. (a) Lessor shall construct improvements to the demised premises
substantially in accordance with the plans attached hereto as Exhibit "A", such
exhibit being initialled by the parties hereto and made a part hereof. It is
understood by the parties that any and all costs over and above the tenant
allowances either stated in this paragraph or reflected in Exhibit "A", will be
at the sole cost and expense of Lessee and shall be paid by Lessee to Lessor
within thirty (30) days after Lessor renders Lessor's invoice(s) therefor to
Lessee. It is expressly understood and agreed that Lessor will be under no
obligation to make any structural or other alterations, decorations, additions
or improvements in or to the demised premises except for the work specifically
designated in Exhibit "A". Lessee shall provide kitchen sink/cabinet unit,
buzzer system, non standard lighting/electric fixtures/outlets, any special
carpentry/cabinetry material, and/or any other special plumbing
fixtures/connections. Lessor shall endeavor to install such items for Lessee
at the most reasonable cost to Lessee.
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<PAGE> 29
(b) All work other than that to be performed by Lessor, as set
forth in subparagraph (a) above, is to be performed by Lessee at Lessee's sole
cost and expense, subject to Lessor's prior written consent, and is hereinafter
referred to as "Lessee's Work." All entry onto the demised premises by Lessee,
at any time, and any and all work done by Lessee, shall be at Lessee's sole
risk. All work performed by Lessee shall be in accordance with good
construction practices, all applicable laws, orders, regulations and
requirements of federal, state, county and municipal authorities having
jurisdiction, and all insurance requirements. Lessee's Work shall be done in
compliance with such rules and regulations as Lessor and its representatives
may reasonably make. Lessee shall schedule Lessee's work so as not to
interfere with any work then being performed or to be performed by Lessor and
so that there shall be no conflict with any union contract to which Lessor or
any of its then contractors or subcontractors may be a party. Lessor shall
have no responsibility or liability whatsoever for any loss of, or damage to,
any fixtures, equipment, merchandise, or other property belonging to Lessee
installed or left in the demised premises. If permission is given to Lessee to
enter into possession of the demised premises or occupy premises other than the
demised premises, prior to the date of commencement, Lessee's entry upon and
occupancy of the demised premises prior to the date of commencement shall be
governed by and subject to all the provisions, covenants and conditions of this
lease other than those requiring payment of rent or additional rent. Lessee
shall furnish to Lessor all certificates and approvals with respect to work
done and installations made by Lessee that may be required from any of the
aforesaid authorities for the issuance of a certificate of occupancy for the
demised premises, so that such certificate of occupancy shall be issued and the
demised premises, shall be ready for the opening of Lessee's business on the
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<PAGE> 30
date of commencement. Lessee shall promptly and regularly remove at its expense
all trash and waste materials resulting during the course of performance of its
work, and promptly upon the completion thereof, shall repair, clean and restore
any portions of the building affected by its work to its prior condition, and
remove any and all trash, waste and other materials resulting from or remaining
after its work. Carpeting shall be provided throughout the demised premises,
except where indicated in Exhibit "A," of a quality and color to the mutual
satisfaction of both Lessee and Lessor, or Lessee shall be granted an allowance
of $5,000.00 by Lessor to purchase his own carpet, with Lessor to install said
purchased carpet.
(c) If Lessor's fulfillment of the obligation set forth in
subparagraph 31(a) is delayed beyond the date of commencement, for any reason
whatsoever, then the date of commencement shall be extended to a date which is
the sixtieth day following the date of commencement (hereinafter referred to as
the "Outside Date"). If for any reason, the date of commencement shall not
have occurred prior to or on the Outside Date, either party shall have the
option to cancel this lease after the Outside Date (except as hereinafter
provided) by giving sixty (60) days' prior written notice of such termination
to the other party. If the date of commencement shall occur prior to the
giving of such notice, the foregoing option to cancel shall thereupon be void.
If the date of commencement shall occur after the giving of such notice but
prior to the expiration of such sixty (60) day period, any notice given within
such period shall thereupon be void. Lessee's right to cancel this lease in
accordance with the provisions of this subsection shall be Lessee's sole remedy
with respect to any failure of Lessor to deliver possession on or before the
Outside Date. Upon any such cancellation Lessor and Lessee shall be entirely
relieved of their respective obligations under this lease and any security
deposit given
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<PAGE> 31
by Lessee to Lessor shall promptly be returned to Lessee.
32. Neither Lessor nor any agent or employee of Lessor has made any
representations or promises with respect to the demised premises of the
building except as herein expressly set forth, and no rights, privileges,
easements or licenses are acquired by Lessee except as herein expressly set
forth. The Lessee, by taking possession of the demised premises shall accept
the same "as is," and such taking of possession shall be conclusive evidence
that the demised premises and the building are in good and satisfactory
condition at the time of such taking of possession.
33. Lessor shall not be required to perform any of its obligations
under this lease, nor be liable for loss or damage for failure so to do, nor
shall Lessee thereby be released from any of its obligations under this lease,
where such failure arises from or through acts of God, strikes, lockouts, labor
difficulties, material shortages, explosions, sabotage, accidents, energy
crisis, riots, civil commotions, acts of war, results of any warfare or warlike
conditions in this or any foreign country, fire and casualty, legal
requirements or other causes beyond the reasonable control of Lessor. If
Lessor is so delayed or prevented from performing any of its obligations during
the term of this lease, the period of such delay or such prevention shall be
deemed added to the time herein provided for the performance of any such
obligation, but the term hereof shall not thereby be extended.
34. In the event of any sale or sales by the Lessor hereunder of the
building in which the demised premises is located, Lessor whose interest is
thus sold shall be an hereby is completely released and forever discharged from
and all covenants, obligations and liability as Lessor hereunder, except for
written claims in existence at the time of any such sale.
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<PAGE> 32
35. Lessee shall, without charge therefor, at any time and from time to
time, within ten (10) days after request therefor by Lessor, execute,
acknowledge and deliver to Lessor a written estoppel certificate certifying to
Lessor, any mortgagee, assignee of a mortgagee, or any purchaser, of the
building, or any other person designated by Lessor, as of the date of such
estoppel certificate, (i) that Lessee is in possession of the demised premises,
(ii) that this lease is unmodified and in full force and effect (or if there
has been a modification, that the same is in full force and effect as modified
and setting forth such modification); (iii) whether or not there are then
existing any set-offs or defenses against the enforcement of any right or
remedy of Lessor, or any duty or obligation of Lessee hereunder (and, if so,
specifying the same in detail); (iv) the date, if any, to which any rent or
other charges have been paid in advance; (v) that Lessee has not knowledge of
any then uncured defaults on the part of Lessor under this lease (or if Lessee
has knowledge of any such uncured defaults, specifying the same in detail);
(vi) that Lessee has no knowledge of any event having occurred that authorizes
the termination of this lease by Lessee (or if Lessee has such knowledge,
specifying the same in detail); and (vii) the amount of any security deposit
held by Lessor.
36. Lessor and Lessee each represent and warranted to the other that,
except as hereinafter set forth, neither of them has employed any broker in
carrying on the negotiations relative to this lease. Lessor and Lessee shall
each indemnify and hold harmless the other from and against any claim or claims
for brokerage or other commission arising from or out of any breach of the
foregoing representation and warranty. Lessor indemnifies and holds harmless
Lessee from any brokerage fee or commission which might be claimed by the Carey
Winston Company as a result of previous efforts by said Company.
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<PAGE> 33
37. Lessor hereby grants to Lessee a non-exclusive right, in common
with Lessor and the other tenants of the building, to use, and to permit its
employees, customers and business invitees to use, (1) the entrances, exits,
corridors, elevators, stairways and other public areas of the building for
access to the demised premises form the public streets adjacent to the
building, (2) the public conveniences, if any, of the building, and (3) all
other areas in the building used in common by tenants of the building, such
public areas, public conveniences and other areas being hereinafter referred to
collectively as the "common areas." All common areas shall be and remain at
all times subject to the exclusive control and management of Lessor and lessor
shall have the right from time to time to establish reasonable rules and
regulations governing the use of the common areas. Lessor reserves the right
to make changes, additions, alterations or improvements in and to the common
areas an to close the same temporarily for such purposes, or to prevent the
acquisition by the public of rights in the common areas or to discourage
non-customer use thereof.
38. Lessee agrees that, upon request by Lessor, Lessee will execute, in
recordable form, for the purposes of recordation at Lessor's expense, a short
form memorandum of lease.
40. In the event that any mechanics' lien is filed against the demised
premises or the building as a result of additions, alterations, repairs,
installations or improvements made by Lessee, or any other work or act of
Lessee, Lessee shall discharge, or bond off, the same within ten (10) days from
the filing thereof. If Lessee fails to discharge any such mechanic's lien,
Lessor, at its option, in addition to all other rights or remedies herein
provided, may bond or pay said lien or claim without inquiring into the
validity thereof for the account of Lessee, and all sums so advanced by Lessor
shall be paid in full by Lessee to Lessor as additional rent on
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<PAGE> 34
demand.
41. Feminine or neuter pronouns shall be substituted for those of the
masculine form, and the plural shall be substituted for the singular number, in
any place or places in this lease in which the context may require such
substitution or substitutions. All rights, remedies and liabilities herein
given to or imposed upon either party hereto, shall extend to their respective
heirs, successors, executors, administrators, other legal representatives, and
assigns, except to the extent otherwise expressly provided in this lease.
42. All notices required or desired to be given hereunder by either
party to the other shall be given by certified or registered mail. Notices to
be respective parties shall be addressed as follows:
If to Lessor: If to Lessee:
Mach I - Research Associates Mr. Herbert G. Blecker
c/o Real Estate Central, Inc. President
11300 Rockville Pike Icarus Corporation
Rockville, Maryland 20852 11300 Rockville Pike
Rockville, Maryland 20852
Either party may, by like written notice, designate a new address and/or
addresses to which such notices shall be directed. Notices given by certified
or registered mail shall be deemed received as of the postmark date.
43. Lessee, simultaneously with the execution of this lease does pay,
to Lessor the sum of six thousand six hundred and 00/100 - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - Dollars ($6,600.00 ), as
prepayment of the 1st three month's rental to be due for the demised premises
under the terms of this lease; namely January, February and March of 1977.
44. Lessor shall subsidize initiation fee cost of one CXXI Club Charter
Membership
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<PAGE> 35
for Lessee President, Herbert G. Blecker.
45. Lessee shall have the right to renew this Lease for two additional
and consecutive terms of five (5) years each, under the same terms and
conditions herein, provided however that Lessee is not in default of any terms
hereof, by giving written notice to Lessor at least one- hundred eighty (180)
days prior to the expiration of the terms hereof, and at a rental to be
determined by the application of Paragraphs 2 and 3 of this Lease, with the
computation of the annual rent and CPI adjustments being based on the final
year of the original term of this Lease, and the final year of any renewal
period.
46. Lessor hereby grants to Lessee a right of prior refusal with
respect to all space on the same floor as the demised premises, not presently
covered by this Lease, under the terms and conditions herein set forth: If
during the term of this Lease, any other lease for space on the same floor as
the demised premises should terminate, Lessor shall offer to lease such space
to Icarus Corporation at rates then prevailing in the building. Icarus
Corporation does not accept said offer within ten (10) days, the Landlord shall
be free to lease such space to others. If Lessee does thus lease any such
space, he may elect to have the term for such additional space coincident with
the term of this original lease, and/or any renewal thereof.
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<PAGE> 36
IN WITNESS WHEREOF, the said parties have hereunto signed their names and
affixed their seals, on the day and year hereinbelow written.
WITNESS: LESSOR:
-------------------------- -----------------------------
Mach I - Research Associates
Real Estate Central, Inc.
DATE: General Partner
-------------------------- James S. Gibson, Jr., President
WITNESS:/s/ Lee Harry, III LESSEE:/s/ Herbert G. Blecker
-------------------------- -----------------------------
DATE: 10/15/76 Icarus Corporation
-------------------------- Herbert G. Blecker, President
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<PAGE> 37
ADDENDUM #1 TO LEASE
This is an Addendum to the following cited Lease and shall be made a part
thereof.
Lease Agreement made the 15th day of October 1976, by and between Mach I -
Research Associates, Lessor, and Icarus Corporation, Lessee, for office space
in the building at 11300 Rockville Pike, Rockville, Maryland 20852.
The Lessor and Lessee do hereby agree that, effective January 1, 1977, the
following terms and conditions in the paragraphs cited herein are amended as
follows:
Paragraph 1. The space comprising the demised premises shall be increased from
"approximately seven thousand one hundred sixty-seven (7167) gross square feet"
TO "approximately seven thousand seven hundred seventy nine (7779) gross square
feet. " The additional six hundred twelve (612) gross square feet are shown in
Exhibit "A" attached hereto and made a part hereof.
Paragraph 3. The monthly rental installments shall be increased from "four
thousand five hundred thirty four and 00/100 dollars ($4,534.00)" TO "four
thousand nine hundred seventeen and 00/100 dollars ($4,917.00)".
Paragraph 4 (a). Lessee's pro-rata share of an increase, if any, in Real Estate
taxes on the building of which the demised premises are a part, shall be
increased from "2.9%" TO "3.1%."
Paragraph 20. The number of additional parking spaces available to Lessee shall
be increased from "nineteen (19)" TO "twenty one (21)."
Paragraph 43. Lessee, simultaneously with the execution of this Addendum #1 to
the Lease, does pay to Lessor the additional sum of $1,250.00, to reflect
payment of the full and proper rent due for the demised premises for the first
three (3) months of this Lease pursuant to the provisions of paragraph 43. The
total payment thus becomes $7,850.00.
<PAGE> 38
IN WITNESS WHEREOF, the said parties have hereunto signed their names and
affixed their seals, on the day and year hereinbelow written.
WITNESS:/s/ LESSOR:/s/ James S. Gibson, Jr.
-------------------------- -----------------------------
March I - Research Associates
Real Estate Central, Inc.
General Partner
James S. Gibson, Jr., President
DATE: 10/25/76
--------------------------
WITNESS:/s/ LESSEE:/s/ Herbert G. Blecker
-------------------------- -----------------------------
Icarus Corporation
Herbert G. Blecker, President
DATE: 10/25/76
--------------------------
<PAGE> 39
EXHIBIT "A"
Floor Plan of Additional Six Hundred
Twelve Gross Square Feet
<PAGE> 40
AGREEMENT made as of this 24th day of August, 1979 between FRED F. FRENCH
OF MARYLAND, INC., as Agent, having an office c/o Fred F. French Management
Company, Inc., 551 Fifth Avenue, New York, New York (hereinafter referred to as
"Landlord"), and ICARUS CORPORATION, a Maryland corporation, having its
principal place of business at No. 11300 Rockville Pike, Rockville, Maryland
(hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord's predecessors in interest and Tenant heretofore
entered into a certain written lease as of October 15, 1976 wherein and whereby
Landlord leased to Tenant, and Tenant hired from Landlord, a portion of the
sixth (6th) floor as described and as shown outlined in red on the plan annexed
to said lease in the building known as One Central Plaza, 11300 Rockville Pike,
Rockville, Maryland, for a term scheduled to end on the 31st day of March, 1982
(or until such term shall sooner cease and expire as provided in said lease),
at the rental and additional rental and upon the covenants, conditions,
provisions and agreements contained in such lease, which lease as the same was
modified by Addendum 1 to Lease, dated October 25, 1976, and as the same may
have been otherwise heretofore modified, is hereinafter referred to as the
"Lease"; and
WHEREAS, Landlord and Tenant desire to modify the Lease only in the
respects hereinafter stated;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto by these presents do covenant and
agree as follows:
1. Effective as of September 1, 1979, and for the remainder of the
term of the lease, there shall be added to, and included in, the premises
demised by the Lease, the following additional space, to wit:
the portion of the sixth (6th) floor outlined in red on Exhibit "B",
attached hereto and made a "part hereof (hereinafter referred to as the
"additional space")
in the building known as No. 11300 Rockville Pike, Rockville, Maryland. In
order to accomplish such addition and inclusion of sate additional space to and
in the premises demised by the Lease, Landlord does hereby lease to Tenant, and
Tenant does hereby hire from Land- lord said additional space for the period to
commence on September 1, 1979, and to end on March 31, 1982, or on such earlier
date upon which said term may expire pursuant to any of the conditions,
covenants, provisions, terms and agreements of the Lease, as modified by this
agreement. It is the intention and agreement of the parties hereto that, by
reason of such addition and inclusion of said additional space to and in the
premises demised by the Lease, the demised premises covered by the Lease, as
modified by this agreement from and after September 1, 1979, shall be and be
deemed to be the portions of the sixth (6th) floor known as Suites 602, 604 &
605.
1
<PAGE> 41
2. Effective as of September 1, 1979, and for the remainder of the
term of the Lease, as modified by this agreement, the Annual Rental rate
specified in the Lease as modified by this agreement shall be increased for the
period commencing September 1, 1979, and ending March 31, 1982, to the sum of
One Hundred One Thousand Eight Hundred Twenty-Eight and 28/100 ($101,828.28)
Dollars per annum, subject to adjustment or adjustments by reason of the
operation of the provisions of the Lease, as modified by this agreement,
including, but not limited to, Articles 3 and 4 thereof.
Effective as of September 1, 1979, and for the remainder of the term of
the Lease, as modified by this agreement, the additional rental and/or increase
in the Annual Rental reserved in the Lease, as modified by this agreement,
shall be paid by Tenant to Landlord at the times and in the manner specified in
the Lease.
3. Effective as of September 1, 1979, and for the remainder of the
term of the Lease, as modified by this agreement:
A. The numbers "2.9" which appear in Article 4 of the Lease shall be
changed to "3.7" therein;
B. The words "seven thousand one hundred sixty-seven (7167)" which
appear in Article 1 of the Lease shall be changed to "ten thousand seventy-one
(10,071)" therein.
4. Tenant hereby covenants and agrees that said additional space shall
be used solely by Tenant in accordance with Article 5 of the Lease. o
5. It is understood and agreed that Articles 31 and 44 of the Lease
shall be deemed deleted.
6. The words "as amended by Agreement dated September 1, 1979" shall
be deemed inserted between the words "Paragraphs 2 and 3 of this Lease" and
"with the computation" in Article 45 of this Lease.
7. The following Article 47 shall be deemed added to the Lease: "47.
Subordination: This lease and Tenant's interest hereunder is and shall be
subject and subordinate to the lien of any mortgage or mortgages now or
hereafter placed upon the fee of the land and/or building of which the demised
premises is a part (including any and all mortgages securing Metropolitan Life
Insurance Company ("Metropolitan") and to any ground lease, and Tenant agrees
that immediately upon the request of any mortgagee or Landlord, in writing,
without charge therefor, it will, from time to time, execute and deliver any
further instruments of subordination in recordable form required by the holder
of any mortgage or any ground lessor to subordinate this lease and Tenant's
interest in the demised premises to the lien of any such mortgage or to any
such ground lease In the event of the enforcement by the Trustees or
Metropolitan of the remedies provided by law or by any mortgage securing
Metropolitan or any foreclosure sale or proceedings in lieu thereof or final
determination for
2
<PAGE> 42
possession in favor of the ground lessor, Tenant will, upon request of any
person succeeding to the interest of Landlord, as the result of said
enforcement, automatically become the lessee of any successor in interest,
without changing the terms or other provision of this lease; provided, however,
that said successor in interest shall not: (i) be liable for any previous act or
omission of Landlord under this lease; (ii) be subject to any offset which shall
theretofore have accrued to Tenant against the Landlord; (iii) have any
obligation with respect to any security deposited under this lease unless such
security shall have been physically delivered to the mortgagee or ground lessor
or their successors in interest; or (iv) be bound by any previous modification
of this lease or by any previous payment of fixed rent for a period greater than
one (1) month, unless such modification or prepayment shall have been expressly
approved in writing by the mortgagee or ground lessor or their successors in
interest. Tenant shall, upon request by any person succeeding to the interest of
Landlord, execute and deliver an instrument or instruments confirming its
attornment.
Wherever the terms "mortgage" or "mortgagee" are used in this lease, they
shall be deemed to mean and include, respectively, (i) mortgages, deeds of
trust or other similar instruments and modifications, consolidation,
extensions, renewals, replacements and substitutes thereof and all advances
thereunder; and (ii) the holder of such mortgage. Wherever the terms "ground
lease" or "ground lessor" are used in this lease, they shall be deemed to mean
and include, respectively, (i) any lease of the entire fee of the land upon
which the building is located and/or the entire building, and all amendments,
modifications, extensions and substitutes thereof; and (ii) the landlord of any
such ground lease. Tenant hereby irrevocably constitutes and appoints Landlord
as Tenant's attorney-in-fact to execute, acknowledge and deliver any and all
such instruments for and on behalf of Tenant."
8. Tenant has examined and inspected said additional space and agrees to
accept the same in the condition in which it exists on the effective date of
such addition to and inclusion in the demised premises. Tenant understands and
agrees that no materials whatsoever are to be furnished by Landlord and no work
whatever is to be performed by Landlord in connection with said additional
space or any part thereof.
9. Tenant represents and warrants to Landlord that it has not dealt with
any real estate agent or broker in connection with this agreement and/or the
additional space and/or the building, that this agreement was not brought about
or procured through the use or instrumentality of any agent or broker and that
all negotiations with respect to the terms of this agreement were conducted
between Landlord and Tenant. Tenant covenants and agrees to indemnify and hold
Landlord harmless from and against any and all claims for commissions and other
compensation made by any agent or agents and/or any broker or brokers, together
with all costs and expenses incurred by Landlord in resisting such claims
(including without limitation attorneys' fees).
10. Except as modified by this agreement, the Lease and all the terms,
covenants, conditions, provisions, and agreements thereof are hereby in all
respects ratified, confirmed, and approved. Tenant hereby affirms that on the
date hereof no breach or default by either
3
<PAGE> 43
party has occurred and that the Lease, and all of its terms, conditions,
covenants, agreements and provisions, except as hereby modified, are in full
force and effect with no defenses or offsets thereto, and Tenant hereby releases
Landlord of and from all liabilities, claims, controversies, causes of action
and other matters of every nature which, through the date hereof, have or might
have arisen out of or in any way in connection with the Lease and/or the
premises demised thereunder.
11. This agreement contains the entire understanding between the
parties with respect to the matters contained herein. No representations,
warranties, covenants or agreements have been made concerning or affecting the
subject matter of this agreement, except as are contained herein.
12. This agreement may not be changed orally, but only by an agreement
in writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
13. This agreement shall be binding upon, and inure to the benefit of the
parties hereto, their respective legal representatives, successors and, except
as otherwise provided in the Lease as modified by this agreement their
respective assigns.
14. The submission of this agreement to Tenant shall not be construed
as an offer, nor shall Tenant have any rights with respect hereto, unless and
until Landlord shall execute a copy of this agreement and deliver the same to
Tenant prior to September l, 1979.
IN WITNESS WHEREOF, the parties hereto have respectively executed this
agreement as of the day and year first above written.
FRED F. FRENCH OF MARYLAND, INC.
By:/s/ Marvin Rosenthal
-----------------------
Vice President
ICARUS CORPORATION
By:/s/ Herbert G. Blecker
-----------------------
President
4
<PAGE> 44
STATE OF NEW YORK
COUNTY OF NEW YORK
On the 28th Day of August, 1979, before me personally came Marvin
Rosenthal, to me known, who being by me duly sworn, did depose and by that he
reisides at One Long Pond Road, Armonk, N.Y.; that he is the Vice-President of
FRED F. FRENCH OF MARYLAND, INC., the corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation and that he
signed his name thereto by like order.
/s/ Hoye Knight
----------------------
Notary Public
STATE OF ) Maryland Hoye Knight
: ss.: Notary Public State of New York
COUNTY ) Montgomery No. 31-2156530, Qualf. In N.Y. Co.
Commission Expires March 30, 1981
On the 24 day of August, 1979, before me personally came Herbert J.
Blecker to me know, who being by me duly sworn, did depose and by that he
resides at Potomac Maryland; that he is the President of ICARUS CORPORATION,
the corporation described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by order to the Board of
Directors of said corporation and that he signed his name thereto by like
order.
/s/ Alice J. Kane
----------------------
Notary Public
My Commission Expires July 1, 1982
5
<PAGE> 45
EXHIBIT "A"
Proposed Layout of ICARUS Corporation
<PAGE> 46
EXHIBIT "B"
Floor Plans of Suite 602 and Suite 605
<PAGE> 47
FRED F. FRENCH OF MARYLAND, INC.
ONE CENTRAL PLAZA
11300 ROCKVILLE PIKE
ROCKVILLE, MARYLAND 20852
301-770-6960 August 31, 1979
Icarus Corporation
11300 Rockville Pike
Rockville, Maryland 20852
Re: Lease dated October 15, 1976 between One Central Plaza Joint
Venture-Mach I Research Associates, Landlord, and Icarus
Corporation, as Tenant, for a portion of the sixth floor in the
building known as One Central Plaza, 11300 Rockville Pike,
Rockville, Maryland (which lease as the same may have been
heretofore amended is hereinafter known as the "Lease")
Gentlemen:
In accordance with you prior request, we hereby grant our consent to
those alterations and changes described and set forth in the attached plan
deemed annexed hereto and made a part hereof (hereinafter referred to as the
"Work"), subject to all of the covenants, conditions, agreements, provisions
and terms contained in the Lease, and also upon and subject to the following
conditions:
1. That said Work and subsequent maintenance of same shall be done
without expense to us, except as we may specifically agree in writing; and
2. That you will not, either directly or indirectly, use any
contractors and/or labor and/or materials for the use of such contractors
and/or labor and/or materials which may create any difficulty with other
contractors, subcontractors and/or labormen then engaged by us or others in the
construction, maintenance and operation of the building or any part thereof;
and
3. That all the Work will be of a quality at least equal to the
materials and workmanship utilized by us as original building standards and
that all of the Work will be supervised by us or our agent to assure yourselves
and ourselves of compliance therewith;
4. You have submitted for written approval by us and we have approved,
the names of any contractors or subcontractors to be employed; and
5. That you and anyone employed by you shall, at your sole cost and
expense, comply with all laws, orders and regulations of federal, state, county
and municipal authorities and in quasi governmental authorities, including, but
not limited to, the Maryland Board of Fire
<PAGE> 48
Page 2
August 31, 1979
ICARUS Corporation
Underwriters and shall, prior to the commencement of the Work, obtain all
necessary insurance coverage, including your subcontractors, satisfactory in the
amounts of:
$500,000 - Bodily Injury per Persons
$500,000 - Bodily Injury per Occurance
$500,000 - Property Damages per Occurance; and
6. That certificates of workmen's compensation and general liability
insurance coverage in amounts and companies satisfactory to us shall be
delivered to us for each and every contractor and subcontractor to be used in
connection with the Work prior to the commencement of the Work; and
7. All fixtures, installations and Work, including, but not limited
to, all air conditioning equipment, shall become the sole property of the
landlord, and shall remain upon and be surrendered with the demised premises in
accordance with the terms and conditions of the Lease; and
8. That all Work and deliveries in connection with the Work will be
scheduled for hours approved by the Landlord, with arrangements to be made in
advance by you with the Building superintendent; and
9. That no other alterations or physical changes, except as
specifically set forth on the said drawings deemed annexed hereto and made a
part hereof, and no modifications to the alterations and physical changes
described and set forth on said plan shall be made on the premises demised
under the Lease, without our prior written consent; and
10. That you covenant and agree to indemnify and save us harmless and
free from claims, counsel fees, loss, damage and expenses whatsoever by reason
of any injury or damage howsoever caused, to any person or property occurring
prior to the completion of the Work or occurring after such completion as a
result of anything done or omitted in connection therewith or arising out of
any fine, penalty or imposition or out of any other matter or doing connected
with the Work done or to be done or materials furnished or to be furnished in
connection with the Work and by reason of any liens, charges, chattel
mortgages, conditional bills of sale, title retention agreements or bills of
any kind whatsoever that may be incurred or become chargeable against us, or
the building of which the demised premises are a part or the Work or any part
thereof by reason of anything done or to be done or materials furnished or to
be furnished to or upon the demised premises in connection with the Work; and
<PAGE> 49
Page 3
August 31, 1979
ICARUS Corporation
11. That you shall leave all structural and mechanical parts of the
building in good workmanlike operating condition, and the Work will be done
with the least possible disturbance to occupants of other parts of the
building; and
12. That you shall promptly pay and discharge all costs and expenses of
the Work at your sole cost and expense and will reimburse us for any and all
expenses incurred by us, including, but not limited to, legal fees and court
costs, on account of failure by you to comply with any of the foregoing
provisions and any requirements of law, rules and regulations and of any public
authority, whether involving structural changes or not and whether ordinary or
extraordinary, structural or otherwise, foreseen or unforeseen, and will not
call upon us for any expenses connected with the Work; and
13. This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and their respective heirs, executors, administrators,
distributees, legal representatives, successors and, except as otherwise
provided in this, their respective assigns; and
14. That nothing herein contained shall be construed to waive, impair
or affect any of the terms, provisions, agreements, covenants or conditions
contained in the lease (except as herein expressly provided), or any breach
thereof, or any of our rights as Landlord against any person or persons liable
or responsible for the performance thereof, and all provisions of the Lease are
hereby mutually declared to be in full force and effect; and
15. The submission of this Agreement shall not be effective, nor shall
you have any rights with respect thereto, unless and until we shall have
executed a counterpart hereof and delivered a counterpart to all parties
hereto.
16. It is specifically understood and agreed that Landlord is not
consenting herein to the installation of a closed-circuit television system
within the demised premises, or the design and erection of signs, as the same
may be set forth in the said plans, and that both of the foregoing items
require Landlord's later approval in writing.
<PAGE> 50
Page 4
August 31, 1979
ICARUS Corporation
If the foregoing correctly sets forth our understanding would you kindly
approve all counterparts hereof by a duly authorized officer and then return to
us, all counterparts for our execution.
Very truly yours,
Fred F. French of Maryland, Inc.
By:/s/ Marvin Rosenthal
----------------------------
Vice President
APPROVED AND AGREED TO:
ICARUS Corporation
By:/s/ Herbert G. Blecker
---------------------------------------
President
<PAGE> 51
ATTACHMENTS (2)
Floor Plans of ICARUS Corporation
<PAGE> 52
ICARUS
COST AND ENGINEERING SERVICES FOR THE CONSTRUCTION INDUSTRY
January 23, 1981
CERTIFIED MAIL
Fred F. French of Maryland, Inc.
One Central Plaza
11300 Rockville Pike
Rockville, Maryland 20852
Attention: Mr. Joseph Conrad
Dear Mr. Conrad:
In accordance with the existing Lease Agreement between ICARUS Corporation and
Mach I - Research Associates dated October 15, 1976, ICARUS Corporation hereby
notifies you as their successor and agent that we will be renewing our lease at
One Central Plaza, 11300 Rockville Pike, Rockville, Md. 20852, for the second
five (5) year term in accordance with Article 45 on Page 20 of the
aforementioned lease.
Sincerely,
ICARUS Corporation
/s/Herbert G. Blecker
Herbert G. Blecker
President
HGB:vje
ICARUS CORPORATION, ONE CENTRAL PLAZA, 11300 ROCKVILLE PIKE, ROCKVILLE,
MARYLAND 20852 * (301) 881-9350 * TELEX NO. 908763
<PAGE> 53
ICARUS
PROVIDING COST, SCHEDULING, PROJECT MANAGEMENT AND ENGINEERING SERVICES
TO INDUSTRY SINCE 1969
April 30, 1986
Cross & Brown Company of Maryland, Inc.
One Central Plaza
11300 Rockville Pike
Rockville, MD 20852
Attention: Mr. Joseph Conrad
Reference: ICARUS Lease - One Central Plaza dated October 15, 1976
CERTIFIED MAIL - RETURN RECEIPT REQUESTED
Gentlemen:
Pursuant to Paragraph 45 of Lease Agreement dated October 15, 1976, as amended
on October 25, 1976 and August 24, 1979, this will serve to notify you that
ICARUS Corporation intends to renew its Lease Agreement for the last 5-year
option contained in the Lease Agreement.
Very truly yours,
ICARUS Corporation
/s/Herbert G. Blecker
Herbert G. Blecker
President
HGB:111
cc: Cross & Brown Company
522 Fifth Avenue
New York, NY 10036
ICARUS CORPORATION, ONE CENTRAL PLAZA, 11300 ROCKVILLE PIKE, ROCKVILLE,
MARYLAND 20852 * (301) 881-9350 * TELEX NO. 908763
<PAGE> 54
CAREY WINSTON 5550 Friendship Boulevard
Commercial Red Estate Services Suite 500
Mortgage Banking Chevy Chase, Maryland 20815
Office: 301-656-4212
Fax:301-961-9102
January 11, 1990
Mr. Herbert G. Blecker
President
ICARUS Corporation
11300 Rockville Pike
Suite 602
Rockville, Maryland 20852
RE: Extension and Additional Space Agreement
11300 Rockville Pike
Suite 602A
Rockville, Maryland
Dear Herb:
Enclosed please find one (1) fully executed copy of the Extension and
Additional Space Agreement for the above referenced property.
If you have any questions, please do not hesitate to call me.
Sincerely,
CAREY WINSTON COMPANY
/s/ Raymond R. Hite
- --------------------------
Raymond R. Hite
Assistant Vice President
Commercial Brokerage Services
RRH:jkm
Encl.
<PAGE> 55
EXTENSION AND ADDITIONAL SPACE AGREEMENT
AGREEMENT made as of this 8th day of January 1990, between ONE CENTRAL
PLAZA JOINT VENTURE, having an office at No. 420 Lexington Avenue, Borough of
Manhattan, City, County and State of New York (hereinafter referred to as
"Landlord"), and ICARUS CORPORATION, a Maryland corporation having its office
at No. 11300 Rockville Pike, Rockville, Maryland (hereinafter referred to as
"Tenant").
W I T N E S S E T H:
WHEREAS, MACH I RESEARCH ASSOCIATES ("Mach I"), Landlord's
predecessor-in-interest, and Tenant heretofore entered into a certain written
lease dated as of October 15, 1976, wherein and whereby Mach I leased to
Tenant, and Tenant hired from Mach I, a portion of the sixth (6th) floor as
shown outlined in red on the plan annexed to said lease in the building known
as No. 11300 Rockville Pike, Rockville, Maryland, for a term scheduled to
commence on the 1st day of January, 1977, and to end on the 31st day of March,
1982 which lease was modified by Addendum No. 1 to lease dated as of October
25, 1976, between Mach I and Tenant, by Agreement dated as of August 24, 1979,
between FRED F. FRENCH of Maryland, as agent ("FFF"), Landlord's subsequent
predecessor-in-interest, and Tenant, by letter agreement dated as of August 31,
1979 between FFF and Tenant, and by those certain letters of Tenant dated
January 23, 1981, and April 30, 1986, wherein and whereby Tenant exercised its
right to extend the term of the lease, which lease is now scheduled to end on
March 31, 1992 (or until such term shall sooner cease and expire as provided in
said lease), at the rental and additional rental and upon the covenants,
conditions, provisions, and agreements contained in such lease, which lease as
so modified and as the same may have been otherwise heretofore modified, is
hereinafter referred to as the "Lease"; and
WHEREAS, Landlord and Tenant desire to modify the Lease only in respects
hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto by these presents do covenant and
agree as follows:
1. The term of the Lease, as hereby modified, is extended for a
further term of six (6) years commencing from April 1, 1992 to and including
March 31, 1998 (hereinafter referred to as the "Extended Term"), upon the same
terms, conditions, covenants, provisions and agreements of the Lease as hereby
modified.
2. Effective as of March 1, 1990 (the "Additional Space Term
Commencement Date") and for the remainder of the term of the Lease (the
"Original Space"), as extended by this agreement, there shall be added to, and
included in, the premises demised by the Lease (the "Original Space"), the
following additional space, to wit:
<PAGE> 56
the portion of the sixth (6th) floor, known as Suite 602(A) as shown
outlined in red on the plan annexed hereto, made a part hereof and marked
Exhibit "B" (the "Additional Space"),
in the building known as No. 11300 Rockville Pike, Rockville, Maryland (the
"Building"). In order to accomplish such addition and inclusion of said
additional space to and in the premises demised by the Lease, Landlord does
hereby lease to Tenant and Tenant does hereby hire from Landlord said
additional space for a period to commence on the Additional Space Term
Commencement Date and to end on the 31st day of March, 1998, or on such earlier
date upon which said term may expire pursuant to any of the conditions,
covenants, provisions, terms and agreements of the Lease, as modified by this
agreement. It is the intention and agreement of the parties hereto that, by
reason of such addition and inclusion of said additional space to and in the
premises demised by the Lease, the demised premises covered by the Lease, as
modified by this agreement, from and after the Additional Space Term
Commencement Date shall be and be deemed to be those portions of the sixth
(6th) floor in the Building known as Suites 602, 602A, 604 and 605 ("the
Demised Premises").
3. A. Effective as of the Additional Space Term Commencement Date
to and including March 31, 1998, inclusive, the annual rental rate specified in
the Lease, as modified by this agreement, shall be increased by the amount of
EIGHT THOUSAND SIX HUNDRED EIGHTY ONE and 04/100 DOLLARS ($8,681.04) to the
amount of ONE HUNDRED NINETY SEVEN THOUSAND NINE HUNDRED FIFTEEN and 13/100
DOLLARS ($197,915.13) per annum, subject to adjustment or adjustments by reason
of the operation of provisions of the Lease, as modified by this agreement,
including, but not limited to, Articles 3 and 4 thereof and Article 5, hereof.
B. Effective as of the Additional Space Term Commencement Date
and for the remainder of the term of the Lease, as extended and modified by
this agreement, the additional rental and/or increases in the annual rental
reserved in the Lease, as modified by this agreement, shall be paid by Tenant
to Landlord at the times and in the manner specified in the Lease.
4. Tenant hereby covenants and agrees that said additional space shall
be used solely for the purposes set forth in Article "5" of the Lease, and for
no other purpose.
5. Effective as of the Additional Space Term Commencement Date to and
including March 31, 1998, inclusive;
A. The figure "2.9" which appears in Article 4a of the Lease, as
heretofore changed to "3.1" and "3.71", shall be deemed to be further changed
to "3.88" in its place and stead in each such instance;
B. Article 45 shall be deemed to be deleted from the Lease.
C. Article 46 shall be deemed to be restated as follows:
<PAGE> 57
"ARTICLE 46
Lessor hereby grants to Lessee a right of prior refusal with respect to
premises known as Suite 601 occupied by AT&T, under the terms and conditions
herein set forth: If during the term of this Lease, the lease with AT&T for
such Suite 601 should terminate, Lessor shall offer to lease such space to
Icarus Corporation at rates then prevailing in the building. If Icarus
Corporation does not accept said offer within ten (10) days, the Landlord
shall be free to lease such space to others. If Lessee does thus lease said
Suite 601, Lessee may elect to have the term for such additional space
coincident with the term of this original lease, and/or any renewal thereof.
D. References in Article 3(b)(i) to "All Items (Base 1967=100)"
shall be deemed to be changed to "All Items (Base 1982-1984=100)".
6.A. Landlord agrees, at Landlord's expense, install a sprinkler system
in and to the Original Space and the Additional Space (the "Sprinkler Work")
and to make the changes, improvements and alterations to the Additional Space
and the Original Space in accordance with the plans and specifications set
forth on the plans dated September 14, 1989 by Bucher, Meyers, Polniaszek,
Silkey & Associates, Inc., A.I.A. for One Central Plaza, 6th Floor, Job No.
89008, pp. CS-1, A-1, A-2, dated 10/25/89, and ID-1, dated 12/1/89, (the
"Plans") incorporated by reference herein. The Sprinkler Work and the Work to
be done pursuant to the Plans are hereinafter together referred to as the
"Landlord's Work". Landlord will commence Landlord's Work promptly upon
execution of this Agreement.
B. Landlord's Work shall be done during ordinary business hours of
business days during the continued occupancy of the Demised Premises by Tenant
without diminution, abatement or reduction in rent or any other compensation to
Tenant as a result thereof, and Tenant covenants and agrees to cooperate with
Landlord in connection therewith. Landlord shall secure the Demised Premises
from theft, unauthorized entry and other similar perils at all times during the
performance of Landlord's Work, and specifically secure the Demised Premises
upon the opening, demolition or removal of any existing demising wall and/or
installation of additional entry doors; provided, however, that, in no event
shall Landlord be subject to consequential liability arising out of or in
connection with the foregoing.
C. Landlord's Work shall be deemed "substantially completed" when (a)
the certificate of occupancy (if any) and any other certificates or
governmental approvals (if any) necessary for Tenant to lawfully use and occupy
the Original Space (as modified) and/or Additional Space have been obtained
(which shall be the responsibility of the Landlord); (b) all building systems
and/or other systems servicing the Demised Premises are operational; and (c)
all Landlord's Work has been performed, other than minor decoration and minor
punch list type adjustments which do not materially interfere with the Tenant's
use and occupancy of the Demised Premises.
D. Except for punch list items delivered to Landlord, Tenant's
acceptance of Landlord's Work in the Demised Premises and/or Tenant's occupancy
of the Additional
<PAGE> 58
Space shall relieve Landlord of obligations to complete Landlord's Work
hereunder in accordance with the Plans and this Agreement, except for latent
defects.
E. Tenant shall be entitled to inspect all work as it deems
appropriate provided that Tenant does not interfere with Landlord's Work. All
Landlord's Work shall be performed in a good and workmanlike manner, utilizing
materials and fixtures specified in the Plans and this Agreement, and in
accordance with all building and other applicable codes and ordinances.
7.A. Anything in this agreement to the contrary notwithstanding, in the
event that Landlord has not substantially completed Landlord's Work pursuant to
the immediately preceding Article hereof by March 1, 1990, Tenant shall not
(except with Landlord's written consent) be entitled to possession of the
Additional Space and the Additional Space Term Commencement Date shall not be
deemed to have occurred until said Additional Space is ready for Tenant's
occupancy (as described in Article 6C, above) and Tenant shall not have any
claim against Landlord, and Landlord shall have no liability to Tenant, by
reason of any such postponement of Tenant's possession of the Additional Space,
nor shall the same affect the validity of the Lease, as hereby modified, or the
obligation of Tenant hereunder, nor shall the same be construed in any wise to
extend the term of the Lease, as hereby modified. In such event, Tenant agrees
to accept occupancy of the Additional Space as soon as the work required to
be-performed by Landlord pursuant to the immediately preceding Article hereof
is substantially completed. The Additional Space shall not be deemed to be
unready for Tenant's occupancy or incomplete if only minor or insubstantial
details of construction, decoration or mechanical adjustments remain to be done
in the Additional Space or any part thereof, or if the delay in the
availability of the Additional Space for occupancy shall be due to special
work, changes, alterations, or additions, required or made by Tenant in the
layout or finish of the Additional Space or any part thereof or shall be caused
in whole or in part by Tenant through the delay of Tenant in submitting any
plans and/or specifications, including but not limited to, supplying
information, approving plans, specifications, or estimates, giving
authorizations or otherwise or shall be caused in whole or in part by delay
and/or default on the part of the Tenant.
B. Notwithstanding anything else to the contrary contained in the
Lease, if Tenant takes possession of the Additional Space of any part thereof
and uses all or any portion of the Additional Space in any way to conduct its
business or any aspect thereof prior to the date when the Additional Space
shall otherwise be ready for Tenant's occupancy within the meaning of this
Article, the Additional Space Term Commencement Date shall be deemed to take
place shall commence as of such earlier date.
8. Tenant hereby affirms that no security has been heretofore
deposited by Tenant under the Lease and that no additional security is required
to be deposited by reason of this Agreement.
9. Tenant understands and agrees that Landlord will not carry
insurance of any kind on any personal property in the demised premises or the
additional space (regardless of whether such property shall be owned by Tenant
and including, but not limited to,
<PAGE> 59
Tenant's goods, supplies, furnishings, furniture, fixtures, equipment). In
the event that Tenant fails to maintain insurance on personal property, then
Tenant hereby waives any and all right of recovery which it might otherwise
have against Landlord, any fee owner or mortgagee and their respective
officers, directors, agents, contractors, servants and employees for loss or
damage to such property or any part thereof, to the same extent that Tenant's
insurer's right of subrogation would be waived if insurance coverage with
waiver of subrogation provisions were being maintained by Tenant upon all of
such property. The provisions of this Article shall also apply to each
permitted assignee, if any, and each permitted subtenant, if any, at any time
occupying the demised premises or any part thereof or the additional space or
any part thereof.
10. Tenant represents and warrants to Landlord that it has not dealt
with any real estate agent or broker in connection with this agreement and/or
the additional space and/or the building, other than Carey Winston Company and
that this agreement was not brought about or procured through the use or
instrumentality of any other agent or broker and that all negotiations with
respect to the terms of this agreement were conducted between Landlord, Carey
Winston Company and Tenant. Tenant covenants and agrees to indemnify and hold
Landlord harmless from and against any and all claims for commissions and other
compensation made by any other agent or agents and/or other broker or brokers
based on any dealing between Tenant and any other agent or agents and/or broker
or other brokers, together with all costs and expenses incurred by Landlord in
resisting such claims (including, without limitation, attorneys' fees).
11. Except as modified and extended by this agreement, the Lease and
all the terms, covenants, conditions and agreements thereof are hereby in all
respects ratified, confirmed and approved.
12. This agreement contains the entire understanding between the
parties with respect to the matters contained herein. No representations,
warranties, covenants or agreements have been made concerning or affecting the
subject matter of this agreement, except as are contained herein.
13. This agreement may not be changed orally, but only by an agreement
in writing signed by the party against whom enforcement of any waiver, change
or modification or discharge is sought.
14. The submission of this agreement to Tenant shall not be construed
as an offer, not shall Tenant have any rights with respect hereto, unless and
until Landlord shall execute a copy of this agreement and deliver the same to
Tenant.
<PAGE> 60
IN WITNESS WHEREOF, the parties hereto have respectively executed this
agreement as of the day and year first above written.
ONE CENTRAL PLAZA JOINT VENTURE
By: French Rockville Limited
Partnership, General
Partner
/s/ Edwin A. Malloy
-------------------------
General Partner
ICARUS CORPORATION
By /s/ Herbert G. Blecker 3 Jan 90
-------------------------
President
<PAGE> 61
STATE OF Maryland )
) : ss:
COUNTY OF Montgomery )
On this 3rd day of January, 1990, before me personally came Herbert G.
Blecker, to me known who, being by me duly sworn, did depose and say that he
resides at Potomac Maryland; that he is the current President of ICARUS
CORPORATION, the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by order of
the Board of Directors of said corporation; and that he signed his name thereto
by like order.
/s/ Valerie J. Evans
--------------------------
Notary Public
STATE OF New York ) MY COMMISSION EXPIRES JULY 1, 1990
) :ss.: JOY ELAINE WARLOCK
COUNTY OF New York ) Notary Public, State of New York
No. 31-4839203
Qualified in New York County Term Expires
August 31, 1991
On this 8th day of January, 1990, before me personally came Edwin A.
Malloy, to me known, who, being by me duly sworn, did depose and say that he is
a general partner of the partnership of FRENCH ROCKVILLE LIMITED PARTNERSHIP,
the firm described in and who executed the foregoing instrument and
acknowledged to me that he executed the foregoing instrument for and in behalf
of said partnership.
/s/ Joy Elaine Warlock
--------------------------
Notary Public
<PAGE> 62
EXHIBIT "B"
FLOOR PLAN OF SUITE 602(A)
<PAGE> 63
One Central Plaza Joint Venture
c/o Fred F. French Realty Corporation
420 Lexington Avenue
New York, New York 10170
January 30, 1990
Icarus Corporation
11300 Rockville Pike
Rockville, Maryland 20509
Re: Extension and Additional Space Agreement
Dated as of January 8, 1990
Gentlemen:
Please note the following corrections to the above Extension and
Additional Space Agreement:
1. The dollar amount "$197,915.13" set forth in Article 3A. Should be
changed to "$197,919.00";
2. The percentage "3.88" in the third line of Article 5A should be
changed to "3.87" percent.
Would you kindly indicate your agreement to the above with your signature
beneath the words "Agreed to", below.
Thank you for your courtesies in this matter.
Very truly yours,
One Central Plaza Joint Venture
By: French Rockville Limited
Partnership
By: /s/Edwin A. Malloy
---------------------
Agreed to:
Icarus Corporation
By: /s/Herbert G. Blecker President 27 Feb 90
------------------------------
<PAGE> 64
ONE CENTRAL PLAZA JOINT VENTURE
c/o FRED F. FRENCH REALTY CORPORATION
60 EAST 42ND STREET
NEW YORK, NEW YORK 10165
February 18, 1992
Icarus Corporation
11300 Rockville Pike
Rockville, Maryland
Re: Additional Space Agreement
dated January 20, 1992 for
Suite 601 at One Central Plaza,
11300 Rockville Pike, Rockville, MD
Gentlemen:
Reference is hereby made to the above-referenced Additional Space
Agreement for Suite 601 in the Building known as One Central Plaza.
This letter will constitute our mutual understanding and agreement that
the "601 Additional Space Term Commencement Date" (as defined in paragraph 1 of
the Additional Space Agreement), is hereby changed from February 1, 1992 to
February 18, 1992. For all purposes of the Additional Space Agreement (and the
Lease, as defined therein and modified thereby), February 18, 1992 shall be
deemed to be, and be, the "601 Additional Space Term Commencement Date." The
aforesaid change in the 601 Additional Space Term Commencement Date will in no
way affect, or be deemed to change, the expiration date of the term of the
Lease, which is and shall continue to be March 31, 1998.
We further mutually agree with you that, by reason of the change of the
601 Additional Space Term Commencement Date, as aforesaid, the date "February
1, 1993", appearing in the last line of paragraph 4A of the Additional Space
Agreement, is hereby changed to "February 18, 1993."
Except as set forth herein, the Additional Space Agreement (and the
Lease) are ratified and confirmed and shall continue in full force and effect,
unmodified. Any capitalization terms used but not defined in this letter shall
have the same meaning contained in the Additional Space Agreement.
Please sign this letter and the enclosed copies to signify your agreement
with the terms hereof and return them to us for countersignature.
Very truly yours,
ONE CENTRAL PLAZA JOINT VENTURE
By: French Rockville Limited
Partnership, General Partner
By: /s/Edwin A. Malloy
--------------------------------
Edwin A. Malloy, General Partner
ACCEPTED AND AGREED TO:
ICARUS CORPORATION
By: /s/Herbert G. Blecker 10 Feb 92
------------------------------------
, Its President
<PAGE> 65
ADDITIONAL SPACE AGREEMENT
AGREEMENT made as of this 28th day of February, 1992, between ONE CENTRAL
PLAZA JOINT VENTURE, having an office at No. 60 East 42nd Street, Suite 1638,
Borough of Manhattan, City, County and State of New York (hereinafter referred
to as "Landlord") and ICARUS CORPORATION, a Maryland corporation having its
office at No. 11300 Rockville Pike, Rockville, Maryland (hereinafter referred
to as "Tenant").
W I T N E S S E T H:
WHEREAS, MACH I RESEARCH ASSOCIATES ("Mach I"), Landlord's
predecessor-in-interest, and Tenant heretofore entered into a certain written
lease dated as of October 15, 1976, wherein and whereby Mach I leased to
Tenant, and Tenant hired from Mach I, a portion of the sixth (6th) floor as
shown outlined in red on the plan annexed to said lease in the building known
as No. 11300 Rockville Pike, Rockville, Maryland, for a term scheduled to
commence on the 1st day of January, 1977, and to end on the 31st day of March,
1982, which lease was modified by Addendum No. 1 to lease dated as of October
25, 1976, between Mach I and Tenant, by Agreement dated as of August 24, 1979,
between Fred F. French of Maryland, as agent ("FFF"), Landlord's subsequent
predecessor-in-interest, and Tenant, by letter agreement dated as of August 31,
1979 between FFF and Tenant, by those certain letters of Tenant dated January
23, 1981, and April 30, 1986, wherein and whereby Tenant exercised its right to
extend the term of the lease, by Extension and Additional Space Agreement dated
as of January 8, 1990, between Landlord and Tenant, as amended by that certain
letter agreement dated January 30, 1990, and by Additional Space Agreement
dated as of January 20, 1992 (the "601 Additional Space Agreement"), between
Landlord and Tenant, which lease is now scheduled to end on March 31, 1998 (or
until such term shall sooner cease and expire as provided in said lease), at
the rental and additional rental and upon the covenants, conditions, provisions
and agreements contained in such lease, which lease as so modified and as the
same may have been otherwise heretofore modified, is hereinafter referred to as
the "Lease"; and
WHEREAS, Landlord and Tenant desire to modify the Lease only in respects
hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto by these presents do covenant and
agree as follows:
1. Effective as of March 1, 1992 (the "609 Additional Space Term
Commencement Date") and for the remainder of the term of the Lease, inclusive,
there shall be added to, and included in, the premises demised by the Lease
(the "Original Space"), the following additional space, to wit:
<PAGE> 66
the portion of the sixth (6th) floor, known as Suite 609 as shown
outlined in red on the plan annexed hereto, made a part hereof and
marked Exhibit "D" (the "609 Additional Space"),
in the building known as One Central Place, NO. 11300 Rockville Pike,
Rockville, Maryland (the "Building"). In order to accomplish such additional
and inclusion of said 609 Additional Space to and in the premises demised by
the Lease, Landlord does hereby lease to Tenant and Tenant does hereby hire
from Landlord said 609 Additional Space for a period to commence on the 609
Additional Space Term Commencement Date and to end on the 31st of March, 1998,
or on such earlier date upon which said term may expire pursuant to any of the
conditions, covenants, provisions, terms and agreements of the Lease, as
modified by this agreement. It is the intention and agreement of the parties
hereto that, by reason of such addition and inclusion of said 609 Additional
Space to and in the premises demised by the Lease, the demised premises covered
by the Lease, as modified by this agreement, from and after the 609 Additional
Space Term Commencement Date, shall be and be deemed to be those portions of
the sixth (6th) floor in the Building known as Suites 601, 602, 602A, 604, 605
and 609 (the "Demised Premises").
2. A. Effective as of the 609 Additional Space Term
Commencement Date to and including March 31, 1998, inclusive, the annual rental
rate specified in the Lease, as modified by this agreement, shall be increased
by the amount of TEN THOUSAND AND 00/100 DOLLARS ($10,000.00) (the "609
Additional Space Fixed Rent") to the amount of TWO HUNDRED THIRTY-TWO THOUSAND
SIX HUNDRED NINETEEN AND 00/100 DOLLARS ($232,619.00) per annum, subject to
adjustment or adjustments by reason of the operation of provisions of the
Lease, as modified by this agreement, including, but not limited to, Articles 3
and 4 thereof and Paragraph 4 hereof.
B. Effective as of the 609 Additional Space Term
Commencement Date and for the remainder of the term of the Lease, as modified
by this agreement, the annual rental rate and/or additional rental and/or
increase in the annual rental reserved in the Lease, as modified by this
agreement, shall be paid by Tenant to Landlord at the time and in the manner
specified in the Lease, as modified by this agreement.
3. Tenant hereby covenants and agrees that said 609 Additional
Space shall be used solely for purposes of storage of personal property of
Tenant utilized in connection with its business activities in the Demised
Premises, and for no other purpose.
4. Effective as of the 609 Additional Space Term Commencement
Date to and including March 31, 1998, inclusive:
A. The provisions of Article 3 of the Lease, as modified
by this agreement, shall apply with respect to the entire Demised Premises
(inclusive of the 609 Additional Space) and, in order to accommodate such
application, the 609 Additional Space Fixed Rent shall be added to and become a
part of the Minimum Annual Rental described
<PAGE> 67
in said Article 3 of the Lease, as modified by this agreement, and all
future calculations of the adjustments in said Minimum Annual Rental shall be
based upon the adjusted Minimum Annual Rental payable by Tenant in the lease
year immediately preceding the 609 Additional Space Term Commencement Date plus
the 609 Additional Space Fixed Rent. However, no adjustment under said
Articles 3 of the Lease, as modified by this agreement, shall be made or become
effective with respect to the 609 Additional Space Fixed Rent until March 1,
1993.
B. Each and every one of the provisions of Article 4 of
the Lease, as modified by this agreement, shall apply with respect to the 609
Additional Space separate and apart from their application with respect to the
Original Space (to which they shall continue to apply).
For purposes of applying the provisions of Article 4 with
respect only to the 609 Additional Space, the following shall apply:
(i) the figure "2.9%", which appears in Article 4(a) of the
Lease, which heretofore has been changed (and/or has been sometimes
referred to as having been changed) to "3.1%", "3.7", "3.71", "3.88", and
"3.87" for purposes of application thereof to all portions of the
Original Space except the 601 Additional Space (as defined in Paragraph 1
of the 601 Additional Space Agreement) (and which, for purposes of
application hereof to the said 601 Additional Space only, hereto has been
changed to ".51") shall be deemed, only for purposes of the application
thereof to the 609 Additional Space, to be changed to ".38" in its place
and stead in each such instance (but shall continue to be "3.87" with
respect to all portions the Original Space except the 601 Additional
Space and ".51" with respect to the 601 Additional Space).
(ii) the term "Base Year", which appears in Article 4 and is defined in
Article 4(b) of the Lease, shall be deemed to be, only for purposes of
the application thereof to the 609 Additional Space (and shall continue,
with respect to the 601 Additional Space, as specified in the 601
Additional Space Agreement), to be the fiscal year commencing July 1,
1991 and ending on June 30, 1992, both dates inclusive (but shall
continue, with respect to all portions of the Original Space except the
610 Additional Space, to be the "Base Year" as defined in Article 4(b) of
the Lease, without regard to this agreement.
5. A. Tenant has examined and inspected said 609 Additional Space
and agrees to accept the same in the condition in which it exists on the date
of this agreement, subject to the changes, improvements and alterations
required to be provided by Landlord hereunder. Tenant understands and agrees
that no materials whatsoever are to be furnished by Landlord and no work
whatever is to be performed by Landlord in connection with the Demised Premises
or said 609 Additional Space or any part thereof, except as hereinafter
specifically set forth.
<PAGE> 68
B. Landlord agrees, at its expense, to make and complete the
following described changes, improvements and alterations in and to the 609
Additional Space ("Landlord's Work"):
(i) remove carpet and seal floor;
(ii) remove fifteen feet (15') of partitioning,
approximately as shown on the sketch attached hereto as
Exhibit "E";
(iii) supply and install electrical outlets, as deemed
necessary by Landlord; and
(iv) supply and install sprinklers.
All of such work shall be of a material, design, capacity, finish and
color, as applicable, of the standard adopted by Landlord for the Building
unless indicated otherwise.
C. Landlord's Work shall be done during ordinary business hours
of business days during the continued occupancy of the Original Space by Tenant
without diminution, abatement or reduction in rent or any other compensation to
Tenant as a result thereof, and Tenant covenants and agrees to cooperate with
Landlord in connection therewith. Landlord shall secure the Demised Premises
from theft, unauthorized entry and other similar perils at all times during the
performance of Landlord's Work, and specifically secure the Demised Premises
upon the opening, demolition or removal of any existing demising wall and/or
installation of additional entry doors, provided, however, that in no event
shall Landlord be subject to consequential liability arising out of or in
connection with the foregoing.
D. Landlord's Work shall be deemed "Substantially completed"
when (a) the certificate of occupancy (if any) and any other certificate or
governmental approvals (if any) necessary for Tenant to lawfully use and occupy
the 609 Additional Space have been obtained (which shall be the responsibility
of the Landlord); (b) all building systems and/or other systems servicing the
609 Additional Space are operational; and (c) all Landlord's Work has been
performed, other than minor decoration and minor punch list type adjustments
which do not materially interfere with the Tenant's use and occupancy of the
609 Additional Space.
E. Except for punch list items delivered to Landlord, Tenant's
acceptance of Landlord's work in, and/or Tenant's occupancy of, the 609
Additional Space shall relieve Landlord of obligations to complete Landlord's
Work hereunder in accordance with this Agreement, except for latent defects.
F. Tenant shall be entitled to inspect all work as it deems
appropriate provided that Tenant does not interfere with Landlord's Work. All
Landlord's Work shall be performed in a good and workmanlike manner, utilizing
materials and fixtures specified
<PAGE> 69
in this Agreement, and in accordance with all building and other applicable
codes and ordinances.
6. A. Anything in this agreement to the contrary notwithstanding,
in the event that Landlord has not substantially completed Landlord's Work
pursuant to the immediately preceding Article hereof by March 1, 1992, Tenant
shall not (except with Landlord's written consent) be entitled to possession of
the 609 Additional Space and the 609 Additional Space Term Commencement Date
shall not be deemed to have occurred until said 609 Additional Space is ready
for Tenant's occupancy (as described in Article 5D above) and Tenant shall not
have any claim against Landlord, and Landlord shall have no liability to
Tenant, by reason of any such postponement of Tenant's possession of the 609
Additional Space, nor shall the same affect the validity of the Lease, as
hereby modified, or the obligation of Tenant hereunder, nor shall the same be
construed in any wise to extend the term of the Lease, as hereby modified. In
such event, Tenant agrees to accept occupancy of the 609 Additional Space as
soon as the work required to be performed by Landlord pursuant to the
immediately preceding Article hereof is substantially completed. The 609
Additional Space shall not be deemed to be unready for Tenant's occupancy or
incomplete if only minor or insubstantial details of construction, decoration
or mechanical adjustments remain to be done in the 609 Additional Space or any
part thereof, or if the delay in the availability of the 609 Additional Space
for occupancy shall be due to special work, changes, alternations, or additions
required or made by Tenant in the layout or finish of the 609 Additional Space
or any part thereof or shall be caused in whole or in part by Tenant through
the delay of Tenant in submitting plans and/or specifications, including, but
not limited to, supplying information, approving plans, specifications, or
estimates, giving authorizations or otherwise or shall be caused in whole or in
part by delay and/or default on the part of the Tenant.
B. Notwithstanding anything else to the contrary contained in
the Lease, as modified by this agreement, if Tenant takes possession of the 609
Additional Space of any part thereof and uses all or any portion of the 609
Additional space in any way to conduct its business or any aspect thereof prior
to the date when the 609 Additional Space shall otherwise be ready for Tenant's
occupancy within the meaning of this or the immediately preceding Article, the
609 Additional Space Term Commencement Date shall be deemed to be as of such
earlier date.
7. (i) Notwithstanding the provisions of Paragraph 3 hereof limiting
the use of the 609 Additional Space to storage purposes, it is agreed that
Tenant, during the term of the Lease, may elect to use the 609 Additional Space
as office space; provided that, prior to such office use, Tenant, as its sole
cost and expense, causes all improvements required to convert such storage
space to office space to be performed and paid for, such work to be done in
accordance with all terms, provisions, covenants and conditions of the Lease
(including, without limitation Article 11 thereof) by contractor(s) of
Landlord's choosing or subject to Landlord's approval. If Tenant pays for said
work, the Lease, as modified by this agreement, shall remain in full force and
effect, without modification of its terms except for the use of the 609
Additional Space, as set forth in Paragraph 3 hereof.
<PAGE> 70
(ii) If Tenant requests that Landlord agree to pay for the cost of
the improvements required to convert the storage space to office space, which
Landlord shall have no obligation to do, and if Landlord considers doing so,
then, as a pre-condition to Landlord's so agreeing to pay for said
improvements, Landlord and Tenant shall mutually agree upon such modifications
to the 609 Additional Space Fixed Rent, and such other monetary adjustments, as
may be appropriate to reflect the value of the improvements to be paid for by
Landlord.
8. Tenant hereby affirms that no security has been heretofore
deposited by Tenant under the Lease and that no additional security is required
to be deposited by reason of this agreement.
9. Tenant understands and agrees that Landlord will not carry
insurance of any kind on any personal property in the demised premises or the
609 Additional Space (regardless of whether such property shall be owned by
Tenant and including, but not limited to, Tenant's goods, supplies,
furnishings, furniture, fixtures, equipment). In the event that Tenant fails
to maintain insurance on such personal property, then Tenant hereby waives any
and all right of recovery which it might otherwise have against Landlord, any
fee owner or mortgage and their respective officers, directors, agents,
contractors, servants and employees for loss or damage to such property or any
part thereof, to the same extent that Tenant's insurer's right of subrogation
would be waived if insurance coverage with waiver of subrogation provisions
were being maintained by Tenant upon all of such property. The provisions of
this Article shall also apply to each permitted assignee, if any, and each
permitted subtenant, if any, at any time occupying the Demised Premises or any
part thereof or the 609 Additional Space or any part thereof.
10. Tenant represents and warrants to Landlord that it has not dealt
with any real estate agent or broker in connection with this agreement and/or
the 609 Additional Space and/or the Building, other than Carey Winston Company,
and that this agreement was not brought about or procured through the use of
instrumentality of any other agent or broker and that all negotiations with
respect to the terms of this agreement were conducted between Landlord, Carey
Winston Company and Tenant. Tenant covenants and agrees to indemnify and hold
Landlord harmless from and against any and all claims for commissions and other
compensation made by any other agent or against and/or other broker or brokers
based on any dealing between Tenant and any other agent or agents and/or other
broker or brokers, together with all costs and expenses incurred by Landlord in
resisting such claims (including, without limitation, attorneys' fees).
11. Except as modified and extended by this agreement, the Lease and
all terms, covenants, conditions and agreements thereof are hereby in all
respects ratified, confirmed and approved.
12. This agreement contains the entire understanding between the
parties with respect to the matters contained herein. No representations,
warranties, covenants or
<PAGE> 71
agreements have been made concerning or affecting the subject matter of this
agreement, except as are contained herein.
13. This agreement may not be changed orally, but only by an agreement,
in writing signed by the party against whom enforcement of any waiver, change
or modification or discharge is sought.
14. The submission of this agreement to Tenant shall not be construed
as an offer, nor shall Tenant have any rights with respect hereto, unless and
until Landlord shall executed a copy of this agreement and deliver the same to
Tenant.
IN WITNESS WHEREOF, the parties hereto have respectively executed this
agreement as of the day and year first above written.
ONE CENTRAL PLAZA JOINT VENTURE
By: French Rockville Limited
Partnership, General Partner
By: /s/ Edwin A. Malloy
-------------------------
General Partner
ICARUS CORPORATION
By: /s/ Herbert G. Blecker
-------------------------
President
<PAGE> 72
STATE OF NEW YORK ) JOY ELAINE ANDERSON
) ss: Notary Public, State of New York
COUNTY OF NEW YORK ) No. 31-4839283
Qualified in New York County Term
Expires August 31, 1993
On this 28th day of February, 1992, before me personally came EDWIN A.
MALLOY, to me known, who being by me duly sworn did depose and say that he is a
general partner of the partnership of French Rockville Limited Partnership, the
firm described in and which executed the foregoing instrument and acknowledged
to me that he executed the foregoing instrument for and in behalf of said
partnership.
/s/ Joy Elaine Anderson
--------------------------------
Notary Public
STATE OF MARYLAND )
) ss:
COUNTY OF MONTGOMERY )
On this 20th day of February, 1992, before me personally came Herbert
Blecker, to me known who, being by me duly sworn, did depose and say that he
resides at ____________ Potomac, MD; that he is the current President of ICARUS
CORPORATION, the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by order of
the Board of Directors of said corporation, and that he signed his name thereto
by like order.
/s/ Valerie J. Evans
------------------------------
Notary Public
My Commission Expires August 1, 1992
<PAGE> 73
ADDITIONAL SPACE AGREEMENT
AGREEMENT made as of this 20th day of January, 1992, between ONE CENTRAL
PLAZA JOINT VENTURE, having an office at No. 420 Lexington Avenue, Borough of
Manhattan, City, County and State of New York (hereinafter referred to as
"Landlord") and ICARUS CORPORATION, a Maryland corporation having its office at
No. 11300 Rockville Pike, Rockville, Maryland (hereinafter referred to as
"Tenant").
W I T N E S S E T H :
WHEREAS, MACH I RESEARCH ASSOCIATES ("Mach I"), Landlord's
predecessor-in-interest, and Tenant heretofore entered into a certain written
lease dated as of October 15, 1976, wherein and whereby Mach I leased to
Tenant, and Tenant hired from Mach I, a portion of the sixth (6th) floor as
shown outlined in red on the plan annexed to said lease in the building known
as No. 11300 Rockville Pike, Rockville, Maryland, for a term scheduled to
commence on the 1st day of January, 1977, and to end on the 31st day of March,
1982, which lease was modified by Addendum No. 1 to lease dated as of October
25, 1976, between Mach I and Tenant, by Agreement dated as of August 24, 1979,
between Fred F. French of Maryland, as agent ("FFF"), Landlord's subsequent
predecessor-in-interest, and Tenant, by letter agreement dated as of August 31,
1979 between FFF and Tenant, by those certain letters of Tenant dated January
23, 1981, and April 30, 1986, wherein and whereby Tenant exercised its right to
extend the term of the lease, and by Extension and Additional Space Agreement
dated as of January 8, 1990, between Landlord and Tenant, as amended by that
certain letter agreement dated January 30, 1990, which
<PAGE> 74
lease is now scheduled to end on March 31, 1998 (or until such term shall
sooner cease and expire as provided in said lease), at the rental and
additional rental and upon the covenants, conditions, provisions and agreements
contained in such lease, which lease as so modified and as the same may have
been otherwise heretofore modified, is hereinafter referred to as the "Lease";
and
WHEREAS, Landlord and Tenant desire to modify the Lease only in respects
hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto by these presents do covenant and
agree as follows:
1. Effective as of February 1, 1992 (the "601 Additional Space
Term Commencement Date") and for the remainder of the term of the Lease,
inclusive, there shall be added to, and included in, the premises demised by
the Lease (the "Original Space"), the following additional space, to wit:
the portion of the sixth (6th) floor, known as Suite 601 as
shown outlined in red on the plan annexed hereto, made a part
hereof and marked Exhibit "C" (the "601 Additional Space"),
in the building known as One Central Plaza, No. 11300 Rockville Pike,
Rockville, Maryland (the "Building"). In order to accomplish such addition and
inclusion of said 601 Additional Space to and in the premises demised by the
Lease, Landlord does hereby lease to Tenant and Tenant does hereby hire from
Landlord said 601 Additional Space for a period to commence on the 601
Additional Space Term Commencement Date and to end on the 31st day, of March,
1998, or on such earlier date upon which said term may expire pursuant to any
of the conditions, covenants, provisions, terms and agreements of the Lease, as
modified
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by this agreement. It is the intention and agreement of the parties
hereto that, by reason of such addition and inclusion of said 601 Additional
Space to and in the premises demised by the Lease, the demised premises covered
by the Lease, as modified by this agreement, from and after the 601 Additional
Space Term Commencement Date, shall be and be deemed to be those portions of
the sixth (6th) floor in the Building known as Suites 601, 602, 602A, 604 and
605 (the "Demised Premises").
2. A. Effective as of the 601 Additional Space Term
Commencement Date to and including March 31, 1998, inclusive, the annual rental
rate specified in the Lease, as modified by this agreement, shall be increased
by the amount of TWENTY-FOUR THOUSAND SEVEN HUNDRED AND 00/100 DOLLARS
($24,700.00) (the "601 Additional Space Fixed Rent") to the amount of TWO
HUNDRED TWENTY-TWO THOUSAND SIX HUNDRED NINETEEN AND 00/100 DOLLARS
($222,619.00) per annum, subject to adjustment or adjustments by reason of the
operation of provisions of the Lease, as modified by this agreement, including,
but not limited to, Articles 3 and 4 thereof and Article 4 hereof.
B. Effective as of the 601 Additional Space Term
Commencement Date and for the remainder of the term of the Lease, as modified
by this agreement, the annual rental rate and/or additional rental and/or
increase in the annual rental reserved in the Lease, as modified by this
agreement, shall be paid by Tenant to Landlord at the time and in the manner
specified in the Lease, as modified by this agreement.
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3. Tenant hereby covenants and agrees that said 601 Additional
Space shall be used solely for the purposes set forth in Article "5" of the
Lease, and for no other purpose.
4. Effective as of the 601 Additional Space Term Commencement
Date to and including March 31, 1998, inclusive:
A. The provisions of Article 3 of the Lease, as modified
by this agreement, shall apply with respect to the entire Demised Premises
(inclusive of the 601 Additional Space) and, in order to accommodate such
application, the 601 Additional Space Fixed Rent shall be added to and become a
part of the Minimum Annual Rental described in said Article 3 of the Lease, as
modified by this agreement, and all future calculations of the adjustments in
said Minimum Annual Rental shall be based upon the adjusted Minimum Annual
Rental payable by Tenant in the lease year immediately preceding the 601
Additional Space Term Commencement Date plus the 601 Additional Space Fixed
Rent. However, no adjustment under said Article 3 of the Lease, as modified by
this agreement, shall be made or become effective with respect to the 601
Additional Space Fixed Rent until February 1, 1993.
B. Each and every one of the provisions of Article 4 of
the Lease, as modified by this agreement, shall apply with respect to the 601
Additional Space separate and apart from their application with respect to the
Original Space (to which they shall continue to apply).
For purposes of applying the provisions of Article 4 with
respect only to the 601 Additional Space, the following shall apply:
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(i) the figure "2.9%", which appears in Article 4(a) of the
Lease, which heretofore has been changed (and/or has been sometimes
referred to as having been changed) to "3.1%", "3.7%", "3.71", "3.88%",
and "3.87" for purposes of application thereof to the Original Space
shall be deemed, only for purposes of the application thereof to the 601
Additional Space, to be changed to ".51%" in its place and stead in each
such instance (but shall continue to be "3.87%" with respect to the
Original Space).
(ii) the term "Base Year", which appears in Article 4 and is
defined in Article 4(b) of the Lease, shall be deemed, only for purposes
of the application thereof to the 601 Additional Space, to be the fiscal
year commencing July 1, 1991 and ending on June 30, 1992, both dates
inclusive (but shall continue, with respect to the Original Space, to be
the "Base Year" as defined in Article 4(b) of the Lease, without regard
to this agreement).
C. Article 46 of the Lease, as heretofore modified by the
provisions of Article 5C of the "Extension and Additional Space Agreement",
dated as of November 8, 1990, shall be deemed to be and hereby is deleted from
the Lease in its entirety. Tenant acknowledges that the 601 Additional Space
is a portion of the "premises known as Suite 601" which were described in said
Article 46, as modified; and acknowledges that Tenant has not exercised its
rights with respect to the balance thereof in accordance with the provisions of
said Article 46 of the Lease, as modified. Tenant acknowledges and agrees that
it has no right of prior refusal, or any other rights or options, with respect
to the
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balance of the said Suite 601 described in said Article 46 (or with respect to
any other portion(s) of the Building).
5. A. Tenant has examined and inspected said 601 Additional
Space and agrees to accept the same in the condition in which it exists on the
date of this agreement, subject to the changes, improvements and alterations
required to be provided by Landlord hereunder. Tenant understands and agrees
that no materials whatsoever are to be furnished by Landlord and no work
whatever is to be performed bit Landlord in connection with the Demised
Premises or said 601 Additional Space or any part thereof, except as
hereinafter specifically set forth.
B. Landlord agrees, at its expense, to make and complete
the changes, improvements and alterations in and to the 601 Additional Space
("Landlord's Work") set forth on the construction documents dated November 26,
1991, which have been approved and initialled by Tenant (the "Plans"). All of
such work shall be of a material, design, capacity, finish and color of the
standard adopted by Landlord for the Building unless indicated otherwise.
C. Landlord's Work shall be done during ordinary business
hours of business days during the continued occupancy of the Original Space by
Tenant without diminution, abatement or reduction in rent or any other
compensation to Tenant as a result thereof, and Tenant covenants and agrees to
cooperate with Landlord in connection therewith. Landlord shall secure the
Demised Premises from theft, unauthorized entry and other similar perils at all
times during the performance of Landlord's Work, and specifically secure the
Demised Premises upon the opening, demolition or removal of any existing
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demising wall and/or installation of additional entry doors; provided, however,
that in no event shall Landlord be subject to consequential liability arising
out of or in connection with the foregoing.
D. Landlord's Work shall be deemed "substantially
completed" when (a) the certificate of occupancy (if any) and any other
certificates or governmental approvals (if any) necessary for Tenant to
lawfully use and occupy the 601 Additional Space have been obtained (which
shall be the responsibility of the Landlord); (b) all building systems and/or
other systems servicing the 601 Additional Space are operational; and (c) all
Landlord's Work has been performed, other than minor decoration and minor punch
list type adjustments which do not materially interfere with the Tenant's use
and occupancy of the 601 Additional Space.
E. Except for punch list items delivered to Landlord,
Tenant's acceptance of Landlord's work in, and/or Tenant's occupancy of, the
601 Additional Space shall relieve Landlord of obligations to complete
Landlord's Work hereunder in accordance with the Plans and this Agreement,
except for latent defects.
F. Tenant shall be entitled to inspect all work as it
deems appropriate provided that Tenant does not interfere with Landlord's Work.
All Landlord's Work shall be performed in a good and workmanlike manner,
utilizing materials and fixtures specified in the Plans and this Agreement, and
in accordance with all building and other applicable codes and ordinances.
6. A. Anything in this agreement to the contrary
notwithstanding, in the event that Landlord has not substantially completed
Landlord's Work pursuant to the
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immediately preceding Article hereof by February, 1, 1992, Tenant shall not
(except with Landlord's written consent) be entitled to possession of the 601
Additional Space and the 601 Additional Space Term Commencement Date shall not
be deemed to have occurred until said 601 Additional Space is ready for
Tenant's occupancy (as described in Article 5D above) and Tenant shall not have
any claim against Landlord, and Landlord shall have no liability to Tenant, by
reason of any such postponement of Tenant's possession of the 601 Additional
Space, nor shall the same affect the validity of the Lease, as hereby modified,
or the obligation of Tenant hereunder, nor shall the same be construed in any
wise to extend the term of the Lease, as hereby modified. In such event,
Tenant agrees to accept occupancy of the 601 Additional Space as soon as the
work required to be performed by Landlord pursuant to the immediately preceding
Article hereof is substantially completed. The 601 Additional Space shall not
be deemed to be unready for Tenant's occupancy or incomplete if only minor or
insubstantial details of construction, decoration or mechanical adjustments
remain to be done in the 601 Additional Space or any part thereof, or if the
delay in the availability of the 601 Additional Space for occupancy shall be
due to special work, changes, alterations, or additions required or made by
Tenant in the layout or finish of the 601 Additional Space or any part thereof
or shall be caused in whole or in part by Tenant through the delay of Tenant in
submitting plans and/or specifications, including, but not limited to,
supplying information, approving plans, specifications, or estimates, giving
authorizations or otherwise or shall be caused in whole or in part by delay
and/or default on the part of the tenant.
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<PAGE> 81
B. Notwithstanding anything else to the contrary contained
in the Lease, as modified by this agreement, if Tenant takes possession of the
601 Additional Space of any part thereof and uses all or any portion of the 601
Additional Space in any way to conduct its business or any aspect thereof prior
to the date when the 601 Additional Space shall otherwise be ready for Tenant's
occupancy within the meaning of this or the immediately preceding Article, the
601 Additional Space Term Commencement Date shall be deemed to be as of such
earlier date.
7. Landlord hereby agrees that, subsequent to the 601 Additional
Space Term Commencement Date, Tenant, at Tenant's sole cost and expense and
subject to all of the terms, covenants, conditions, provisions and agreements
of this Article and of the Lease, as modified by this Agreement, may require
that Landlord perform or cause the installation in the 601 Additional Space
and/or Demised Premises of not more than six (6) heat pump units (the "Heat
Pump Units") to service same (such installation of the Heat Pump Units being
called the "Heat Pump Work"), provided that:
(i) all costs of purchasing and installing such Heat Pump
Units and all aspects of the Heat Pump Work shall, except as set forth in
(iv) below, be borne solely by Tenant;
(ii) the Heat Pump Work will be performed by the Landlord's
contractor for the Building;
(iii) all fixtures and installations comprising the Heat Pump
Work, once attached to the Demised Premises and upon the expiration or
sooner termination of the term of the Lease, as modified by this
agreement, shall remain
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upon and be surrendered up with the Demised Premises in accordance with
the provisions of the Lease, as modified by this agreement (and shall
thereupon become the sole property of the Landlord); and
(iv) Tenant shall be obligated to pay as additional rent,
within thirty (30) days after same is billed by Landlord, all costs
associated with the Heat Pump Work. However, in no event shall the costs
to be borne by Tenant for purchasing and installing the Heat Pump Units
exceed the sum of Two Thousand ($2,000.00) Dollars per Heat Pump Unit.
In the event that such cost exceeds said Two Thousand ($2,000.00) Dollars
per Heat Pump Unit, Landlord will be responsible for the excess of the
actual cost per unit over Two Thousand ($2,000.00) Dollars per unit.
7.A. Landlord represents and hereby covenants to Tenant that upon
completion of the 601 Additional Space, the air conditioning therein will be
such that each office within the 601 Additional Space, whether adjacent to or
bordering on an exterior wall or completely within the interior of the 601
Additional Space shall be maintained at a temperature which does not exceed the
greater of (i) fifteen degrees Fahrenheit (15 degrees F) less than the outside
temperature or (ii) seventy-eight degrees Fahrenheit (78 degrees F), during the
air conditioning season. In the event the Landlord's HVAC system is
insufficient to provide cooling capacity in the 601 Additional Space sufficient
to comply with the foregoing, Landlord shall undertake such measures as are, in
Landlord's discretion, reasonable and necessary to increase such capacity. In
such event, all costs of any work necessary to increase the cooling capacity
within the 601 Additional Space shall be borne by Landlord. Such work by
Landlord shall be done by contractors of Landlord's choosing and shall comply
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with all applicable codes, ordinances, statutes, rules and regulations.
Landlord's obligation hereunder is subject to Tenant's obligation, and Tenant
hereby covenants, to make appropriate utilization of window treatments (e.g.,
blinds, shades, etc.), as applicable, installed in the 601 Additional Space to
reduce or eliminate heat therein from direct sunlight.
8. Tenant hereby affirms that no security has been heretofore
deposited by Tenant under the Lease and that no additional security is required
to be deposited by reason of this agreement.
9. Tenant understands and agrees that Landlord will not carry
insurance of any kind on any personal property in the demised premises or the
601 Additional Space (regardless of whether such property shall be owned by
Tenant and including, but not limited to, Tenant's goods, supplies,
furnishings, furniture, fixtures, equipment). In the event that Tenant fails
to maintain insurance on such personal property, then Tenant hereby waives any
and all right of recovery which it might otherwise have against Landlord, any
fee owner or mortgagee and their respective officers, directors, agents,
contractors, servants and employees for loss or damage to such property or any
part thereof, to the same extent that Tenant's insurer's right of subrogation
would be waived if insurance coverage with waiver of subrogation provisions
were being maintained by Tenant upon all of such property. The provisions of
this Article shall also apply to each permitted assignee, if any, and each
permitted subtenant, if any, at any time occupying the Demised Premises or any
part thereof or the 601 Additional Space or any part thereof.
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10. Tenant represents and warrants to Landlord that it has not
dealt with any real estate agent or broker in connection with this agreement
and/or the 601 Additional Space and/or the Building, other than Carey Winston
Company, and that this agreement was rot brought about or procured through the
use or instrumentality of any other agent or broker and that all negotiations
with respect to the terms of this agreement were conducted between Landlord,
Carey Winston Company and Tenant. Tenant covenants and agrees to indemnify and
hold Landlord harmless from and against any and all claims for commissions and
other compensation made by any other agent or agents and/or other broker or
brokers based on any dealing between Tenant and any other agent or agents
and/or other broker or brokers, together with all costs and expenses incurred
by Landlord in resisting such claims (including, without limitation, attorneys'
fees).
11. Except as modified and extended by this agreement, the Lease
and all the terms, covenants, conditions and agreements thereof are hereby in
all respects ratified, confirmed and approved.
12. This agreement contains the entire understanding between the
parties with respect to the matters contained herein. No representations,
warranties, covenants or agreements have been made concerning or affecting the
subject matter of this agreement, except as are contained herein.
13. This agreement may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change or modification or discharge is sought.
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14. The submission of this agreement to Tenant shall not be
construed as an offer, nor shall Tenant have any rights with respect hereto,
unless and until LandLord shall executed a copy of this agreement and deliver
the same to Tenant.
IN WITNESS WHEREOF, the parties hereto have respectively executed this
agreement as of the day and year first above written:
ONE CENTRAL PLAZA JOINT VENTURE
By: French Rockville Limited
Partnership, General Partner
By:/s/ Edwin A. Malloy
---------------------------
General Partner
ICARUS CORPORATION
By:/s/ Herbert G. Blecker
----------------------------
President
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 20th day of January, 1992, before me personally came EDWIN A.
MALLOY, to me known, who being by me duly sworn did depose and say that he is a
general partner of the partnership of French Rockville Limited Partnership, the
firm described in and which executed the foregoing instrument and acknowledged
to me that he executed the foregoing instrument for and in behalf of said
partnership.
/s/ Joy Elaine Anderson
--------------------------
Notary Public
STATE OF MARYLAND )
) ss.:
COUNTY OF MONTGOMERY )
On this 13th day of January, 1992, before me personally came Herbert G.
Blecker, to me known who, being by me duly sworn, aid depose and say that he
resides at________________________; that he is the _____________ President of
ICARUS CORPORATION, the corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation, and that he signed his
name thereto by like order.
/s/ Valerie J. Evans
--------------------------
Notary Public
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ADDITIONAL SPACE AGREEMENT
AGREEMENT made as of the 1st day of January, 1994, between ONE CENTRAL
PLAZA JOINT VENTURE, having an office at 60 East 42nd Street, Suite 1638, New
York, New York 10165 (hereinafter referred to as "Landlord") and ICARUS
CORPORATION, a Maryland corporation having its office at No. 11300 Rockville
Pike, Suite 601, Rockville, Maryland 20852 (hereinafter referred to as
"Tenant").
WITNESSETH:
WHEREAS, MACH I RESEARCH ASSOCIATES ("MACH I"), Landlord's
predecessor-in-interest, and Tenant heretofore entered into a certain written
lease dated as of October 15, 1976, wherein and whereby Mach I leased to
Tenant, and Tenant hired from Mach I, a portion of the Sixth (6th) floor as
shown outlined in red on the plan annexed to said lease in the building known
as No. 11300 Rockville Pike, Rockville, Maryland, for a term scheduled to
commence on the 1st day of January, 1977, and to end on the 31st day of March,
1982; which lease was modified by Addendum No. 1 to Lease dated as of October
25, 1976, between Mach I and Tenant; by Agreement dated as of August 24, 1979,
between Fred F. French of Maryland, as agent ("FFF"), Landlord's subsequent
predecessor-in-interest, and Tenant; by letter agreement dated as of August 31,
1979 between FFF and Tenant; by those certain letters of Tenant dated January
23, 1981 and April 30, 1986, wherein and whereby Tenant exercised its right to
extend the term of the lease; by Extension and Additional Space Agreement dated
as of January 8, 1990, between Landlord and Tenant, as amended by that certain
letter agreement dated January 30, 1990; by Additional Space Agreement dated as
of January 20, 1992 (the "601 Additional Space Agreement"), between Landlord
and Tenant; and by Additional Space Agreement dated as of February 28, 1992
(the "609 Additional Space Agreement")' which lease is now scheduled to end on
March 31, 1998 (or until such term shall sooner cease and expire as provided in
said lease), at the rental and additional rental and upon the covenants,
conditions, provisions and agreements contained in such lease, which lease as
so modified and as the same may have been otherwise heretofore modified, is
hereinafter referred to as the "Lease"; and
WHEREAS, Landlord and Tenant desire to modify the Lease only in respects
hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto by these presents do covenant and
agree as follows:
1. Elective as of January 1, 1994 (the "Storage Space Term
Commencement Date") and for the remainder of the term of the Lease, inclusive,
there shall be added to, and included in, the premises heretofore demised by
the Lease (the "Original Space"), the following additional space, to wit:
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<PAGE> 88
the portion of the mezzanine floor, known as Storage Area #11 as shown
outlined in red on the plan annexed hereto, made a part hereof and marked
Exhibit "F" (the "Storage Space"),
in the building known as One Central Plaza, No. 11300 Rockville Pike,
Rockville, Maryland (the "Building"). In order to accomplish such addition and
inclusion of said Storage Space to and in the premises demised by the Lease,
Landlord does hereby lease to Tenant and Tenant does hereby hire from Landlord
said Storage Space for a period to commence on the Storage Space Term
Commencement Date and to end on the 31st day of March, 1998, or on such earlier
date upon which said term may expire pursuant to any of the conditions,
covenants, provisions, terms and agreements of the Lease, as modified by this
agreement. It is the intention and agreement of the parties hereto that, by
reason of such addition and inclusion of said Storage Space to and in the
premises demised by the Lease, the demised premises covered by the Lease, as
modified by this agreement, from and after the Storage Space Term Commencement
Date, shall be and be deemed to be those portions of the Sixth (6th) Floor in
the Building known as Suites 601, 602, 602A, 604, 605 and 609 and said Storage
Area #11 (the "Demised Premises").
2. A. Effective as of the Storage Space Term Commencement Date to
and including, March 31, 1998. inclusive, the annual rental rate payable by
Tenant for the Storage Space only will be the sum of ONE THOUSAND NINE HUNDRED
TWENTY AND 00/100 DOLLARS ($1,920.00) per annum (the "Storage Space Fixed
Rent") subject to adjustment or adjustments by reason of the operation of
Paragraph 4 hereof.
B. Effective as of the Storage Space Term Commencement Date and
for the remainder of the term of the Lease, the Storage Space Fixed Rent, as
well as the annual rental rate and/or additional rental reserved in the Lease,
as modified by this Agreement, shall be paid by Tenant to Landlord at the time
and in the manner specified in the Lease, as modified by this Agreement.
3. Tenant hereby covenants and agrees that said Storage Space shall be
used solely for purposes of storage of personal property of Tenant utilized in
connection with its business activities in the Demised Premises, and for no
other purpose.
4. Effective as of the Storage Space Term Commencement Date to and
including March 31, 1998, inclusive:
A. The provisions of Article 3 of the Lease shall not apply with
respect only to the Storage Space, but shall continue to apply to the balance
of the Demised Premises.
B. The provisions of Article 4 of the Lease shall not apply with
respect only to the Storage Space, but shall continue to apply to the balance
of the Demised Premises as heretofore provided in the Lease.
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<PAGE> 89
C. Beginning January 1, 1995, and each January 1 of each year
thereafter during the term of the Lease, the Storage Space Fixed Rent shall be
increased by three (3%) per cent per annum more than the Storage Space Fixed
Rent payable in the immediately preceding January 1 to December 31 period, as
previously adjusted in accordance with this sentence. Such annual increase
shall then be added to and become part of the Storage Space Fixed Rent for said
year.
5. A. Tenant has examined and inspected said Storage Space and
agrees to accept the same in the condition in which it exists on the date of
this Agreement, subject to the changes, improvements and alterations required
to be provided by Landlord hereunder. Tenant understands and agrees that no
materials whatsoever are to be furnished by Landlord and no work whatever is to
be performed by Landlord in connection with the Demised Premises or said
Storage Space or any part thereof, except as hereinafter specifically set
forth.
B. Landlord agrees, at its expense, to furnish and install one
(1) demising wall and tow (2) doors in and to the Storage Space ("Landlord's
Work"), as shown on the plan initialled by the parties.
All of such Landlord's Work shall be of a material, design,
capacity, finish and color, as applicable, of the standard adopted by Landlord
for the Building, unless indicated otherwise, and shall be performed by a
contractor selected by Landlord.
C. Landlord's Work shall be done during ordinary business hours
of business days without requirement that Landlord incur any overtime labor
costs.
D. Landlord's Work shall be deemed "substantially completed"
when an Landlord's Work has been performed, other than minor decoration and
minor punch list type adjustments which do not materially interfere with the
Tenant's use and occupancy of the Storage Space.
E. Except for punch list items delivered to Landlord, Tenant's
acceptance of Landlord's Work in, and/or Tenant's occupancy of, the Storage
Space shall relieve Landlord of obligations to compete Landlord's Work
hereunder in accordance with this Agreement, except for latent defects.
F. Tenant shad be entitled to inspect all work as it deems
appropriate provided that Tenant does not interfere with Landlord's Work. All
Landlord's Work shall be performed in a good and workmanlike manner, utilizing
materials and fixtures specified in this Agreement, and in accordance with all
building and other applicable codes and ordinances.
6. A. Anything in this Agreement to the contrary notwithstanding,
in the event that Landlord has not substantially completed Landlord's Work
pursuant to the
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<PAGE> 90
immediately preceding Article hereof by January 1, 1994, Tenant shall not
(except with Landlord's written consent) be entitled to possession of the
Storage Space and the Storage Space Term Commencement Date shall not be deemed
to have occurred until said Storage Space is ready for Tenant's occupancy (as
described in Article 5D above) and Tenant shall not have any claim against
Landlord, and Landlord shad have no liability to Tenant, by reason of any such
postponement of Tenant's possession of the Storage Space, nor shall the same
affect the validity of the Lease, as hereby modified, or the obligation of
Tenant hereunder, nor shall the same be construed in any wise to extend the
term of the Lease, as hereby modified. Tenant agrees to accept occupancy of
the Storage Space as soon as the work required to be performed by Landlord
pursuant to the immediately preceding Article hereof is substantially
completed. The Storage Space shall not be deemed to be unready for Tenant's
occupancy or incomplete if only minor or insubstantial details of construction,
decoration or mechanical adjustments remain to be done in the Storage Space or
any part thereof, or if the delay in the availability of the Storage Space for
occupancy shall be due to special work, changes, alterations, or additions
required or made by Tenant in the layout or finish of the Storage Space or any
part thereof or shall be caused in whole or in part by Tenant through the delay
of Tenant in submitting plans and/or specifications, including, but not limited
to, supplying information, approving plans, specifications, or estimates,
giving authorizations or otherwise or shall be caused in whole or in part by
delay and/or default on the part of the Tenant.
B. Notwithstanding anything else to the contrary contained in
the Lease, as modified by this Agreement, if Tenant takes possession of the
Storage Space or any part thereof and uses all or any portion of the Storage
Space in any way to conduct its business or any aspect thereof prior to the
date when the Storage Space shall otherwise be ready for Tenant's occupancy
within the meaning of this or the immediately preceding Article, the Storage
Space Term Commencement Date shall be deemed to be as of such earlier date.
7. (Intentionally Omitted)
8. Tenant hereby affirms that no security has been heretofore
deposited by Tenant under the Lease and that no additional security is required
to be deposited by reason of this Agreement.
9. Tenant understands and agrees that Landlord will not carry
insurance of any kind on any personal property in the Demised Premises or the
Storage Space (regardless of whether such property shall be owned by Tenant and
including, but not limited to, Tenant's goods, supplies, furnishings,
furniture, fixtures, equipment). In the event that Tenant fails to maintain
insurance on such personal property, then Tenant hereby waives any and all
right of recovery which it might otherwise have against Landlord, any fee owner
or mortgagee and their respective officers, directors, agents, contractors,
servants and employees for loss or damage to such property or any part thereof,
to the same extent that Tenant's insurer's right of subrogation would be waived
if insurance coverage with waiver of subrogation provisions were being
maintained by Tenant upon all of such property. The
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<PAGE> 91
provisions of this Article shall also apply to each permitted assignee, if
any, and each permitted subtenant, if any, at any time occupying the Demised
Premises or any part thereof or the Storage Space or any part thereof.
10. Tenant represents and warrants to Landlord that is has not dealt
with any real estate agent or broker in connection with this Agreement and/or
the Storage Space and/or the Building, other than Carey Winston Company, and
that this Agreement was not brought about or procured through the use or
instrumentality of any other agent or broker and that all negotiations with
respect to the terms of this Agreement were conducted between Landlord, Carey
Winston Company and Tenant. Tenant covenants and agrees to indemnify and
hold Landlord harmless from and against any and all claims for commissions and
other compensation made by any other agent or agents and/or other broker or
brokers based on any dealing between Tenant and any other agent or agents
and/or other broker or brokers, together with all costs and expenses incurred
by Landlord in resisting such claims (including, without limitation, attorneys'
fees).
11. Except as modified and extended by this Agreement, the Lease and
all the terms, covenants, conditions and agreements thereof are hereby in all
respects ratified, confirmed and approved.
12. This Agreement contains the entire understanding between the
parties with respect to the matters contain herein. No representations,
warranties, covenants or agreements have been made concerning or affecting the
subject matter of this Agreement, except as are contained herein.
13. This Agreement may not be changed orally, but only by an agreement
in writing signed by the party against whom enforcement of any waiver, change
or modification or discharge is sought.
14. The submission of this Agreement to Tenant shall not be construed
as an offer, nor shall Tenant have any rights with respect hereto, unless and
until Landlord shall execute a copy of this Agreement and deliver the same to
Tenant.
5
<PAGE> 92
IN WITNESS WHEREOF, the parties hereto have respectively executed this
Agreement as of the day and year first above written.
ONE CENTRAL PLAZA JOINT VENTURE
By: French Rockville Limited
Partnership, General Partner
By: /s/ Edwin A. Malloy
----------------------------------
Edwin A. Malloy, General Partner
ICARUS CORPORATION
By: /s/ Herbert G. Blecker 6 Apr 94
----------------------------------
Herbert G. Blecker, President
6
<PAGE> 93
JOY ELAINE ANDERSON
STATE OF NEW YORK ) Notary Public, State of New York
) SS.: No. 31-4839283
COUNTY OF NEW YORK ) Qualified in New York County
Term Expires 9/22/95
On this 13 day of April, 1994, before me personally came Edwin A. Malloy,
to me known, who being by me duly sworn did depose and say that he is a general
partner of the partnership of French Rockville Limited Partnership, which is
the general partner of the partnership of ONE CENTRAL PLAZA JOINT VENTURE, the
firm described in and which executed the foregoing instrument and acknowledged
to me that he executed the foregoing instrument for an in behalf of said
partnerships.
/s/ Joy Elaine Anderson
---------------------------
Notary Public
STATE OF MARYLAND )
) SS.:
COUNTY OF MONTGOMERY )
On this 6th day of April 1994, before me personally came Herbert G.
Blecker, to me known who, being by me duly sworn, did depose and say that he
resides at Maryland, USA; that he is the President of ICARUS CORPORATION, the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed by order of the Board
of Directors of said corporation, and that he signed his name thereto by like
order.
/s/ Valerie J. Evans
----------------------------
Notary Public
Valerie J. Evans
Notary Public - Maryland
Montgomery County
My Commission Expires 8/1/96
7
<PAGE> 94
ADDITIONAL SPACE AGREEMENT
AGREEMENT made as of the 1st day of May, l995, between ONE CENTRAL PLAZA
LIMITED PARTNERSHIP, having an office at c/o Fred F. French Investing LLC,
Metro Center - One Station Place, Stamford, CT 06902-3546 (hereinafter referred
to as "Landlord") and ICARUS CORPORATION, a Maryland corporation having its
office at No. 11300 Rockville Pike, Suite 604, Rockville, Maryland 20852
(hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, MACH I RESEARCH ASSOCIATES ("MACH I"), Landlord's
predecessor-in-interest, and Tenant heretofore entered into a certain written
lease dated as of October 15, 1976, wherein and whereby Mach I leased to
Tenant, and Tenant leased from Mach I, a portion of the Sixth (6th) floor, as
shown on the plan annexed to said lease as Exhibit "A", in the building known
as No. 11300 Rockville Pike, Rockville, Maryland, for a term scheduled to
commence on the 1st day of January, 1977, and to end on the 31st day of March,
1982; which lease was modified: (i) by Addendum No. 1 to Lease dated as of
October 25, 1976, between Mach I and Tenant; (ii) by Agreement dated as of
August 24, 1979, between Fred F. French of Maryland, as agent ("FFF"), another
of Landlord's predecessor-in-interest, and Tenant; (iii) by letter agreement
dated as of August 31, 1979 between FFF and Tenant; (iv) by those certain
letters of Tenant dated January 23, 1981 and April 30, 1986, wherein and
whereby Tenant exercised its rights to extend the term of the lease; (v) by
Extension and Additional Space Agreement dated as of January 8, 1990, between
One Central Plaza Joint Venture ("OCPJV"), another of Landlord's
predecessors-in-interest, and Tenant, as amended by that certain letter
agreement dated January 30, 1990 between OCPJV and Tenant; (vi) by Additional
Space Agreement dated as of January 20, 1992 (the "601 Additional Space
Agreement"), between OCPJV and Tenant; (vii) by Additional Space Agreement
dated as of February 28, 1992 (the "609 Additional Space Agreement")' between
OCPJV and Tenant; and (viii) by Additional Space Agreement dated sa of January
1, 1994 (the "Storage Area #11 Additional Space Agreement") between OCPJV and
Tenant; which lease is now scheduled to end on March 31, 1998 (or on such date
as the term shall sooner cease and expire as provided in said lease), at the
rental and additional rental and upon the covenants, conditions, provisions and
agreements contained in such lease, which lease as so modified and as the same
may have been otherwise heretofore may have been modified, is hereinafter
referred to as the "Lease"; and
WHEREAS, Landlord and Tenant desire to modify the Lease only in respects
hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto by these presents do covenant and
agree as follows:
1. Effective as of June 1, l995 (the "Suite 611 Storage Space Term
Commencement Date") and for the remainder of the term of the Lease, inclusive,
there
<PAGE> 95
shall be added to, and included in, the premises heretofore demised by
the Lease (the "Original Space"), the following additional space, to wit:
the portion of the sixth (6th) floor, known as Suite 611, as shown
outlined in red on the plan annexed hereto and made a part hereof
and marked Exhibit "G" (the "Suite 611 Storage Space"),
in the building known as One Central Plaza, No. 11300 Rockville Pike,
Rockville, Maryland (the "Building"). In order to accomplish such addition and
inclusion of said Suite 611 Storage Space to and in the premises demised by the
Lease, Landlord does hereby lease to Tenant and Tenant does hereby lease from
Landlord said Suite 611 Storage Space for a period to commence on the Suite 611
Storage Space Term Commencement Date and to end on the 31st day of March, 1998,
or on such earlier date upon which said term may expire pursuant to any of the
conditions, covenants, provisions, terms and agreements of the Lease, as
modified by this agreement. It is the intention and agreement of the parties
hereto that, by reason of such addition and inclusion of said Suite 611 Storage
Space to and in the premises demised by the Lease, the demised premises covered
by the Lease, as modified by this agreement, from and after the Suite 611
Storage Space Term Commencement Date, shall be and be deemed to be those
portions of the Sixth (6th) Floor in the Building known as Suites 601, 602,
602A, 604, 605, 609 and 611, and Storage Area #11 (the "Demised Premises).
2. A. Effective as of the Suite 611 Storage Space Term Commencement
Date to and including March 31, 1998, inclusive, the annual rental rate payable
by Tenant for the Suite 611 Storage Space only will be the sum of TWO THOUSAND
FOUR HUNDRED THIRTY-NINE AND 72/100 DOLLARS ($2,439.72) per annum, payable in
equal monthly installments of TWO HUNDRED THREE AND 31/100 DOLLARS ($203.31)
per month, (the "Suite 611 Storage Space Fixed Rent") subject to adjustments by
reason of the operation of the provisions of the Lease, as modified by this
agreement, including, but not limited to, Articles 3 and 4 thereof and
Paragraph 4 hereof.
B. Effective as of the Suite 611 Storage Space Term Commencement
Date and for the remainder of the term of the Lease, the Suite 611 Storage
Space Fixed Rent, as well as the annual rental rate and/or additional rental
reserved in the Lease, as modified by this Agreement, shall be paid by Tenant
to Landlord at the time and in the manner specified in the Lease, as modified
by this Agreement.
3. Tenant hereby covenants and agrees that said Suite 611 Storage
Space shall be used solely for purposes of storage of personal property of
Tenant utilized in connection with its business activities in the Demised
Premises, and for no other purpose, and otherwise in accordance with the terms
of the Lease, as modified by this agreement.
2
<PAGE> 96
4. Effective as of the Suite 611 Storage Space Term Commencement Date
to and including March 31, 1998, inclusive:
A. The provisions of Article 3 of the Lease, as modified by this
agreement, shall apply with respect to the Suite 611 Storage Space (and shall
continue to apply with respect to the Original Space as provided in the Lease),
and, for purposes of the application of said Article 3 to said Suite 611
Storage Space, (i) the term "Minimum Annual Rental" therein contained shall be
deemed to be and to mean "Suite 611 Storage Space Fixed Rent"; and (ii) the
words "date of commencement" deemed to be and shall mean "Suite 611 Storage
Space Term Commencement Date". It is agreed that no adjustment under said
Article 3 of the Lease, as modified by this agreement, shall be made or become
effective with respect to the Suite 611 Storage Space Fixed Rent until May 1,
1996.
B. Each and every one of the provisions of Article 4 of the
Lease, as modified by this Agreement, shall apply with respect to the Suite 611
Storage Space separate and apart from their application with respect to the
Original Space (to which they shall continue to apply).
For purposes of applying the provisions of Article 4 with respect only to
the Suite 611 Storage Space, the following shall apply:
(i) the figure "2.9%", which appears in Article 4(a) of the
Lease, which heretofore has been changed (and/or has been sometimes
referred to as having been changed) to "3.1 %", "3.7%", "3.71 %",
"3.88%", and "3.87%" for purposes of application thereof to all portions
of the Original Space except the 601 Additional Space (as defined in
Paragraph 1 of the 601 Additional Space Agreement) and the 609 Additional
Space (as defined in Paragraph 1 of the 609 Additional Space Agreement)
(and which, for the purposes of application thereof to the said 601
Additional Space and the said 609 Additional Space only, heretofore has
been changed to ".51%" and ".38%", respectively) shall be deemed, only
for purposes of the application thereof to the Suite 61 Storage Space, to
be changed to ".087%" in its place and stead in each such instance (but
shall continue to be "3.87%" with respect to all portions the Original
Space (except Storage Area #11, the 601 Additional Space and the 609
Additional Space) and ".51%" with respect to the 601 Additional Space and
".38%" with respect to the 609 Additional Space, without regard to this
Agreement).
(ii) the term "Base Year", which appears in Article 4 and is
defined in Article 4(b) of the Lease, shall be deemed, only for purposes
of the application thereof to the Suite 611 Storage Space (and shall
continue, with respect to the 601 Additional Space and the 609 Additional
Space), to be the fiscal year commencing July 1, 1991 and ending on June
30, 1992, both dates inclusive (but shall continue, with respect to all
portions of the Original Space except the 601 Additional Space,
3
<PAGE> 97
the 609 Additional Space and Storage Area #11 to be the "Base Year" as
defined in Article 4(b) of the Lease, without regard to this Agreement).
5. Tenant has examined and inspected said Suite 611 Storage Space and
agrees to accept the same in the "as is" condition in which it exists on the
date of this Agreement. Tenant understands and agrees that no materials
whatsoever are to be furnished by Landlord and no work whatever is to be
performed by Landlord in connection with the Demised Premises or said Suite 611
Storage Space or any part thereof.
6. [Intentionally Omitted]
7. Tenant represents and warrants to Landlord that Tenant has emerged
from Chapter 11 bankruptcy proceedings pursuant to an approved and completed
plan of reorganization and that, as of the date hereof, there are no actions,
voluntary or otherwise, pending or threatened by or against Tenant under the
bankruptcy, reorganization, moratorium or similar laws of the United States or
any state thereof, or any other jurisdiction.
8. Tenant hereby affirms that no security has been heretofore
deposited by Tenant under the Lease and that no additional security is required
to be deposited by reason of this Agreement.
9. Tenant understands and agrees that Landlord will not carry
insurance of any kind on any personal property in the Demised Premises or the
Suite 611 Storage Space (regardless of whether such property shall be owned by
Tenant and including, but not limited to, Tenant's goods, supplies,
furnishings, furniture, fixtures, equipment). In the event that Tenant fails
to maintain insurance on such personal property, then Tenant hereby waives any
and all right of recovery which it might otherwise have against Landlord, any
fee owner or mortgagee and their respective officers, directors, agents,
contractors, servants and employees for loss or damage to such property or any
part thereof, to the same extent that Tenant's insurer's right of subrogation
would be waived if insurance coverage with waiver of subrogation provisions
were being maintained by Tenant upon all of such property. The provisions of
this Article shall also apply to each permitted assignee, if any, and each
permitted subtenant, if any, at any time occupying the Demised Premises or any
part thereof or the Suite 611 Storage Space or any part thereof.
10. Tenant represents and warrants to Landlord that is has not dealt
with any real estate agent or broker in connection with this Agreement and/or
the Suite 611 Storage Space and/or the Building, other than Carey Winston
Company, and that this Agreement was not brought about or procured through the
use or instrumentality of any other agent or broker and that all negotiations
with respect to the terms of this Agreement were conducted between Landlord,
Carey Winston Company and Tenant. Tenant covenants and agrees to indemnify and
hold Landlord harmless from and against any and all claims for commissions and
other compensation made by any other agent or agents and/or other broker or
brokers
4
<PAGE> 98
based on any dealing between Tenant and any other agent or agents
and/or other broker or brokers with respect to the Suite 611 Storage Space,
together with all costs and expenses incurred by Landlord in resisting such
claims (including, without limitation, reasonable attorneys' fees).
11. Except as modified and extended by this Agreement, the Lease and
all the terms, covenants, conditions and agreements thereof are hereby in all
respects ratified, confirmed and approved.
12. This Agreement contains the entire understanding between the
parties with respect to the matters contained herein. No representations,
warranties, covenants or agreements have been made concerning or affecting the
subject matter of this Agreement, except as are contained herein.
13. This Agreement may not be changed orally, but only by an agreement
in writing signed by the party against whom enforcement of any waiver, change
or modification or discharge is sought.
14. The submission of this Agreement to Tenant shall not be construed
as an offer, nor shall Tenant have any rights with respect hereto, unless and
until Landlord shall execute a copy of this Agreement and deliver the same to
Tenant.
IN WITNESS WHEREOF, the parties hereto have respectively executed this
Agreement as of the day and year first above written.
ONE CENTRAL PLAZA LIMITED PARTNERSHIP
By: /s/Edwin A. Malloy
------------------------------------
Edwin A. Malloy, General Partner
ICARUS CORPORATION
By: /s/Herbert G. Blecker
------------------------------------
Herbert G. Blecker, President
5
<PAGE> 99
STATE OF CONNECTICUT )
) SS.:
COUNTY OF FAIRFIELD )
On this 13th day of November 1995, before me personally came EDWIN A.
MALLOY, to me known, who being by me duly sworn, did depose and say that he is
the general partner of ONE CENTRAL PLAZA LIMITED PARTNERSHIP, the firm
described in and which executed the foregoing instrument, and he acknowledged
to me that he executed the foregoing instrument for and on behalf of said
partnership.
/s/Susan Riley
---------------------------------
SUSAN RILEY
COMMISSIONER OF DEEDS
STATE OF CONNECTICUT
My Commission Expires: 10/19/99
STATE OF MARYLAND )
) SS.:
COUNTY OF MONTGOMERY )
On this 16th day of October 1995, before me personally came Herbert G. Blecker,
to me know who, being by me duly sworn, did depose and say that he resides at
Maryland, U.S.A.; that he is the President of ICARUS CORPORATION, the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal thereof was affixed to said
instrument by order of the Board of Directors of said corporation, and that he
signed his name thereto by like order.
/s/Valerie J. Evans
---------------------------------
Notary Public
Valerie J. Evans
Notary Public - Maryland
Montgomery County
My Commission Expires: 8/1/96
6
<PAGE> 100
Exhibit "G"
Floor Plan of Suite 611
7
<PAGE> 101
ONE CENTRAL PLAZA LIMITED PARTNERSHIP
C/O FRED F. FRENCH INVESTING LLC
METRO CENTER - ONE STATION PLACE
STAMFORD, CT 06902-3546
Dated As Of September 1, 1995
Icarus Corporation
One Central Plaza - Suite 601
11300 Rockville Pike
Rockville, Maryland 20852
Re: Lease Agreement by and between MACH I RESEARCH ASSOCIATES
("MACH I"), one of Landlord's predecessors-in-interest, and
ICARUS CORPORATION ("Tenant") dated as of October 15, 1976,
wherein and whereby Mach I leased to Tenant a portion of the
sixth (6th) floor in the building known as No. 11300
Rockville Pike, Rockville, Maryland (the "Building"), for a
term scheduled to commence on the 1st day of January, 1977,
and to end on the 31st day of March, 1982; which lease was
modified: (i) by Addendum No. 1 to Lease dated as of October
25, 1976, between Mach I and Tenant; (ii) by Agreement dated
as of August 24, 1979, between Fred F. French of Maryland, as
agent ("FFF"), another of Landlord's
predecessors-in-interest, and Tenant; (iii) by letter
agreement dated as of August 31, 1979 between FFF and
Tenant; (iv) by those certain letters of Tenant dated January
23, 1981 and April 30, 1986, wherein and whereby Tenant
exercised its rights to extent the term of the lease; (v) by
Extension and Additional Space Agreement dated as of January
8, 1990, between One Central Plaza Joint Venture ("OCPJV"),
another of Landlord's predecessors-in-interest, and Tenant,
as amended by that certain letter agreement dated January 30,
1990 between OCPJV and Tenant; (vi) by Additional Space
Agreement dated as of January 20, 1992 (the "601 Additional
Space Agreement"), between OCPJV and Tenant; (vii) by
Additional Space Agreement dated as of February 28, 1992 (the
"609 Additional Space Agreement") between OCPJV and Tenant;
(viii) by Additional Space Agreement dated as of January 1,
1994 (the "Storage Area #11 Additional Space Agreement")
between OCPJV and Tenant; and (ix) by Additional Space
Agreement dated as of May 1, 1995 (the "611 Additional Space
Agreement") between One Central Plaza Limited Partnership
("Landlord") and Tenant which lease is now scheduled to end
on March 31, 1998 (or on such date as the term shall sooner
cease and expire as provided in said lease), at the rental
and additional rental and upon the covenants, conditions,
provisions and agreements contained in such lease, which
lease as so modified and as the same otherwise heretofore may
have been modified, is hereinafter referred to as the "Lease"
Gentlemen:
Reference hereby is made to the above-described Lease, and particularly
to the aforescribed "Storage Area #11 Additional Space Agreement" dated as of
January 1, 1994 (the "Agreement").
This letter will confirm our mutual understanding and agreement that,
effective as of NOVEMBER 1, 1995, Storage Area #10 on the mezzanine floor of
the Building ("Storage Area #10") which is adjacent to the "Storage Space"
described in the Agreement (i.e. Storage Area #11) hereby is added to and made
a part of the demised premises on the same terms and conditions as are
contained in the Agreement, except as hereby expressly modified.
<PAGE> 102
Icarus Corporation
Dated As Of September 1, 1995 Page 2
Landlord and Tenant hereby agree to the following with respect to said
Storage Space #10:
1. Effective as of NOVEMBER 1, 1995, Storage Area #10 in the
Building, as depicted outlined in red on Exhibit "1" annexed hereto, is hereby
leased to Tenant by Landlord and hired from Landlord by Tenant, for the balance
of the term of aforesaid Lease (i.e., until and including March 31, 1998).
2. Storage Space #10 shall be used by Tenant for purposes only
of storage of personal property utilized by Tenant in connection with the
operation of Tenant's business at the Premises, and otherwise in accordance
with the aforesaid Lease, except as hereby modified.
3. If Tenant has taken occupancy of Storage Space #10 prior to
the execution and delivery of this Agreement, Tenant hereby ratifies and
confirms that the terms of this agreement and of the Lease, except as modified
by this agreement, are applicable to Tenant's occupancy prior to execution of
this agreement.
4. The rent payable by Tenant to Landlord for Storage Space #10
only shall be the annual sum of FOUR HUNDRED NINETY-FOUR AND 40/100 DOLLARS
($494.40) (the "Storage Space #10 Rent"), which shall be payable in equal
monthly installments of FORTY-ONE AND 20/100 DOLLARS ($41.20) per month,
payable in advance on the first day of each month during the term of this
agreement, and payable otherwise in accordance with, and subject to, the terms
of the Lease, except as hereby modified. Beginning January 1, 1996, and each
January 1 of each year thereafter during the term of the Lease, Storage Space
#10 Rent shall be increased by three (3%) per cent per annum more than Storage
Space #10 Rent payable in the immediately preceding calendar year, as
previously adjusted in accordance with this sentence. Such annual increase
shall then be added to and become part of Storage Space #10 Rent for said year.
5. Tenant acknowledges that it is fully familiar with the
existing condition of said Storage Space #10 and agrees to accept same "as is"
and in its condition and state of repair existing on the date hereof; and
Tenant acknowledges and agrees that Landlord will not be required to perform
any work whatsoever to prepare same for Tenant's use and occupancy.
6. Tenant represents and warrants that it has dealt with no
broker in connection with this agreement and Storage Space #10, other than
Carey Winston Company; and Tenant agrees to indemnify and hold Landlord
harmless against and from
<PAGE> 103
Icarus Corporation
Dated As Of September 1, 1995 Page 3
any loss, damage, cost, expense, obligation or claim incurred by or asserted
against Landlord by reason of said representation and warranty being false or
misleading.
7. It is agreed that (i) Landlord will not be required to
furnish any services with respect to Storage Space #10 only; and (ii) that the
following provisions of the Lease shall not be applicable only with respect to
said Storage Space #10: Articles 3 and 4.
8. Tenant acknowledges that no security has been deposited by it
with Landlord in connection with this agreement or Storage Space #10.
Tenant hereby ratifies and confirms the Lease, as hereby modified,
and represents to Landlord that neither Tenant nor Landlord is in default under
the Lease and that Tenant has no claims against Landlord and no defenses or
offsets to Tenant's obligations under the Lease.
Please confirm Tenant's understanding of and mutual agreement with
the foregoing by executing the enclosed four (4) copies of this letter
agreement beneath the words "Accepted and Agreed"; and then return all four (4)
copies to us. This letter agreement shall not be binding upon Landlord unless
and until Landlord shall have executed same and delivered a fully executed
counterpart to Tenant. Upon such mutual execution and delivery, this letter
agreement shall be considered and deemed to be, and shall constitute, a binding
agreement between us.
Very truly yours,
ONE CENTRAL PLAZA LIMITED PARTNERSHIP
By: /s/Edwin A. Malloy
----------------------------------
Edwin A. Malloy, General Partner
Accepted And Agreed:
ICARUS CORPORATION
By: /s/Herbert G. Blecker
-------------------------------
Herbert G. Blecker, President
<PAGE> 104
EXHIBIT 1
Floor Plan of Storage Area #10
<PAGE> 105
ADDITIONAL SPACE AGREEMENT (SUITE 600)
AGREEMENT made as of the 13th day of November, 1996, ONE CENTRAL PLAZA
LIMITED PARTNERSHIP, having an office at c/o Fred F. French Investing LLC,
Metro Center - One Station Place, Stamford, CT 06902-3546 (hereinafter
referred to as "Landlord") and ICARUS CORPORATION, a Maryland corporation
having its office at No. 11300 Rockville Pike, Suite 604, Rockville, Maryland
20852 (herein referred to as "Tenant").
W I T N E S E T H:
WHEREAS, MACH I RESEARCH ASSOCIATES ("MACH I"), one of Landlord's
predecessors-in-interest, and Tenant heretofore entered into a certain written
lease dated as of October 15, 1976, wherein and whereby Mach I leased to
Tenant, and Tenant hired from Mach I, a portion of the sixth (6th) floor, as
shown on the plan annexed to said lease as Exhibit "A", in the building known
as No. 11300 Rockville Pike, Rockville, Maryland, for a term scheduled to
commence on the 1st day of January, 1977, and to end on the 31st day of March,
1982; which lease was modified: (i) by Addendum No. 1 to Lease dated as of
October 25, 1976, between Mach I and Tenant; (ii) by Agreement dated as of
August 24, 1979, between Fred F. French of Maryland, as agent ("FFF"), another
of Landlord's predecessors-in-interest, and Tenant; (iii) by letter agreement
dated as of August 31, 1979 between FFF and Tenant; (iv) by those certain
letters of Tenant dated January 23, 1981 and April 30, 1986, wherein and
whereby Tenant exercised its rights to extend the term of the lease; (v) by
Extension and Additional Space Agreement dated as of January 8, 1990, between
One Central Plaza Joint Venture ("OCPJV"), another of Landlord's
predecessors-in-interest, and Tenant, as amended by that certain letter
agreement dated January 30, 1990 between OCPJV and Tenant; (vi) by Additional
Space Agreement dated as of January 20, 1992 (the "601 Additional Space
Agreement"), between OCPJV and Tenant, as amended by that certain letter
agreement dated February 18, 1992 between OCPJV and Tenant; (vii) by Additional
Space Agreement dated as of February 28, 1992 (the "609 Additional Space
Agreement") between OCPJV and Tenant; (viii) by Additional Space Agreement
dated as of January 1, 1994 (the "Storage Area # 11 Additional Space
Agreement") between OCPJV and Tenant; (ix) by Additional Space Agreement dated
as of May 1, 1995 (the Suite 611 Additional Space Agreement") between Landlord
and Tenant; and (x) by letter agreement dated as of September 1, 1995 (the
"Storage Area # 10 Additional Space Agreement") between Landlord and Tenant;
which lease is now scheduled to end on March 31, 1998 (or on such date as the
term shall sooner cease and expire as provided in said lease), at the rental
and additional rental and upon the covenants, conditions, provisions and
agreements contained in such lease, which lease as so modified and as the same
otherwise heretofore may have been modified, is hereinafter referred to as the
"Lease"; and
WHEREAS, Landlord and Tenant desire to modify the Lease only in respects
hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto by these presents do covenant and
agree as follows:
<PAGE> 106
1. Effective as of December 1, 1996 (the "Suite 600 Term Commencement
Date") and for the remainder of the term of the Lease, inclusive, there shall
be added to, and included in, the premises heretofore demised by the Lease (the
"Original Space"), the following additional space, to wit:
the portion of the sixth (6th) floor, known as Suite 600, as shown
outlined in red on the plan annexed hereto and made a part hereof and
marked Exhibit "H" (the "Suite 600 Additional Space"),
in the building known as One Central Plaza, No. 11300 Rockville Pike,
Rockville, Maryland (the "Building"). In order to accomplish such addition and
inclusion of said Suite 600 Additional Space to and in the premises demised by
the Lease, Landlord does hereby lease to Tenant and Tenant does hereby lease
from Landlord said Suite 600 Additional Space for a period to commence on the
Suite 600 Term Commencement Date and to end on the 31st day of March, 1998, or
on such earlier date upon which said term may expire pursuant to any of the
conditions, covenants, provisions, terms and agreements of the Lease, as
modified by this agreement. It is the intention and agreement of the parties
hereto that, by reason of such addition and inclusion of said Suite 600
Additional Space to and in the premises demised by the Lease, the demised
premises covered by the Lease, as modified by this agreement, from and after
the Suite 600 Term Commencement Date, shall be and be deemed to be those
portions of the Sixth (6th) Floor in the Building known as Suites 600, 601,
602, 602A, 604, 605, 609 and 611 and Storage Areas #10 and #11 (the "Demised
Premises").
2. A. Effective as of the Suite 600 Term Commencement Date to and
including March 31, 1998, inclusive, the annual rental rate payable by Tenant
for the Suite 600 Additional Space only will be the sum of EIGHTY SIX THOUSAND
ONE HUNDRED TWELVE AND 50/100 DOLLARS ($86,112.50) per annum, payable in equal
monthly installments of SEVEN THOUSAND ONE HUNDRED SEVENTY-SIX AND 04/100
DOLLARS ($7,176.04) per month (the "Suite 600 Additional Space Fixed Rent")
subject to adjustments by reason of the operation of the provisions of the
Lease, as modified by this agreement, including, but not limited to, Articles 3
and 4 thereof and Paragraph 4 hereof.
B. Effective as of the Suite 600 Term Commencement Date and for
the remainder of the term of the Lease, the Suite 600 Additional Space Fixed
Rent, as well as the annual rental rate and/or additional rental reserved in
the Lease, as modified by this Agreement, shall be paid by Tenant to Landlord
at the time and in the manner specified in the Lease, as modified by this
Agreement.
3. Tenant hereby covenants and agrees that said Suite 600 Additional
Space shall be used solely for purposes specified in Article 5 of the Lease,
and for no other purpose, and otherwise in accordance with the terms of the
Lease, as modified by this agreement.
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<PAGE> 107
4. Effective as of the Suite 600 Term Commencement Date to and
including March 31, 1998, inclusive:
A. The provisions of Article 3 of the Lease, as modified by this
agreement, shall apply with respect to the Suite 600 Additional Space (and
shall continue to apply with respect to the Original Space as provided in the
Lease), and, for purposes of the application of said Article 3 only to said
Suite 600 Additional Space, (i) the term "Minimum Annual Rental" therein
contained shall be deemed to be and shall mean the "Suite 600 Additional Space
Fixed Rent"; and (ii) the words "date of commencement" shall be deemed to be
and shall mean the "Suite 600 Term Commencement Date". It is agreed that no
adjustment under said Article 3 of the Lease, as modified by this
agreement, shall be made or become effective with respect to the Suite 600
Additional Space Fixed Rent until December 1, 1997.
B. Each and every one of the provisions of Article 4 of the
Lease, as modified by this Agreement, shall apply with respect to the Suite 600
Additional Space separate and apart from their application with respect to the
Original Space (to which they shall continue to apply as provided in the
Lease).
For purposes of applying the provisions of Article 4 with
respect only to the Suite 600 Additional Space, the following shall apply:
(i) the figure "2.9%", which appears in Article 4(a) of the Lease,
which heretofore has been changed (and/or has been sometimes referred to as
having been changed) to "3.1%", "3.7%", "3.71%", "3.88%", and "3.87%" for
purposes of application thereof to those portions of the Original Space
consisting of Suites 602, 602A, 604 and 605 (and which, for purposes of the
application thereof to the 601 Additional Space (as defined in Paragraph 1 of
the 601 Additional Space Agreement), the 609 Additional Space (as defined in
Paragraph 1 of the 609 Additional Space Agreement) and the Suite 611 Storage
Space (as defined in paragraph 1 of the Suite 611 Additional Space Agreement)
only, heretofore has been changed to ".51%", ".38%" and ".087%", respectively)
shall be deemed, only for purposes of the application thereof to the Suite 600
Additional Space, to be changed to "1.58%" in its place and stead in each such
instance (but shall continue to be "3.87%" with respect to Suites 602, 602A,
604 and 605 and ".51%" with respect to the 601 Additional Space and ".38%" with
respect to the 609 Additional Space and ".087%" with respect to the Suite 611
Storage Space, without regard to this Agreement).
(ii) the term "Base Year", which appears in Article 4 and is defined in
Article 4(b) of the Lease, shall be deemed, only for purposes of the
application thereof to the Suite 600 Additional Space, to be the fiscal year
commencing July 1, 1996 and ending on June 30, 1997, both dates inclusive (but
shall continue, with respect to all portions of the Original Space to which
said Article applies, to be the "Base Year" as defined in Article 4(b) of the
Lease, as heretofore modified but without regard to this Agreement).
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<PAGE> 108
5. A. Tenant has examined and inspected said Suite 600 Additional
Space and agrees to accept the same in the condition in which it exists on the
date of this Agreement, subject to the changes, improvements and alterations
required to be provided by Landlord hereunder. Tenant understands and agrees
that no materials whatsoever are to be furnished by Landlord and no work
whatever is to be performed by Landlord in connection with the Demised Premises
or said Suite 600 Additional Space or any part thereof, except as hereinafter
specifically set forth.
B. Landlord agrees, at its expense, to make and complete the
changes, improvements and alterations to the Suite 600 Additional Space (the
"Landlord's Work") which are set forth on the construction documents dated
September 27, 1996, prepared by Arium Architects, (the "Construction
Documents") which have been initialled by Landlord and Tenant.
C. All of such Landlord's Work shall be of a material, design,
capacity, finish and color as applicable, of the standard adopted by Landlord
for the Building, unless indicated otherwise, and shall be performed by a
contractor selected by Landlord. Landlord shall cause the Demised Premises to
be reasonably secured from and against theft, unauthorized entry and
other similar, foreseeable perils during the performance of Landlord's Work
(particularly upon the opening, demolition or removal of any existing demising
walls and/or the installation of any additional entry doors).
D. Landlord's Work shall be done during ordinary business hours
of business days without requirement that Landlord incur any overtime labor
costs.
E. Landlord's Work shall be deemed "substantially completed"
when all Landlord's Work has been performed; other than minor decoration and
minor punch list type adjustments which do not materially interfere with the
Tenant's use and occupancy of the Suite 600 Additional Space, and the
appropriate governmental authority has evidenced final sign-off on the
Landlord's Work having been performed in accordance with the plans filed and/or
permits issued therefor. The issuance of a Certificate of Use & Occupancy
("CUO") by said governmental authority will not be a prerequisite to
substantial completion (unless Tenant is prohibited by law from using and
occupying the Premises prior to the issuance thereof), but Landlord will cause
application for such CUO to be made and same to be obtained. Tenant will
assist Landlord and/or Landlord's contractor, as requested by Landlord and/or
said contractor, in the process of applying for and obtaining said CUO.
F. Except for punch list items delivered to Landlord, Tenant's
acceptance of Landlord's Work in, and/or Tenant's occupancy of, the Suite 600
Additional Space shall relieve Landlord of obligations to compete Landlord's
Work hereunder in accordance with this Agreement, except for latent defects.
G. Tenant shall be entitled to inspect all work as it deems
appropriate provided that Tenant does not interfere with Landlord's Work. All
Landlord's Work shall be
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<PAGE> 109
performed in a good and workmanlike manner, and in accordance with all
building and other applicable codes and ordinances.
6. A. Anything in this Agreement to the contrary notwithstanding,
in the event that Landlord has not substantially completed Landlord's Work
pursuant to the immediately preceding Article hereof by December 1, 1996,
Tenant shall not (except with Landlord's written consent) be entitled to
possession of the Suite 600 Additional Space and the Suite 600 Term
Commencement Date shall not be deemed to have occurred until said Suite 600
Additional Space is ready for Tenant's occupancy (as described in Article 5E
above) and Tenant shall not have any claim against Landlord, and Landlord shall
have no liability to Tenant, by reason of any such postponement of Tenant's
possession of the Suite 600 Additional Space, nor shall the same affect the
validity of the Lease, as hereby modified, or the obligation of Tenant
hereunder, nor shall the same be construed in any wise to extend the term of
the Lease, as hereby modified. In such event, Tenant agrees to accept
occupancy of the Suite 600 Additional Space as soon as the work required to be
performed by Landlord pursuant to the immediately preceding Article hereof is
substantially completed. The 600 Additional Space shall not be deemed to be
unready for Tenant's occupancy or incomplete if only minor or insubstantial
details of construction, decoration or mechanical adjustments remain to be done
in the Suite 600 Additional Space or any part thereof, or if the delay in the
availability of the Suite Additional 600 Space for occupancy shall be due to
special work, changes, alterations, or additions required or made by Tenant in
the layout or finish of the Suite 600 Additional Space or any part thereof or
shall be caused in whole or in part by Tenant through the delay of Tenant in
submitting plans and/or specifications, including, but not limited to,
supplying information, approving plans, specifications, or estimates,
giving authorizations or otherwise or shall be caused in whole or in part by
delay and/or default on the part of the Tenant.
B. Notwithstanding anything else to the contrary contained in
the Lease, as modified by this Agreement, if Tenant takes possession of the
Suite 600 Additional Space or any part thereof and uses all or any portion of
the Suite 600 Additional Space in any way to conduct its business or any aspect
thereof prior to the date when the Suite 600 Additional Space shall otherwise
be ready for Tenant's occupancy within the meaning of this or the immediately
preceding Article, the Suite 600 Term Commencement Date shall be deemed to be
as of such earlier date
7. Effective as of the date of this Agreement, and for the balance of
the Term of the Lease, the following is hereby added to the Lease as Article 31
(former Article 31 thereof having been deleted therefrom by virtue of paragraph
5 of the August 24, 1979 Agreement between FFF and Tenant):
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<PAGE> 110
"ARTICLE 31 - ADDITIONAL ASSIGNMENT/
SUBLETTING PROVISIONS
Section 31.01 Supplementing the provisions of Article 20 hereof, any
transfer, by operation of law or otherwise (including, without limitation, the
merger or consolidation of Tenant into or with any other business entity), of
Tenant's interest in this Lease or of any interest greater than forty-nine
(49%) percent in Tenant or, where applicable, in any majority shareholder,
partner or member of Tenant (whether stock, partnership interest or otherwise),
in a single transaction or a related series of transactions, which results in
majority ownership and operating control of either Tenant or any such majority
shareholder, partner or member of Tenant being owned or held, directly or
indirectly, by other than those persons or entities who/which have majority
ownership and operating control of Tenant and/or of any such majority
shareholders, partners or members of Tenant immediately prior to such
transaction(s), shall be deemed an assignment of this Lease within the meaning
of Article 20 hereof. Tenant will provide prior written notice to Landlord of
any and all changes in ownership of Tenant or, where applicable, in any
majority shareholder, partner or member of Tenant, and Tenant, upon request of
landlord, will provide Landlord promptly with a statement certifying the
persons or entities who or which, at the time of such request, are the
shareholders, partners or members of said Tenant (and/or of any such majority
shareholder, partner or member of Tenant) (and the percentage of ownership of
each). Annexed hereto as Exhibit "I" is a list of the names, addresses and
percentages of ownership of those persons or entities who or which, as of the
date of this agreement, are the shareholders, partners or members of Tenant
and/or of any such majority shareholder, partner or member of Tenant. In the
event that, at any time hereafter, Tenant's stock (or any class thereof) shall
become listed on a reputable, nationally recognized stock exchange, then, at
any time after such stock is so listed, (a) any public sale or other transfer
of such publicly traded stock (regardless of the number of shares and/or the
percentage of ownership in the Tenant which it represents) shall not (i) be
deemed to be an assignment of this Lease and (ii) require any consent or
approval of Landlord (or any other party who, by reason of its relationship to
or with Landlord, might otherwise have rights of consent or approval pursuant
to the terms of this Lease); and (b) Tenant no longer shall be required to
provide Landlord with the aforesaid statement(s) certifying the persons or
entities owning interests in Tenant.
Section 31.02 No subletting or assignment, in whatever manner accomplished,
shall be deemed in any way to relieve Tenant, or any other person or entity
having liability under this Lease, of any of the obligations under this Lease,
or to modify any of the terms and conditions of this Lease, except where
expressly agreed to or consented to in writing by Landlord. No such subletting
or assignment, or Landlord's consent to any of same, shall be deemed to permit
any further or other or future subletting or assignment, all of which shall be
subject to all of the terms of this Lease and Article 20.
Section 31.03 The liability of Tenant and the due performance of the
obligations of this Lease on Tenant's part to be performed or observed shall
not in any way be discharged, released or impaired by any (a) agreement which
modifies any of the rights or obligations of the parties under this Lease, (b)
stipulation which extends the time within which an obligation under this
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<PAGE> 111
Lease is to be performed, (c) waiver of the performance of an obligation
required under this Lease, or (d) failure to enforce any of the obligations set
forth in this Lease."
8. Tenant represents and warrants to Landlord that Tenant has emerged
from Chapter 11 bankruptcy proceedings pursuant to an approved and completed
plan of reorganization and that, as of the date hereof, there are no
actions, voluntary or otherwise, pending or threatened by or against Tenant
under the bankruptcy, reorganization, moratorium or similar laws of the United
States or any state thereof, or any other jurisdiction.
9. Tenant hereby affirms that no security has been heretofore
deposited by Tenant under the Lease and that no additional security is required
to be deposited by reason of this Agreement.
10. Tenant understands and agrees that Landlord will not carry
insurance of any kind on any personal property in the Demised Premises or the
Suite 600 Additional Space (regardless of whether such property shall be owned
by Tenant and including, but not limited to, Tenant's goods, supplies,
furnishings, furniture, fixtures, equipment). In the event that Tenant fails
to maintain insurance on such personal property, then Tenant hereby waives any
and all right of recovery which it might otherwise have against Landlord, any
fee owner or mortgagee and their respective officers, directors, agents,
contractors, servants and employees for loss or damage to such property or any
part thereof, to the same extent that Tenant's insurer's right of subrogation
would be waived if insurance coverage with waiver of subrogation provisions
were being maintained by Tenant upon all of such property. The provisions of
this Article shall also apply to each permitted assignee, if any, and each
permitted subtenant, if any, at any time occupying the Demised Premises or any
part thereof or the Suite 600 Additional Space or any part thereof.
11. Tenant represents and warrants to Landlord that is has not dealt
with any real estate agent or broker in connection with this Agreement and/or
the Suite 600 Additional Space and/or the Building, other than Carey Winston
Company, and that this Agreement was not brought about or procured through the
use or instrumentality of any other agent or broker and that all negotiations
with respect to the terms of this Agreement were conducted between Landlord,
Carey Winston Company and Tenant. Tenant covenants and agrees to indemnify and
hold Landlord harmless from and against any and all claims for commissions and
other compensation made by any other agent or agents and/or other broker or
brokers based on any dealing between Tenant and any other agent or agents
and/or other broker or brokers with respect to the Suite 600 Additional Space,
together with all costs and expenses incurred by Landlord in resisting such
claims (including, without limitation, reasonable attorneys' fees).
12. Except as modified and extended by this Agreement, the Lease and
all the terms, covenants, conditions and agreements thereof are hereby in all
respects ratified, confirmed and approved. Tenant hereby affirms that, on the
date hereof, no breach or default by either party has occurred and that the
Lease, and all of its terms, covenants, conditions, provisions and
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<PAGE> 112
agreements, except as hereby expressly modified, are in full force and
effect with no defenses or offsets thereto.
13. This Agreement contains the entire understanding between the
parties with respect to the matters contained herein. No representations,
warranties, covenants or agreements have been made concerning or affecting the
subject matter of this Agreement, except as are contained herein.
14. This Agreement may not be changed orally, but only by an agreement
in writing signed by the party against whom enforcement of any waiver, change
or modification or discharge is sought.
15. The submission of this Agreement to Tenant shall not be construed
as an offer, nor shall Tenant have any rights with respect hereto, unless and
until Landlord shall execute a copy of this Agreement and deliver the same to
Tenant.
IN WITNESS WHEREOF, the parties hereto have respectively executed this
Agreement as of the day and year first above written.
ONE CENTRAL PLAZA LIMITED PARTNERSHIP
By: /s/ Edwin A. Malloy
---------------------------------
Edwin A. Malloy, General Partner
ICARUS CORPORATION
By: /s/ Herbert G. Blecker 8 Nov. 96
---------------------------------
Herbert G. Blecker, President
-8-
<PAGE> 113
ACKNOWLEDGEMENTS
STATE OF CONNECTICUT )
) ss.: Stamford
COUNTY OF FAIRFIELD )
On this 13th day of November, 1996, before me personally came EDWIN A.
MALLOY, to me known, who being by me duly sworn, did depose and say that he is
the general partner of ONE CENTRAL PLAZA LIMITED PARTNERSHIP, the firm
described in and which executed the foregoing instrument, and he acknowledged
to me that he executed the foregoing instrument for and on behalf of said
partnership.
/s/ Susan Riley
----------------------
SUSAN RILEY
COMMISSIONER OF DEEDS
STATE OF CONNECTICUT
My Commission Expires: October 19, 1999
STATE OF MARYLAND )
) ss.: Rockville
COUNTY OF MONTGOMERY )
On this 8th day of November 1996, before me personally came Herbert G.
Blecker, to me known who, being by me duly sworn, did depose and say that he is
the President of ICARUS CORPORATION, the corporation described in and which
executed the foregoing instrument; and he acknowledged to me that he executed
the foregoing instrument for and on behalf of said corporation, and that he
signed his name thereto, by order of the Board of Directors of said
corporation.
/s/ Valerie J. Evans
--------------------------
Notary Public
Valerie J. Evans
Notary Public - Maryland
Montgomery County
My Commission Expires 8/1/00
-9-
<PAGE> 114
EXHIBIT "H"
Floor Plan of Suite 600
<PAGE> 115
EXHIBIT I
NAMES, ADDRESSES AND OWNERSHIP
PERCENTAGES OF SHAREHOLDERS OF TENANTS
<TABLE>
<CAPTION>
Name of Shareholder Address % of Ownership
- ------------------- ------- --------------
<S> <C> <C>
Herbert G. Blecker 11300 Rockville Pike, Rockville, MD 20852 N97
Eunice E. Blecker 11300 Rockville Pike, Rockville, MD 20852 N3
</TABLE>
<PAGE> 116
ONE CENTRAL PLACE LIMITED PARTNERSHIP
C/O FRED F. FRENCH INVESTING LLC
METRO CENTER - ONE STATION PLACE
STAMFORD, CT 06902-3546
DATED AS OF: January 21, 1998
Icarus Corporation
One Central Plaza - Suite 602
11300 Rockville Pike
Rockville, Maryland 20852
Re: Lease Agreement by and between MACH I RESEARCH ASSOCIATES ("MACH
I"), one of Landlord's predecessors-in-interest, and ICARUS
CORPORATION ("Tenant") dated as of October 15, 1976, wherein and
whereby Mach I leased to Tenant a portion of the sixth (6th) floor
in the building at 11300 Rockville Pike, Rockville, Maryland (the
"Building"), for a term scheduled to commence on the 1st day of
January, 1977, and to end on the 31st day of March 1982, which
lease was modified: (i) by Addendum No. 1 to Lease dated as of
October 25, 1976, between Mach I and Tenant; (ii) by Agreement
dated as of August 24, 1979, between Fred F. French of Maryland, as
agent ("FFF"), another of Landlord's predecessors-in-interest, and
Tenant; (iii) by letter agreement dated as of August 31, 1979
between FFF and Tenant; (iv) by those certain letters of Tenant
dated January 23, 1981 and April 30, 1986, wherein and whereby
Tenant exercised its rights to extend the term of the lease; (v) by
Extension and Additional Space Agreement dated as of January 8,
1990, between One Central Plaza Joint Venture ("OCPJV"), another of
Landlord's predecessors-in-interest, and Tenant, as amended by that
certain letter agreement dated January 30, 1990 between OCPJV and
Tenant; (vi) by Additional Space Agreement, dated as of January 20,
1992 (the "601 Additional Space Agreement"), between OCPJV and
Tenant, (vii) by Additional Space Agreement dated as of February
28, 1992 (the "609 Additional Space Agreement") between OCPJV and
Tenant; (viii) by Additional Space Agreement dated as of January 1,
1994 (the "Storage Area #11 Additional Space Agreement") between
OCPJV and Tenant; (ix) by Additional Space Agreement dated as of
May 1, 1995 (the "611 Additional Space Agreement") between One
Central Plaza Limited Partnership ("Landlord") and Tenant; (x) by
letter agreement dated as of September 1, 1995 (the "Storage Area
#10 Additional Space Agreement") between Landlord and Tenant; and
(xi) by Additional Space Agreement dated as of November 13, 1996
(the Suite 600 Additional Space Agreement") between Landlord and
Tenant; which lease is scheduled to end on March 31, 1998 (which
lease as so modified and as same otherwise heretofore may have been
modified is hereinafter referred to as the "Lease".
<PAGE> 117
Icarus Corporation
Dated As Of January 21, 1998
Gentlemen:
Reference hereby is made to the above-described Lease, the term of which
presently is scheduled to expire on March 31, 1998. Capitalized terms used but
not defined in this agreement, if any, shall have the same meanings as are
ascribed to them in the Lease.
Tenant has requested that Landlord agree to extend the term of the Lease
for a period on one (1) month beyond the present expiration date thereof, in
order to facilitate the orderly removal by Tenant from the Building, and the
relocation by Tenant to new premises, upon the expiration of the term of the
Lease.
This letter will confirm our mutual understanding and agreement that,
effective as of January 21, 1998, the term of the Lease, for all of the
premisses demised thereby (the "Premises"), hereby is extended for a further
period of one (1) month beyond the presently scheduled expiration date of the
term (the "Extended Term"), commencing on April 1, 1998 and ending on April 30,
1998 (the "New Expiration Date").
Tenant's occupancy of the Premises during the Extended Term shall be upon
and subject to all of the same terms, covenants, conditions, provisions and
agreements contained in the Lease, except that, from and after January 21,
1998, Tenant shall have no right or privilege whatsoever to assign the Tenant's
interest in the Lease, or to sublet all or any portion of the Premises, or to
make any alterations to the Premises, in each case without the prior written
consent of the Landlord, which Landlord may grant or withhold in its sole
discretion.
Tenant hereby acknowledges and agrees that Landlord will perform no work
in and will make no improvements to the Premises in connection with Tenant's
use and occupancy thereof during the Extended Term; and Tenant accepts the
Premises in their condition and state of repair existing on the date hereof.
Tenant hereby represents and warrants to Landlord, and covenants with Landlord,
that:
(i) Tenant has dealt with no broker in connection with this agreement
other than Carey Winston Company and Tenant agrees to indemnify and
hold Landlord harmless against and from any loss, damage, cost.
expense, obligation or claim incurred by or asserted against
Landlord by reason of said representation and warranty being false
or misleading;
(ii) Tenant heretofore has not deposited any sums with Landlord as
security for the Lease and no further security is being deposited
in connection with this agreement;
<PAGE> 118
Icarus Corporation
Dated As Of January 21, 1998
(iii) neither Tenant nor Landlord is in default under the Lease in any
respect and Tenant has no defenses to or offsets against the
performance of Tenant's obligations under the Lease, which, as
hereby modified, is ratified and confirmed by Tenant;
(iv) Tenant acknowledges that time is of the essence with respect to
Landlord's need to obtain possession of the Premises immediately
after the New Expiration Date and, accordingly, Tenant agrees that
if Tenant holds over in possession after the expiration or sooner
termination of the Extended Term of the Lease, such holding over
shall not be deemed to extend the Term or renew the Lease, but such
holding over thereafter shall continue upon the terms, covenants,
conditions, provisions and agreements set forth in the Lease,
except that the charge for use and occupancy of such holding over
for each calendar month or part thereof (even if such part shall be
a small fraction of a calendar month) shall be two (2) times the
sum of the fixed rent and the additional rent and other sums which
had been due and payable during the last full calendar month of the
end of the Extended Term, which total sum Tenant agrees to pay
Landlord promptly upon demand, in full, without set-off or
deduction. Notwithstanding the provisions of paragraph 26 of the
Lease, neither the billing nor the collection of use and occupancy
in the above amount shall be deemed a waiver of any right of
Landlord to reenter and take possession of the Premises in the
event of Tenant's holding over, nor shall same be deemed a waiver
of any right of Landlord to collect damages for Tenant's failure to
vacate the Premises after the expiration or sooner termination of
the Extended Term of the Lease; and
(v) Notwithstanding the provisions of paragraph 14 of the Lease, Tenant
agrees that, after the date hereof, Landlord, at all times, shall
be entitled to enter the Premises to show the Premises or any part
thereof to any parties contemplating subsequent leasing of all or a
portion of the Premises or to any prospective purchaser or
mortgagee of the Building.
<PAGE> 119
Icarus Corporation
Dated As Of January 21, 1998
Please confirm Tenant's understanding of and mutual agreement with the
foregoing by executing the enclosed four (4) copies of this letter agreement
beneath the words "Accepted and Agreed"; and then return all four (4) copies to
us. This letter agreement shall not be binding upon Landlord unless and until
Landlord shall have executed same and delivered a fully executed counterpart to
Tenant. Upon such mutual execution and delivery, this letter agreement shall
be considered and deemed to be, and shall constitute, a binding agreement
between us.
Very truly yours,
ONE CENTRAL PLAZA LIMITED PARTNERSHIP
By:/s/
------------------------------------------
Edwin A. Malloy, General Partner
Accepted And Agreed:
ICARUS CORPORATION
By:/s/Herbert G. Blecker
-----------------------------
Herbert G. Blecker, President
<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.
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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.
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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.
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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.
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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 825,000, 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.
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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
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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.
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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
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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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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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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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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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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
3
<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 550,000 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
4
<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
7
<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
8
<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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<PAGE> 1
EXHIBIT 10.14
FIRST AMENDMENT TO LEASE
between
ALLSTATE LIFE INSURANCE COMPANY
and
ICARUS INTERNATIONAL, INC.
THIS FIRST AMENDMENT TO LEASE (the "Amendment"), made effective for all
purposes as of the 31st day of December, 1997, by and between ALLSTATE LIFE
INSURANCE COMPANY ("Landlord") and ICARUS INTERNATIONAL, INC. ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant did enter into a certain Lease dated
December 31, 1997 (the "Lease") for certain premises fifth "Original Premises")
located on the fifth floor of the building known as Jefferson Plaza (the
"Building"), all as more particularly described in the Lease; and
WHEREAS, Landlord and Tenant desire to amend the Lease to correct
certain provisions thereof which inadvertently do not reflect the original
agreement of the parties; and
WHEREAS, Tenant desires to lease from Landlord and Landlord desires to
lease to Tenant certain additional office space located on the fourth floor of
the Building (the "Additional Premises"), which Additional Premises is to be
added to the description of Leased Premises is to be added to the description of
the Leased Premises and leased by Tenant under the same terms and conditions as
the Original Premises, including a corresponding allowance for the buildout of
improvements thereto similar to the Allowance granted Tenant for the
Improvements to be constructed by Landlord with respect to the Original
Premises.
NOW, THEREFORE, in consideration of the foregoing recitals (which are
hereby incorporated by reference and made a part hereof), the covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and adequacy of which is conclusively acknowledged by the parties,
Landlord and Tenant covenant and agree as follows:
1. The parties hereby incorporate into the Leased Premises the
Additional Premises, which Additional Premises is comprised of approximately
1644 rentable square feet on the fourth floor of the Building as shown and
located as Section A on the floor plan attached hereto and made a part hereof as
Schedule 1B. All references to the "Leased Premises" in the Lease shall be
deemed a reference to both the Original Premises and the Additional Premises,
and Section 1.1(a) is hereby amended accordingly. All capitalized terms utilized
herein shall have the same meaning as that attributable to them in the Lease
unless the context of this Amendment dictates otherwise.
<PAGE> 2
2. Section 1.1(d) of the Lease is hereby amended to reflect
Tenant's Square Footage as 30,566 rentable square feet. Section 1.1(f) of the
Lease is hereby amended to reflect the revised initial Base Rent of $603,678.50
per year, payable in monthly installments of $50,306.54 plus applicable sales
tax, if any. Section 1.1(g) of the Lease is hereby amended to reflect Tenant's
Pro Rata Share as 26.53%. Moreover, the parties acknowledge and agree that the
Base Rent for lease years 2 through 10 shall be as follows notwithstanding
anything in Section 1.1(f) of the Lease to the contrary, which calculations
below incorporate all fixed annual increases of three percent (3%) in the Base
Rent except for the 6th lease year which incorporates a $1.00 per sq. ft.
increase in lieu of the three percent (3%) annual increase:
<TABLE>
<CAPTION>
Lease Year Rent (PSF) Base Rent Monthly Installments
- ---------- ---------- --------- --------------------
<S> <C> <C> <C>
2 $20.34 $621,788.86 $ 51,815.74
3 $20.95 $640,442.52 $ 53,370.21
4 $21.58 $659,655.80 $ 54,971.32
5 $22.23 $679,445.47 $ 56,620.46
6 $23.23 $710,011.47 $ 59,167.62
7 $23.93 $731,311.81 $ 60,942.65
8 $24.64 $753,251.17 $ 62,770.93
9 $25.38 $775,848.70 $ 64,654.06
10 $26.14 $799,124.16 $ 66,593.68
</TABLE>
In the event the Additional Premises are not completed and delivered to
Tenant concurrently with the Original Premises, the Leased Premises, Tenant's
Square Footage, Base Rent, Tenant's Pro Rata Share of Operating Costs and other
obligations under the Lease shall be as originally outlined in the Lease prior
to this Amendment except that the Base Rent for the Original Premises shall be
as specified below (which calculations incorporate all fixed annual increases of
three percent (3%) in the Base Rent except for the sixth lease year which
incorporates a $1.00 per sq. ft. increase in lieu of the three percent (3%)
annual increase):
<TABLE>
<CAPTION>
Lease Year Rent (PSF) Base Rent Monthly Installments
- ---------- ---------- --------- --------------------
<S> <C> <C> <C>
1 $19.75 $571,209.50 $47,600.79
2 $20.34 $588,345.79 $49,028.82
3 $20.95 $605,996.16 $50,499.68
4 $21.58 $624,176.04 $52,014.67
5 $22.23 $642,901.32 $53,575.11
6 $23.23 $671,823.32 $55,985.28
7 $23.93 $691,978.02 $57,664.84
8 $24.64 $712,737.37 $59,394.78
9 $25.38 $734,119.49 $61,176.62
10 $28.14 $756,143.07 $63,011.92
</TABLE>
2
<PAGE> 3
3. Notwithstanding anything in the Lease to the contrary, the
Deposit shall be held by Landlord in a segregated account for this purpose, in
the name of Landlord, and returned to Tenant in accordance with the provisions
of Section 3.2 of the Lease, and Landlord agrees to transfer the Deposit to any
successor or assign of Landlord and such transferee shall be required to (and
shall) hold the Deposit in a segregated account for this purpose, in the name of
Landlord, in accordance with the terms hereof.
4. Landlord and Tenant acknowledge and agree that the Additional
Premises have not currently been incorporated into the Preliminary Plan,
Construction Documents and other materials pertaining to the construction of the
Improvements for the Original Premises, and that the Landlord shall construct
the Improvements or Leasehold Improvements (as such term is used in Schedule 6
of the Lease) for the Additional Premises in accordance with the provisions of
Schedule 6. An outline of the Additional Premised is attached hereto as Schedule
1B and the Preliminary Plan of the Additional Premises when approved and
initialled by the parties will be incorporated by reference and made a part of
the Lease as Schedule 1C. A separate set of Construction Documents shall be
prepared for the Additional Premises, along with the Final Cost for such
Leasehold Improvements, and the Landlord agrees to pay the costs attributable to
the construction of the Leasehold Improvements for the Additional Premises up to
an aggregate maximum limit of $20.00 per square foot of Tenant's Square Footage
applicable to the Additional Premises; it being the intent of the parties that
the buildout of the Leasehold Improvements for the Additional Premises shall be
a separate process notwithstanding the parties desire to construct such
Leasehold Improvements for the Additional Premises concurrently with those being
constructed for the Original Premises; provided however, that Tenant shall be
entitled to use and apply any unused portion of the $20 per square foot
improvement allowance applicable to the Additional Premises for the costs of the
Improvements to the Original Premises. Landlord acknowledges and agrees that it
will use its reasonable efforts to deliver the Additional Premises to Tenant
concurrently with delivery of the Original Premises. However, in the event the
Additional Premises are not completed and delivered to Tenant concurrently with
the Original Premises, the Lease Commencement Date for the Additional Premises
shall be separately determined and, upon delivery of the Additional Premises to
Tenant in accordance with the terms hereof, Tenant's Square Footage, Base Rent,
Tenant's Pro Rata Share of Operating Costs and other obligations of Tenant under
the Lease shall be as specified in this Amendment for the combined Original
Premises and Additional Premises.
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<PAGE> 4
5. Paragraph 2 (Option to Renew) of Schedule 8 of the Lease is
hereby amended by adding the following:
Notwithstanding anything in this Paragraph 2 of Schedule 8 to
the contrary, Tenant's right to exercise the Option to Renew
shall be further conditioned upon Tenant not having previously
assigned the Lease or sublet more than twenty-five percent
(25%) of the Leased Premises to an independent, unrelated
third party; it being the intent of the parties that Tenant's
right to exercise the Option to Renew shall not be lost or
affected by virtue of an assignment of the Lease or a sublease
of twenty-five percent (25%) or more of the Leased Premises to
(i) any parent, subsidiary or affiliate of Tenant, (ii) any
entity into which the Tenant is merged or consolidated and/or
(iii) any person or entity acquiring all or substantially all
of the assets of Tenant.
6. Paragraph 3 (Right of First Opportunity) of Schedule 8 of the
Lease is hereby amended by adding the following:
Notwithstanding anything in this Paragraph 3 of Schedule 8 to
the contrary, from time to time, upon written notice to
Landlord of its need for additional space and for a period of
six (6) months thereafter, Tenant shall be entitled to
exercise its Right of First Opportunity with respect to any
space becoming available on the fourth (4th) floor of the
Building during such six (6) month period, subject only to the
prior rights, if any, of any existing tenant of the Building
as such right(s) exist as of the date of the Lease; it being
the intent of the parties that Landlord shall offer to Tenant
such space on the fourth (4th) floor of the Building as may
become available during each six (6) month period following
any such notice provided by Tenant (or its agent) to Landlord.
Landlord and Tenant agree to execute a written amendment to
the Lease outlining the agreed upon economic terms of the
Lease applicable to such expansion space within thirty (30)
days of the date the parties agree upon such economic terms to
incorporate such expansion space within the definition of the
Leased Premises for the balance of the term (and any extension
thereof).
7. Paragraph 4 (Option to Terminate) of Schedule 8 of the Lease
is hereby amended by deleting the first sentence and replacing it with the
following:
In the event Landlord is not able to offer Tenant at least two
thousand three hundred eighty-two (2,382) rentable square feet
of expansion space in the Building during the fifth (5th) and
sixth (6th) lease years of the original term of this Lease,
Tenant shall have a one time
4
<PAGE> 5
right to terminate the Lease on the last day of the seventh
(7th) lease year ("Early Termination Date"). In the event
Tenant exercises its Right of First Opportunity pursuant to
the terms of Paragraph 3 of Schedule 8 of the Lease so as to
expand the Leased Premises by two thousand three hundred
eighty-two (2,382) or more rentable square feet on or before
the expiration of the sixth (6th) lease year, the right of
termination granted Tenant hereunder shall be void and of no
legal effect.
8. Except as expressly amended, modified and/or supplemented by
the terms of this Amendment, all other terms and conditions of the Lease (to the
extent not in conflict with the terms of this Amendment) are hereby ratified and
confirmed by the parties.
IN WITNESS WHEREOF, the parties have caused this First Amendment to
Lease to be signed by their duly authorized representatives as of the day and
year first above written.
LANDLORD:
Witness/Attest: ALLSTATE LIFE INSURANCE COMPANY
- ---------------------------- -------------------------------
By:
Its:
Date:
--------------------------
Attest: ICARUS INTERNATIONAL INC.
/s/ Eunice E. Blecker /s/ Herbert G. Bleaker
- ---------------------------- -------------------------------
Eunice E. Blecker, Secretary Herbert G. Bleaker, President
Date: 30 March 1998
--------------------------
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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
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Grant Thornton LLP
Vienna, Virginia
April 15, 1998
